<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 20, 2000
REGISTRATION NO. 333-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ADVANTA BUSINESS RECEIVABLES CORP.
(ORIGINATOR OF THE TRUST DESCRIBED HEREIN
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ADVANTA BUSINESS CARD MASTER TRUST
(ISSUER OF THE NOTES)
NEVADA 23-2852207
(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER
OR ORGANIZATION) IDENTIFICATION NO.)
639 ISBELL ROAD, SUITE 390
RENO, NEVADA 89509
(775) 823-3080
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ELIZABETH H. MAI, ESQ.
ADVANTA CORP.
WELSH & MCKEAN ROADS
SPRING HOUSE, PENNSYLVANIA 19477
(215) 444-5920
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
KEITH L. KRASNEY, ESQ.
WOLF, BLOCK, SCHORR AND SOLIS-COHEN LLP
250 PARK AVENUE
NEW YORK, NEW YORK 10177
(212) 883-4954
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after this registration statement becomes effective as determined
by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / __________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / / ____________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT TO BE MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED AGGREGATE PRICE OFFERING PRICE REGISTRATION
REGISTERED (a) (b) PER NOTE(c) (c) FEE
- ------------------------- ---------------------- ----------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
ASSET BACKED NOTES $1,000,000 100% $1,000,000 $264
</TABLE>
(a) With respect to any Asset Backed Notes issued with original issue
discount, the amount to be registered is calculated based on the
initial public offering price thereof.
(b) With respect to any Asset Backed Notes denominated in any foreign
currency, the amount to be registered shall be the U.S. dollar
equivalent thereof based on the prevailing exchange rate at the time
such Asset Backed Note is first offered.
(c) Estimated solely for the purpose of calculating the registration fee.
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.
<PAGE> 2
INTRODUCTORY NOTE
This registration statement includes:
- a representative form of prospectus supplement to the base
prospectus relating to the offering by Advanta Business Card
Master Trust of a series of asset backed notes; and
- a form of base prospectus relating to asset backed notes of
Advanta Business Card Master Trust.
<PAGE> 3
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS 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 AND THE ACCOMPANYING PROSPECTUS ARE NOT AN OFFER TO SELL
NOR ARE THEY 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 MARCH 20, 2000
Prospectus Supplement to Prospectus dated , 2000
ADVANTA BUSINESS CARD MASTER TRUST
Issuer
ADVANTA BUSINESS RECEIVABLES CORP.
Transferor
ADVANTA BANK CORP.
Servicer
SERIES 2000- ASSET BACKED NOTES
<TABLE>
<CAPTION>
CLASS A NOTES CLASS B NOTES CLASS C NOTES
------------- ------------- -------------
<S> <C> <C> <C>
Principal Amount $ $ $
Interest Rate [One-Month LIBOR plus [One-Month LIBOR plus [One-Month LIBOR plus
[ ]% per year] [ ]% per year] [ ]% per year]
Interest payment dates Monthly on the 15th, Monthly on the 15th, Monthly on the 15th,
beginning , 2000 beginning , 2000 beginning , 2000
Expected principal
payment date ,200 ,200 ,200
Legal maturity date ,200 ,200 ,200
Price to public $ (or %) $ (or %) $ (or %)
Underwriting discount $ (or %) $ (or %) $ (or %)
Proceeds to issuer $ (or %) $ (or %) $ (or %)
</TABLE>
The Class B notes are subordinated to the Class A notes. The Class C notes are
subordinated to the Class A and Class B notes. The Class D notes are
subordinated to the Class A, Class B and Class C notes.
Only the Class A, Class B and Class C notes are offered by this prospectus
supplement and the accompanying prospectus.
We expect to issue your series of notes on or about ________________, 2000. We
will deliver your notes in book-entry form.
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 7 IN THE
PROSPECTUS.
A note is not a deposit and neither the notes nor the underlying accounts or
receivables are insured or guaranteed by the Federal Deposit Insurance
Corporation or any other governmental agency.
The notes are obligations of Advanta Business Card Master Trust only and are not
obligations of Advanta Business Receivables Corp., Advanta Bank Corp., Advanta
Corp., any affiliate of them or any other person.
THIS PROSPECTUS SUPPLEMENT MAY BE USED TO OFFER AND SELL THE OFFERED NOTES ONLY
IF ACCOMPANIED BY THE PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THESE NOTES OR DETERMINED THAT THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Underwriters of the Series 2000- notes
, 2000
<PAGE> 4
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about your 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 vary between this prospectus supplement and
the accompanying prospectus, you should rely on the information in this
prospectus supplement.
You should rely only on the information provided in this prospectus supplement
and the accompanying prospectus, including the information incorporated by
reference. We have not authorized anyone to provide you with different
information. We are not offering the notes in any state where the offer is not
permitted.
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 in the
accompanying prospectus provide the pages on which these captions are located.
This prospectus supplement uses some defined terms. You can find a listing of
the pages where definitions can be found under the caption "Index of Terms for
Prospectus Supplement" beginning on page S-40 in this prospectus supplement and
under the caption "Index of Terms for Prospectus" beginning on page 71 in the
accompanying prospectus.
-ii-
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Transaction Summary.................................................. S-2
Summary of Terms.................................................... S-3
The Issuer.......................................................... S-3
Seller, Servicer and Transferor..................................... S-3
The Series 2000- Notes............................................. S-3
Credit Enhancement.................................................. S-4
[Pre-Funding Account................................................ S-4
Events of Default................................................... S-4
Other Interests in the Trust........................................ S-5
The Receivables..................................................... S-6
Allocations of Collections.......................................... S-6
Application of Collections.......................................... S-6
Pay Out Events...................................................... S-7
Optional Redemption................................................. S-8
Denominations....................................................... S-8
Registration, Clearance and Settlement.............................. S-8
Tax Status.......................................................... S-8
ERISA Considerations................................................ S-8
[Exchange Listing................................................... S-9
The Seller's Business Card Portfolio................................. S-10
Delinquency and Loss Experience..................................... S-10
Receivable Yield Considerations..................................... S-11
Recoveries.......................................................... S-12
Payment Rates....................................................... S-12
The Trust Portfolio.................................................. S-12
Maturity Considerations.............................................. S-16
Controlled Accumulation Period...................................... S-16
Early Amortization Period........................................... S-17
Description of Series Provisions..................................... S-17
Issuance............................................................ S-17
Interest Payments................................................... S-18
[Pre-Funding Account................................................ S-20
Principal Payments.................................................. S-20
Postponement of Controlled Accumulation Period...................... S-22
Allocation Percentages.............................................. S-23
Floating Allocation Definitions..................................... S-23
Fixed Allocation Definitions........................................ S-24
Invested Amount Definitions......................................... S-25
Reallocated Principal Collections................................... S-25
Application of Collections.......................................... S-26
Payments of Principal............................................... S-27
Subordination....................................................... S-28
Shared Finance Charge Collections................................... S-29
Shared Principal Collections........................................ S-29
Defaulted Receivables; Investor Charge-Offs......................... S-29
Principal Funding Account........................................... S-30
Reserve Account..................................................... S-30
Cash Collateral Account............................................. S-31
Cash Collateral Account Distributions............................... S-34
Additional Series Enhancement....................................... S-34
[Issuance of Additional Notes....................................... S-34
Pay Out Events...................................................... S-34
Events of Default................................................... S-36
Servicing Compensation and Payment of Expenses...................... S-36
Reports to Noteholders.............................................. S-37
ERISA Considerations................................................. S-37
Underwriting......................................................... S-38
Legal Matters........................................................ S-40
Index of Terms for Prospectus Supplement............................. S-41
Other Series Issued and Outstanding.................................. A-1
</TABLE>
-iii-
<PAGE> 6
TRANSACTION SUMMARY
This Transaction Summary lists certain information concerning the Advanta
Business Card Master Trust Notes, Series 2000- . The table also describes the
Class D notes which have not been registered under the Securities Act of 1933
and will be retained by the transferor or an affiliate or sold to investors in
private transactions.
<TABLE>
<S> <C>
Trust: Advanta Business Card Master Trust
Transferor: Advanta Business Receivables Corp.
Seller: Advanta Bank Corp.
Servicer: Advanta Bank Corp.
Indenture Trustee: [_____________________________]
Owner Trustee: [_____________________________]
Closing Date: __________, 2000
Clearance and Settlement: DTC/Clearstream/Euroclear
Primary Trust Asset: Receivables originated in business MasterCard(R) accounts
Offered Notes Class A, Class B and Class C
</TABLE>
<TABLE>
<CAPTION>
NOTE STRUCTURE Amount % of Total Series
<S> <C> <C>
Class A $ %
Class B $ %
Class C $ %
Class D $ %
Annual Servicing Fee Rate: 2.0%
</TABLE>
<TABLE>
<CAPTION>
CLASS A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Anticipated Ratings:* AAA/Aaa/AAA A/A-2/A BBB/Baa2/BBB
(Fitch IBCA/ Moody's/Standard &
Poor's)
Credit Enhancement subordination of subordination of subordination of Class
Class B, Class C and Class C and Class D D; cash collateral
Class D account
Interest Rate: One-Month LIBOR One-Month LIBOR One-Month LIBOR
plus [___]% per year plus [___]% per year plus [___]% per year
Interest Accrual Method: actual/360 actual/360 actual/360
Interest Payment Dates: monthly (15th) monthly (15th) monthly (15th)
Interest Rate Index Reset Date: 2 London business 2 London business 2 London business
days before each days before each days before each
interest payment date interest payment date interest payment date
First Interest Payment Date: , 200 , 200 , 200
Expected Principal Payment Date: , 200 , 200 , 200
Commencement of Accumulation , 200 , 200 , 200
Period (subject to adjustment):
Legal Maturity Date: , 200 , 200 , 200
</TABLE>
- --------------
* It is a condition to issuance that at least one of these ratings for each
class be obtained.
S-1
<PAGE> 7
SUMMARY OF TERMS
This summary highlights selected information and does not contain all of the
information that you need to consider in making your investment decision. You
should carefully read this entire document and the accompanying prospectus
before you purchase any notes.
THE ISSUER
The notes will be issued by Advanta Business Card Master Trust, a Delaware
statutory business trust, pursuant to an indenture supplement to an indenture,
each between the trust and the indenture trustee.
For additional information concerning the issuer, see "The Issuer" in the
accompanying prospectus.
SELLER, SERVICER AND TRANSFEROR
For additional information concerning Advanta Bank Corp. as a seller and
servicer and Advanta Business Receivables Corp. as a transferor, see "Advanta
Bank Corp., Advanta Business Receivables Corp. and Advanta Corp." in the
accompanying prospectus.
THE SERIES 2000- NOTES
Only the Class A, Class B and Class C notes are offered by this prospectus
supplement and the accompanying prospectus.
INTEREST
The Class A notes will bear interest at [one-month LIBOR as determined each
month] plus ___% per annum.
The Class B notes will bear interest at [one-month LIBOR as determined each
month] plus ___% per annum.
The Class C notes will bear interest at [one-month LIBOR as determined each
month] plus ___% per annum.
[The Class D notes will bear interest at [one-month LIBOR as determined each
month] plus ___% per annum.]
For each class of the Series 2000- notes, interest will be calculated as
follows:
Principal balance Number of days
at end of prior X in interest period X Interest
monthly period ------------------ rate
360
Each interest period begins on and includes a payment date and ends on but
excludes the next payment date. However, the first interest period will begin on
and include the closing date.
Interest on the Series 2000- notes will be paid on each payment date, which will
be __________[ 15 ], 2000 and the 15th day of each following month if the 15th
is a business day and, if not, the following business day.
You may obtain the interest rates for the current interest period and the
immediately preceding interest period by telephoning the indenture trustee at
(___) ___-____.
See "Description of Series Provisions -- Interest Payments" in this prospectus
supplement for a description of how and when LIBOR will be determined.
PRINCIPAL
Principal of the Class A notes, Class B notes, Class C notes and Class D notes
is expected to be paid in full on the ____________, 200 payment date.
However:
- no principal will be paid on the Class B notes until the Class
A notes are paid in full;
- no principal will be paid on the Class C notes until the Class
A and Class B notes are paid in full; and
- no principal will be paid on the Class D notes until the Class
A notes, Class B notes and Class C notes are paid in full.
We are scheduled to begin accumulating collections of principal receivables
starting on __________, 200 for payment to the Series 2000- noteholders on the
expected principal payment date, but we may begin accumulating at a later date.
S-2
<PAGE> 8
Principal of the Series 2000- notes may be paid earlier or later than the
expected principal payment date. You will not be entitled to any premium for
early or late payment of principal. If specified events known as pay out events
occur, principal may be paid earlier than expected. If collections of the
business card receivables are less than expected or are collected more slowly
than expected, then principal payments may be delayed. If the Series 2000- notes
are not paid on the expected principal payment date, collections of principal
receivables will continue to be used to pay principal on the Series 2000- notes
until the notes are paid or until __________ , 200 , whichever occurs first.
__________ , 200 is the legal maturity date for Series 2000- .
For more information about principal payments, see "Maturity Considerations,"
"Description of Series Provisions--Principal Payments" and "--Allocation
Percentages" in this prospectus supplement.
CREDIT ENHANCEMENT
Credit enhancement for your series is for the benefit of your series only. You
are not entitled to the benefits of credit enhancement available to other
series.
SUBORDINATION
Credit enhancement for the Class A notes is provided by the subordination of the
Class B notes, Class C notes and Class D notes.
Credit enhancement for the Class B notes is provided by the subordination of the
Class C notes and Class D notes.
Credit enhancement for the Class C notes is provided in part by the
subordination of the Class D notes.
The Class D notes do not have the benefit of subordination of any other class of
notes.
CASH COLLATERAL ACCOUNT
A cash collateral account will provide credit enhancement for the Class C notes
and the Class D notes.
The cash collateral account initially will [not] be funded. After the Series
2000- notes are issued, deposits in the cash collateral account will be made
each month from available finance charge collections and, if necessary, shared
finance charge collections from other series in group [one] up to the required
cash collateral account amount as described in this prospectus supplement under
"Description of Series Provisions--Cash Collateral Account." The cash collateral
account will be used to make payments on the Class C notes and the Class D notes
if collections of finance charge and administrative receivables allocated to the
Class C notes and the Class D notes are insufficient to make required payments.
For more information about credit enhancement, see "Description of Series
Provisions -- Reallocated Principal Collections," " -- Application of
Collections" and "-- Defaulted Receivables; Investor Charge-Offs" in this
prospectus supplement.
[PRE-FUNDING ACCOUNT
On the closing date, $__________ will be deposited into a pre-funding account.
Funds will be maintained in this account until the earliest of:
- the commencement of the early amortization period;
- the date on which the invested amount first equals
$__________; and
- __________, 200__.
During this funding period, funds may be withdrawn on a weekly basis to the
extent of any increases in the invested amount resulting from an increase in the
amount of the trust's principal receivables. Funds may be withdrawn only to the
extent that (a) the transferor interest on that day exceeds the required
transferor interest on that day and (b) the aggregate amount of principal
receivables in the trust on that day exceeds the required minimum principal
balance on that day. However, the invested amount will not exceed the initial
outstanding principal amount of the Series 2000- notes or increase by an amount
greater than the funds on deposit in the pre-funding account immediately prior
to that increase. If there are funds in the pre-funding account after the end of
the funding period, those funds will be paid to the noteholders based on each
noteholder's interest in the trust.]
EVENTS OF DEFAULT
The Series 2000- notes are subject to specified events of default described
under "Description of Series Provisions --Events of Default" in this prospectus
S-3
<PAGE> 9
supplement and "The Indenture --Events of Default; Rights upon Event of Default"
in the accompanying prospectus. These include, among other things, the failure
to pay interest for 35 days after it is due or to pay principal on the legal
maturity date.
If an event of default occurs and continues with respect to the Series 2000-
notes, the indenture trustee or holders of more than 50% of the then-outstanding
principal balance of the Series 2000- notes may declare the principal amount of
the notes to be immediately due and payable. That declaration may be rescinded
by holders of more than 50% of the then-outstanding principal balance of the
Series 2000- notes.
After an event of default and the acceleration of the Series 2000- notes, funds
on deposit in the collection account, the principal funding account, the reserve
account, and the excess funding account and, for the Class C notes and the Class
D notes, the cash collateral account, will be applied to pay principal of and
interest on the Series 2000- notes to the extent permitted by law. Collections
of principal receivables and collections of finance charge and administrative
receivables allocated to the Series 2000- notes will be applied to make the
monthly principal and interest payments on the Series 2000- notes until the
earlier of the date those notes are paid in full or the legal maturity of those
notes.
If the Series 2000- notes are accelerated or the issuer fails to pay the
principal of the Series 2000- notes on the legal maturity date, once certain
conditions described under "The Indenture --Events of Default; Rights upon Event
of Default" are satisfied, the indenture trustee may, if legally permitted, or
will at the direction of holders of at least 66 2/3% of the principal amount of
each class of Series 2000- notes:
- institute proceedings in its own name for the collection of
all amounts then payable on the Series 2000- notes;
- take any other appropriate action to protect and enforce the
rights and remedies of the indenture trustee and the Series
2000- noteholders; or
- foreclose on a portion of the trust's assets by causing the
trust to issue a foreclosure certificate to the holders of the
notes or to a third party selected by the indenture trustee or
by holders of more than 50% of the then-outstanding principal
balance of the Series 2000- notes.
A foreclosure certificate is an investor certificate issued by the trust
representing ownership of the interest in the assets of the trust securing the
Series 2000- notes. A foreclosure certificate held by a noteholder or a third
party will be subject to certain restrictions on transfer described under "The
Indenture --Events of Default; Rights upon Event of Default" in the accompanying
prospectus.
OTHER INTERESTS IN THE TRUST
OTHER SERIES OF NOTES
The trust will issue other series of notes secured by the assets of the trust
from time to time in the future. A summary of the outstanding series is in
"Annex I: Other Series Issued and Outstanding" included at the end of this
prospectus supplement. A predecessor trust has issued 3 series of asset-backed
securities in private transactions, which securities have been, or will be, at
the same time as the initial issuance of notes offered under the accompanying
prospectus, refinanced with notes issued by the trust in private transactions.
With respect to those privately issued notes and any other notes that may be
issued by the trust privately in the future, references in this prospectus
supplement or the accompanying prospectus to the terms of any series of notes
described in the applicable prospectus supplement instead refer to the governing
documents for those privately issued notes. One or more of the series of those
previously issued notes or notes that may be issued by the trust privately in
the future may have the right to consent to the issuance of future series as
long as they are outstanding. The issuance of future series will occur without
prior review or consent by you or, except as described above, any other
noteholder.
THE TRANSFEROR INTEREST
The interest in the trust not securing your series or any other series is the
"TRANSFEROR INTEREST." The transferor interest is owned by the transferor. The
transferor may, however, sell all or a portion of its interest in the transferor
interest. The transferor interest does not provide credit enhancement for your
series or any other series.
S-4
<PAGE> 10
THE RECEIVABLES
The primary assets of the trust are receivables in MasterCard(R)* revolving
credit card accounts. The receivables consist of principal receivables and
finance charge and administrative receivables.
The following information is as of , 2000:
- Receivables in the trust: $
- Accounts designated to the trust:
For more information, see "The Trust Portfolio" in this prospectus supplement.
ALLOCATIONS OF COLLECTIONS
The servicer will collect payments on the receivables and will deposit those
collections in an account. It will keep track of those collections that are
finance charge and administrative receivables and those that are principal
receivables.
Each month, the servicer will allocate collections received among:
- your series;
- other series outstanding; and
- the transferor interest in the trust.
The amount allocated to your series will be determined based mainly upon the
size of the invested amount of your series compared to the total amount of
principal receivables in the trust. At the time of issuance of Series 2000- ,
the invested amount for your series will be $[_____].
You are entitled to receive payments of interest and principal only from
collections of receivables and other trust assets allocated to your series. If
the invested amount of your series declines, amounts allocated and available for
payment to your series and to you may be reduced. For a description of the
allocation calculations and the events which may lead to these reductions, see
"Description of Series Provisions -- Allocation Percentages" and "-- Reallocated
Principal Collections" in this prospectus supplement.
APPLICATION OF COLLECTIONS
COLLECTIONS OF FINANCE CHARGE
AND ADMINISTRATIVE RECEIVABLES
The trust will apply your series' share of collections of finance charge and
administrative receivables in the following order of priority:
- to pay interest on the Class A notes;
- to pay interest on the Class B notes;
- to pay the servicing fee to the servicer;
- to pay interest on the Class C Notes;
- to cover your series' allocation of defaulted receivables;
- to cover reductions in your series' invested amount resulting
from investor charge-offs allocated to your series and from
reallocated principal collections, in each case that have not
been reimbursed;
- to fund a reserve account to cover interest payment shortfalls
for the Series 2000- notes during the controlled accumulation
period;
- to make a deposit to the cash collateral account for the Class
C notes and Class D notes up to the required cash collateral
account amount;
- to pay interest on the Class D notes;
- to other series in group [one]; and
- to the holders of the transferor certificates.
For a more detailed description of these applications, see "Description of
Series Provisions -- Application of Collections" in this prospectus supplement.
- --------
* MasterCard(R) is a federally registered servicemark of MasterCard
International Inc.
S-5
<PAGE> 11
PRINCIPAL COLLECTIONS
The trust will apply your series' share of collections of principal receivables
each month as follows:
- During the revolving period, no principal will be paid to you
or accumulated in a trust account. Instead, your series' share
of collections of principal receivables will be treated as
shared principal collections and may be available to make
principal payments for other series in group [one].
- The controlled accumulation period is scheduled to begin on
, 200 , but may begin at a later date. During the
accumulation period, your series' share of collections of
principal receivables will be deposited in a trust account, up
to a controlled deposit amount. On the expected principal
payment date, amounts on deposit in that account will be paid
first to the Class A noteholders, then to the Class B
noteholders, then to the Class C noteholders and then to the
Class D noteholders.
- If a pay out event that applies only to Series 2000- or to
all series occurs, the early amortization period will begin.
During the early amortization period, your series' share of
collections of principal receivables will be paid first to the
Class A noteholders, then to the Class B noteholders, then to
the Class C noteholders and then to the Class D noteholders.
- During any of the above periods, collections of principal
receivables allocated to your series may be reallocated, if
necessary, to make required interest payments on the Class A
notes, the Class B notes and the Class C notes not made from
available finance charge collections, shared finance charge
collections available from other series in group [one] or
funds in the reserve account or the cash collateral account.
However, the sum of these reallocated principal collections
for all monthly periods cannot exceed [_____]% of the initial
invested amount of your series, as reduced due to the writing
off of receivables or for previously reallocated principal
collections, in each case, that have not been reimbursed.
- Any remaining collections of principal receivables will first
be made available to other series in group [one] and then be
paid to the holders of the transferor certificates or
deposited in the excess funding account.
For a more detailed description of these applications, see "Description of
Series Provisions -- Application of Collections" in this prospectus supplement.
PAY OUT EVENTS
The documents under which the Series 2000- notes will be issued include a list
of events known as pay out events. There are two types of pay out events: series
pay out events that apply only to the Series 2000- notes and trust pay out
events that apply to notes of all series. If a Series 2000- pay out event or a
trust pay out event occurs, the trust will use collections of principal
receivables allocated to Series 2000- each month to pay principal on the Series
2000- notes.
The following are Series 2000- pay out events:
- the transferor fails to make required payments or deposits,
violates other covenants and agreements or makes
representations and warranties that are materially incorrect;
- the yield on the trust portfolio less the percentage of
receivables that are written off as uncollectible allocated to
Series 2000- , averaged over three consecutive monthly
periods, is less than the weighted average interest rate for
Series 2000- , calculated by taking into account the interest
rate for the Class A notes, Class B notes, [and] Class C notes
[and Class D
S-6
<PAGE> 12
notes,] plus the servicing fee rate for Series 2000- ;
- the Class A notes, Class B notes, Class C notes or Class D
notes are not paid in full on their expected principal payment
dates; and
- an event of default occurs for the Series 2000- notes.
The following are trust pay out events:
- a failure by the transferor (including any additional
transferor) to transfer receivables in additional accounts to
the trust within 5 business days after the date required by
the transfer and servicing agreement;
- any servicer default occurs which would have a material
adverse effect on the noteholders;
- specified bankruptcy, insolvency, liquidation,
conservatorship, receivership or similar events relating to
the transferor (including any additional transferor) or the
seller (including any additional seller);
- the transferor (including any additional transferor) is unable
to transfer receivables to the trust in accordance with the
provisions of the transfer and servicing agreement; or
- the trust becomes subject to regulation as an investment
company within the meaning of the Investment Company Act of
1940.
For a more detailed discussion of the pay out events, see "Description of Series
Provisions -- Pay Out Events" in this prospectus supplement and "Description of
the Notes -- Pay Out Events" in the accompanying prospectus.
OPTIONAL REDEMPTION
The trust has the option to repurchase your notes when the invested amount for
your series has been reduced to 10% or less of the initial principal amount [as
increased by the initial principal amount of any notes of your series issued
after the closing date of your series]. See "Description of the Notes -- Final
Payment of Principal; Termination" in the accompanying prospectus.
DENOMINATIONS
Beneficial interests in the Offered Series 2000- notes may be purchased in
minimum denominations of $1,000 and multiples of $1,000 in excess of that
amount.
REGISTRATION, CLEARANCE AND SETTLEMENT
Your Series 2000- notes will be in book-entry form and will be registered in
the name of Cede & Co., as the nominee of The Depository Trust Company. Except
in certain limited circumstances, you will not receive a definitive instrument
representing your notes. See "Description of the Notes -- Definitive Notes" in
the accompanying prospectus.
You may elect to hold your Series 2000- notes through The Depository Trust
Company, in the United States, or Clearstream Banking, societe anonyme, or the
Euroclear System, in Europe.
Transfers will be made in accordance with the rules and operating procedures of
those clearing systems. See "Description of the Notes -- Book Entry
Registration" in the accompanying prospectus.
TAX STATUS
Subject to important considerations described under "Federal Income Tax
Consequences" in the accompanying prospectus, Wolf, Block, Schorr and
Solis-Cohen LLP, as special tax counsel to the trust, is of the opinion that
under existing law your Series 2000- notes will be characterized as debt for
federal income tax purposes. By your acceptance of an offered Series 2000-
note, you will agree to treat your offered Series 2000- notes as debt for
federal, state and local income and franchise tax purposes. See "Federal Income
Tax Consequences" in the accompanying prospectus for additional information
concerning the application of federal income tax laws.
ERISA CONSIDERATIONS
Subject to important considerations described under "ERISA Considerations" in
this prospectus supplement and in the accompanying prospectus, the offered
Series 2000- notes are eligible for purchase by persons
S-7
<PAGE> 13
investing assets of employee benefit plans or individual retirement accounts. A
fiduciary or other person contemplating purchasing an offered Series 2000- note
on behalf of or with plan assets of any plan or account should consult with its
counsel regarding whether the purchase or holding of an offered Series 2000-
note could give rise to a transaction prohibited or not otherwise permissible
under ERISA or Section 4975 of the Internal Revenue Code.
[EXCHANGE LISTING
We will apply to list the offered Series 2000- notes on the Luxembourg Stock
Exchange. We cannot guarantee that the application for the listing will be
accepted.]
S-8
<PAGE> 14
THE SELLER'S BUSINESS CARD PORTFOLIO
For additional information regarding the Advanta Business Card
Portfolio, see "The Bank's Credit Card Activities" in the accompanying
prospectus.
DELINQUENCY AND LOSS EXPERIENCE
The following tables set forth the delinquency and loss experience for
each of the periods shown for the Advanta Business Card Portfolio. As of
____________, 200 , the Advanta Business Card Portfolio included receivables
from accounts designated to the trust and forming the trust assets in an
aggregate amount equal to $______ million. The accounts designated to the trust
have been selected from the accounts in the Advanta Business Card Portfolio
based on certain eligibility criteria specified in the transfer and servicing
agreement.
Actual delinquency and charge off experience for the receivables may be
different from that set forth below for the Advanta Business Card Portfolio, for
reasons including:
- because the trust portfolio is only a portion of the Advanta
Business Card Portfolio;
- because additional sellers may in the future originate or
acquire accounts to be designated to the trust; and
- because the transferor will have the right, subject to certain
conditions set forth in the transfer and servicing agreement,
and in some circumstances, the obligation, to designate
additional accounts, and to convey to the trust all
receivables in such additional accounts, which additional
accounts may not have the same characteristics as accounts
previously designated to the trust.
We cannot assure you that the future delinquency and loss experience
for the receivables in either the Advanta Business Card Portfolio or the trust
portfolio will be similar to the historical experience of the Advanta Business
Card Portfolio set forth below.
ADVANTA BUSINESS CARD PORTFOLIO
DELINQUENCY EXPERIENCE(1)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
1999 1998 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
RECEIVABLES $1,040,114 $814,734 $663,087 $305,962
OUTSTANDING: ---------- -------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
RECEIVABLES
DELINQUENT AND % OF % OF % OF % OF
NUMBER OF DAYS DELINQUENT RECEIVABLES DELINQUENT RECEIVABLES DELINQUENT RECEIVABLES DELINQUENT RECEIVABLES
DELINQUENT AMOUNT OUTSTANDING AMOUNT OUTSTANDING AMOUNT OUTSTANDING AMOUNT OUTSTANDING
- ---------- ------ ----------- ------ ----------- ------ ----------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
30 to 59 days $13,050 1.25% $11,600 1.42% $ 9,894 1.49% $4,725 1.54%
60 to 89 days $ 8,300 0.80% $ 8,007 0.98% $ 7,110 1.07% $2,777 0.91%
90 or more days $17,087 1.64% $16,293 2.00% $12,337 1.86% $1,450 0.47%
------- ----- ------- ----- ------- ----- ------ -----
TOTAL $38,437 3.69% $35,900 4.40% $29,340 4.42% $8,952 2.92%
======= ===== ======= ===== ======= ===== ====== =====
</TABLE>
- ----------------
(1) The receivables outstanding on the accounts consist of all amounts due
from cardholders as posted to the accounts as of the end of the period
shown, including principal and finance charge and administrative
receivables.
S-9
<PAGE> 15
ADVANTA BUSINESS CARD PORTFOLIO
LOSS EXPERIENCE
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ending December 31,
------------------------------------------------------
1999 1998 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Average Receivables Outstanding(1) $893,006 $743,940 $504,360 $159,939
Gross Losses(2) $ 53,085 $ 51,050 $ 20,813 $ 4,533
Interest Charge-Offs(3) $ 4,092 $ 3,408 $ 1,153 $ 215
Recoveries $ 4,689 $ 3,909 $ 731 $ 106
-------- -------- -------- --------
Net Losses(4) $ 44,304 $ 43,733 $ 18,929 $ 4,211
======== ======== ======== ========
Net Losses as a Percentage of 4.96% 5.88% 3.75% 2.63%
Average Receivables Outstanding
</TABLE>
- --------
(1) Average Receivables Outstanding for each indicated period is calculated
as the average of the opening monthly balances for such periods and
includes principal and finance charge and administrative receivables.
(2) Gross Losses include charge-offs of principal and finance charge and
administrative receivables.
(3) Interest charge-offs include charge-offs of finance charge and
administrative receivables.
(4) Net Losses are calculated as gross losses less interest charge-offs
less recoveries.
RECEIVABLE YIELD CONSIDERATIONS
The yield on the Advanta Business Card Portfolio for certain periods is
set forth in the following table. The historical yield figures in the table are
calculated on an as-billed basis. Revenues from finance charges and fees will be
affected by numerous factors, including the rates of the finance charges on
principal receivables, the amount of other fees paid by cardholders, the
percentage of cardholders who pay off their balances in full each month, and
changes in delinquency rates. There can be no assurance that the portfolio yield
in the future will be similar to the historical experience set forth below or
that the portfolio yield experience with respect to the trust portfolio, which
is only a portion of the Advanta Business Card Portfolio, will be similar to the
historical experience for the Advanta Business Card Portfolio. See "The Bank's
Credit Card Activities" in the accompanying prospectus.
ADVANTA BUSINESS CARD PORTFOLIO
REVENUE FROM FEES AND FINANCE CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ending December 31,
---------------------------------------------------------
1999 1998 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Average Monthly Accrued Fees and
Finance Charges(1)(2)(3) $ 76.29 $ 73.35 $ 71.62 $ 52.83
Average Account Balance(4) $ 4,167 $ 4,470 $ 4,725 $ 3,833
Yield From Fees and Finance Charges(2)(3) 21.97% 19.69% 18.19% 16.54%
</TABLE>
- ----------------
(1) The figures shown include revenue attributable to interchange.
(2) Fees and Finance Charges are comprised of finance charges, annual
cardholder fees and certain other service charges.
(3) Average Monthly Accrued Fees and Finance Charges and Yield from Fees
and Finance Charges are presented net of adjustments made pursuant to
the seller's normal servicing procedures, including removal of
incorrect or disputed finance charges and reversal of finance charges
accrued on charged-off accounts.
(4) Average Account Balance includes purchases, cash advances and billed
and unpaid finance and other charges, and is calculated based on the
average of the opening monthly account balances for accounts with
balances during the periods shown.
S-10
<PAGE> 16
RECOVERIES
Pursuant to the terms of the indenture, the transferor will be required
to transfer to the trust all of the recoveries that are reasonably estimated by
the servicer on receivables in charged-off accounts of the trust, including
amounts received by the transferor or the servicer from the purchaser or
transferee with respect to the sale or other disposition of receivables in
defaulted accounts ("RECOVERIES"). Collections of recoveries will be treated as
collections of finance charge and administrative receivables and included as
part of the Net Portfolio Yield.
PAYMENT RATES
The following table sets forth the highest and lowest cardholder
monthly payment rates for the Advanta Business Card Portfolio during any month
in the periods shown and the average cardholder monthly payment rates for all
months in the periods shown, in each case calculated as a percentage of total
opening monthly account balances during the periods shown. Payment rates shown
in the table are based on amounts which would be deemed payments of principal
receivables and finance charge and administrative receivables for the accounts.
ADVANTA BUSINESS CARD PORTFOLIO
CARDHOLDER MONTHLY PAYMENTS RATES
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------
1999 1998 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Lowest Month(1) 15.97% 12.32% 11.84% 14.99%
Highest Month(1) 19.10% 17.64% 14.80% 17.38%
Monthly Average 17.82% 15.23% 13.44% 16.07%
</TABLE>
- ----------------
(1) The monthly payment rates are calculated as the total amount of
payments received during the month divided by the average monthly
receivables outstanding for each month.
The amount of collections on receivables may vary from month to month
due to seasonal variations, general economic conditions and payment habits of
individual cardholders. We cannot assure you that collections of principal
receivables for the trust portfolio, and thus the rate at which noteholders
could expect to accumulate or receive payments of principal on their notes
during the controlled accumulation period or the early amortization period, will
be similar to the historical experience of the Advanta Business Card Portfolio
set forth above.
THE TRUST PORTFOLIO
The receivables conveyed to the trust arise in accounts selected from
the Advanta Business Card Portfolio at the time the trust was established, and
in additional accounts selected since that time, on the basis of criteria
described in the transfer and servicing agreement (the "TRUST PORTFOLIO"). The
transferor has the right to designate additional accounts for the trust
portfolio and to transfer to the trust all receivables of those additional
accounts, whether the receivables already exist or arise after the designation,
if certain conditions are satisfied. For a discussion of these conditions, see
"Description of the Notes --Addition of Trust Assets" in the accompanying
prospectus. In addition, the transferor will be required to designate additional
accounts, to the extent available, (a) to maintain the Transferor Interest so
that, during any period of 30 consecutive days, the Transferor Interest averaged
over that period equals or exceeds the Required Transferor Interest for the same
period and (b) to maintain, for so long as notes of any series remain
outstanding, an aggregate amount of principal receivables in the trust portfolio
equal to or greater than the Required Minimum Principal Balance, as adjusted for
any series having a paired series as described in the related indenture
supplement.
The "TRANSFEROR INTEREST" on any date is equal to the difference
between:
(a) the sum of
S-11
<PAGE> 17
(i) the total amount of principal receivables in the
trust and
(ii) the Excess Funding Account balance minus
(b) the total adjusted invested amounts of all series of notes then
outstanding.
The "REQUIRED TRANSFEROR INTEREST" will be calculated as follows:
Required Transferor Percentage X total amount of principal
receivables in the trust portfolio
The "REQUIRED TRANSFEROR PERCENTAGE" initially is 7%, but may be
reduced if certain conditions set forth in the transfer and servicing agreement
are satisfied, including receipt of written confirmation that reducing the
Required Transferor Percentage will not result in the reduction or withdrawal by
any rating agency of its rating of any outstanding series or class.
The "REQUIRED MINIMUM PRINCIPAL BALANCE" on any date is, for all
outstanding series, unless otherwise provided in the related indenture
supplement for a series having a paired series,
- the sum of the Invested Amounts for each series outstanding on
that date, plus
- the Required Transferor Interest on that date, minus
- the amounts on deposit in the Excess Funding Account.
The transferor also has the right to designate certain removed accounts
and to require the indenture trustee to transfer all receivables in the removed
accounts back to the transferor, whether the receivables already exist or arise
after the designation, if certain conditions are satisfied. For a discussion of
these conditions, see "Description of the Notes --Removal of Accounts" in the
accompanying prospectus.
Throughout the term of the trust, the accounts from which the
receivables arise will be the accounts designated by the transferor at the time
the trust is established, plus any additional accounts, minus any removed
accounts. As a result, the composition of the trust assets is expected to change
over time. For a general description of the receivables in the trust, see "The
Trust Portfolio" in the accompanying prospectus.
The following is selected information about the receivables:
- The receivables in the trust portfolio, as of the beginning of
the day on __________, 2000, included $__________ of principal
receivables and $__________ of finance charge and
administrative receivables.
- The accounts designated for the trust portfolio had an average
principal receivable balance of $__________ and an average
credit limit of $__________.
- The percentage of the aggregate total receivable balance to
the aggregate total credit limit was ___%. The average age of
the accounts was approximately __________ months.
- As of the beginning of the day on __________, 2000,
cardholders whose accounts are designated for the trust
portfolio had billing addresses in all 50 states and the
District of Columbia.
S-12
<PAGE> 18
The following tables summarize the trust portfolio by various criteria
as of the beginning of the day __________, 2000. Because the future composition
of the trust portfolio may change over time, these tables are not necessarily
indicative of the composition of the trust portfolio at any subsequent time.
COMPOSITION BY ACCOUNT BALANCE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE OF
NUMBER OF NUMBER OF OUTSTANDING TOTAL
ACCOUNT BALANCE RANGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- --------------------- ---------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Credit Balance.................................. % $ ( ) ( )%
$0.00........................................... 0 0.0
$0.01-$1,000.00.................................
$1,000.01-$2,500.00.............................
$2,500.01-$5,000.00.............................
$5,000.01-$7,500.00.............................
Over $7,500.00..................................
---------- -------- ----------- ----------
Total.................................. 100.00% $ 100.00%
========== ======== =========== ==========
</TABLE>
COMPOSITION BY CREDIT LIMIT
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE OF
NUMBER OF NUMBER OF OUTSTANDING TOTAL
ACCOUNT BALANCE RANGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- --------------------- ----------- -------- ------------ -----------
<S> <C> <C> <C> <C>
$0.00-$1,000.00................................. % $ %
$1,000.01-$2,000.00.............................
$2,000.01-$2,500.00.............................
$2,500.01-$5,000.00.............................
$5,000.01-$7,500.00.............................
Over $7,500.00..................................
---------- -------- ----------- ----------
Total.................................. 100.00% $ 100.00%
========== ======== =========== ==========
</TABLE>
COMPOSITION BY PERIOD OF DELINQUENCY
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE OF
NUMBER OF NUMBER OF OUTSTANDING TOTAL
ACCOUNT BALANCE RANGE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- --------------------- ---------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Not Delinquent.................................. % $ %
Up to 29 Days...................................
30 to 59 Days...................................
60 to 89 Days ..................................
90 to 119 Days..................................
120 to 149 Days.................................
150 to 179 Days.................................
180 or more Days................................
---------- -------- ----------- ----------
Total.................................. 100.00% $ 100.00%
========== ======== =========== ==========
</TABLE>
S-13
<PAGE> 19
COMPOSITION BY ACCOUNT AGE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL PERCENTAGE OF
ACCOUNT AGE NUMBER OF NUMBER OF OUTSTANDING TOTAL
(IN MONTHS) ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ----------- ----------- -------- ------------ -----------
<S> <C> <C> <C> <C>
Not more than 6 Months......................... % $ %
Over 6 Months to 12 Months......................
Over 12 Months to 24 Months.....................
Over 24 Months to 36 Months.....................
Over 36 Months to 60 Months.....................
Over 60 Months..................................
---------- -------- ----------- ----------
Total.................................. 100.00% $ 100.00%
========== ======== =========== ==========
</TABLE>
COMPOSITION BY STATE
TRUST PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL PERCENTAGE OF
NUMBER OF NUMBER OF OUTSTANDING TOTAL
STATE ACCOUNTS ACCOUNTS RECEIVABLES RECEIVABLES
- ----- ---------- -------- ------------ -----------
<S> <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...................................
</TABLE>
S-14
<PAGE> 20
<TABLE>
<S> <C> <C> <C> <C>
New Jersey......................................
New Mexico......................................
New York........................................
North Carolina..................................
North Dakota....................................
Ohio............................................
Oklahoma........................................
Oregon..........................................
Pennsylvania....................................
Rhode Island....................................
South Carolina..................................
South Dakota....................................
Tennessee.......................................
Texas...........................................
Utah............................................
Vermont.........................................
Virginia........................................
Washington......................................
West Virginia...................................
Wisconsin.......................................
Wyoming.........................................
All Others......................................
---------- -------- ----------- ----------
Total.................................. 00% $ 100.00%
========== ======== =========== ==========
</TABLE>
MATURITY CONSIDERATIONS
You are expected to receive payment of principal in full on _______,
200 . We call this date the "EXPECTED PRINCIPAL PAYMENT DATE." You may, however,
receive payments of principal earlier than the expected principal payment date
if a pay out event occurs and the early amortization period begins. The holders
of the Class B notes will not begin to receive payments of principal until the
final principal payment on the Class A notes has been made. The holders of the
Class C notes will not begin to receive payments of principal until the final
principal payments on the Class A notes and Class B notes have been made. The
holders of the Class D notes will not begin to receive payments of principal
until the final principal payment on the Class A notes, Class B notes and Class
C notes have been made.
CONTROLLED ACCUMULATION PERIOD
Principal for payment to the Series 2000- noteholders will accumulate
during the controlled accumulation period in the Principal Funding Account
established by the indenture trustee. The controlled accumulation period is
scheduled to begin at the close of business on __________, 200 , but may be
delayed based on recent payment rate experience, as discussed under "Description
of Series Provisions -- Postponement of Controlled Accumulation Period" in this
prospectus supplement. On each payment date during the controlled accumulation
period, an amount will be deposited into the Principal Funding Account equal to,
for each monthly period, the least of:
- Available Principal Collections;
- the Controlled Deposit Amount; and
- the Adjusted Invested Amount prior to any deposits on that
day.
We expect, but cannot assure you, that the amounts available in the
Principal Funding Account on the expected principal payment date will be
sufficient to pay in full the outstanding principal balance of the Class A
notes, Class B notes, Class C notes and Class D notes. If these amounts are not
available on the expected principal payment date, a pay out event will occur and
the early amortization period will begin.
S-15
<PAGE> 21
EARLY AMORTIZATION PERIOD
If a pay out event occurs during either the revolving period or the
controlled accumulation period, the early amortization period will begin. If a
pay out event occurs during the controlled accumulation period, on the next
payment date any amount on deposit in the Principal Funding Account will be paid
to the Class A noteholders. After the outstanding principal balance of the Class
A notes has been paid in full, any remaining amount will be paid to the Class B
noteholders. After the outstanding principal balance of the Class B notes has
been paid in full, any remaining amount will be paid to the Class C noteholders.
After the outstanding principal balance of the Class C notes has been paid in
full, any remaining amount will be paid to the Class D noteholders, up to the
outstanding principal balance of the Class D notes.
In addition, if the outstanding principal balance of the Class A notes
has not been paid in full, Available Principal Collections will be paid to the
Class A noteholders on each payment date until the earlier of:
- the date the Class A notes are paid in full; and
- __________, 200 , called the "SERIES 2000- TERMINATION DATE."
After the Class A notes have been paid in full, and if the Series 2000-
termination date has not occurred, Available Principal Collections will be paid
to the Class B noteholders on each payment date until the earlier of:
- the date the Class B notes are paid in full; and
- the Series 2000- termination date.
After the Class B notes have been paid in full, and if the Series 2000-
termination date has not occurred, Available Principal Collections will be paid
to the Class C noteholders on each payment date until the earlier of:
- the date the Class C notes are paid in full; and
- the Series 2000- termination date.
After the Class C notes have been paid in full, and if the Series 2000-
termination date has not occurred, Available Principal Collections will be paid
to the Class D noteholders on each payment date until the earlier of:
- the date the Class D notes are paid in full; and
- the Series 2000- termination date.
DESCRIPTION OF SERIES PROVISIONS
The following is a summary of the material provisions of the Series
2000- notes. This summary is not a complete description of the terms of the
Series 2000- notes. You should refer to "Description of the Notes" in the
accompanying prospectus as well as to the transfer and servicing agreement, the
indenture and the Series 2000- indenture supplement for a complete description.
The form of each of these agreements has been filed with the SEC as an exhibit
to the registration statement for the notes.
ISSUANCE
The Class A notes, Class B notes, Class C notes and Class D notes
comprise the "SERIES 2000- NOTES." Only the Class A notes, Class B notes and
Class C notes are offered by this prospectus supplement and the accompanying
prospectus. We call these notes the "OFFERED NOTES" or the "OFFERED SERIES 2000-
NOTES." The Series 2000- notes will be issued under the indenture, as
supplemented by the indenture supplement relating to the Series 2000- notes (the
"SERIES 2000- INDENTURE SUPPLEMENT"), in each case between the trust and the
indenture trustee. As described under
S-16
<PAGE> 22
"Description of the Notes --Issuance of Additional Series" in the accompanying
prospectus, the transferor may cause the owner trustee, on behalf of the trust,
and the indenture trustee to execute further indenture supplements in order to
issue additional series.
The "CLOSING DATE" for the Series 2000- notes is __________, 2000. The
Offered Series 2000- notes will be issued in denominations of $1,000 and
integral multiples of $1,000 and will be available only in book-entry form,
registered in the name of Cede & Co., as nominee of DTC. As described under
"Description of the Notes--General," "-- Book-Entry Registration" and "--
Definitive Notes" in the accompanying prospectus, unless and until definitive
notes are issued, you will be able to transfer your notes only through the
facilities of DTC. You will receive payments and notices through DTC and its
participants. Payments of interest and principal will be made on each payment
date on which those amounts are due to the noteholders in whose names Series
2000- notes were registered on the record date for that payment date. The
"RECORD DATE" is the business day immediately preceding a payment date.
[Application will be made to list the notes on the Luxembourg Stock
Exchange. However, we cannot assure you that the listing will be obtained. You
should consult with [_____________], the Luxembourg listing agent for the notes,
[Address] Luxembourg, phone number (__________) ___________, for the status of
the listing.]
INTEREST PAYMENTS
The Class A notes will accrue interest from and including the closing
date through but excluding __________, 2000, and for each following interest
period, at a rate of ___% per annum above LIBOR for the related LIBOR
determination date for each interest period (the "CLASS A NOTE INTEREST RATE").
The Class B notes will accrue interest from and including the closing
date through but excluding __________, 2000, and for each following interest
period, at a rate of ___% per annum above LIBOR for the related LIBOR
determination date for each interest period (the "CLASS B NOTE INTEREST RATE").
The Class C notes will accrue interest from and including the closing
date through but excluding __________, 2000, and for each following interest
period, at a rate of ___% per annum above LIBOR for the related LIBOR
determination date for each interest period (the "CLASS C NOTE INTEREST RATE").
The Class D notes will accrue interest from and including the closing
date through but excluding __________, 2000, and for each following interest
period, at a rate of ___% per annum above LIBOR for the related LIBOR
determination date for each interest period (the "CLASS D NOTE INTEREST RATE").
The indenture trustee will determine LIBOR for each interest period two
London business days before the related interest period commences. We call each
of these determination dates a "LIBOR DETERMINATION DATE." In calculating LIBOR,
a "LONDON BUSINESS DAY" is any business day on which dealings in deposits in
United States dollars are transacted in the London interbank market.
An "INTEREST PERIOD" begins on and includes a payment date and ends on
but excludes the next payment date. However, the first interest period will
begin on and include the closing date.
"LIBOR" means, for any LIBOR determination date, the London interbank
offered rate for deposits in U.S. dollars having a maturity of one month
commencing on the related LIBOR determination date (the "ONE-MONTH INDEX
MATURITY") which appears on Telerate Page 3750 as of 11:00 a.m., London time, on
that LIBOR determination date. If that rate does not appear on Telerate Page
3750, the rate for that day will be determined on the basis of the rates at
which deposits in United States dollars, having the One-Month Index Maturity and
in an amount of not less than U.S. $1,000,000, are offered by three major banks
selected by the servicer at approximately 11:00 a.m., London time, on that LIBOR
determination date to prime banks in the London interbank market. The indenture
trustee will request the principal London office of each of those banks to
provide a quotation of its rate. If at least two quotations are provided, the
rate for that LIBOR determination date will be the arithmetic mean of the
quotations. If fewer than two quotations are provided, the rate for that LIBOR
determination date will be the arithmetic mean of the rates quoted by major
banks in New York City, selected by the servicer, at approximately 11:00 a.m.,
New York City time, on that day for loans in
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United States dollars to leading European banks having the One Month Index
Maturity and in an amount equal to an amount of not less than U.S. $1,000,000;
provided that if the banks selected are not quoting as mentioned in this
sentence, LIBOR in effect for the applicable interest period will be LIBOR in
effect for the previous interest period.
"TELERATE PAGE 3750" means the display page currently so designated on
the Bridge Telerate Capital Markets Report, or any other page that replaces that
page on that service for the purpose of displaying comparable rates or prices.
The Class A note interest rate, Class B note interest rate, Class C
note interest rate and Class D note interest rate applicable to the then-current
and immediately preceding interest period may be obtained by telephoning the
indenture trustee at its corporate trust office at (___) ________.
Interest on the notes will be calculated on the basis of the actual
number of days in the related interest period and a 360-day year.
Interest will be paid on each "PAYMENT DATE," which will be __________
, 2000 and the 15th day of each following month. If the 15th day is not a
business day, then the payment date will be the following business day. For
purposes of this prospectus supplement and the accompanying prospectus, a
"BUSINESS DAY" is any day other than a Saturday, a Sunday or a day on which
banking institutions in New York, New York, Delaware, Utah or any other state in
which the principal executive offices of the seller, the owner trustee or the
indenture trustee are located, are authorized or obligated by law, executive
order or governmental decree to be closed.
Interest payments on the Class A notes, Class B notes, Class C notes
and Class D notes on any payment date will be calculated on the outstanding
principal balance of the Class A notes, Class B notes, Class C notes and Class D
notes, as applicable, as of the preceding record date. However, interest for the
first payment date will accrue at the applicable note interest rate on the
initial outstanding principal balance of the Class A notes, Class B notes, Class
C notes and Class D notes, as applicable, from the closing date.
Interest due on the Class A notes, Class B notes, Class C notes and
Class D notes but not paid on any payment date will be payable on the following
payment date, together with additional interest on that amount at the applicable
note interest rate. We refer to this additional interest as "CLASS A ADDITIONAL
INTEREST," "CLASS B ADDITIONAL INTEREST," "CLASS C ADDITIONAL INTEREST" and
"CLASS D ADDITIONAL INTEREST." Additional interest will accrue on the same basis
as interest on the Series 2000- notes, and will accrue from the payment date on
which the overdue interest became due, to but excluding the payment date on
which the additional interest is paid. Unpaid additional interest will not also
accrue additional interest.
Interest payments on the Series 2000- notes on any payment date will be
paid from Available Finance Charge Collections for the related monthly period
and, to the extent Available Finance Charge Collections are insufficient to pay
the interest, from any Shared Finance Charge Collections and Reallocated
Principal Collections for that monthly period. Interest payments on the Class C
notes and the Class D notes on any payment date will also be paid from available
amounts on deposit in the cash collateral account to the extent needed.
"AVAILABLE FINANCE CHARGE COLLECTIONS" means, for any monthly period,
an amount equal to the sum of:
- the Investor Percentage of collections of finance charge and
administrative receivables deposited in the collection account
for that monthly period;
- any net investment earnings on amounts on deposit in the
Principal Funding Account for that monthly period; and
- any amounts withdrawn from the reserve account which are
required to be included in Available Finance Charge
Collections under the Series 2000-A indenture supplement for
the related payment date.
For purposes of the Series 2000- notes,
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<PAGE> 24
"FINANCE CHARGE AND ADMINISTRATIVE RECEIVABLES," are periodic
finance charges, and annual membership fees and service
charges, late fees, overlimit fees, cash advance fees, and the
portion of interchange and all other fees and charges on
accounts designated by the transferor to be included as
finance charge and administrative receivables, and any other
amounts, other than principal receivables, designated by the
transferor to be "finance charge and administrative
receivables." See "The Trust Portfolio" for further
information on the type of receivables included in the trust.
The transferor will be required to transfer to the trust a percentage
of the interchange attributed to the accounts in the trust. Interchange arising
under the accounts will be allocated to the Invested Amount on the basis of the
Floating Investor Percentage of the ratio which the amount of principal
receivables in the trust bears to the total amount of principal receivables
attributable to accounts owned by the seller, as reasonably estimated by the
servicer. See "The Bank's Credit Card Activities--Interchange" in the
accompanying prospectus. Interchange will be treated as collections of finance
charge and administrative receivables for purposes of allocating collections of
finance charge and administrative receivables, making required monthly payments
and calculating Net Portfolio Yield. Interchange will be used to pay a portion
of the monthly servicing fee, as described under "Description of the Notes --
Servicing Compensation and Payment of Expenses."
Each "MONTHLY PERIOD" will be the period from and including the first
day of a calendar month to and including the last day of that calendar month.
The initial monthly period will commence on and include the closing date and end
on and include __________ , 2000.
[PRE-FUNDING ACCOUNT
On the closing date, $__________ will be deposited into an account
called the "PRE-FUNDING ACCOUNT." The Pre-Funding Account will be established
with an eligible institution. Funds will be maintained in the Pre-Funding
Account until the earliest of:
- the commencement of the Early Amortization Period;
- the date on which the Invested Amount first equals
$__________; and
- __________, 20__.
During this funding period, funds may be withdrawn on a weekly basis to the
extent of any increases in the Invested Amount resulting from an increase in the
amount of the trust's principal receivables. Funds may be withdrawn only to the
extent that (a) the Transferor Interest on that day exceeds the Required
Transferor Interest on that day and (b) the aggregate amount of principal
receivables in the trust on that day exceeds the Required Minimum Principal
Balance on that day. However, the Invested Amount will not exceed the initial
outstanding principal amount of the Series 2000- notes or increase by an amount
greater than the funds on deposit in the Pre-Funding Account immediately prior
to that increase. If there are funds in the Pre-Funding Account after the end of
the funding period, those funds will be paid to the noteholders based on each
noteholder's interest in the trust.
All amounts on deposit in the Pre-Funding Account will be invested by
the indenture trustee in eligible investments. On each payment date during the
funding period, all net investment income earned on amounts in the Pre-Funding
Account during the preceding monthly period will be withdrawn from the
Pre-Funding Account and deposited into the collection account for distribution
as collections of finance charge and administrative receivables allocable to the
noteholders. This investment income will be deemed to be collections of finance
charge and administrative receivables allocable to the Series 2000- notes for
that monthly period.]
PRINCIPAL PAYMENTS
Principal payments on the Series 2000- notes will be paid from
"AVAILABLE PRINCIPAL COLLECTIONS" which, for any monthly period, equal:
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<PAGE> 25
- the Investor Percentage of collections of principal
receivables deposited in the collection account for that
monthly period; minus
- the amount of Reallocated Principal Collections for that
monthly period; plus
- any Shared Principal Collections from other series in group
[one] allocated to your series.
REVOLVING PERIOD
The "REVOLVING PERIOD" for the Series 2000- notes begins on the closing
date and ends on the earlier of the date the controlled accumulation period or
the early amortization period begins. During the revolving period, the Investor
Percentage of collections of principal receivables will, subject to specified
limitations, including the allocation of any Reallocated Principal Collections
for that monthly period, be treated as Shared Principal Collections and used to
pay principal to other series in group [one] or will be paid to the holders of
the transferor certificates.
CONTROLLED ACCUMULATION PERIOD
The "CONTROLLED ACCUMULATION PERIOD" for the Series 2000- notes is
scheduled to begin on __________, 200 , but may be postponed, as discussed under
"Description of Series Provisions --Postponement of the Controlled Accumulation
Period" in this prospectus supplement.
The controlled accumulation period ends on the earliest of:
- the beginning of the early amortization period;
- the payment in full of the Invested Amount; and
- the Series 2000- termination date.
If a pay out event occurs before the controlled accumulation period
begins, there will be no controlled accumulation period and the early
amortization period will begin.
On each payment date during the controlled accumulation period, the
indenture trustee will deposit in the Principal Funding Account an amount equal
to the least of (a) Available Principal Collections for that payment date, (b)
the applicable Controlled Deposit Amount and (c) the Adjusted Invested Amount
prior to any deposits on that date. Amounts in the Principal Funding Account
will be paid:
- first to Class A noteholders, up to the outstanding principal
balance of the Class A notes;
- then to Class B noteholders, up to the outstanding principal
balance of the Class B notes;
- then to Class C noteholders, up to the outstanding principal
balance of the Class C notes;
- then to Class D noteholders, up to the outstanding principal
balance of the Class D notes;
in each case, on the expected principal payment date unless paid earlier due to
the commencement of the early amortization period.
During the controlled accumulation period, the portion of Available
Principal Collections not applied for the payment of principal on the Class A
notes, the Class B notes, the Class C notes or the Class D notes on a payment
date and not treated as Reallocated Principal Collections generally will be
treated as Shared Principal Collections.
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<PAGE> 26
EARLY AMORTIZATION PERIOD
The "EARLY AMORTIZATION PERIOD" for the Series 2000- notes will begin
on the day on which a pay out for Series 2000- occurs.
The early amortization period ends on the earliest of:
- the payment in full of the Invested Amount; and
- the Series 2000- termination date.
On each payment date during the early amortization period, the Class A
noteholders will be entitled to receive Available Principal Collections for the
related monthly period in an amount up to the outstanding principal balance of
the Class A notes.
After payment in full of the outstanding principal balance of the Class
A notes, the Class B noteholders will be entitled to receive, on each payment
date during the early amortization period, Available Principal Collections for
the related monthly period in an amount up to the outstanding principal balance
of the Class B notes.
After payment in full of the outstanding principal balance of the Class
B notes, the Class C noteholders will be entitled to receive, on each payment
date during the early amortization period, Available Principal Collections for
the related monthly period in an amount up to the outstanding principal balance
of the Class C notes.
After payment in full of the outstanding principal balance of the Class
C notes, the Class D noteholders will be entitled to receive on each payment
date during the early amortization period, Available Principal Collections for
the related monthly period in an amount up to the outstanding principal balance
of the Class D notes.
See "-- Pay Out Events" below for a discussion of events that might
lead to the commencement of the early amortization period.
POSTPONEMENT OF CONTROLLED ACCUMULATION PERIOD
The controlled accumulation period is scheduled to last [__________]
months. However, the servicer may elect to extend the revolving period and
postpone the controlled accumulation period by notifying the indenture trustee.
The servicer can make this election only if the number of months needed to fund
the Principal Funding Account based on expected collections of principal
receivables needed to pay principal on the Series 2000- notes is less than
[__________] months.
On each determination date beginning in __________200__ and ending when
the controlled accumulation period begins, the servicer will review the amount
of expected collections of principal receivables and determine the number of
months expected to be required to fully fund the Principal Funding Account by
the expected principal payment date and may elect to postpone the controlled
accumulation period. In making its decision, the servicer is required to assume
that the principal payment rate will be no greater than the lowest monthly
payment rate for the prior 12 months and will consider the amount of principal
expected to be allocable to noteholders of all other series which are expected
to be amortizing or accumulating principal during the controlled accumulation
period for Series 2000- .
In no case will the controlled accumulation period be reduced to less
than one month.
The method for determining the number of months required to fully fund
the Principal Funding Account may be changed upon receipt of written
confirmation that the change will not result in the reduction or withdrawal by
any rating agency of its rating of any outstanding series or class.
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<PAGE> 27
ALLOCATION PERCENTAGES
Under the indenture, for each monthly period, the servicer will
allocate among the Invested Amount, the invested amount for all other series
issued and outstanding and the transferor interest, all amounts collected on
finance charge and administrative receivables, all amounts collected on
principal receivables and all Defaulted Amounts for that monthly period.
These amounts will be allocated based on the Investor Percentage.
The "INVESTOR PERCENTAGE," for any monthly period, means (a) for
Defaulted Amounts at any time and for collections of finance charge and
administrative receivables and principal receivables during the revolving
period, the Floating Investor Percentage and (b) for collections of finance
charge and administrative receivables and principal receivables during the
controlled accumulation period and early amortization period, the Fixed Investor
Percentage.
FLOATING ALLOCATION DEFINITIONS
Defaulted Amounts at any time and collections of finance charge and
administrative receivables and principal receivables during the revolving period
will be allocated to the Invested Amount based on the Floating Investor
Percentage. The "FLOATING INVESTOR PERCENTAGE" means, for any monthly period,
the percentage equivalent of a fraction:
(a) the numerator of which is the Adjusted Invested Amount as of
the close of business on the last day of the preceding monthly
period, or for the first monthly period, the initial Invested
Amount, and
(b) the denominator of which is the greater of:
(i) the sum of (A) the aggregate amount of principal
receivables in the trust as of the close of business
on the last day of the preceding monthly period, or
for the first monthly period, the aggregate amount of
principal receivables in the trust as of the close of
business on the closing date, and (B) the principal
amount on deposit in the Excess Funding Account as of
the close of business on the last day of the
preceding monthly period, or for the first monthly
period, as of the closing date, and
(ii) the sum of the numerators used to calculate the
Investor Percentages for allocations of finance
charge and administrative receivables, Defaulted
Amounts or principal receivables, as applicable, for
all outstanding series on the date of determination.
The denominator used in the calculation of Floating Investor
Percentage, however, will be adjusted as follows, for any monthly period in
which a Reset Date occurs:
the amount in clause (b)(i)(A) above will be:
(1) the aggregate amount of principal receivables in the
trust as of the close of business on the last day of
the prior monthly period, for the period from and
including the first day of the prior monthly period
to but excluding the related Reset Date; and
(2) the aggregate amount of principal receivables in the
trust as of the close of business on the related
Reset Date after adjusting for the aggregate amount
of principal receivables added to or removed from the
trust on the related Reset Date, for the period from
and including the related Reset Date to and including
the last day of that monthly period.
A "RESET DATE" is any date that is an addition date, a date on which the
issuance of additional notes of an outstanding series occurs, a date on which an
increase or decrease in the invested amount of any series that is a variable
principal funding series occurs, or a removal date on which for any series that
has been paid in full, principal receivables in an aggregate amount
approximately equal to the initial invested amount of that series are removed
from the trust.
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<PAGE> 28
FIXED ALLOCATION DEFINITIONS
Collections of finance charge and administrative receivables and
principal receivables during the controlled accumulation period and early
amortization period will be allocated to the Invested Amount based on the Fixed
Investor Percentage. The "FIXED INVESTOR PERCENTAGE" means, for any monthly
period, the percentage equivalent of a fraction:
(a) the numerator of which is the Invested Amount as of the close
of business on the last day of the revolving period; and
(b) the denominator of which is the greater of:
(i) the sum of (A) the aggregate amount of principal
receivables in the trust as of the close of business
on the last day of the prior monthly period, or for
the first monthly period, the aggregate amount of
principal receivables in the trust as of the closing
date, and (B) the principal amount on deposit in the
Excess Funding Account as of the close of business on
the last day of the preceding monthly period, or with
respect to the first monthly period, as of the
closing date, and
(ii) the sum of the numerators used to calculate the
Investor Percentages for allocations of principal
receivables or finance charge receivables, as
applicable, for all outstanding series on the date of
determination.
The denominator used in the calculation of Fixed Investor Percentage,
however, will be adjusted as follows, for any monthly period in which a Reset
Date occurs:
the amount in clause (b)(1)(A) above will be:
(1) the aggregate amount of principal receivables in the trust as
of the close of business on the last day of the prior monthly
period, for the period from and including the first day of the
prior monthly period to but excluding the related Reset Date;
and
(2) the aggregate amount of principal receivables in the trust as
of the close of business on the related Reset Date after
adjusting for the aggregate amount of principal receivables
added to or removed from the trust on the related Reset Date,
for the period from and including the related Reset Date to
and including the last day of that monthly period.
During the controlled accumulation period, on any date, at the option
of the transferor, for purposes of allocating collections of principal
receivables, the numerator of the Fixed Investor Percentage may be reduced below
the numerator used in the previous monthly period, to an amount not less than
the greater of:
- the Invested Amount as of the last day of the immediately
preceding monthly period, less the amount of any distributions
of principal deposited in the Principal Funding Account since
the last day of the immediately preceding monthly period; and
- an amount that if used as the numerator of the Fixed Investor
Percentage for the remainder of the controlled accumulation
period, based on assumptions set forth in the indenture
supplement, would assure that the Available Principal
Collections for Series 2000- would equal at least 125% of the
Controlled Deposit Amount for each monthly period for so long
as the Invested Amount is greater than zero.
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<PAGE> 29
INVESTED AMOUNT DEFINITIONS
The "INVESTED AMOUNT," for any date of determination, means an amount
equal to (a) the initial outstanding principal amount of the Series 2000- notes,
minus (b) the amount of principal previously paid to the Series 2000-
noteholders, minus (c) the amount of unreimbursed Investor Charge-Offs and
Reallocated Principal Collections.
The "ADJUSTED INVESTED AMOUNT" means for any date of determination the
Invested Amount as of that date, minus the amount on deposit in the Principal
Funding Account for that date.
REALLOCATED PRINCIPAL COLLECTIONS
On each payment date, if the sum of Class A Monthly Interest, Class B
Monthly Interest, Class C Monthly Interest and the monthly servicing fee cannot
be paid from Available Finance Charge Collections, Shared Finance Charge
Collections as described under "-- Application of Collections," and, in the case
of the Class C notes, monthly interest from amounts withdrawn from the cash
collateral account, then collections of principal receivables allocated to the
Invested Amount will be treated as collections of finance charge and
administrative receivables and will be available to pay these amounts in an
amount equal to the Reallocated Principal Collections, and the Invested Amount
will be reduced accordingly. A reduction in the Invested Amount will reduce the
allocation of collections of finance charge and administrative receivables and
collections of principal receivables to your series.
"REALLOCATED PRINCIPAL COLLECTIONS" means for any monthly period
Available Principal Collections used to pay interest on the Class A notes, the
Class B notes, the Class C notes or used to pay the monthly servicing fee in an
amount equal to the lower of:
- the excess of the amounts needed to pay current and
past due Class A Monthly Interest and Class A
additional interest as described under "--
Application of Collections -- Payment of Interest,
Fees and Other Items" below over the Available
Finance Charge Collections and Shared Finance Charge
Collections allocated to cover these amounts; and
- [ ]% of the initial Invested Amount, minus the amount
of unreimbursed Investor Charge-Offs and unreimbursed
Reallocated Principal Collections;
plus
- the lower of:
- the sum of (a) the excess of the amounts needed to
pay current and past due Class B Monthly Interest and
Class B additional interest as described under
"--Application of Collections --Payments of Interest,
Fees and Other Items" below over the Available
Finance Charge Collections and Shared Finance Charge
Collections allocated to cover these amounts and (b)
the excess of the monthly servicing fee over the
Available Finance Charge Collections allocated to
cover these amounts; and
- [___]% of the initial Invested Amount minus the
amount of unreimbursed Investor Charge-Offs and
unreimbursed Reallocated Principal Collections;
plus
- the lower of:
- the excess of the amounts needed to pay current and
past due Class C Monthly Interest and Class C
additional interest as described under " --
Application of Collections -- Payment of Interest,
Fees and Other Items" below over the Available
Finance Charge Collections, Shared
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<PAGE> 30
Finance Charge Collections and amounts withdrawn from
the cash collateral account for the benefit of the
Class C notes allocated to cover these amounts; and
- [ ]% of the initial Invested Amount, minus the amount
of unreimbursed Investor Charge-Offs and unreimbursed
Reallocated Principal Collections.
APPLICATION OF COLLECTIONS
Payment of Interest, Fees and Other Items
On each payment date, the servicer will direct the indenture trustee to
apply Available Finance Charge Collections and Shared Finance Charge Collections
on deposit in the collection account in the following order:
- an amount equal to the Class A Monthly Interest plus Class A
additional interest due for the related payment date, and past
due for any prior payment dates, will be paid to the Class A
noteholders on that payment date;
- an amount equal to the Class B Monthly Interest plus Class B
additional interest due for the related payment date, and past
due for any prior payment dates, will be paid to the Class B
noteholders on that payment date;
- an amount equal to the monthly servicing fee due for the
related payment date, and past due for any prior payment date,
will be paid to the servicer;
- an amount equal to the Class C Monthly Interest plus Class C
additional interest due for the related payment date, and past
due for any prior payment dates, will be paid to the Class C
noteholders on that payment date;
- an amount equal to any Investor Default Amount for the related
monthly period, will be treated as Available Principal
Collections;
- an amount equal to the sum of the Investor Charge-Offs and the
amount of unreimbursed Reallocated Principal Collections will
be treated as Available Principal Collections;
- on and after the reserve account funding date, an amount equal
to any excess of the Required Reserve Account Amount over the
amount then on deposit in the reserve account will be
deposited into the reserve account;
- an amount equal to the Class D Monthly Interest plus Class D
additional interest due for the related payment date, and past
due for any prior payment dates, will be paid to the Class D
noteholders on that payment date;
- an amount equal to any excess of the Required Cash Collateral
Account Amount over the amount then on deposit in the cash
collateral account will be deposited into the cash collateral
account;
- all remaining amounts will be treated as Shared Finance Charge
Collections and will be available to cover any shortfalls in
collections of finance charge and administrative receivables
for other outstanding series in group [one]; and
- after payment of these shortfalls, the remaining amount will
be paid to the holders of the transferor certificates.
In the event that Available Finance Charge Collections and Shared
Finance Charge Collections for any monthly period are insufficient to pay the
Class C Monthly Interest or the Class D Monthly Interest when due, a draw will
be
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<PAGE> 31
made from amounts available in the cash collateral account to the extent of that
insufficiency and will be paid to the Class C noteholders or the Class D
noteholders on the related payment date.
"CLASS A MONTHLY INTEREST" for any payment date will equal the product
of (a) the Class A note interest rate for the related interest period, (b) the
actual number of days in that interest period divided by 360 and (c) the
outstanding principal balance of the Class A notes as of the close of business
on the applicable record date or, for the first payment date, the outstanding
principal balance of the Class A notes as of the closing date.
"CLASS B MONTHLY INTEREST" for any payment date will equal the product
of (a) the Class B note interest rate for the related interest period, (b) the
actual number of days in that interest period divided by 360 and (c) the
outstanding principal balance of the Class B notes as of the close of business
on the applicable record date or, with respect to the first payment date, the
outstanding principal balance of the Class B notes as of the closing date.
"CLASS C MONTHLY INTEREST" for any payment date will equal the product
of (a) the Class C note interest rate for the related interest period, (b) the
actual number of days in that interest period divided by 360 and (c) the
outstanding principal balance of the Class C notes as of the close of business
on the applicable record date or, with respect to the first payment date, the
outstanding principal balance of the Class C notes as of the closing date.
"CLASS D MONTHLY INTEREST" for any payment date will equal the product
of (a) the Class D note interest rate for the related interest period, (b) the
actual number of days in that interest period divided by 360 and (c) the
outstanding principal balance of the Class D notes as of the close of business
on the applicable record date or, with respect to the first payment date, the
outstanding principal balance of the Class D notes as of the closing date.
"MONTHLY INTEREST" for any payment date will equal the sum of the Class
A Monthly Interest, the Class B Monthly Interest, the Class C Monthly Interest
and the Class D Monthly Interest for that payment date.
PAYMENTS OF PRINCIPAL
On each payment date, the servicer will direct the indenture trustee to
apply Available Principal Collections on deposit in the collection account in
the following priority:
- on each payment date during the revolving period, all
Available Principal Collections will be treated as Shared
Principal Collections and applied as described under
"Description of Series Provisions -- Shared Principal
Collections" in this prospectus supplement and "Description of
the Notes -- Shared Principal Collections" in the accompanying
prospectus;
- on each payment date during the controlled accumulation period
and the early amortization period, all Available Principal
Collections will be paid or deposited in the following
priority:
- during the controlled accumulation period, an amount
equal to Monthly Principal will be deposited in the
Principal Funding Account;
- during the early amortization period, an amount equal
to the Monthly Principal will be distributed to the
paying agent for payment to the Class A noteholders
until the outstanding principal balance of the Class
A notes has been paid in full;
- during the early amortization period, an amount equal
to Monthly Principal will, after the outstanding
principal balance of the Class A notes has been paid
in full be distributed to the paying agent for
payment to the Class B noteholders until the
outstanding principal balance of the Class B notes
has been paid in full; and
- during the early amortization period, an amount equal
to Monthly Principal will, after the outstanding
principal balances of the Class A notes and the Class
B notes have been paid in full be distributed to the
paying agent for payment to the Class C
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<PAGE> 32
noteholders until the outstanding principal balance
of the Class C notes has been paid in full; and
- during the early amortization period, an amount equal
to Monthly Principal will, after the outstanding
principal balances of the Class A notes, the Class B
notes and the Class C notes have been paid in full be
distributed to the paying agent for payment to the
Class D noteholders until the outstanding principal
balance of the Class D notes has been paid in full;
and
- on each payment date during the controlled accumulation period
and the early amortization period, any Available Principal
Collections not applied as described above will be treated as
Shared Principal Collections and applied as described under
"Description of Series Provisions -- Shared Principal
Collections" in this prospectus supplement and "Description of
the Notes -- Shared Principal Collections" in the accompanying
prospectus.
"ACCUMULATION SHORTFALL" means:
(a) on the first payment date during the controlled accumulation
period, any excess of the Controlled Accumulation Amount for
that payment date over the amount deposited in the Principal
Funding Account on that payment date; and
(b) on each subsequent payment date during the controlled
accumulation period, any excess of the applicable Controlled
Accumulation Amount for that subsequent payment date plus any
Accumulation Shortfall for the prior payment date over the
amount deposited in the Principal Funding Account on that
subsequent payment date.
"CONTROLLED ACCUMULATION AMOUNT" for any payment date during the
controlled accumulation period means $__________. However, if the commencement
of the controlled accumulation period is postponed as described under
"-- Postponement of Controlled Accumulation Period," the Controlled Accumulation
Amount may be higher than the amount stated above for each payment date during
the controlled accumulation period and will be determined by the servicer in
accordance with the Series 2000- indenture supplement based on the principal
payment rates for the accounts and on the invested amounts of other series,
other than certain excluded series, which are scheduled to be in their revolving
periods and then scheduled to create Shared Principal Collections during the
controlled accumulation period.
"CONTROLLED DEPOSIT AMOUNT" for any payment date during the controlled
accumulation period means the sum of (i) the Controlled Accumulation Amount for
that payment date, plus (ii) any Accumulation Shortfall.
"MONTHLY PRINCIPAL" for any payment date will equal the least of (i)
the Available Principal Collections on deposit in the collection account for
that payment date, (ii) for each payment date during the controlled accumulation
period, the Controlled Deposit Amount for that payment date, and (iii) the
Adjusted Invested Amount (as adjusted for any Investor Charge-Offs and
Reallocated Principal Collections on that payment date) prior to any deposits
into the Principal Funding Account on that payment date.
SUBORDINATION
The Class B notes, the Class C notes and the Class D notes are
subordinated to the Class A notes. The Class C notes and the Class D notes are
subordinated to the Class B notes. The Class D notes are subordinated to the
Class C notes.
Interest payments will be made on the Class A notes prior to being made
on the Class B notes, the Class C notes and the Class D notes. Interest payments
will be made on the Class B notes prior to being made on the Class C notes and
the Class D notes. Interest payments will be made on the Class C notes prior to
being made on the Class D notes.
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<PAGE> 33
Principal payments on the Class B notes will not begin until the Class
A notes have been paid in full. Principal payments on the Class C notes will not
begin until the Class A notes and the Class B notes have been paid in full.
Principal payments on the Class D notes will not begin until the Class A notes,
the Class B notes and the Class C notes have been paid in full. If collections
of principal receivables allocated to your series are reallocated to pay the
interest on the Class A notes, the principal balance of the Class D notes, the
Class C notes and the Class B notes may not be repaid. If collections of
principal receivables allocated to your series are reallocated to pay interest
on the Class B notes, the principal balance of the Class C notes and the Class D
notes may not be repaid. If a foreclosure certificate is sold after an event of
default, the net proceeds of that sale which are available to pay principal on
the Series 2000- notes would be paid first to the Class A notes before any
remaining net proceeds would be available for payments due to the Class B notes,
the Class C notes or the Class D notes.
SHARED FINANCE CHARGE COLLECTIONS
Collections of finance charge and administrative receivables and other
amounts treated like collections of finance charge and administrative
receivables in excess of the amount required to make payments or deposits for
your series will be made available to other series included in group [one] whose
allocation of collections of finance charge and administrative receivables is
not sufficient to make its required payments or deposits. If collections of
finance charge and administrative receivables allocated through the Investor
Percentage are insufficient to make payments described under "-- Application of
Collections -- Payment of Interest, Fees and Other Items" in this prospectus
supplement, your series will have access to collections of finance charge and
administrative receivables and other amounts treated like collections of finance
charge and administrative receivables from each other series in group [one], if
any, to the extent they exceed the amounts necessary to make required payments
for that series. We call these collections "SHARED FINANCE CHARGE COLLECTIONS."
Each series that is part of group [one] and has a shortfall will receive a share
of the total amount of Shared Finance Charge Collections available for that
month based on the amount of shortfall for that series divided by the total
shortfall for all series for that same month. The amount of the shortfall for
each series will be calculated as described in the documents governing each
series.
SHARED PRINCIPAL COLLECTIONS
Collections of principal receivables for any monthly period allocated
to the Invested Amount will first be used to cover, for any monthly period
during the controlled accumulation period, deposits of the applicable Controlled
Deposit Amount to the Principal Funding Account, and during the early
amortization period, payments to the noteholders. The servicer will determine
the amount of collections of principal receivables for any monthly period
allocated to the Invested Amount remaining after covering required payments to
the noteholders and any similar amount remaining for any other series in group
[one]. This remaining amount we call "SHARED PRINCIPAL COLLECTIONS." The
servicer will allocate the Shared Principal Collections to cover any scheduled
or permitted principal payments to noteholders and any deposits to Principal
Funding Accounts for any series in group [one] which have not been covered out
of the collections of principal receivables allocable to the other series in
group [one] and certain other amounts for those series. We call these uncovered
amounts "PRINCIPAL SHORTFALLS." Shared Principal Collections will not be used to
cover investor charge-offs for any series. If Principal Shortfalls exceed Shared
Principal Collections for any monthly period, then Shared Principal Collections
will be allocated among the applicable series in group [one] based on the
relative amounts of Principal Shortfalls. To the extent that Shared Principal
Collections exceed Principal Shortfalls, the balance will be paid to the holders
of the transferor certificates or deposited in the Excess Funding Account.
DEFAULTED RECEIVABLES; INVESTOR CHARGE-OFFS
The Investor Default Amount represents the series' share of losses from
the trust portfolio. On each payment date, the servicer will calculate the
"INVESTOR DEFAULT AMOUNT" by multiplying:
- the Floating Investor Percentage for that month, by
- the "DEFAULTED AMOUNT," which is the total amount of principal
receivables, other than ineligible receivables, in the trust
that were charged-off for that month.
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<PAGE> 34
If the Investor Default Amount exceeds the amount of collections of finance
charge and administrative receivables allocated to fund this amount for the
prior month, then the Invested Amount will be reduced by the excess. In no
event, however, will the Invested Amount be reduced below zero. Reductions in
the Invested Amount may be reimbursed from subsequent collections of finance
charge and administrative receivables allocated for reimbursement. If the
Invested Amount is reduced to zero, your series will not receive any further
allocations of collections of finance charge and administrative receivables and
collections of principal receivables.
PRINCIPAL FUNDING ACCOUNT
The indenture trustee will establish and maintain with an eligible
institution an eligible deposit account held for the benefit of the noteholders
to serve as the "PRINCIPAL FUNDING ACCOUNT." During the controlled accumulation
period, the indenture trustee at the direction of the servicer will transfer
Available Principal Collections from the collection account to the Principal
Funding Account as described under "-- Application of Collections" in this
prospectus supplement.
Funds on deposit in the Principal Funding Account will be invested to
the following payment date by the indenture trustee at the direction of the
servicer in eligible investments. Investment earnings, net of investment losses
and expenses, on funds on deposit in the Principal Funding Account will be
deposited in the collection account and included in Available Finance Charge
Collections for the related interest period.
If, for any payment date, the net investment earnings are less than the
product of (i) the balance of the Principal Funding Account, up to the Invested
Amount on the record date immediately preceding that payment date, (ii) the
weighted average of the Class A note interest rate, Class B note interest rate,
Class C note interest rate and Class D note interest rate for the related
interest period and (iii) the number of days in the related interest period
divided by 360, then the indenture trustee will withdraw the shortfall, called
the "RESERVE DRAW AMOUNT," to the extent required and available, from the
reserve account and deposit it in the collection account for use as Available
Finance Charge Collections.
RESERVE ACCOUNT
The indenture trustee will establish and maintain a segregated trust
account with an eligible institution for the benefit of the noteholders to serve
as the "RESERVE ACCOUNT." The reserve account is established to assist with the
payment of interest on the notes during the controlled accumulation period and
on the first payment date during the early amortization period. On each payment
date from and after the reserve account funding date, but prior to the
termination of the reserve account, the indenture trustee, acting on the
servicer's instructions, will apply Available Finance Charge Collections and
Shared Finance Charge Collections allocated to the Series 2000- notes, to the
extent described above under "-- Application of Collections -- Payment of
Interest, Fees and Other Items", to increase the amount on deposit in the
reserve account up to the Required Reserve Account Amount.
The "RESERVE ACCOUNT FUNDING DATE" will be the payment date for the
monthly period which commences no later than three months prior to the
commencement of the controlled accumulation period, or an earlier date selected
by the servicer.
The "REQUIRED RESERVE ACCOUNT AMOUNT" for any payment date on or after
the reserve account funding date will be equal to (a) [___]% of the outstanding
aggregate principal balance of the Class A notes, the Class B notes, the Class C
notes and the Class D notes or (b) any other amount selected by the transferor.
However, if the amount designated by the transferor is less than the amount in
clause (a), the transferor will provide the servicer and the indenture trustee
with written confirmation that the designation will not result in the reduction
or withdrawal by any rating agency of its rating of any outstanding series or
class, and the transferor will deliver to the indenture trustee a certificate of
an authorized officer to the effect that, based on the facts known to that
officer at the time, in the reasonable belief of the transferor, the other
amount selected will not cause a pay out event or an event that, after the
giving of notice or the lapse of time, would cause a pay out event to occur for
Series 2000- .
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<PAGE> 35
On each payment date, after giving effect to any deposit to be made to,
and any withdrawal to be made from, the reserve account on that payment date,
the indenture trustee will withdraw from the reserve account an amount equal to
any excess of the amount on deposit in the reserve account over the Required
Reserve Account Amount. The indenture trustee will deposit the excess in the
cash collateral account to the extent that funds available in the cash
collateral account are less than the Required Cash Collateral Account Amount and
will distribute any remaining excess to the holders of the transferor
certificates. Any amounts withdrawn from the reserve account and deposited in
the cash collateral account as described above will be available for
distribution only to the holders of the Class C notes and the Class D notes. Any
amounts withdrawn from the reserve account and distributed to the holders of the
transferor certificates as described above will not be available for
distribution to the noteholders.
So long as the reserve account is not terminated as described below,
all amounts on deposit in the reserve account on any payment date, after giving
effect to any deposits to, or withdrawals from, the reserve account to be made
on that payment date, will be invested to the following payment date by the
indenture trustee at the direction of the servicer in eligible investments. The
interest and other investment income, net of investment expenses and losses,
earned on these investments will be retained in the reserve account, to the
extent the amount on deposit is less than the Required Reserve Account Amount,
or deposited in the collection account and treated as Available Finance Charge
Collections.
On or before each payment date during the controlled accumulation
period and on the first payment date during the early amortization period, the
indenture trustee will withdraw from the reserve account and deposit in the
collection account to be included as Available Finance Charge Collections for
that payment date an aggregate amount equal to the least of:
- the amount then on deposit in the reserve account for that
payment date;
- the Required Reserve Account Amount; and
- the Reserve Draw Amount for that payment date.
However, the amount of the withdrawal will be reduced to the extent that funds
otherwise would be available to be deposited in the reserve account on that
payment date.
The reserve account will be terminated upon the earliest of:
- the first payment date during the early amortization period;
- the expected principal payment date; and
- the Series 2000- termination date.
Upon the termination of the reserve account, all amounts on deposit in
the reserve account, after giving effect to any withdrawal from the reserve
account on that date as described above, will be deposited in the cash
collateral account to the extent that funds available in the cash collateral
account are less than the Required Cash Collateral Account Amount and any
remaining amounts will be distributed to the holders of the transferor
certificates. Any amounts withdrawn from the reserve account and deposited in
the cash collateral account as described above will be available for
distribution only to the holders of the Class C notes and the Class D notes. Any
amounts withdrawn from the reserve account and distributed to the holders of the
transferor certificates as described above will not be available for
distribution to the noteholders.
CASH COLLATERAL ACCOUNT
The servicer will establish and maintain a segregated account with an
eligible institution for the benefit of the Class C noteholders and Class D
noteholders called the "CASH COLLATERAL ACCOUNT." Amounts on deposit in the cash
collateral account will be used to fund shortfalls in interest payments on the
Class C notes and the Class D notes and on
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<PAGE> 36
the Series 2000- termination date to fund any shortfall in payment of the
outstanding principal balance of the Class C notes and the Class D notes.
The cash collateral account initially will [not] be funded, but will be
funded by (a) Available Finance Charge Collections and Shared Finance Charge
Collections, as described above under "--Application of Collections-- Payment of
Interest, Fees and Other Items," (b) any amounts withdrawn from the reserve
account to be treated as Available Finance Charge Collections, as described
above under "-- Reserve Account," and deposited into the cash collateral account
on any payment date to the extent that the funds available in the cash
collateral account are less than the Required Cash Collateral Account Amount on
that payment date and (c) investment earnings on funds in the cash collateral
account.
The "REQUIRED CASH COLLATERAL ACCOUNT AMOUNT" will be determined on
each payment date. In general, for any date of determination, it will be equal
to the product of (a) the Cash Collateral Account Percentage in effect on that
date and (b) the initial Invested Amount. However, in the absence of an event of
default for your series, the Required Cash Collateral Account Amount will not
exceed the outstanding aggregate principal balance of the Class C notes and the
Class D notes minus any excess of the Principal Funding Account balance over the
sum of the outstanding principal balances of the Class A notes and the Class B
notes on that date.
Upon an event of default for your series, the Required Cash Collateral
Account Amount for any payment date will automatically increase to the sum of
(a) the amount on deposit in the cash collateral account on that payment date
plus (b) Available Finance Charge Collections and Shared Finance Charge
Collections for that payment date available immediately after funding the
reserve account plus (c) amounts withdrawn from the reserve account to be
treated as Available Finance Charge Collections, as described above under
"-- Reserve Account." However, following an event of default for your series, if
the maturity of your notes is not accelerated, the increase in the Required Cash
Collateral Account Amount will be limited to an amount equal to the outstanding
principal amount of your series of notes.
The "REQUIRED CASH COLLATERAL ACCOUNT PERCENTAGE" will be determined as
follows:
<TABLE>
<CAPTION>
IF THE QUARTERLY EXCESS CASH
COLLATERAL PERCENTAGE IS GREATER THEN, THE CASH COLLATERAL ACCOUNT
THAN OR EQUAL TO: AND LESS THAN PERCENTAGE WILL EQUAL:
----------------- ------------- ----------------------
<S> <C> <C>
[ _____ ]% [ _____ ]% 0
[ _____ ]% [ _____ ]% [ _____ ]%
[ _____ ]% [ _____ ]% [ _____ ]%
</TABLE>
However, if a pay out event, other than a pay out event resulting from the
occurrence of an event of default for Series 2000- has occurred, the Cash
Collateral Account Percentage will be [___]%.
After the Cash Collateral Account Percentage has been increased above
zero as specified in the table above, it will remain at the specified percentage
until:
- further increased to a higher required percentage as specified
above; or
- the payment date on which the Quarterly Excess Cash Collateral
Percentage has increased to a level above that for the
then-current Cash Collateral Account Percentage, in which case
the Cash Collateral Account Percentage will be decreased to
the appropriate percentage as specified above, or, if the
Quarterly Excess Cash Collateral Percentage is greater than or
equal to [___]% the Cash Collateral Account Percentage will be
zero and the Required Cash Collateral Account Amount will be
zero.
However, if a pay out event, other than a pay out event resulting from the
occurrence of an event of default for Series 2000- has occurred, the Cash
Collateral Account Percentage will equal [___]%, as provided in the definition
of Cash Collateral Account Percentage above, and may not be subsequently
reduced.
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<PAGE> 37
The transferor may at any time in its sole discretion decrease the
"Required Cash Collateral Percentage." However, any decrease in the Required
Cash Collateral Percentage is permitted only if that decrease will not cause a
reduction or withdrawal by any rating agency of its rating of any outstanding
series or class.
The "QUARTERLY EXCESS CASH COLLATERAL PERCENTAGE" will be determined as
follows:
<TABLE>
<S> <C>
For the [Month 1] 2000 The Modified Excess Cash Collateral Percentage
payment date
For the [Month 2] 2000 The Modified Excess Cash Collateral Percentage for the first
payment date monthly period, plus the Excess Cash Collateral Percentage
for the [Month 1] 2000 monthly period
----------------------------------------------------------------
2
For the [Month 3] The Modified Excess Cash Collateral Percentage for the first
payment date monthly period, plus the Excess Cash Collateral Percentage
for the [Month 1] 2000 monthly period, plus the Excess
Cash Collateral Percentage for the [Month 2] 2000 monthly period
----------------------------------------------------------------
3
For each following The sum of the Excess Cash Collateral Percentages for the
payment date 3 prior monthly periods
----------------------------------------------------------------
3
</TABLE>
The "EXCESS CASH COLLATERAL PERCENTAGE" for any monthly period will be
determined as follows:
- during the controlled accumulation period, but only if the
amount on deposit in the reserve account is greater than or
equal to the Required Reserve Account Amount:
Available Finance Charge Collections for that
monthly period available immediately after
covering Class A's portion of the Investor times 12
Default Amount and Shared Finance Charge
Collections allocated to your series
-------------------------------------------------
the Adjusted Invested Amount on the first day of
that monthly period
- and, in all other cases:
Available Finance Charge Collections for that
monthly period available immediately after
covering Class A's portion of the Investor times 12
Default Amount and Shared Finance Charge
Collections allocated to your series
---------------------------------------------
the Invested Amount on the first day of that
monthly period
The "MODIFIED EXCESS CASH COLLATERAL PERCENTAGE" will be calculated for
the first monthly period in accordance with the Series 2000- indenture
supplement based on collections of finance charge and administrative receivables
for that monthly period in relation to the amount of interest and servicing fee
accrued for the first payment date.
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<PAGE> 38
Funds on deposit in the cash collateral account will be invested at the
direction of the servicer in eligible investments. Investment earnings, net of
losses and investment expenses, will be deposited into the cash collateral
account and will be available for payment to holders of the Class C notes and
the Class D notes.
CASH COLLATERAL ACCOUNT DISTRIBUTIONS
If on any payment date, the aggregate interest to be paid on the Class
C notes and the Class D notes exceeds the amount allocated to pay that interest,
the servicer will direct the indenture trustee to withdraw from the cash
collateral account the lesser of (i) the amount on deposit in the cash
collateral account, including investment earnings to the extent necessary to
fund that excess, and (ii) the amount of the excess, and will deposit that
amount into the collection account for payment of interest on the Class C notes
and the Class D notes.
On the Series 2000- termination date, funds available in the cash
collateral account, after giving effect to any withdrawals to be made as
discussed in the preceding paragraph, will be used to fund any shortfall in the
payment of the outstanding principal balance of the Class C notes and Class D
notes.
Funds on deposit in the cash collateral account on any payment date in
excess of the Required Cash Collateral Account Amount on that date will be paid
to the holders of the transferor certificates. On the date on which all amounts
due the Class C noteholders and the Class D noteholders from the cash collateral
account have been paid in full, all amounts then remaining in the cash
collateral account will be distributed to the holders of the transferor
certificates.
ADDITIONAL SERIES ENHANCEMENT
The transferor may at any time in its sole discretion arrange for any
additional series enhancement for the benefit of any class or classes of the
Series 2000- notes. This additional series enhancement may be in the form of
additional cash collateral funded from collections of receivables otherwise
allocable to the Transferor Interest, a letter of credit, surety bond, the
purchase of interest rate caps or swaps and/or another form of series
enhancement, provided that the form and amount of additional series enhancement
will not cause a reduction or withdrawal by any rating agency of its rating of
any outstanding series or class.
[ISSUANCE OF ADDITIONAL NOTES
The Series 2000- indenture supplement provides that, from time to time
during the revolving period, the transferor may, subject to conditions specified
in the indenture supplement, cause the trust to issue additional notes of Series
2000- . When issued, the additional notes of each class will be identical in all
respects to the other outstanding notes of that class and will be equally and
ratably entitled to the benefits of the transfer and servicing agreement, the
indenture and the Series 2000- indenture supplement without preference, priority
or distinction.
In connection with each additional issuance, the outstanding principal
amount of each class of notes and the series enhancement will be increased
proportionately. As of the date of any additional issuance, the Invested Amount
will be increased to reflect the initial principal amount of the additional
notes of each class.]
PAY OUT EVENTS
As described above, the revolving period will continue through
__________, 200 , unless that date is postponed as described under
"--Postponement of Controlled Accumulation Period" in this prospectus
supplement, unless a pay out event occurs prior to that date.
There are two types of pay out events: series pay out events that apply
only to the Series 2000- notes; and trust pay out events that apply to notes of
all series.
A "SERIES 2000- PAY OUT EVENT" refers to any of the following events:
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<PAGE> 39
(a) failure by the transferor (i) to make any payment or deposit
on the date required under the transfer and servicing
agreement, the indenture or the Series 2000- indenture
supplement, or within the applicable grace period which shall
not exceed 5 business days or (ii) to observe or perform in
any material respect any other covenants or agreements of the
transferor set forth in the transfer and servicing agreement,
the indenture or the Series 2000- indenture supplement, which
failure has a material adverse effect on the Series 2000-
noteholders and which continues unremedied for a period of 60
days after written notice of the failure, requiring the same
to be remedied, and continues to materially and adversely
affect the interests of the noteholders for the designated
period. However, a Series 2000- pay out event described in
this subparagraph (a) will not be deemed to have occurred if
the transferor repurchases the related receivables or all
related receivables, during the designated period in
accordance with the provisions of transfer and servicing
agreement;
(b) any representation or warranty made by the transferor in the
transfer and servicing agreement, the indenture or the Series
2000- indenture supplement, or any information required to be
given by the transferor to the indenture trustee to identify
the accounts proves to have been incorrect in any material
respect when made or delivered and which continues to be
incorrect in any material respect for a period of 60 days
after written notice of the failure, requiring the same to be
remedied, and as a result of which the interests of the
noteholders are materially and adversely affected and continue
to be materially and adversely affected for the designated
period. However, a pay out event described in this
subparagraph (b) will not occur if the transferor has accepted
reassignment of the related receivable or all related
receivables, during the designated period in accordance with
the provisions of the transfer and servicing agreement;
(c) the Net Portfolio Yield averaged over any three consecutive
monthly periods is less than the weighted average of the Base
Rates for the same monthly periods; or
(d) an event of default for Series 2000- occurs under the
indenture.
A "TRUST PAY OUT EVENT" refers to any of the following events:
(i) a failure by the transferor (including any additional
transferor) to transfer receivables in additional accounts to
the trust within 5 business days after the date required by
the transfer and servicing agreement;
(ii) any servicer default occurs which would have a material
adverse effect on the noteholders;
(iii) certain bankruptcy, insolvency, liquidation, conservatorship,
receivership or similar events relating to the transferor or
the seller unless, in the case of any of those events with
respect to a seller, the receivables originated by that seller
are no longer eligible and written confirmation is received
from each rating agency that the subsequent exclusion of that
seller's receivables from the trust portfolio will not result
in a reduction or withdrawal of its rating of any outstanding
series or class;
(iv) the transferor (including any additional transferor) is unable
to transfer receivables to the trust in accordance with the
provisions of the transfer and servicing agreement; or
(v) the trust becomes subject to regulation as an investment
company within the meaning of the Investment Company Act of
1940.
Series 2000- pay out events and trust pay out events together are
called "PAY OUT EVENTS."
In the case of any Series 2000- pay out event described in clause (a)
or (b) or any trust pay out event described in clause (ii) above, a pay out
event will be deemed to have occurred with respect to the notes only if, after
any applicable grace period, either the indenture trustee or the Series 2000-
noteholders evidencing interests aggregating not less than 50% of the then
outstanding principal balance of the Series 2000- notes, by written notice to
the transferor and the
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<PAGE> 40
servicer, and to the indenture trustee if given by the Series 2000- noteholders,
declare that a pay out event has occurred with respect to the Series 2000- notes
as of the date of the notice.
In the case of any event described in clause (i), (iii), (iv) or (v), a
pay out event with respect to all series then outstanding, and in the case of
any event described in clause (c) or (d), a pay out event with respect to only
the Series 2000- notes, will occur without any notice or other action on the
part of the indenture trustee or the Series 2000- noteholders immediately upon
the occurrence of the event.
On the date on which a pay out event is deemed to have occurred, the
early amortization period will begin.
See "Description of the Notes--Pay Out Events" in the accompanying
prospectus for an additional discussion of the consequences of an insolvency,
conservatorship or receivership of the transferor.
The term "BASE RATE" means, with respect to any monthly period, the
annualized percentage equivalent of a fraction:
- the numerator of which is the sum of the Monthly Interest and
the monthly servicing fee, each for the related payment date;
and
- the denominator of which is the Invested Amount as of the
close of business on the last day of the prior monthly period.
The term "NET PORTFOLIO YIELD" means, for any monthly period, the
annualized percentage equivalent of a fraction:
- the numerator of which is the sum of collections of finance
charge and administrative receivables and any other amount,
other than principal receivables, designated by the transferor
to be finance charge and administrative receivables, Shared
Finance Charge Collections, any net investment earnings on
funds deposited in the Principal Funding Account and any
amounts withdrawn from the Reserve Account and deposited in
the collection account and allocable to the Series 2000- notes
for that monthly period, calculated on a cash basis after
subtracting the Investor Default Amount for that monthly
period; and
- the denominator of which is the Invested Amount as of the last
day of the prior monthly period.
EVENTS OF DEFAULT
The events of default for Series 2000- , as well as the rights and
remedies available to the indenture trustee and the Series 2000- noteholders
when an event of default occurs, are described under "The Indenture -- Events of
Default; Rights Upon Event of Default" in the accompanying prospectus.
If an event of default for Series 2000- occurs, the indenture trustee
or the holders of a majority of the then-outstanding principal balance of the
Series 2000- notes may declare the Series 2000- notes to be immediately due and
payable. If the Series 2000- notes are accelerated, you may receive principal
prior to the expected principal payment date for your notes.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The share of the monthly servicing fee allocable to the Invested Amount
for any payment date will be equal to one-twelfth of the product of (a) 2% and
(b)(i) the Adjusted Invested Amount as of the last day of the monthly period
preceding that payment date, minus (ii) the product of any amount on deposit in
the Excess Funding Account as of the last day of the monthly period preceding
that payment date and the Investor Percentage of collections of finance charge
and administrative receivables for that monthly period. However, for the first
payment date, the monthly servicing fee will equal $[________].
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<PAGE> 41
On each payment date, but only if Advanta Bank Corp., an affiliate or
the Indenture Trustee is the servicer, Servicer Interchange for the related
Monthly Period that is on deposit in the collection account will be withdrawn
and paid to the servicer in payment of a portion of the monthly servicing fee
for that monthly period. "SERVICER INTERCHANGE" for any monthly period for which
Advanta Bank Corp., an affiliate or the Indenture Trustee is the servicer will
be an amount equal to the portion of collections of finance charge and
administrative receivables allocated to the Invested Amount for that monthly
period that is attributable to interchange. However, Servicer Interchange for a
monthly period will not exceed one-twelfth of the product of (i) the Adjusted
Invested Amount, as of the last day of that monthly period, and (ii) [____]%.
For the first payment date, the Servicer Interchange may equal but will not
exceed $---------.
In the case of any insufficiency of Servicer Interchange on deposit in
the collection account, a portion of the monthly servicing fee for that monthly
period will not be paid to the extent of the insufficiency. In no event will the
trust, the indenture trustee, the owner trustee, the noteholders or the
transferor be liable for the share of the monthly servicing fee to be paid out
of Servicer Interchange.
The servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the receivables including, without
limitation, payment of the fees and disbursements of the indenture trustee and
independent certified public accountants and other fees which are not expressly
stated in the transfer and servicing agreement, the indenture or the Series
2000- indenture supplement to be payable by the trust or the noteholders other
than federal, state and local income and franchise taxes, if any, of the trust.
REPORTS TO NOTEHOLDERS
On each payment date, the paying agent, on behalf of the indenture
trustee will forward to each noteholder of record, a statement prepared by the
servicer setting forth the items described in "Description of the Notes--Reports
to Noteholders" in the accompanying prospectus.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and Section 4975 of the Code impose certain requirements on employee
benefit plans and certain other plans and arrangements, including individual
retirement accounts and annuities, Keogh plans and certain collective investment
funds or insurance company general or separate accounts in which the plans,
accounts or arrangements are invested, that are subject to the fiduciary
responsibility provisions of ERISA and/or Section 4975 of the Code (collectively
called "PLANS"), 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 (called "parties in interest"
under ERISA and "disqualified persons" under the Code) who have specified
relationships to a plan or its plan assets, unless a statutory or administrative
exemption is available. These persons are collectively called "PARTIES IN
INTEREST." 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 in the accompanying
prospectus, the notes are eligible for purchase with plan assets of any plan.
Any fiduciary or other plan investor considering whether to purchase
the notes with plan assets of any plan should determine whether that purchase is
consistent with its fiduciary duties and whether that purchase would constitute
or result in a non-exempt prohibited transaction under ERISA and/or Section 4975
of the Code because any of the transferor, the servicer, the indenture trustee,
the owner trustee or any other party may be parties in interest with respect
S-36
<PAGE> 42
to the investing plan and may be deemed to be benefitting from the issuance of
the notes. If the transferor or the servicer is a party in interest with respect
to the prospective plan investor, any 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 United States
Department of Labor Prohibited Transaction Class Exemption (called a "PTCE")
96-23 (for transactions determined by "in-house asset managers"), PTCE 95-60
(for transactions involving insurance company general accounts), PTCE 91-38 (for
transactions involving bank collective investment funds), PTCE 90-1 (for
transactions involving insurance company pooled separate accounts) or PTCE 84-14
(for transactions determined by independent "qualified professional asset
managers") or any other prohibited transaction exemption issued by the
Department of Labor. A purchaser of the notes should be aware, however, that
even if the conditions specified in one or more of the above-referenced
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 addition, under Department of Labor Regulation Section 2510.3-101
(called the "PLAN ASSET REGULATION"), the purchase with plan assets of equity
interests in the issuer could, in certain circumstances, cause the receivables
and other assets of the issuer to be deemed plan assets of the investing plan.
This, in turn, would subject the issuer and its assets 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 -- Tax Characterization of the
Trust and the Notes -- Treatment of the Notes as Debt" in the accompanying
prospectus), 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 receivables and other assets included as
assets of the issuer 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 transferor, the servicer, the
indenture trustee, the owner trustee or any of their respective affiliates (a)
has investment or administrative discretion with respect to the plan assets used
to effect the purchase; (b) has authority or responsibility to give, or
regularly gives, investment advice with respect to the plan assets, for a fee
and pursuant to an agreement or understanding that the advice (1) will serve as
a primary basis for investment decisions with respect to the plan assets, and
(2) will be based on the particular investment needs of that plan; or (c) unless
PTCE 95-60, PTCE 91-38 or PTCE 90-1 is applicable, is an employer maintaining or
contributing to that plan. Each purchaser or holder of the notes or any interest
in the notes will be deemed to have represented by its purchase and holding of
the notes that it is not subject to the foregoing limitation.
Any 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 by this prospectus supplement and
the accompanying prospectus.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting
agreement as supplemented by a terms agreement relating to the Class A notes
(together, the "CLASS A UNDERWRITING AGREEMENT") between the transferor and the
Class A underwriters named below (the "CLASS A UNDERWRITERS"), the terms and
conditions set forth in an underwriting agreement as supplemented by a terms
agreement relating to the Class B notes (together, the "CLASS B UNDERWRITING
AGREEMENT") between the transferor and the Class B underwriters named below (the
"CLASS B UNDERWRITERS") and the terms and conditions set forth in an
underwriting agreement as supplemented by a terms agreement relating the Class C
notes (together, the "CLASS C UNDERWRITING AGREEMENT" and, together with the
Class A underwriting agreement and the Class B underwriting agreement, the
"UNDERWRITING AGREEMENT") between the transferor and the Class C underwriters
named below (the "CLASS C UNDERWRITERS" and, together with the Class A
underwriters and the Class B underwriters, the "UNDERWRITERS"), the transferor
has agreed to sell to the underwriters, and each of the underwriters has
severally agreed to purchase, the principal amount of the notes set forth
opposite its name:
S-37
<PAGE> 43
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
CLASS A UNDERWRITERS CLASS A NOTES
- -------------------- -------------
<S> <C>
$
Total................................... $
============
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
CLASS B UNDERWRITERS CLASS B NOTES
- -------------------- -------------
<S> <C>
$
Total................................... $
============
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
CLASS C UNDERWRITERS CLASS C NOTES
- -------------------- --------------
<S> <C>
Total................................... $
$
============
</TABLE>
In the Class A underwriting agreement, the Class A underwriters have
agreed, subject to the terms and conditions set forth in that agreement, to
purchase all of the Class A notes offered hereby if any of the Class A notes are
purchased. In the Class B underwriting agreement, the Class B underwriters have
agreed, subject to the terms and conditions set forth in that agreement, to
purchase all of the Class B notes offered hereby if any of the Class B notes are
purchased. In the Class C underwriting agreement, the Class C underwriters have
agreed, subject to the terms and conditions set forth in that agreement, to
purchase all of the Class C notes offered hereby if any of the Class C notes are
purchased.
The Class A underwriters propose initially to offer the Class A notes
to the public at [_____]% of their principal balance and to certain dealers at
that price less concessions not in excess of [_____]% of the principal balance
of the Class A notes. The Class A underwriters may allow, and the dealers may
reallow, concessions not in excess of [_____]% of the principal balance of the
Class A notes to certain brokers and dealers. After the initial public offering,
the public offering price and other selling terms may be changed by the Class A
underwriters.
The Class B underwriters propose initially to offer the Class B notes
to the public at [_____ ]% of their principal balance and to certain dealers at
that price less concessions not in excess of [_____ ]% of the principal balance
of the Class B notes. The Class B underwriters may allow, and the dealers may
reallow, concessions not in excess of [_____]% of the principal balance of the
Class B notes to certain brokers and dealers. After the initial public offering,
the public offering price and other selling terms may be changed by the Class B
underwriters.
The Class C underwriters propose initially to offer the Class C notes
to the public at [_____]% of their principal balance and to certain dealers at
that price less concessions not in excess of [_____ ]% of the principal balance
of the Class C notes. The Class C underwriters may allow, and the dealers may
reallow, concessions not in excess of [_____]% of the principal balance of the
Class C notes to certain brokers and dealers. After the initial public offering,
the public offering price and other selling terms may be changed by the Class C
underwriters.
We will receive proceeds of approximately $[_____ ] from the sale of
the notes (representing [_____]% of the principal balance of each Class A note,
[_____ ]% of the principal balance of each Class B note and [_____ ]% of the
principal balance of each Class C note) after paying the underwriting discount
of $[_____ ] (representing [_____ ]% of the principal balance of each Class A
note, [_____ ]% of the principal balance of each Class B note and [_____ ]% of
the principal balance of each Class C note). Additional offering expenses are
estimated to be $[_____].
Each underwriter has represented and agreed that:
- 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 notes in, from or otherwise involving the United Kingdom;
S-38
<PAGE> 44
- 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 or sale
of the notes to a person who is of a kind described in Article 11 (3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996
or is a person to whom that document may otherwise lawfully be issued or passed
on;
- if it is an authorized person under Chapter III of part I of the
Financial Services Act 1986, it has only promoted and will only promote (as that
term is defined in Regulation 1.02(2) of the Financial Services (Promotion of
Unregulated Schemes) Regulations 1991) to any person in the United Kingdom the
scheme described in this prospectus supplement and the accompanying prospectus
if that person is of a kind described either in Section 76(2) of the Financial
Services Act 1986 or in Regulation 1.04 of the Financial Services (Promotion of
Unregulated Schemes) Regulations 1991; and
- it is a person of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996.
The seller will indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act, or contribute to payments the
underwriters may be required to make in respect thereof.
The underwriters may engage in over-allotment transactions, stabilizing
transactions, syndicate covering transactions and penalty bids with respect to
the notes in accordance with Regulation M under the Securities Exchange Act.
Over-allotment transactions involve syndicate sales in excess of the offering
size, which creates a syndicate short position. Stabilizing transactions permit
bids to purchase the notes so long as the stabilizing bids do not exceed a
specified maximum. Syndicate covering transactions involve purchases of the
notes in the open market after the distribution has been completed in order to
cover syndicate short positions. Penalty bids permit the underwriters to reclaim
a selling concession from a syndicate member when the notes originally sold by
that syndicate member are purchased in a syndicate covering transaction.
Over-allotment transactions, stabilizing transactions, syndicate covering
transactions and penalty bids may cause the prices of the notes to be higher
than they would otherwise be in the absence of those transactions. Neither the
transferor nor the underwriters represent that the underwriters will engage in
any of these transactions or that those transactions, once commenced, will not
be discontinued without notice at any time.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Series 2000-
notes will be passed upon for the transferor by Wolf, Block, Schorr and
Solis-Cohen LLP, special counsel to the transferor. Certain legal matters
relating to the federal tax consequences of the issuance of the Series 2000-
notes will be passed upon for the transferor by Wolf, Block, Schorr and
Solis-Cohen LLP. Certain legal matters relating to the issuance of the Series
2000- notes will be passed upon for the underwriters by _____________________.
S-39
<PAGE> 45
INDEX OF TERMS FOR PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
TERMS PAGE
<S> <C>
Accumulation Shortfall.............................................. S-28
Adjusted Invested Amount............................................ S-25
Available Finance Charge Collections................................ S-19
Available Principal Collections..................................... S-20
Base Rate........................................................... S-36
business day........................................................ S-19
cash collateral account............................................. S-31
Class A additional interest......................................... S-19
Class A Monthly Interest............................................ S-27
Class A note interest rate.......................................... S-18
Class A underwriters................................................ S-38
Class A underwriting agreement...................................... S-38
Class B additional interest......................................... S-19
Class B Monthly Interest............................................ S-27
Class B note interest rate.......................................... S-18
Class B underwriters................................................ S-38
Class B underwriting agreement...................................... S-38
Class C additional interest......................................... S-19
Class C Monthly Interest............................................ S-27
Class C note interest rate.......................................... S-18
Class C underwriters................................................ S-38
Class C underwriting agreement...................................... S-38
Class D additional interest......................................... S-19
Class D Monthly Interest............................................ S-27
Class D note interest rate.......................................... S-18
closing date........................................................ S-18
controlled accumulation period...................................... S-21
Controlled Accumulation Amount...................................... S-28
Controlled Deposit Amount........................................... S-28
Defaulted Amount.................................................... S-29
early amortization period........................................... S-22
ERISA............................................................... S-37
Excess Cash Collateral Percentage................................... S-33
Expected Principal Payment Date..................................... S-16
finance charge and administrative receivables....................... S-20
Fixed Investor Percentage........................................... S-24
Floating Investor Percentage........................................ S-23
interest period..................................................... S-18
Invested Amount..................................................... S-25
Investor Default Amount............................................. S-29
Investor Percentage................................................. S-23
LIBOR............................................................... S-18
LIBOR determination date............................................ S-18
London business day................................................. S-18
Modified Excess Cash Collateral Percentage.......................... S-33
monthly period...................................................... S-20
Monthly Interest.................................................... S-27
Monthly Principal................................................... S-28
Net Portfolio Yield................................................. S-36
offered notes....................................................... S-17
Offered Series 2000- notes........................................ S-17
One-Month Index Maturity............................................ S-18
pay out events...................................................... S-35
payment date........................................................ S-19
plan asset regulation............................................... S-38
plans............................................................... S-37
Pre-Funding Account................................................. S-20
Principal Funding Account........................................... S-30
Principal Shortfalls................................................ S-29
PTCE................................................................ S-38
Quarterly Excess Cash Collateral Percentage......................... S-33
Reallocated Principal Collections................................... S-25
record date......................................................... S-18
recoveries.......................................................... S-12
Required Cash Collateral Account Percentage......................... S-32
Required Cash Collateral Account Amount............................. S-32
Required Minimum Principal Balance.................................. S-13
Required Reserve Account Amount..................................... S-30
Required Transferor Interest........................................ S-13
Required Transferor Percentage...................................... S-13
reserve account..................................................... S-30
Reserve Account Funding Date........................................ S-30
Reserve Draw Amount................................................. S-30
Reset Date.......................................................... S-23
revolving period.................................................... S-21
Series 2000- indenture supplement.................................. S-17
Series 2000- notes................................................. S-17
Series 2000- pay out event........................................ S-34
Series 2000- termination date...................................... S-17
Shared Finance Charge Collections................................... S-29
Shared Principal Collections........................................ S-29
Telerate Page 3750.................................................. S-19
transferor interest................................................. S-5
Transferor Interest................................................. S-12
trust pay out event................................................. S-35
trust portfolio..................................................... S-12
underwriters........................................................ S-38
underwriting agreement.............................................. S-38
</TABLE>
S-40
<PAGE> 46
ANNEX I
OTHER SERIES ISSUED AND OUTSTANDING
The table below sets forth the principal characteristics of the other
series previously issued by the trust, or a predecessor trust, that are
currently outstanding, all of which are in group [one]. For more specific
information with respect to any series, any prospective investor should contact
Advanta Bank Corp., Treasury Department at (___) ___-____. Advanta Bank Corp.
will provide, without charge, to any prospective purchaser of the notes, a copy
of the disclosure documents for any previous publicly-issued series.
<TABLE>
<CAPTION>
[ Series 2000 -
<S> <C> <C>
Initial Class A Invested Amount $
Current Class A Invested Amount $
Class A note interest rate [one-month] LIBOR plus
Initial Class B Invested Amount $
Current Class B Invested Amount $
Class B note interest rate [one-month] LIBOR plus ___% per annum
Initial Class C Invested Amount $
Current Class C Invested Amount $
Class C note interest rate [one-month] LIBOR plus ___% per annum
Initial Class D Invested Amount $
Current Class D Invested Amount $
Class D note interest rate [one-month] LIBOR plus ___% per annum
[Controlled Accumulation Amount $_________*]
[Expected principal payment date [__________] payment date]
Annual servicing fee percentage [___] per annum
[Enhancement for the Class A notes subordination of Class B notes,
Class C notes and Class D notes]
[Enhancement for the Class B notes subordination of Class C notes
and Class D notes]
[Enhancement for the Class C notes subordination of Class D notes
and cash collateral account]
[Enhancement for the Class D notes cash collateral account]
Series 2000- termination date [__________] payment date
Series Issuance Date [__________] __________, 200__
</TABLE>
- -------------
(*) Subject to change if the commencement of the accumulation period or
controlled accumulation period, as applicable, is delayed.
A-1
<PAGE> 47
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE AMENDED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
Subject to Completion, dated March 20, 2000
Prospectus
ADVANTA BUSINESS CARD MASTER TRUST
Issuer
ADVANTA BUSINESS RECEIVABLES CORP.
Transferor
ADVANTA BANK CORP.
Servicer
Asset Backed Notes
THE TRUST --
- may periodically issue asset backed notes in one or more
series with one or more classes; and
- will own--
- receivables in a portfolio of MasterCard(R) and
VISA(R) business revolving credit card accounts;
- payments due on those receivables; and
- other property described in this prospectus and in
the accompanying prospectus supplement.
THE NOTES --
- will be paid only from the trust assets;
- offered with this prospectus will be rated in one of the four
highest rating categories by at least one nationally
recognized rating organization;
- may have one or more forms of series enhancement; and
- will be issued as part of a designated series which may
include one or more classes of notes.
You should consider carefully the risk factors beginning on page 7 in this
prospectus.
A note is not a deposit and neither the notes nor the underlying accounts or
receivables are insured or guaranteed by the Federal Deposit Insurance
Corporation or any other governmental agency.
The notes are obligations of Advanta Business Card Master Trust only and are not
obligations of Advanta Business Receivables Corp., Advanta Bank Corp., Advanta
Corp., any affiliate of them or any other person.
This prospectus may be used to offer and sell notes of a series only if
accompanied by the prospectus supplement for that series.
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> 48
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the notes in two separate
documents: (a) this prospectus, which provides general information, some of
which may not apply to your series of notes; and (b) the accompanying prospectus
supplement, which describes the specific terms of your series of notes,
including:
- the terms, including interest rates, for each class;
- the timing of interest and principal payments;
- information about the receivables;
- information about any series enhancement for each class;
- the ratings for each class being offered; and
- the method for selling the notes.
If the terms of your series vary between this prospectus and the
accompanying prospectus supplement, you should rely on the information in the
prospectus supplement.
You should rely only on the information provided in this prospectus and
the accompanying prospectus supplement, including the information incorporated
by reference. We have not authorized anyone to provide you with different
information. We are not offering the notes in any state where the offer is not
permitted.
We include cross references in this prospectus and the accompanying
prospectus supplement to captions in these materials where you can find further
related discussions. The following Table of Contents and the Table of Contents
in the accompanying prospectus supplement provide the pages on which these
captions are located.
This prospectus uses some defined terms. You can find a listing of the
pages where definitions can be found under the caption "Index of Terms for
Prospectus" beginning on page 71 in this prospectus.
ii
<PAGE> 49
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................................................... 1
Issuer............................................................... 1
Series............................................................... 1
Indenture Trustee.................................................... 1
Transferor........................................................... 1
Seller, Servicer and Administrator................................... 1
Trust Assets......................................................... 1
Collections and Allocations.......................................... 2
Interest Payments on the Notes....................................... 2
Principal Payments on the Notes...................................... 2
Events of Default.................................................... 4
Event of Default Remedies............................................ 4
Shared Finance Charge Collections.................................... 5
Shared Principal Collections......................................... 5
Paired Series........................................................ 5
Series Enhancement................................................... 5
Tax Status .......................................................... 5
ERISA Considerations................................................. 6
Note Ratings......................................................... 6
Risk Factors.......................................................... 7
The Issuer............................................................ 12
Advanta Bank Corp., Advanta Business
Receivables Corp. and Advanta Corp................................. 13
The Bank's Credit Card Activities..................................... 13
Advanta Business Card Portfolio...................................... 13
Acquisition and Use of Credit Cards.................................. 14
Partnerships ........................................................ 15
Underwriting and Credit Risk ........................................ 15
Risk Based Pricing .................................................. 16
Interchange.......................................................... 16
Operations........................................................... 17
Billing and Payments................................................. 18
Key Supplier Relationships........................................... 18
Credit Card Association Relationships................................ 18
Description of First Data Resources.................................. 18
The Trust Portfolio................................................... 19
Maturity Considerations............................................... 20
Use of Proceeds....................................................... 21
Description of the Notes.............................................. 21
General.............................................................. 21
Securities Depository................................................ 22
Book-Entry Registration.............................................. 23
Definitive Notes..................................................... 26
Interest Payments.................................................... 26
Principal Payments................................................... 27
Transfer and Assignment of Receivables............................... 27
Issuance of Additional Series........................................ 28
Issuance of Additional Notes......................................... 29
Representations and Warranties....................................... 30
Addition of Trust Assets............................................. 34
Automatic Account Additions.......................................... 35
Removal of Accounts.................................................. 36
Collection and Other Servicing Procedures............................ 37
Adjustment........................................................... 37
Trust Accounts....................................................... 37
Funding Period....................................................... 39
Investor Percentage and Transferor
Percentage......................................................... 40
Application of Collections........................................... 40
Shared Finance Charge Collections.................................... 42
Shared Principal Collections......................................... 42
Defaulted Receivables; Rebates and
Fraudulent Charges; Investor Charge-Offs........................... 42
Final Payment of Principal; Termination.............................. 43
Paired Series........................................................ 43
Pay Out Events....................................................... 44
Servicing Compensation and Payment of
Expenses........................................................... 45
Certain Matters Regarding the Transferor and
the Servicer....................................................... 45
Servicer Default..................................................... 47
Reports to Noteholders............................................... 48
Evidence as to Compliance............................................ 49
Amendments........................................................... 50
The Indenture......................................................... 51
Events of Default; Rights upon Event
of Default......................................................... 51
Certain Covenants.................................................... 54
Modification of the Indenture........................................ 55
Annual Compliance Statement.......................................... 56
Indenture Trustee's Annual Report.................................... 56
List of Noteholders.................................................. 57
Satisfaction and Discharge of Indenture.............................. 57
The Indenture Trustee................................................ 57
Certain Matters Regarding the Administrator.......................... 57
Credit Enhancement.................................................... 58
General.............................................................. 58
</TABLE>
-iii-
<PAGE> 50
TABLE OF CONTENTS (CONT'D)
<TABLE>
Page
----
<S> <C>
Subordination........................................................ 59
Letter of Credit..................................................... 59
Cash Collateral Guaranty or Account.................................. 59
Collateral Interest.................................................. 60
Surety Bond or Insurance Policy...................................... 60
Spread Account....................................................... 60
Reserve Account...................................................... 60
Interest Rate Swap Agreements and Interest
Rate Cap Agreements................................................ 60
Description of the Purchase Agreement................................. 60
Note Ratings.......................................................... 62
Certain Legal Aspects of the Receivables.............................. 62
Transfer of Receivables.............................................. 62
Borrower Protection Laws............................................. 63
Claims and Defenses of Cardholders
Against the Trust.................................................. 63
Certain Matters Relating to Conservatorship,
Receivership and Bankruptcy........................................ 63
Federal Income Tax Consequences....................................... 65
General.............................................................. 65
Tax Characterization of the Trust and the Notes...................... 66
Consequences to Holders of the Notes................................. 66
State and Local Tax Consequences..................................... 68
ERISA Considerations.................................................. 68
Plan of Distribution.................................................. 69
Legal Matters......................................................... 69
Reports to Noteholders................................................ 70
Where You Can Find More Information................................... 70
Index of Terms for Prospectus......................................... 71
Global Clearance, Settlement and Tax Documentation Procedures......... A-1
</TABLE>
-iv-
<PAGE> 51
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION AND DOES NOT CONTAIN ALL OF THE
INFORMATION THAT YOU NEED TO CONSIDER IN MAKING YOUR INVESTMENT DECISION. YOU
SHOULD CAREFULLY READ THIS ENTIRE DOCUMENT AND THE ACCOMPANYING PROSPECTUS
SUPPLEMENT BEFORE YOU PURCHASE ANY NOTES.
ISSUER
Advanta Business Card Master Trust, a Delaware statutory business trust, is the
issuer of the notes. The trust's principal place of business is located at
_______________. Its telephone number is ___________________.
The trust is a master trust and will issue notes in series.
SERIES
The trust will issue other series of notes secured by the assets of the trust
from time to time in the future.
Each series of notes will consist of one or more classes. The classes of a
series may be issued at the same time or at different times. The notes of each
series will be issued under an indenture supplement to an indenture, in each
case between the trust and the indenture trustee.
Some classes or series may not be offered by this prospectus. They may be
offered, for example, in a private placement.
A predecessor trust has issued 3 series of asset-backed securities in private
transactions, which securities have been, or will be, at the same time as the
initial issuance of notes offered under this prospectus, refinanced with notes
issued by the trust in private transactions. With respect to those privately
issued notes and any other notes that may be issued by the trust privately in
the future, references in this prospectus or the accompanying prospectus
supplement to the terms of any series of notes described in the applicable
prospectus supplement instead refer to the governing documents for those
privately issued notes. One or more of the series of those previously issued
notes or notes that may be issued by the trust privately in the future may have
the right to consent to the issuance of future series as long as they are
outstanding. The issuance of future series will occur without prior review or
consent by you or, except as described above, any other noteholder.
INDENTURE TRUSTEE
[_____________________]
TRANSFEROR
Advanta Business Receivables Corp. ("ABRC") is the initial transferor of the
credit card receivables to the trust. Its principal place of business is 639
Isbell Road, Suite 390, Reno, Nevada 89509. Its telephone number is (775)
823-3080. ABRC is a wholly owned subsidiary of Advanta Bank Corp. (the "BANK").
Additional transferors may be designated.
SELLER, SERVICER AND ADMINISTRATOR
The bank is the initial seller of the credit card receivables to the transferor.
Additional sellers may be designated. A seller may sell credit card receivables
to the transferor or transfer the receivables directly to the trust.
The bank's principal place of business is 11850 South Election Road, Draper,
Utah 84020. Its telephone number is (801) 523-0858. The bank is an indirect
wholly-owned subsidiary of Advanta Corp.
The bank will service the receivables for the trust and will act as the trust's
administrator. In limited cases, the servicer may resign or be removed, and
either the indenture trustee or a third party may be appointed as the new
servicer. The servicer receives a servicing fee from the trust, and each series
is obligated to pay a portion of that fee.
TRUST ASSETS
The seller is the owner of the accounts in which the credit card receivables
were created. It has
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designated selected MasterCard(R)* revolving business credit card accounts from
its portfolio and has either sold the receivables in those accounts to the
transferor under a receivables purchase agreement or transferred the receivables
directly to the trust under a transfer and servicing agreement. The transferor
has, in turn, transferred the receivables to the trust under the transfer and
servicing agreement. In the future, receivables in VISA(R)* revolving business
credit card accounts could be transferred to the trust.
All new receivables generated in the accounts will be transferred automatically
to the trust. The total amount of receivables in the trust fluctuates daily as
new receivables are generated and payments are received on existing receivables.
See "The Receivables" in the accompanying prospectus supplement.
The receivables transferred to the trust are the primary trust assets.
Additional similar assets may be transferred to the trust as described under
"Description of the Notes -- Addition of Trust Assets" in this prospectus. The
transferor may also remove receivables that it transferred to the trust as
described under "Description of the Notes --Removal of Accounts" in this
prospectus.
For more information about the receivables, see "The Trust Portfolio" in this
prospectus.
COLLECTIONS AND ALLOCATIONS
The servicer receives collections on the receivables, deposits those collections
in the collection account and keeps track of them as either finance charge and
administrative receivables or principal receivables.
The servicer then allocates those collections among each series of notes
outstanding and the transferor interest. The servicer allocates (a) collections
of finance charge and administrative receivables and principal receivables and
(b) receivables in accounts written off as uncollectible to each series based on
varying percentages. The accompanying prospectus supplement describes the
allocation percentages applicable to your series.
The principal amount of the transferor interest fluctuates with the amount of
the principal receivables held in the trust and the amount of notes outstanding.
The transfer and servicing agreement requires the transferor to transfer
receivables in additional accounts to the trust (a) if the transferor interest,
averaged over any 30-day period, is less than the required transferor interest,
or (b) if the total amount of principal receivables in the trust portfolio is
less than the required minimum principal balance. The transferor may sell all or
part of its interest in the transferor interest by issuing a supplemental
certificate. The transferor interest does not provide series enhancement for any
series.
INTEREST PAYMENTS ON THE NOTES
Each note entitles the holder to receive payments of interest as described in
the applicable prospectus supplement. If a series of notes consists of more than
one class, each class may differ in priority of payments, payment dates,
interest rates, methods for computing interest, rights to series enhancement and
other things.
Each class of notes may have a fixed, floating or any other type of interest
rate. Generally, interest will be paid monthly, quarterly, semi-annually or on
other scheduled dates over the life of the notes. See "Description of the Notes
- -- Interest Payments" in this prospectus.
PRINCIPAL PAYMENTS ON THE NOTES
Each note offered under this prospectus entitles the holder to receive payments
of principal as described in the applicable prospectus supplement. If a series
of notes has more than one class, each class may differ in the amounts allocated
for principal payments, priority of payments, payment dates, maturity, rights to
series enhancement and other things. See "Description of the Notes -- Principal
Payments" in this prospectus.
REVOLVING PERIOD
From the date a series of notes is issued until a date specified in the series
supplement, the trust will not pay or accumulate principal for payment to the
noteholders. During this revolving period, the trust will pay available
principal to noteholders of other series in a group as shared principal
collections or to
- --------
* MasterCard(R) and VISA(R) are federally registered servicemarks of
Mastercard International Inc. and Visa U.S.A., Inc., respectively.
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the transferor as holder of the transferor interest, or in certain circumstances
will deposit the available principal in the excess funding account.
After the revolving period, each class of notes will have one or more of the
following periods:
- the controlled accumulation period, during which principal is
accumulated in specified amounts per month and paid on an
expected principal payment date;
- the controlled amortization period, during which principal is
paid in fixed amounts at scheduled intervals; or
- the early amortization period or early accumulation period,
during which principal is paid or accumulated, respectively,
in varying amounts each month based on the amount of principal
receivables collected following a pay out event.
CONTROLLED ACCUMULATION PERIOD
If a series or class of notes is in a controlled accumulation period, the trust
is expected to pay available principal to those noteholders on the expected
principal payment date specified in the prospectus supplement for that series.
If the series has more than one class, each class may have a different priority
of payment. For a period of time prior to the expected principal payment date,
the trust will deposit specified amounts of available principal in a trust
account. The controlled accumulation period for a series or class begins on a
date specified in the applicable prospectus supplement and ends when any one of
the following occurs:
- the notes of that series or class are paid in full;
- the early amortization period or early accumulation period
starts; or
- the series termination date.
CONTROLLED AMORTIZATION PERIOD
If a series or class of notes is in a controlled amortization period, the trust
will pay available principal up to a fixed amount to those noteholders on each
payment date during that period. The trust will pay available principal in a
fixed amount, plus any amounts not previously paid. If the series has more than
one class, each class may have a different priority of payment. The controlled
amortization period for a series or class starts on the date specified in the
applicable prospectus supplement and ends when any one of the following occurs:
- the notes of that series or class are paid in full;
- the early amortization period or early accumulation period
starts; or
- the series termination date.
EARLY AMORTIZATION PERIOD OR EARLY ACCUMULATION PERIOD
If a series or class of notes is in an early amortization period or early
accumulation period, the trust will pay available principal to those noteholders
on each payment date or accumulate available principal by making a deposit into
an account on each payment date. If the series has more than one class, each
class may have a different priority for payment. The early amortization period
or early accumulation period for a series or class starts on the day a pay out
event occurs and ends when any of the following occurs:
- the notes of that series or class are paid in full;
- the series termination date; or
- the trust termination date.
All principal and interest will be due and payable no later than the series
termination date.
PAY OUT EVENTS
Pay out events for any series of notes will consist of series pay out events and
trust pay out events. Series pay out events are described in the prospectus
supplement for that series and apply only to that
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series. Trust pay out events apply to all series and consist of the following:
- any servicer default occurs which would have a material
adverse effect on the noteholders;
- certain bankruptcy, insolvency, liquidation, conservatorship,
receivership or similar events relating to the transferor or
the seller unless, in the case of any of those events with
respect to a seller, the receivables originated by that seller
are no longer eligible and written confirmation is received
from each rating agency that the subsequent exclusion of that
seller's receivables from the trust portfolio will not result
in a reduction or withdrawal of its rating of any outstanding
series or class;
- the transferor is unable for any reason to transfer
receivables to the trust in accordance with the provisions of
the transfer and servicing agreement; or
- the trust becomes subject to regulation as an "investment
company" within the meaning of the Investment Company Act of
1940.
See "Description of the Notes -- Pay Out Events" in this prospectus.
EVENTS OF DEFAULT
The indenture and related indenture supplement governing the terms and
conditions of the notes include a list of events of default.
If an event of default occurs, then, after any applicable cure period, the
indenture trustee or the holders of a majority in principal amount of the
affected series of notes may accelerate those notes by declaring the principal
amount of those notes to be immediately due and payable. That declaration may be
rescinded by the holders of a majority in principal amount of the affected
series of notes.
Events of default include the following:
- the trust fails to pay interest on any note within 35 days of
its due date;
- the trust fails to pay in full principal on any note on its
series termination date;
- the trust defaults on any covenant or breaches any agreement
under the indenture, the default or breach is materially
adverse to noteholders and the default or breach continues
unremedied for 60 days after written notice of the default or
breach is given to the trust by the indenture trustee or to
the trust and the indenture trustee by holders of at least 25%
in principal amount of the affected notes;
- the occurrence of certain events of bankruptcy, insolvency,
reorganization or similar events relating to the trust; or
- as to any series of notes, any additional events of default
specified in the applicable prospectus supplement.
See "The Indenture -- Events of Default; Rights upon Event of Default" in this
prospectus for a description of the events of default and their consequences to
noteholders.
It is not an event of default if the principal of a note is not paid on its
expected principal payment date.
EVENT OF DEFAULT REMEDIES
After an event of default and the acceleration of a series of notes, funds on
deposit in the collection account and any trust accounts for that series will be
applied to pay principal of and interest on those notes to the extent permitted
by law. After an event of default, collections of principal receivables and
finance charge and administrative receivables allocated to the affected notes
will be applied to
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make monthly principal and interest payments on those notes until the earlier of
the date those notes are paid in full or the series termination date of those
notes.
After an event of default, the indenture trustee (acting on its own or at the
direction of holders of notes that have been accelerated) will have a limited
right to foreclose on the portion of the receivables allocable to the
accelerated notes by causing the trust to sell an interest in the assets of the
trust by issuing a foreclosure certificate. This foreclosure certificate would
represent an undivided interest in the assets of the trust equal to the invested
amount securing the notes of the related series. See "The Indenture -- Events of
Default; Rights upon Event of Default" in this prospectus.
SHARED FINANCE CHARGE COLLECTIONS
Any series may be included in a group of series. The group to which a series
belongs will be specified in the prospectus supplement for that series. If
specified in the prospectus supplement for any of these series, to the extent
that collections of finance charge and administrative receivables allocated to a
series are not needed for that series, those collections may be applied to cover
certain shortfalls of other series in the same group. See "Description of the
Notes -- Shared Finance Charge Collections" in this prospectus.
SHARED PRINCIPAL COLLECTIONS
If a series is identified in its prospectus supplement as being in a group of
series, to the extent that collections of principal receivables allocated to
that series are not needed for that series at that time, those collections may
be applied to cover principal payments for other principal sharing series in the
same group, and vice versa. Certain principal payments for certain principal
sharing series in the same group may have priority in receiving those
collections over other principal payments for other principal sharing series in
that group. See "Description of the Notes -- Shared Principal Collections" in
this prospectus.
PAIRED SERIES
If specified in its prospectus supplement, a series may be paired with another
series so that a reduction in the invested amount securing the notes of one
series results in an increase in the invested amount securing the notes of the
other such series.
SERIES ENHANCEMENT
Each class of a series may be entitled to series enhancement. Series enhancement
for the notes of any class may take the form of one or more of the following:
- subordination
- letter of credit
- collateral interest
- surety bond
- insurance policy
- spread account
- cash collateral guaranty
- reserve account
- cash collateral account
- swap arrangement
- interest rate cap agreement
- cross support feature
- other form of support
The type, characteristics and amount of any series enhancement for a series will
be:
- based on several factors, including the characteristics of the
receivables and accounts at the time a series of notes is
issued; and
- established based on the requirements of the rating agencies.
See "Credit Enhancement" in this prospectus.
TAX STATUS
Subject to important considerations described under "Federal Income Tax
Consequences" in this prospectus, Wolf, Block, Schorr and Solis-Cohen LLP, as
special tax counsel to the trust, is of the opinion that, for United States
federal income tax purposes (1) the notes will be treated as indebtedness and
(2) the trust will not be an association or a publicly traded partnership
taxable as a corporation. In addition, noteholders will agree, by acquiring
notes, to treat the notes as debt for federal, state and local income and
franchise tax purposes.
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ERISA CONSIDERATIONS
Under the regulations issued by the United States Department of Labor, the
trust's assets would not be deemed plan assets of any employee benefit plan
holding notes if certain conditions are met. If the trust's assets were deemed
to be plan assets of an employee benefit plan, there is uncertainty as to
whether existing exemptions from the prohibited transaction rules of the
Employee Retirement Income Security Act of 1974, as amended, would apply to all
transactions involving the trust's assets. Fiduciaries or other persons
contemplating purchasing notes of any series with "plan assets"of any employee
benefit plan should consult their counsel before making a purchase. See "ERISA
Considerations" in this prospectus.
NOTE RATINGS
Any note offered by this prospectus and an 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 agency. Each rating should be
evaluated independently of any other rating. See "Note Ratings" in this
prospectus.
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RISK FACTORS
You should consider the following risk factors and any risk factors in the
accompanying prospectus supplement before deciding whether to purchase the
notes.
IT MAY NOT BE POSSIBLE TO FIND AN INVESTOR TO PURCHASE YOUR NOTES.
The underwriters may assist in resales of the notes of any class or series but
they are not required to do so. A secondary market for the notes of your class
may not develop. If a secondary market does develop, it might not continue or it
might not be sufficiently liquid to allow you to resell any of your notes. You
must be prepared to hold the notes you purchase for as long as they are
outstanding.
THE SERIES ENHANCEMENT FOR YOUR NOTES MAY NOT BE SUFFICIENT TO PROTECT YOU
AGAINST LOSSES.
The series enhancement for your notes is designed to protect your investment
against certain types and amount of losses as described in the prospectus
supplement for your series of notes. The amount of any series enhancement is
limited and may decline during an amortization or accumulation period. If a
series enhancer fails to perform its obligations or if the series enhancement
ends under the terms on which it is provided, then you will bear directly the
credit and other risks associated with your investment in the notes.
THE INTEREST OF THE INDENTURE TRUSTEE IN THE RECEIVABLES MAY BECOME JUNIOR TO
THE INTERESTS OF OTHER PERSONS IN THE RECEIVABLES.
There are certain limited circumstances under the Uniform Commercial Code and
applicable Federal law in which prior or subsequent transferees of receivables
could have an interest in the receivables superior to the interest of the
indenture trustee. A tax or other statutory lien on the property of any seller
or transferor arising before any receivable comes into existence may have
priority over the interests of the transferor or the indenture trustee in the
receivables.
SOME LIENS WOULD BE GIVEN PRIORITY OVER YOUR NOTES WHICH COULD CAUSE DELAYED OR
REDUCED PAYMENTS.
The seller and the transferor will account for the transfer of the receivables
as a sale. However, a court could conclude that the seller or the transferor
still owns the receivables and that the trust holds only a security interest.
Even if a court would reach that conclusion, the indenture trustee will have a
first priority perfected security interest.
If a court were to conclude that the trust has only a security interest, a tax
or government lien (or other lien imposed under applicable state or federal law
without consent) on the property of the person that owns the receivables arising
before new receivables come into existence may be senior to the trust's interest
in the receivables.
Additionally, if a receiver or conservator were appointed for any seller, the
fees and expenses of the receiver or conservator might be paid from the
receivables before the trust received any payments on the receivables. If a
receiver or conservator were appointed for the bank, the trust may not have a
first-priority perfected security interest in collections commingled and used
for the benefit of the bank as servicer. If any of these events occur, payments
to you could be delayed or reduced. See "Certain Legal Aspects of the
Receivables -- Transfer of Receivables" and "Description of the Notes --
Representations and Warranties" in this prospectus.
IF A RECEIVER OR CONSERVATOR WERE APPOINTED FOR A SELLER OR A TRANSFEROR THAT IS
A BANK, OR IF A SELLER OR A TRANSFEROR THAT IS NOT A BANK BECAME A DEBTOR IN A
BANKRUPTCY CASE, DELAYS OR REDUCTIONS IN PAYMENT OF YOUR NOTES COULD OCCUR.
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The Federal Deposit Insurance Act, as amended by the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 (the "FDIA"), provides that a
security interest granted by a bank in the receivables would be respected to the
extent that:
- the applicable receivables purchase agreement, transfer and
servicing agreement or back-up security agreement, as the case
may be, complies with the requirements of the FDIA;
- the security interest granted under the applicable receivables
purchase agreement, transfer and servicing agreement or
back-up security agreement, as the case may be, was perfected
before the Federal Deposit Insurance Corporation (the "FDIC")
is appointed as receiver or conservator for the bank; and
- the security interest was not taken in contemplation of the
bank's insolvency or with the intent to hinder, delay or
defraud the bank 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 any seller or transferor that is a bank in the
receivables. If the FDIC were to assert a contrary position, however, payments
of principal and interest on your notes could be delayed and possibly reduced.
Furthermore, the FDIC could:
- require the indenture trustee to go through an administrative
claims procedure to obtain payments on the notes;
- request a stay of any actions by the indenture trustee or
owner trustee to enforce the applicable receivables purchase
agreement, transfer and servicing agreement or back-up
security agreement, as the case may be, or the notes; or
- repudiate the applicable receivables purchase agreement,
transfer and servicing agreement or back-up security
agreement, as the case may be, and limit the claims of the
holders of the notes to "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 the notes, thus
resulting in losses to you.
ABRC is a wholly-owned bankruptcy remote subsidiary of the bank. The certificate
of incorporation of ABRC limits the nature of its business and restricts its
ability to commence a voluntary case under the bankruptcy code without the
unanimous consent of its directors.
If, however, ABRC or any other transferor or any seller that is not a bank
became a debtor in a bankruptcy case, and if its transfer of the receivables to
a transferor or the trust were construed as the grant of a security interest to
secure a borrowing, your payments of outstanding principal and interest could be
delayed and possibly reduced.
If a receiver or conservator were appointed for any seller or transferor that is
a bank, or if any seller or transferor that is not a bank became a debtor in a
bankruptcy case, this could cause a pay out event and an early payment of
principal on all outstanding series of notes could result. Under the terms of
the applicable receivables purchase agreement or transfer and servicing
agreement, new principal receivables would not be transferred to the trust.
However, the bankruptcy court, the receiver or conservator may have the power,
regardless of the terms of the transfer and servicing agreement, (a) to delay
the effect of any provision under the indenture, the applicable receivables
purchase agreement or transfer and servicing agreement, (b) to prevent the early
payment of principal or (c) to require new principal receivables to continue
being transferred.
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If a receiver or conservator were appointed for the servicer and no servicer
default other than the appointment of the receiver or conservator has occurred,
the receiver or conservator may have the power to prevent either the indenture
trustee or the noteholders from appointing a new servicer.
See "Certain Legal Aspects of the Receivables -- Certain Matters Relating to
Conservatorship, Receivership and Bankruptcy" in this prospectus.
THE ACCOUNT OWNER MAY CHANGE THE TERMS AND CONDITIONS OF THE ACCOUNTS IN A WAY
THAT REDUCES COLLECTIONS.
The bank and any other seller which owns accounts will have the right to change
the finance charge and the other fees and charges which will be applicable from
time to time on the accounts, to alter the minimum monthly payment required
under the accounts and to change various other terms of its agreement with
cardholders on the accounts. Such changes may be voluntary on the part of the
owner of the accounts or may be required by law or forced by market conditions.
For example, changes in applicable law, changes in the marketplace or prudent
business practice might result in a determination by the bank or any other
seller which owns accounts to decrease finance charges or other fees and charges
for existing accounts, or to take actions which would otherwise change the terms
of the accounts. Changes could also result in lower credit ratings on your
notes. A decrease in the finance charges and the other fees and charges assessed
on the accounts should decrease the effective yield on the accounts and could
result in the occurrence of a pay out event and commencement of the early
amortization period or early accumulation period. If an early amortization
period occurs, you could receive an early payment of principal on your notes.
LIMITED REMEDIES FOR BREACHES OF REPRESENTATIONS COULD REDUCE OR DELAY PAYMENTS.
The transferor makes representations and warranties relating to the validity and
enforceability of the receivables arising under the accounts in the trust
portfolio, as to compliance with applicable law of the accounts and the
receivables, and as to the perfection and priority of the indenture trustee's
interest in the receivables. However, neither the owner trustee nor the
indenture trustee will make any examination of the receivables or the related
assets to determine the presence of defects, compliance with the representations
and warranties or for any other purpose.
If a representation or warranty relating to the receivables is violated, the
related obligors may have defenses to payment or offset rights, or creditors of
the seller or the transferor may claim rights to the trust assets. If a
representation or warranty is violated, the transferor may have an opportunity
to cure the violation. If it is unable to cure the violation within the
specified time period or if there is no right to cure the violation, the
transferor must accept reassignment of the receivables affected by the
violation. These reassignments are the only remedy for breaches of
representations and warranties, even if your damages exceed your share of the
reassignment price. See "Description of the Notes --Representations and
Warranties" in this prospectus.
PAYMENT PATTERNS OF RECEIVABLES COULD REDUCE COLLECTIONS.
The receivables transferred to the trust may be paid at any time. The trust
cannot assure the creation of additional receivables in the trust's accounts or
that any particular pattern of cardholder payments will occur. A significant
decline in the amount of new receivables generated could result in the
occurrence of a pay out event for one or more series and the commencement of the
early amortization period or the early accumulation period for each of those
series. If a pay out event occurs, you could receive payment of principal sooner
than expected. The bank's ability to compete in the current industry environment
will affect its ability to generate new receivables and might also affect
payment patterns on the receivables. In addition, changes in finance charges can
alter the monthly payment rates of cardholders. A significant decrease in
monthly payment rates could slow the return or accumulation of principal during
an amortization period or accumulation period. See "Maturity Considerations" in
this prospectus.
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CREDIT CARD INDUSTRY ANTITRUST LITIGATION COULD ADVERSELY AFFECT THE BANK'S
BUSINESS CARD PROGRAM.
On October 7, 1998 the United States Department of Justice filed suit in United
States District Court for the Southern District of New York, in United States of
America v. VISA U.S.A., Inc. et al. challenging two sets of membership rules
adopted by VISA U.S.A., Inc. and MasterCard International Inc. that have been
significant to the profitability of the bank's credit card businesses. In
particular, the suit seeks to eliminate the exclusionary policies of MasterCard
and VISA that have prevented the associations' member banks from offering other
branded credit card products (e.g., American Express(R), Discover Card(R)). The
suit also seeks to eliminate the "duality" policies of VISA and MasterCard that
allow a bank to belong to both the MasterCard and VISA associations. The suit
alleges that, as a result of the duality policies, the same large banks control
both associations, and that this has substantially lessened competition between
the associations because these banks have been, and continue to be,
significantly less willing to fund and implement competitive initiatives that
would cause consumers to switch their business from one association to the
other. The suit alleges that the exclusionary policies have eliminated certain
forms of competition among MasterCard and VISA member banks, and have
effectively precluded American Express and Discover Financial Services, Inc.
from competing to enlist banks in the United States to issue their cards. The
suit also alleges that, through their control of both the MasterCard and VISA
associations, the largest banks have stifled competition between these two
networks and have thwarted competition from smaller competitor networks, and
that this has hindered and delayed the development and implementation of
improved network products and services and has lessened consumer choice.
If successful in eliminating the duality policies, the suit would force banks to
choose to belong to one or the other of the MasterCard and VISA systems. This
could have the effect of reducing the competitiveness of the MasterCard product
to banks (and ultimately, to merchants an consumers as well) as banks may choose
to belong to the significantly larger VISA association. This could have an
adverse effect on the bank's existing business card program generally, which is
significantly dependent today on the bank's membership in the MasterCard
association. Eliminating the exclusivity policies could adversely affect the
operation, competitiveness and profitability of the bank's business card
program.
THE RATING ASSIGNED TO A CLASS OF NOTES IS LIMITED.
Any rating assigned to the notes by a credit rating agency will reflect the
rating agency's assessment solely of the likelihood that noteholders will
receive the payments of interest and principal required to be made under the
terms of the series and will be based primarily on the value of the receivables
in the trust and the series enhancement provided. The rating is not a
recommendation to purchase, hold or sell any notes. The rating does not
constitute a comment as to the marketability of any notes, any market price or
suitability for a particular investor. Any rating can be changed or withdrawn by
a rating agency at any time.
ADDITION OF RECEIVABLES WITH DIFFERENT CHARACTERISTICS COULD AFFECT ADVERSELY
THE COMPOSITION OF THE TRUST AND REDUCE THE AVERAGE YIELD ON THE PORTFOLIO.
The transferor expects, and in some cases will be obligated, to designate
additional accounts, and the receivables generated in these additional accounts
will be conveyed to the trust. These may include receivables arising in accounts
originated using criteria different from those which were applied to the initial
accounts transferred to the trust because these accounts were originated at a
later date, were part of a portfolio of accounts which were not part of the
bank's portfolio as of the initial cut-off date or were acquired from another
institution. Moreover, additional accounts designated at any time may not be
accounts of the same type as those previously included in the trust.
Consequently, the trust cannot assure you that additional accounts and the
receivables generated in those accounts will be of the same credit quality as
the accounts and receivables previously included in the trust. In addition,
additional accounts may consist of receivables arising in revolving business
credit card accounts that have different terms than the accounts previously
transferred to the trust, including lower periodic finance charges and other
fees and charges, which may have the effect of reducing the average yield on the
portfolio of accounts included in the trust. The designation of additional
accounts will be subject to the satisfaction of certain conditions, including
that
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each rating agency that has rated the series of notes confirm in writing that
the addition of receivables will not result in a reduction or withdrawal of its
rating of any class.
THE NOTES ARE SOLELY LIMITED OBLIGATIONS OF THE TRUST.
The notes of any series will represent the right to receive payments of
principal and interest in the amounts and at the times described in the
prospectus supplement for the series. The notes will not represent an interest
in or obligation of the seller, the transferor, the owner trustee, the indenture
trustee or any of their affiliates and will not be guaranteed or insured by any
of them. A specified percentage of collections, amounts on deposit in specified
accounts and funds provided by any series enhancer will be the sole source of
payment on the notes. You will not have recourse to the seller, the transferor,
the owner trustee, the indenture trustee or any other entity if the proceeds are
insufficient or otherwise unavailable to make all payments provided for under
the notes of your series.
SUBORDINATED CLASSES BEAR LOSSES BEFORE SENIOR CLASSES.
One or more classes of notes in a series may be subordinated to one or more
senior classes of notes in the same series. Principal payments to the
subordinated class or classes will not begin until each of the more senior
classes has been paid in full. Additionally, if collections of finance charge
and administrative receivables allocated to a series are insufficient to cover
amounts due for that series' senior notes, the invested amount for the series
might be reduced. This would reduce the amount of the collections of finance
charge and administrative receivables available to the subordinated notes in
future periods and could cause a possible delay or reduction in principal and
interest payments on the subordinated notes.
ALLOCATIONS OF CHARGED-OFF RECEIVABLES COULD REDUCE PAYMENTS TO YOU.
The servicer will write off the receivables arising in accounts in the trust
portfolio if the receivables become uncollectible. Your series will be allocated
a portion of these charged-off receivables. See "Description of Series
Provisions -- Allocation Percentages" and "The Seller's Business Card Portfolio
- -- Delinquency and Loss Experience" in the accompanying prospectus supplement.
If the amount of charged-off receivables allocated to your series of notes
exceeds the amount of funds available to reimburse those charge-offs, you may
not receive the full amount of principal and interest due to you. If a
cardholder sought protection under federal or state bankruptcy or debtor relief
laws, a court could reduce or discharge completely the cardholder's obligations
to repay amounts due on its account and, as a result, the related receivables
would be written off as uncollectible. See "Certain Legal Aspects of the
Receivables -- Borrower Protection Laws" in this prospectus and "Description of
Series Provisions -- Reallocated Principal Collections," "--Application of
Collections" and "-- Defaulted Receivables; Investor Charge-Offs" in the
accompanying prospectus supplement.
THE NOTE INTEREST RATE AND THE RECEIVABLES INTEREST RATE MAY RE-SET AT DIFFERENT
TIMES, BE BASED ON DIFFERENT INDICES, OR BE CALCULATED IN A DIFFERENT MANNER, OR
ONE COULD BE FIXED AND THE OTHER FLOATING, RESULTING IN REDUCED OR EARLY
PAYMENTS TO YOU.
Some accounts may have finance charges set at a variable rate based on a
designated index, for example, the prime rate. A series of notes may bear
interest either at a fixed rate or at a floating rate based on a different
index. If the interest rate charged on the accounts declines, collections of
finance charge and administrative receivables may be reduced without a
corresponding reduction in the amounts of interest payable on your notes and
other amounts required to be paid out of collections of finance charge and
administrative receivables. This could result in delayed or reduced payments to
you.
A series of notes may bear interest at a floating rate, while all or a portion
of the receivables bear interest at a fixed rate. If the rate on the notes
increased, collections of finance charge and administrative receivables may not
support the note interest rate. This could result in delayed or reduced payments
to you.
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A decrease in the spread, or difference, between collections of finance charge
and administrative receivables and those collections allocated to make interest
payments on your notes could reduce the net portfolio yield and increase the
risk of early repayment of your notes.
ISSUANCE OF ADDITIONAL SERIES BY THE TRUST MAY AFFECT THE TIMING OF PAYMENTS TO
YOU.
The trust will issue additional series of notes from time to time. The trust may
issue additional series with terms that are different from your series without
your prior review or consent. It is a condition to the issuance of each new
series that each rating agency that has rated an outstanding series confirm in
writing that the issuance of the new series will not result in a reduction or
withdrawal of its rating of any class of any outstanding series. The rating
agency confirmation primarily will be based on the trust's ability to pay
principal by the series termination date and interest on each payment date. The
rating agency confirmation will not consider how the terms of a new series could
affect the timing and amounts of payments on your series.
THE ISSUER
Advanta Business Card Master Trust is a statutory business trust
created under the laws of the State of Delaware on ___________ , 2000. It is
operated under a trust agreement, dated as of __________, 2000, between ABRC, as
transferor, and [______________________], as owner trustee. Advanta Business
Card Master Trust is called the "ISSUER" or the "TRUST" and
[___________________________], in its capacity as owner trustee of the issuer,
is called the "OWNER TRUSTEE."
The activities of the issuer are limited to:
- acquiring, owning and managing the trust assets and the
proceeds of those assets;
- issuing and making payments on the notes; and
- engaging in related activities.
As a consequence, the trust is not expected to have any need for, or
sources of, capital resources other than the trust assets.
The bank, in its capacity as "ADMINISTRATOR," under the administration
agreement, dated as of __________, 2000, between the administrator and the
trust, will provide the notices and perform on behalf of the trust certain other
administrative obligations required by the transfer and servicing agreement, the
indenture and the indenture supplement for each series, and will be compensated
for acting as the administrator.
The trust's principal offices are in Delaware, in care of
[____________________], as owner trustee, at the following address:
[_________________________]
The transferor will pay the fees of the owner trustee and will
reimburse it for certain liabilities and expenses.
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ADVANTA BANK CORP.,
ADVANTA BUSINESS RECEIVABLES CORP.
AND ADVANTA CORP.
The bank is a Utah-chartered industrial loan corporation. It is a
depository institution subject to regulatory oversight and examination by both
the FDIC and the Utah Department of Financial Institutions. Under its banking
charter, the bank is permitted to make consumer and commercial loans and to
accept all FDIC insured deposits with the exception of demand deposits (checking
accounts). The bank is an indirect wholly-owned subsidiary of Advanta Corp.
Advanta Corp. is a publicly-traded company based in Spring House, Pennsylvania
and is listed on the NASDAQ as ADVNA and ADVNB.
The principal executive office of the bank is located in Draper, Utah.
ABRC is a bankruptcy remote limited purpose corporation incorporated
under the laws of the State of Nevada in May, 1996. All of ABRC's issued and
outstanding shares of common stock are owned by the bank.
The principal executive office of ABRC is located in Reno, Nevada.
ABRC's articles of incorporation and by-laws limit the types of business in
which it may engage.
THE BANK'S CREDIT CARD ACTIVITIES
ADVANTA BUSINESS CARD PORTFOLIO
The receivables have been generated from transactions made by holders
of MasterCard(R) credit card accounts selected from the portion of the portfolio
of credit card accounts originated by the bank. This portfolio is called the
"ADVANTA BUSINESS CARD PORTFOLIO." In the future, the Advanta Business Card
Portfolio, and the accounts designated to the trust, could include VISA(R)
credit card accounts or another type of account.
The bank has traditionally defined its target market as established
small businesses that have been in operation for at least two years.
The bank's principal product is a co-branded MasterCard(R) business
card offering access, through merchants, banks and ATMs, to an instant unsecured
revolving business credit line. Under the terms of the cardholder agreement, the
card may be used solely for business purposes. The interest rate and credit line
size offered varies and is ultimately determined based upon credit history and
creditworthiness of the cardholder. The bank's business card offering is
customized in a variety of ways that differentiate its product. The bank offers
a business card that can be personalized with the cardholder customer's company
name and generally charges no annual fee. In addition, the bank offers a number
of benefits that it believes are important to a small business owner including:
- personalized company checks which can be used at the same
interest rate as the interest rate on card purchases;
- additional cards for company employees at no fee with the
ability to set individual spending limits;
- detailed quarterly and annual expense management reports that
categorize purchases and itemize charges for record keeping
and tax purposes; and
- access to cash advances up to the full credit line at the same
interest rate as the interest rate on card purchases.
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The card also offers free auto rental insurance, free purchase
protection service for a specified time period, and several free emergency
assistance and referral services.
The bank also offers on a limited basis for an annual fee a bonus miles
program whereby the cardholder receives credit toward the purchase of airline
tickets with each card purchase. Additionally, it offers a travel card whereby
use of the card entitles the cardholder to discounts at various hotels and
restaurants along with all of the benefits described above. The bank expects to
continue to expand its product offerings as it looks for innovative ways to
tailor the bank's products to the unique needs of small businesses.
Some data processing and administrative functions associated with the
servicing of the Advanta Business Card Portfolio are currently performed on
behalf of the bank by First Data Resources, Inc. See "--Description of First
Data Resources." If First Data Resources were to fail or become insolvent,
delays in processing and recovery of information about charges incurred by
cardholders could occur. The replacement of the services that First Data
Resources now provides to the bank could be time-consuming. As a result, delays
in payments to noteholders of each series outstanding at that time could occur.
ACQUISITION AND USE OF CREDIT CARDS
The bank credit card industry is highly competitive. There is increased
competitive use of advertising, target marketing and pricing competition in
interest rates and annual cardholder fees as both traditional and new credit
card issuers seek to expand or to enter the market. The bank issues Master
Card(R) credit cards to customers nationwide, competing with certain money
center banks and other large nationwide issuers, as well as with regional and
local banks, savings and loan associations and other depository institutions.
Many of these competitors have sizeable branch systems through which credit
cards are marketed to the institutions' customer bases and have greater capital
resources and a larger depositor base than the bank. Certain major credit card
issuers assess finance charges for selected portions of their portfolios at
rates significantly lower than the rates currently being assessed on the
accounts designated to the trust. The bank has responded to the increased
competition primarily by marketing cards to a target market of small businesses
that have been in operation for at least two years and introducing benefits and
incentives for a set period of time (generally less than 12 months in length).
See "-- Advanta Business Card Portfolio."
Substantially all of the bank's new accounts are generated through
direct mail and telemarketing solicitation of potential cardholders.
The bank prescreens potential applicants to identify those who meet its
target market profile. The source of information used in the prescreening
process is compiled by Dun & Bradstreet and includes general demographic and
credit information. The bank then uses targeted direct marketing programs,
primarily direct mail and telemarketing, to reach its prospective customers.
The bank currently mails solicitations monthly, offering potential
applicants the invitation to apply for an Advanta MasterCard business card.
Interested applicants may return the application to the bank via fax, mail or
the Internet. Upon receipt, the applicant data is verified and input into the
bank's database. If an application is submitted via the Internet and approved,
the applicant is sent a cardholder agreement which must be signed and returned
to the bank before a card is issued. Similarly, the bank uses inbound and
outbound telemarketing to invite potential applicants to apply. Through the use
of proprietary models, the bank scores applicants to determine creditworthiness.
If an applicant is approved, a fulfillment package including the card is sent
via mail. If an applicant is declined, typically due to a poor credit history or
lack of complete or accurate credit information, a decline letter is issued.
In an effort to expand the bank's customer reach, the bank is testing
new sources by which to identify potential customers. These sources include the
use of other external credit reporting agencies, as well as the purchase of
customer lists from establishments with a small business customer base.
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The bank is also expanding its marketing channels through the use of an
internet site that offers instant online approval. The site address is
www.applytoday.com. The bank is the first in the business card market to offer
this service. All of its direct mail solicitations offer the invitation to apply
online, and the bank hopes to obtain customers via the internet through the use
of banner advertising to draw potential customers to its website.
PARTNERSHIPS
The bank anticipates finding new customers by forming relationships
with third parties whose customers fit the bank's target market profile. These
third parties might include, for example, suppliers of office products, office
furniture, and personal computers and related software.
UNDERWRITING AND CREDIT RISK
The bank has developed sophisticated modeling techniques for assessing
the creditworthiness of potential cardholders. Through the application process,
the bank is able to verify the applicant's demographic information and collect
current sales and income statistics. This information, coupled with credit
reports received from external credit agencies, forms the basis for the bank's
decision to extend credit. Using a scoring system, the bank is able to rank
prospective cardholders based upon their expected creditworthiness and
profitability potential.
The bank's current scoring system, implemented in August 1999, includes
an underwriting risk score and a revolving balance score. The underwriting risk
score is a measure of credit risk or potential for default. The revolving
balance score measures the expected potential balance of an account or the
propensity for a cardholder to maintain an ongoing balance on its account. These
scores, when taken together, are key determinants of overall profitability.
Using this two-score technique, the bank is able to eliminate those potential
applicants who are low risk but have a low propensity to maintain an ongoing
balance, indicating little or no card usage, and which does not contribute to
the bank's overall profitability. Likewise, it allows the bank to include
potential applicants who are moderate risk, but who have a high propensity to
maintain an ongoing balance, and which can therefore contribute to the bank's
overall profitability, who may have been traditionally excluded using only
credit risk criteria.
The underwriting risk score is determined using several indicators of
risk. One predictive indicator is the FICO score. The FICO score is a
measurement determined by Fair, Isaac & Company using information contained
within the major credit bureaus to assess consumer risk. Although Fair, Isaac &
Company does not disclose the variables it uses to assess risk, the bank
believes they include, but are not limited to, debt level, number of credit
experiences, delinquency experience and utilization level of available credit.
The bank believes that the FICO score, as a measure of consumer risk, has only
limited value in assessing the small business market because it does not capture
all relevant information. Therefore, the bank also scores potential applicants
based on their current and historical business performance via information
purchased from an external-reporting agency. In cases where this information is
not available, a score is assigned which is reflective of the additional risk
inherent in this lack of performance data.
At the point of approval of a potential cardholder, the bank's profile
of that cardholder is limited to the information outlined above, including the
FICO score and possibly historical business information. As the bank compiles
information regarding cardholder behavior, it maintains and continually updates
its performance database. The bank believes that this information regarding
actual account performance and behavior over time becomes a better indicator of
future performance and therefore diminishes the relevance of the criteria
initially used to score cardholders and potential cardholders. Hence, the bank
periodically re-scores the cardholder based on all of the information the bank
has accumulated and uses this information to evaluate and potentially adjust
both the interest rate and credit line size offered to the cardholder.
The bank does not report credit information on its cardholders to
external credit agencies as these agencies typically collect only consumer
credit information rather than information regarding a business's credit
history. The bank does, however, report to the consumer bureaus exclusively in
the case of delinquency, as the authorizing
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officer of the business is an undersignor to the account and agrees to be held
liable in conjunction with the company for all charges.
The bank's credit policies are recommended by the bank's credit policy
group, the members of which are responsible for identifying potential
cardholders, establishing the initial credit assessment of those cardholders,
and monitoring cardholder performance and behavior throughout the account's
life.
RISK BASED PRICING
Upon the completion of credit assessment and identification of
potential cardholders who meet the bank's criteria via the prescreening process,
the bank's solicitation will offer a range of potential interest rates for which
the cardholder may be eligible. The offer is not pre-approved and is subject to
verification of information provided by the potential cardholder through the
application process. If the applicant is approved, the actual interest rate and
credit line size assigned will reflect the level of risk in the cardholder's
creditworthiness. The bank offers primarily variable rate credit card accounts.
The periodic finance charge assessed on balances in most of these accounts is
indexed to LIBOR (London Interbank Offered Rate) plus an add-on percentage. The
interest rate will typically range from approximately 12% to 20%. In most cases,
the rate will change with changes in LIBOR and is subject to a minimum below
which the rate cannot fall. The bank's typical business credit card interest
rate, as of the date of this prospectus, is between 15% and 19%.
With minimal notice, any account may be subject to re-pricing at the
bank's discretion, typically based upon changes in a cardholder's credit
standing. The credit line size may also be adjusted up or down based on the
bank's continual credit monitoring. To discourage delinquent payments, the bank
utilizes penalty pricing whereby any account that is two payment cycles
delinquent is automatically subject to a rate increase of 3% or greater.
Each cardholder is subject to an agreement governing the terms and
conditions of the related account. Under each agreement, the seller that owns
the account reserves the right, upon advance notice to the cardholder, to change
or terminate any terms, conditions, services or features of its accounts at any
time, including increasing or decreasing finance charges, other fees and charges
or minimum payment terms. The agreement with each cardholder provides that the
relevant seller may, after notice to a cardholder of any change, apply changes,
when applicable, to current outstanding balances as well as to future
transactions.
A cardholder may use the credit card for purchases, balance transfers
or cash advances. Cardholders make purchases when using the credit card to buy
goods or services. A cash advance is made when a credit card is used to obtain
cash from a financial institution or an automated teller machine or when the
cardholder uses special drafts issued by the relevant seller to draw against the
cardholder's credit line.
When a cardholder uses the credit card issued by a bank (a "MEMBER
BANK") under contract with MasterCard or VISA, the seller of goods or services
or the provider of cash advances generally sells the resulting receivable to a
merchant bank, which in turn sells the receivable (usually indirectly, through a
clearing corporation and its agent bank) to the member bank that issued the
credit card for its face amount less interchange and other fees. The member bank
is usually required by its contracts with MasterCard and VISA to purchase and
pay daily for all receivables generated by use of credit cards issued by the
member bank. If the member bank were to fail to perform these obligations,
MasterCard or VISA would have the right to cancel the credit cards issued by the
member bank.
INTERCHANGE
Creditors participating in the MasterCard and VISA associations receive
certain fees called "INTERCHANGE," as partial compensation for taking credit
risk, absorbing fraud losses and funding receivables for a limited period prior
to initial billing. Under the MasterCard and VISA systems, a portion of
interchange in connection with cardholder charges for goods and services is
passed from banks that clear the related transactions to credit card-
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issuing banks. MasterCard and VISA set interchange fees annually based on the
number of credit card transactions and the amount charged per transaction. To
the extent set forth in the accompanying prospectus supplement, (a) collections
of finance charge and administrative receivables for any monthly period will be
deemed to include any interchange allocated to the receivables and (b)
interchange will be used to pay a portion of the monthly servicing fee.
OPERATIONS
The bank's operations are organized and designed to support rapid
product introduction and cardholder growth. The bank uses internal and external
resources to support different functions, allowing it to achieve operational
efficiencies in the most cost effective manner. The bank's operations management
team provides management oversight for those functions that are outsourced. The
key functional components of the bank's operations are as follows:
- Customer Service and Support
The bank's operations staff performs customer service and support
functions. The quality of the bank's customer service is reviewed through
monitoring of telephone contacts with customers. In addition, the bank uses call
management software to monitor call abandonment, call length and other call
productivity measurements.
- Delinquencies and Collections
Each account is billed monthly on or about the same day of the month.
An account is "contractually delinquent" if the minimum payment indicated on the
cardholder's statement is not received by the due date. For purposes of
determining the delinquency of an account, the period from one monthly billing
statement to the next is considered a period of 30 days, regardless of the
actual number of days elapsed. Efforts to collect contractually delinquent
credit card receivables currently are made by the bank's service center
personnel or its designees. Collection activities include statement messages,
formal collection letters and telephone calls. Collection personnel initiate
telephone contact with delinquent cardholders as early as the first day the
cardholder becomes contractually delinquent. The intensity at which collection
activity is pursued depends on the risk the account presents to the bank, which
is determined by behavioral scoring and adaptive control techniques. If initial
telephone contact fails to resolve the delinquency, the bank continues to
contact the cardholder by telephone and by mail. Although such arrangements are
made infrequently, the bank may also enter into arrangements with cardholders to
extend or otherwise change payment schedules. Delinquency levels are monitored
by management of both the collections and asset quality department of the bank,
and information is reported daily to senior management. Accounts are charged off
when they become 180 days contractually delinquent, at which time delinquent
accounts of cardholders who have not filed bankruptcy are generally referred to
outside collection agencies. The bank charges-off an account within 90 days
after receipt of any notice of fraudulent charges within such account. For
accounts for which the bank has received a notice of bankruptcy of the business,
the bank uses a 90-day investigation period to determine whether the bank should
challenge the bankruptcy. Following that 90-day period, if it decides not to
challenge the bankruptcy, the bank charges-off the outstanding balance. The
credit evaluation, servicing and charge-off policies and collection practices of
the bank may change from time to time in accordance with its business judgment
and applicable laws and regulations.
- Processing
First Data Resources performs certain core processing services for the
bank. These services include authorizing transactions through the MasterCard
system, performing billing and settlement processes, generating and monitoring
monthly billing statements, and issuing credit card plastics and new account
agreements.
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BILLING AND PAYMENTS
First Data Resources, as the bank's service bureau, generates and mails
to cardholders monthly statements summarizing account activity. For the majority
of accounts, cardholders receive a 25-day grace period on purchases. All
cardholders must make a minimum monthly payment. For significantly all of the
accounts in the Advanta Business Card Portfolio, the minimum monthly payment is
equal to 2.25% of the cardholder's principal balance.
All fees, charges and credit insurance premiums assessed by the bank
are automatically charged to an account and are included in the account balance
at the end of each billing cycle. The finance charges assessed by the bank are
calculated by multiplying the average daily balances of cash advances and
previously billed unpaid purchases in an account by the applicable daily
periodic rate, and then multiplying the resulting product by the number of days
in the billing cycle. Finance charges are not assessed in most circumstances on
purchases if all balances shown in the billing statement are paid by the due
date. Under certain conditions related to customer performance, the bank may
immediately convert the annual percentage rate applicable to existing and future
balances to a higher rate.
The bank primarily offers cards to cardholders without an annual fee.
The bank does, however, assess miscellaneous transaction fees, including cash
advance and draft fees, late and overlimit charges, and returned check, returned
draft, and draft stop payment charges.
KEY SUPPLIER RELATIONSHIPS
The bank relies on third parties to provide several essential services.
First Data Resources provides essential fulfillment and processing functions
while CFM Direct provides marketing and acquisition support services and Dun &
Bradstreet provides customer sourcing and credit history information. Any
interruption, deterioration or termination of these services could adversely
affect the bank's business operations and reputation.
CREDIT CARD ASSOCIATION RELATIONSHIPS
MasterCard and VISA license banks to issue credit cards using their
trademarks and to utilize their interchange networks. The bank is licensed to
issue both MasterCard(R) and VISA(R) credit cards. However, to date the bank has
issued MasterCard credit cards exclusively.
DESCRIPTION OF FIRST DATA RESOURCES
First Data Resources provides certain data processing and
administrative functions associated with servicing the receivables in the
Advanta Business Card Portfolio.
First Data Resources is located in Omaha, Nebraska and provides
computer data processing services primarily to the bankcard industry. First Data
Resources is a subsidiary of First Data Corp.
The bank utilizes a variety of services provided by First Data
Resources in originating and servicing the Advanta Business Card Portfolio.
These functions include transaction processing and data management systems,
fraud management and transaction level pricing. The bank currently does not
employ any of First Data Resource's direct customer service capabilities. All
direct customer service functions, such as collections and customer service
inquiries, are handled directly by the bank.
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THE TRUST PORTFOLIO
The assets of the trust include receivables generated through accounts
selected from the Advanta Business Card Portfolio owned by the bank. These
designated accounts are called the "TRUST PORTFOLIO." In addition to the
receivables in the trust portfolio, the trust assets include:
- all monies due or to become due in payment of these
receivables;
- all proceeds of these receivables;
- all proceeds of any credit insurance policies relating to
these receivables;
- any recoveries allocable to the trust because of these
receivables;
- interchange, if any, allocated to your series of notes, as
described in the prospectus supplement for your series;
- all monies on deposit in specified trust accounts or
investments made with these monies, including any earned
investment proceeds if the prospectus supplement for your
series of notes so indicates;
- proceeds of any series enhancement, as described in the
prospectus supplement for your series of notes; and
- proceeds of any derivative contracts between the trust or a
transferor and a counterparty, as described in the prospectus
supplement for your series of notes.
Receivables in the trust consist of:
- "PRINCIPAL RECEIVABLES," which are amounts charged by
cardholders for merchandise, services, cash advances and
balance transfers; and
- "FINANCE CHARGE AND ADMINISTRATIVE RECEIVABLES," which are
periodic finance charges, and annual membership fees and
service charges, late fees, overlimit fees, cash advance fees,
and all other fees and charges on accounts designated by the
transferor to be included as finance charge and administrative
receivables, and any other amounts, other than principal
receivables, designated by the transferor to be "finance
charge and administrative receivables."
The trust considers net recovery amounts for defaulted receivables,
called "RECOVERIES," as collections of finance charge and administrative
receivables.
Initially, a group of accounts were selected on __________ , 2000 (the
"INITIAL CUT-OFF DATE") and designated to the trust. These accounts are the
"INITIAL DESIGNATED ACCOUNTS." In the future, additional accounts may be
designated for inclusion in the trust. The initial designated accounts and any
future accounts designated for inclusion in the trust must meet eligibility
criteria set forth in the transfer and servicing agreement. Existing receivables
in the initial designated accounts have been conveyed to the trust. Additional
receivables arising from time to time in the initial designated accounts or
other accounts designated for inclusion in the trust will also be conveyed to
the trust. Receivables conveyed to the trust must also meet eligibility criteria
set forth in the transfer and servicing agreement. If receivables conveyed to
the trust are found to have been ineligible when created or designated for
inclusion, the transferor that transferred those receivables must accept
retransfer of those receivables back to it.
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The transferor has the right, and may be required to, designate
additional accounts for inclusion in the trust portfolio or may elect to
automatically designate additional accounts, as described under "Description of
the Notes -- Addition of Trust Assets" in this prospectus.
The transferor also has the right to remove accounts from the trust
portfolio, as described under "Description of the Notes -- Removal of Accounts"
in this prospectus. If the transferor does so, the trust will reconvey all
receivables in these removed accounts, whether existing or to be created, to the
transferor that transferred those receivables.
When the trust issues a new series of notes, the transferor will
represent and warrant to the trust that, as of the closing date for the new
series, the accounts designated to the trust met the eligibility criteria set
forth in the transfer and servicing agreement at their time of designation. See
"Description of the Notes -- Representations and Warranties" in this prospectus
for more information on eligibility criteria for accounts and receivables.
The prospectus supplement relating to each series of notes will provide
certain information about the trust portfolio as of the date specified. This
information will include:
- the amount of principal receivables;
- the amount of finance charge and administrative receivables;
- the range and average of principal balances of the accounts;
- the range and average of credit limits of the accounts;
- the range and average of ages of the accounts;
- the geographic distribution of the accounts; and
- delinquency statistics relating to the accounts.
MATURITY CONSIDERATIONS
Following its revolving period, each series of notes is expected to
begin to accumulate principal or begin to distribute principal to noteholders.
The accompanying prospectus supplement describes the conditions under which an
accumulation or amortization period will begin for your class of notes.
Principal will accumulate in a principal funding account if your series
features controlled accumulation or early accumulation and one of these
accumulation periods begins. As described in the accompanying prospectus
supplement, during controlled accumulation on each payment date an amount of
principal, up to the amount specified, will be set aside in the principal
funding account. If a pay out event occurs and your series features early
accumulation, the full amount of principal available to your series will be
deposited in the principal funding account, up to the amount specified in the
related prospectus supplement. This accumulated principal will be paid to you on
the Expected Principal Payment Date for your class of notes, or earlier if an
early amortization period begins before your Expected Principal Payment Date.
Note that although your series may feature an accumulation period, your class of
notes might not make use of it.
Principal will be paid to you in increments, up to the amount specified
in the accompanying prospectus supplement, if your series features controlled
amortization and this period begins. Your class of notes might also begin to pay
principal to you if the accompanying prospectus supplement specifies that your
class will begin early amortization. Early amortization will begin for all
classes of your series when a pay out event occurs. During any amortization
period, principal will be paid to you only on a payment date.
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If the series described in the accompanying prospectus supplement
features multiple classes, different classes of your series may have differing
priorities for the accumulation or payment of principal. This means that
noteholders of other classes could begin to receive payments of principal before
you do.
The trust cannot assure you that principal will be available when
expected, either to accumulate or to pay to you. The Expected Principal Payment
Date for your class of notes is based upon assumptions about payment rates on
the receivables, as detailed in the accompanying prospectus supplement. The
trust cannot assure you that these payment rate assumptions will be correct.
Payment rates depend on collections of receivables. Collections can vary
seasonally and are also affected by general economic conditions and the payment
habits of individual cardholders. The accompanying prospectus supplement will
provide historical payment rates, total charge-offs and other information
relating to the Advanta Business Card Portfolio. The trust cannot assure you
that future events will be consistent with this historical performance. The life
of your notes might be longer than expected if principal is collected more
slowly. The accompanying prospectus supplement may provide that if the principal
payment rate falls below a specified level, a pay out event will occur. The
occurrence of any pay out event may substantially shorten the average life of
your notes.
USE OF PROCEEDS
The net proceeds from the sale of each series of notes the trust offers
by this prospectus and the accompanying prospectus supplement will be paid to
the relevant transferor. The transferor will use those proceeds to pay the
relevant seller the purchase price of the receivables transferred to it and to
pay its other expenses. The seller will use the proceeds received from the
transferor to provide liquidity for anticipated future asset growth and for its
general corporate purposes.
DESCRIPTION OF THE NOTES
The notes will be issued in series. Each series will represent an
obligation of the trust. Each series of notes will be issued under the
indenture, as supplemented by an indenture supplement, in each case entered into
by the trust and the indenture trustee. The following summaries describe certain
provisions common to each series of notes. The accompanying prospectus
supplement gives you additional information specific to the notes of your
series. The summaries are not complete and are subject to, and are qualified by,
all of the provisions of the transfer and servicing agreement, the indenture and
the related indenture supplement.
GENERAL
The notes will be secured by and paid from the assets of the trust.
Each series and the Transferor Interest will be allocated collections of
principal receivables, finance charge and administrative receivables and
defaulted receivables based on a percentage called the "INVESTOR PERCENTAGE."
The Investor Percentage will be set forth in the related prospectus supplement.
The Investor Percentage will be based on the Invested Amount for a series.
The "INVESTED AMOUNT" for a series on any date will be equal to:
- the initial outstanding principal amount of that series of
notes as of the closing date for that series (increased by the
principal balance of any notes of that series issued after the
closing date for that series); minus
- the amount of principal paid to noteholders of that series
prior to that date; minus
- the amount of unreimbursed Investor Charge-Offs for notes of
that series prior to that date.
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If specified in the prospectus supplement for any series of notes, under certain
circumstances the Invested Amount may be further adjusted by the amount of
principal allocated to noteholders, the funds on deposit in any specified
account, and any other amount specified in the accompanying prospectus
supplement.
Each series of notes may consist of one or more classes, one or more of
which may be senior notes and one or more of which may be subordinated notes.
Each class of a series will evidence the right to receive a specified portion of
each payment of principal or interest or both. Each class of a series may differ
from other classes in some aspects, including:
- amounts allocated to principal payments;
- maturity date;
- interest rate; and
- availability and amount of series enhancement.
Payments and deposits of interest and principal will be made on payment
dates to noteholders in whose names the notes were registered on the last day of
the month preceding any payment date unless a different record date is specified
in the accompanying prospectus supplement. Interest will be paid to noteholders
in the amounts, for the periods and on the dates specified in the accompanying
prospectus supplement.
The transferor initially will own the "TRANSFEROR INTEREST" which
represents the right to receive all cash flows from the trust assets not
required to make payments on the notes or to be paid to a series enhancer. The
holder of the Transferor Interest, subject to certain limitations, will have the
right to a percentage, called the "TRANSFEROR PERCENTAGE," of all cardholder
payments from the receivables in the trust. The Transferor Interest may be
transferred, in whole or in part, subject to certain limitations and conditions
described in the trust agreement and in a transaction exempt from the
registration requirements of the Securities Act of 1933. At the discretion of
the transferor, the Transferor Interest may be held either in an uncertificated
form or in the form of a certificate representing the Transferor Interest,
called a "TRANSFEROR CERTIFICATE." See " -- Certain Matters Regarding the
Transferor and the Servicer" in this prospectus.
During the revolving period, the Invested Amount of a series will
remain constant except under certain limited circumstances. See "-- Defaulted
Receivables; Rebates and Fraudulent Charges; Investor Charge-Offs" in this
prospectus. The amount of principal receivables in the trust, however, will vary
each day as new principal receivables are created and others are paid. The
amount of the Transferor Interest will fluctuate each day, therefore, to reflect
the changes in the amount of the principal receivables in the trust. When a
series is amortizing, the Invested Amount of that series will decline as
customer payments of principal receivables are collected and distributed, or
accumulated for payment, to the noteholders. As a result, the Transferor
Interest will generally increase to reflect reductions in the Invested Amount
for that series and will also change to reflect the variations in the amount of
principal receivables in the trust. The Transferor Interest may also be reduced
as the result of new issuances. See " -- New Issuances" in this prospectus.
SECURITIES DEPOSITORY
Generally, notes offered through this prospectus and the accompanying
prospectus supplement:
- will be represented by notes registered in the name of a DTC
nominee;
- will be available for purchase in minimum denominations of
$1,000 and multiples of $1,000 in excess of that amount; and
- will be available for purchase in book-entry form only.
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The accompanying prospectus supplement will specify if your notes have
different characteristics from those listed above.
DTC has informed the transferor that initially its nominee will be Cede
& Co. Accordingly, Cede & Co. is expected to be the holder of record of each
series of notes. As an owner of beneficial interests in the notes, called a
"NOTE OWNER," you will generally not be entitled to a definitive note
representing your interest in the issued notes because you will own notes
through a book-entry record maintained by DTC. References in this prospectus and
the accompanying prospectus supplement to payments, reports, notices and
statements to noteholders refer to DTC or Cede & Co., as registered holder of
the notes, for payment to you in accordance with DTC procedures. All references
in this prospectus and the accompanying prospectus supplement to actions by
noteholders shall refer to actions taken by DTC upon instructions from DTC
participants.
The accompanying prospectus supplement may state that application will
be made to list your series or class of notes on the Luxembourg Stock Exchange
or another exchange.
BOOK-ENTRY REGISTRATION
Following is a description of the form your notes will take. We also
describe how your notes may be transferred and how payments will be made to you.
The information in this section concerning DTC and DTC's book-entry
system has been provided by DTC. The transferor has not independently verified
the accuracy of this information.
You may hold your notes through DTC in the U.S., Clearstream Banking or
Euroclear in Europe or in any other manner described in the accompanying
prospectus supplement. You may hold your notes directly with one of these
systems if you are a participant in the system, or indirectly through
organizations which are participants.
Cede & Co., as nominee for DTC, will hold the global notes. Clearstream
Banking and Euroclear will hold omnibus positions on behalf of the Clearstream
Banking customers and the Euroclear participants, respectively, through
customers' securities accounts in Clearstream Banking's and Euroclear's names on
the books of their respective depositaries collectively called the
"DEPOSITARIES," which in turn will hold such 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 under the provisions of Section 17A of the
Securities Exchange Act of 1934. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers (who may
include the underwriters of any series), banks, trust companies and clearing
corporations and may include certain other organizations. Indirect access to the
DTC system also is available to others such as banks, brokers, dealers and trust
companies, as indirect participants, that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
Transfers between DTC participants will occur in accordance with DTC
rules. Transfers between Clearstream Banking customers and Euroclear
participants will occur in the ordinary way in accordance with their 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
Banking 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 system by its depositary; however, such cross-market
transactions will require delivery of instructions to the relevant
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European international clearing system by the counterparty in that system in
accordance with its rules and procedures and within its established deadlines
(European time). The relevant European international clearing system will, if
the transaction meets its settlement requirements, deliver instructions to its
depositary to take action to effect final settlement on its behalf by delivering
or receiving securities in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
Clearstream Banking customers and Euroclear participants may not deliver
instructions directly to the depositaries.
Because of time-zone differences, credits of securities in Clearstream
Banking or Euroclear as a result of a transaction with a participant will be
made during the subsequent securities settlement processing, dated the business
day following the DTC settlement date, and such credits or any transactions in
such securities settled during such processing will be reported to the relevant
Clearstream Banking customer or Euroclear participant on that business day. Cash
received in Clearstream Banking or Euroclear as a result of sales of securities
by or through a Clearstream Banking customer or a Euroclear participant to a DTC
participant will be received with value on the DTC settlement date but will be
available in the relevant Clearstream Banking or Euroclear cash account only as
of the business day following settlement in DTC.
Note owners 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, note owners will receive all payments of principal of and interest on
the notes from the indenture trustee through the participants who in turn will
receive them from DTC. Under a book-entry format, note owners may experience
some delay in their receipt of payments, since payments will be forwarded by the
indenture trustee to Cede & Co., as nominee for DTC. DTC will forward payments
to its participants, which thereafter will forward them to indirect participants
or note owners. It is anticipated that the only "noteholder" will be Cede & Co.,
as nominee of DTC. Note owners will not be recognized by the indenture trustee
as noteholders, as such term is used in the indenture, and note owners will only
be permitted to exercise the rights of noteholders indirectly through the
participants who in turn will exercise the rights of noteholders 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 payments of principal and interest on the notes.
Participants and indirect participants with which note owners have accounts with
respect to the notes similarly are required to make book-entry transfers and
receive and transmit payments on behalf of their respective note owners.
Accordingly, although note owners will not possess notes, note owners will
receive payments and will be able to transfer their interests.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants and certain banks, the ability of a note owner
to pledge notes to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of its notes, may be limited due to
the lack of a physical certificate for its notes.
DTC has advised the transferor that it will take any action permitted
to be taken by a noteholder under the indenture only at the direction of one or
more participants to whose account with DTC the notes are credited.
Additionally, DTC has advised the transferor that it will take such actions with
respect to specified percentages of the Invested Amount only at the direction of
and on behalf of participants whose holdings include interests that satisfy such
specified percentages. DTC may take conflicting actions with respect to other
interests to the extent that such actions are taken on behalf of participants
whose holdings include such interests.
Clearstream Banking is incorporated under the laws of Luxembourg as a
professional depository. Clearstream Banking holds securities for its customers
and facilitates the clearance and settlement of securities transactions between
Clearstream Banking customers through electronic book-entry changes in accounts
of Clearstream Banking customers, thereby eliminating the need for physical
movement of notes. Transactions may be settled in Clearstream Banking in any of
28 currencies, including United States dollars. Clearstream Banking provides to
its Clearstream Banking customers, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Clearstream
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Banking interfaces with domestic markets in several countries. As a registered
bank in Luxembourg, Clearstream Banking is subject to regulation by the
Luxembourg Commission for the Supervision of the Financial Sector. Clearstream
Banking customers are world-wide financial institutions, including underwriters,
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations and may include the underwriters of any series
of notes. Indirect access to Clearstream Banking is also available to other
institutions, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a Clearstream Banking
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 notes and any
risk from lack of simultaneous transfers of securities and cash. Transactions
may now be settled in any of 27 currencies, including United States dollars. The
Euroclear System includes various other services, including securities lending
and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. The Euroclear System is operated by Morgan Guaranty Trust
Company of New York, Brussels, Belgium office as the Euroclear operator, under
contract with Euro-clear 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 the
underwriters of any series of 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. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law. These rules and laws govern transfers of securities and cash within the
Euroclear System, withdrawal 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 these rules and laws only on behalf of
Euroclear participants and has no record of or relationship with persons holding
through Euroclear participants.
Payments with respect to notes held through Clearstream Banking or
Euroclear will be credited to the cash accounts of Clearstream Banking customers
or Euroclear participants in accordance with the relevant system's rules and
procedures, to the extent received by its depositary. Such distributions will be
subject to tax reporting in accordance with relevant United States tax laws and
regulations. See "Federal Income Tax Consequences" in this prospectus.
Clearstream Banking or the Euroclear operator will take any other action
permitted to be taken by a noteholder under the indenture on behalf of a
Clearstream Banking customer or Euroclear participant only in accordance with
its rules and procedures and subject to its depositary's ability to effect those
actions on its behalf through DTC.
Although DTC, Clearstream Banking and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of notes among
participants of DTC, Clearstream Banking and Euroclear, they are under no
obligation to perform or continue to perform those procedures. Those procedures
may be discontinued at any time.
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DEFINITIVE NOTES
Notes issued in fully registered, certificated form are called
"DEFINITIVE NOTES." The notes of each series will be issued as definitive notes
to note owners or their nominees, rather than to DTC or its nominee, only if:
- the transferor advises the indenture trustee for that series
in writing that DTC is no longer willing or able to discharge
properly its responsibilities as depository with respect to
that series of notes, and the indenture trustee or the
transferor is unable to locate a qualified successor,
- the transferor at its option, advises the indenture trustee in
writing that it elects to terminate the book-entry system
through DTC; or
- after the occurrence of a servicer default, note owners
representing not less than 51% (or another percentage
specified in the accompanying prospectus supplement) of the
Invested Amount advise the indenture trustee and DTC through
participants in writing that the continuation of a book-entry
system through DTC (or a successor thereto) is no longer in
the best interest of the note owners.
If any of these events occur, DTC must notify all participants of the
availability through DTC of definitive notes. Upon surrender by DTC of the
definitive instrument representing the notes and instructions for
re-registration, the indenture trustee will issue the notes as definitive notes,
and thereafter the indenture trustee will recognize the holders of those
definitive notes as noteholders under the indenture.
Payment of principal and interest on the notes will be made by the
indenture trustee directly to holders of definitive notes in accordance with the
procedures set forth in this prospectus and in the indenture. Interest payments
and any principal payments on each payment date will be made to holders in whose
names the definitive notes were registered at the close of business on the
record date. Payments will be made by check mailed to the address of the
noteholders as it appears on the register maintained by the indenture trustee.
The final payment on any note (whether definitive notes or the notes registered
in the name of Cede & Co. representing the noteholders) will be made only upon
presentation and surrender of that note at the office or agency specified in the
notice of final payment to noteholders. The indenture trustee will provide this
notice to registered noteholders not later than the fifth day of the month of
the final payment.
Definitive notes will be transferable and exchangeable at the offices
of the transfer agent and registrar, which will initially be the indenture
trustee. No service charge will be imposed for any registration of transfer or
exchange, but the transfer agent and registrar may require payment of a sum
sufficient to cover any tax or other governmental charge imposed in connection
with the transfer or exchange. The transfer agent and registrar will not be
required to register the transfer or exchange of definitive notes for a period
of fifteen days preceding the payment date for any payment on those definitive
notes.
INTEREST PAYMENTS
For each series of notes and each class, interest will accrue from the
relevant closing date on the applicable outstanding principal balance at the
applicable interest rate. The interest rate on any note may be a fixed, floating
or any other type of rate as specified in the accompanying prospectus
supplement. Interest will be paid, or deposited for later payment, to
noteholders on the payment dates.
Interest payments or deposits on any payment date will be funded from:
- collections of finance charge and administrative receivables
allocated to the Invested Amount during the preceding monthly
period or periods;
- investment earnings, if any, on any funds held in trust
accounts;
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- any series enhancement, to the extent described in the
accompanying prospectus supplement; and
- any derivative counterparty, to the extent described in the
accompanying prospectus supplement.
If interest payments will be made less frequently than monthly, an
interest funding account may be established to accumulate the required interest
amount. If a series has more than one class of notes, that series may have more
than one interest funding account.
Your class of notes will pay interest on the payment dates and at the
interest rate specified in the accompanying prospectus supplement. If your notes
bear interest at a floating or variable rate, the accompanying prospectus
supplement will describe how that rate is calculated. The interest rate on
floating rate notes will be a variable or adjustable rate. The payment dates for
floating rate notes will be set forth in the accompanying prospectus supplement
and need not be the same as the payment dates for the other notes of that
series, but may be either more or less frequent. For each class of floating rate
notes, the related prospectus supplement will set forth the initial floating
rate note interest rate, or the method of determining it, the dates or the
method for determining the dates on which the floating rate note interest rate
is adjusted, and the formula, index or other method by which the interest rate
is determined on such dates.
PRINCIPAL PAYMENTS
Generally, each series will begin with a period, called the "REVOLVING
PERIOD," when no principal is paid or accumulated. The revolving period begins
on the closing date for a series and ends on the day before an amortization
period or accumulation period begins. During the revolving period no principal
payments will be made to the noteholders of that series.
During the controlled amortization period, which will be scheduled to
begin on the date specified in, or determined in the manner specified in, the
accompanying prospectus supplement, and during the early amortization period,
which will begin upon the occurrence of a pay out event or, if specified in the
accompanying prospectus supplement, the early accumulation period, principal
will be paid to any class of the series in the amounts and on the dates
specified in the accompanying prospectus supplement.
During an accumulation period, principal will be accumulated in a trust
account, called a "PRINCIPAL FUNDING ACCOUNT," established for the benefit of
that class of noteholders for later distribution to noteholders on the date
specified in the prospectus supplement, called the "EXPECTED PRINCIPAL PAYMENT
DATE," in the amounts specified in the accompanying prospectus supplement.
Principal payments for any series or class will be funded from
collections of principal receivables received during the related monthly period
or periods as specified in the accompanying prospectus supplement and allocated
to that series or class and from certain other sources specified in the
accompanying prospectus supplement. In the case of a series with more than one
class of notes, the noteholders of one or more classes may receive payments of
principal at different times. The accompanying prospectus supplement will
describe the manner, timing and priority of payments of principal to noteholders
of each class.
TRANSFER AND ASSIGNMENT OF RECEIVABLES
The bank, as the initial seller, has transferred and assigned to ABRC,
as the initial transferor, for further transfer and assignment by ABRC to the
trust, all of the bank's right, title and interest in and to the receivables in
the accounts designated as accounts of the trust and future receivables created
in these accounts. One or more additional sellers may transfer and assign to the
transferor or directly to the trust all their right, title and interest in and
to receivables in designated accounts. The bank and any additional sellers,
together, may sometimes be called the "SELLER." Additional transferors may also
be designated. ABRC, any additional transferors and any sellers that transfer
receivables directly to the trust, together, may sometimes be called the
"TRANSFEROR." Any additional seller or transferor will be designated only in
accordance with the procedures specified in the governing documents.
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Each of the seller and the transferor, has indicated and, in connection
with each future transfer of receivables to the trust, will indicate in its
computer files or books and records that the receivables have been conveyed to
the trust. In addition, the seller and the transferor have provided or caused to
be provided (or will provide or cause to be provided) to the owner trustee
computer files or microfiche lists, containing a true and complete list showing
each account designated to the trust, identified by account number and by total
outstanding balance on the date of transfer. Neither the seller nor the
transferor will deliver to the owner trustee any other records or agreements
relating to the accounts or the receivables, except in connection with additions
or removals of accounts. Except as stated above, the records and agreements
relating to the accounts and the receivables maintained by the seller or the
transferor are not and will not be segregated from other documents and
agreements relating to other credit card accounts and receivables and are not
and will not be stamped or marked to reflect the transfers described above. The
computer records of the seller and the transferor are and will be required to be
marked to evidence these transfers. Each of the seller and the transferor has
filed or will file in all appropriate jurisdictions Uniform Commercial Code
financing statements covering the receivables meeting the requirements of
applicable law. See "Risk Factors -- Some liens would be given priority over
your notes which could cause delayed or reduced payments" and "Certain Legal
Aspects of the Receivables" in this prospectus.
ISSUANCE OF ADDITIONAL SERIES
The indenture provides that, under any one or more indenture
supplements, the transferor may cause the owner trustee, on behalf of the trust,
to issue one or more new series of notes and may designate all principal terms
of those series. Each additional series issued may contain one or more classes
and may have different terms and enhancements than any other series. A
predecessor trust has issued 3 series of asset-backed securities in private
transactions, which securities have been, or will be, at the same time as the
initial issuance of notes offered under this prospectus, refinanced with notes
issued by the trust in private transactions. With respect to those privately
issued notes and any other notes that may be issued by the trust privately in
the future, references in this prospectus or the accompanying prospectus
supplement to the terms of any series of notes described in the applicable
prospectus supplement instead refer to the governing documents for those
privately issued notes. One or more of the series of those previously issued
notes and notes that may be issued by the trust privately in the future may have
the right to consent to the issuance of future series as long as they are
outstanding. The issuance of future series will occur without prior review or
consent by you or, except as described above, any other noteholder. Upon the
issuance of an additional series of notes, except as described above, none of
the transferor, the servicer, the indenture trustee, the owner trustee or the
trust will be required or will intend to obtain the consent of any noteholder of
any other series previously issued by the trust. However, as a condition of a
new issuance, the indenture trustee must receive written confirmation that the
new issuance will not result in the reduction or withdrawal by any rating agency
of its rating of any outstanding series or class. The principal terms of one
series may vary substantially from those of another series. Some series may be
in revolving periods while others are in amortization periods or accumulation
periods. The trust cannot assure you that the terms of any series might not have
an impact on the time or amount of payments received by the noteholders of any
other series. The issuance of a series of notes will cause a reduction in the
Transferor Interest. The trust may offer any additional series under a
prospectus or other disclosure document in offerings under this prospectus or in
transactions either registered under the Securities Act of 1933, or exempt from
registration under the Securities Act of 1933, directly, through one or more
underwriters or placement agents, in fixed-price offerings or in negotiated
transactions or otherwise.
Unless otherwise specified in the accompanying prospectus supplement, a
new issuance may only occur upon the satisfaction of certain conditions provided
in the indenture. Under the indenture, the transferor may cause the owner
trustee, on behalf of the trust, to issue new series of notes by notifying the
owner trustee, the indenture trustee, the servicer and each rating agency at
least five days in advance of the date upon which the new issuance is to occur.
Under the indenture, the notice will state the date upon which the new issuance
is to occur.
The owner trustee will execute, and the indenture trustee will
authenticate, the notes of any series only upon delivery to them of the
following items, or satisfaction of the following conditions, among others:
- an indenture supplement specifying the principal terms of the
new series;
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- an opinion of counsel to the effect that, except as otherwise
stated in the related indenture supplement, the notes of the
new series will be characterized as indebtedness for federal
income tax purposes;
- for any series for which a tax opinion was given at the time
of its issuance, an opinion of counsel to the effect that, for
federal income tax purposes:
- the issuance will not adversely affect the tax
characterization as debt of notes of any outstanding
series or class that were characterized as debt at
the time of their issuance;
- the new issuance will not cause the trust to be
deemed to be an association (or publicly traded
partnership) taxable as a corporation; and
- the new issuance will not cause or constitute an
event in which gain or loss would be recognized by
any noteholder (an opinion of counsel with respect to
these tax matters is referred to in this prospectus
as a "TAX OPINION");
- if required by the related indenture supplement, the form of
series enhancement and an appropriate series enhancement
agreement for that series enhancement executed by the
transferor and the series enhancer;
- written confirmation from each rating agency that the new
issuance will not result in a reduction or withdrawal of its
rating of any outstanding series or class;
- the new issuance will not:
- cause a pay out event or an event of default; or
- materially and adversely affect the amount or timing
of payments to be made to the noteholders of any
series or class (any such effect is referred to in
this prospectus as an "ADVERSE EFFECT");
- a certificate of an authorized officer of the transferor to
the effect that it reasonably believes the new issuance will
not have an adverse effect; and
- after giving effect to the new issuance, (a) the total amount
of principal receivables previously transferred to the trust
exceeds a specified amount, called the "REQUIRED MINIMUM
PRINCIPAL BALANCE" and (b) the Transferor Interest exceeds the
Required Transferor Interest.
ISSUANCE OF ADDITIONAL NOTES
If specified in the accompanying prospectus supplement, from time to
time during the revolving period, the transferor may, subject to certain
conditions described below, cause the trust to issue additional notes of an
outstanding series. Each issuance of additional notes of an outstanding series
is called an "ADDITIONAL ISSUANCE." When issued, the additional notes of each
class will be identical in all respects to the other outstanding notes of that
class and will be equally and ratably entitled to the benefits of the transfer
and servicing agreement, the indenture and the related indenture supplement
without preference, priority or distinction.
In connection with each additional issuance, the outstanding principal
amounts of each class of notes and the series enhancement will be increased
proportionately. The additional series enhancement provided in connection with
an additional issuance may take the form of an additional letter of credit, the
establishment of a cash collateral account, the purchase of interest rate caps
or swaps and/or another form of series enhancement, provided that the
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form and amount of additional series enhancement will not cause a reduction or
withdrawal by any rating agency of its rating of any outstanding series or class
of notes.
Following an additional issuance of a series and class, the respective
portions of the series enhancement that are for the benefit of the holders of
notes of that series and class will remain the same, as a percentage of the
total series enhancement, as the respective proportions in effect on the closing
date for that series. If applicable, the amount to be deposited into the
principal funding account also will be increased proportionately to reflect the
principal amount of additional notes.
Except as set forth in the accompanying prospectus supplement, in order
to issue additional notes of a series, several conditions must be satisfied,
including:
- notice to the indenture trustee, the owner trustee, the
servicer and any series enhancer of the issuance and the date
upon which it is to occur;
- after giving effect to the additional issuance, the total
amount of principal receivables must at least equal the
Required Minimum Principal Balance;
- delivery to the indenture trustee of any additional series
enhancement agreement related to the additional issuance,
executed by each of the parties to the series enhancement
agreement;
- delivery to the indenture trustee of written confirmation that
the additional issuance will not result in the reduction or
withdrawal by any rating agency of its rating of any
outstanding series or class;
- delivery to the indenture trustee of a certificate of an
authorized officer of the transferor to the effect that, in
the transferor's reasonable belief, the issuance will not have
a material adverse effect on the interests of the holders of
any outstanding series or class of notes at the date of
issuance or at any future date;
- as of the date of the additional issuance, all amounts due to
the holders of notes of that series must have been paid, and
there must not be any unreimbursed Investor Charge-Offs;
- the excess of the principal amount of the additional notes
over their issue price shall not exceed the maximum amount
permitted under the Code without the creation of original
issue discount;
- after giving effect to the issuance, the Transferor Interest
must equal or exceed the Required Transferor Interest; and
- delivery by the transferor to the indenture trustee of a tax
opinion.
There are no restrictions on the timing or amount of any additional issuance,
provided that the conditions described above are met. As of the date of any
additional issuance, the Invested Amount will be increased to reflect the
initial principal balance of the additional notes of each class.
REPRESENTATIONS AND WARRANTIES
When the trust issues a new series of notes, the transferor will make
several representations and warranties to the trust in the transfer and
servicing agreement, including the following:
- the execution and delivery by the transferor of the transfer
and servicing agreement and each other document relating to
the issuance to which it is a party will not conflict with any
law or any other agreement to which it is a party; and
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- all required governmental approvals in connection with the
execution and delivery by the transferor of the transfer and
servicing agreement and each other document relating to the
issuance have been obtained and remain in force and effect.
If a representation or warranty made by the transferor is later found
to be materially incorrect when made, and:
- continues to be materially incorrect for 60 days after notice
to the transferor by the indenture trustee, or to the
transferor and the indenture trustee by any noteholder; and
- as a result, the interests of the noteholders are materially
and adversely affected, and continue to be materially and
adversely affected during the 60-day period;
then the indenture trustee or noteholders holding more than 50% of the
then-outstanding principal balance of the notes of the affected series may give
notice to the transferor and the servicer (and to the indenture trustee if given
by the noteholders) declaring that a pay out event has occurred. Declaring a pay
out event will automatically begin early amortization or, if specified in the
accompanying prospectus supplement, early accumulation of principal.
The transferor will make other representations and warranties to the
trust in the transfer and servicing agreement, including the following:
- as of the closing date, the transferor is duly incorporated
and in good standing and has the authority to consummate the
issuance;
- the transfer and servicing agreement, and each other document
relating to the issuance to which it is a party constitutes a
legal, valid and binding obligation enforceable against ABRC
or the additional transferor; and
- the trust has all right, title and interest in the receivables
in the trust portfolio or has a first priority perfected
security interest in these receivables.
In the event:
- any representation or warranty described immediately above is
breached; and
- as a result, the interests of noteholders in the receivables
in the trust portfolio are materially and adversely affected;
then the owner trustee, the indenture trustee or noteholders representing 50% or
more of the then- outstanding principal balance of all of the trust's
outstanding series may give notice to the transferor and the servicer (and to
the owner trustee and indenture trustee if given by the noteholders) directing
the transferor to accept reassignment of the entire trust portfolio and to pay
into the trust's collection account a cash deposit equal to the sum of the
amounts specified with respect to each outstanding series in the related
indenture supplement. However, no reassignment will be required if:
- within 60 days, or up to 120 days if specified in the notice,
ABRC or the additional transferor cures the breach and any
material adverse effect caused by the breach; or
- on any day within the applicable 60-day to 120-day period, the
relevant representation and warranty is then true and correct
in all material respects and ABRC or the additional transferor
delivers to the owner trustee a certificate of an authorized
officer describing the nature of the breach and the manner in
which the relevant representation and warranty became true and
correct.
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Reassignment of the trust portfolio and ABRC's or the additional
transferor's obligation to make the cash deposit in the trust's collection
account are the only remedies for any breach of the representations and
warranties described above.
The transferor makes representations and warranties in the transfer and
servicing agreement concerning the accounts and the receivables in the trust
portfolio. Only eligible accounts can be designated as accounts for the trust
portfolio. The trust can give you no assurance that eligible accounts will
remain eligible once added to the trust.
The transferor represents that each receivable transferred by it in the
trust portfolio is an eligible receivable when created. If a receivable in the
trust portfolio is found to be ineligible when created, and, as a result, the
interests of noteholders in any receivable in the trust portfolio are materially
and adversely affected, the transferor must accept reassignment of the principal
amount of this ineligible receivable. However, the transferor will have 60 days,
or up to 120 days if agreed to by the indenture trustee and the servicer, from
the earlier to occur of discovery of the breach by the transferor or receipt by
the transferor of written notice of the breach given by the owner trustee, the
indenture trustee or the servicer, to cure the ineligibility before reassignment
is required.
The transferor will accept reassignment by directing the servicer to
deduct the principal amount of the ineligible receivable from the Transferor
Interest. If this would reduce the Transferor Interest below the Required
Transferor Interest, the transferor will make a cash deposit in the trust's
Excess Funding Account in the amount by which the Transferor Interest would have
been reduced below the Required Transferor Interest. Any deduction or deposit is
considered a repayment in full of the ineligible receivable. The transferor's
obligation to accept reassignment of any ineligible receivable is the only
remedy for any breach of a representation concerning eligibility of receivables.
The accompanying prospectus supplement may specify additional
representations and warranties made by the transferor when your notes are
issued. The indenture trustee is not required to make periodic examinations of
receivables in the trust portfolio or any records relating to them. However, the
servicer will deliver to the indenture trustee once each year an opinion of
counsel affirming, among other things, that no further action is necessary to
maintain the trust's perfected security interest in the receivables.
For each series of notes, an "ELIGIBLE ACCOUNT" means, as of the
cut-off date, or, with respect to additional accounts, as of their date of
designation for inclusion in the trust, each account originated by the seller:
- which was in existence and maintained by the seller, as
applicable;
- which is payable in United States dollars;
- the cardholder of which has provided, as his or her most
recent billing address, an address located in the United
States or its territories, possessions or military bases;
- which, except as provided below, has a cardholder who has not
been identified by the servicer in its computer files as
currently being involved in a bankruptcy proceeding;
- which has not been classified as stolen or lost;
- which has a cardholder who has not been identified by the
servicer as an employee or affiliate of the seller;
- which does not have any receivables that are defaulted
receivables;
- which does not have any receivables that have been identified
by the servicer or the relevant cardholder as having been
incurred as a result of fraudulent use of any credit card; and
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- which, except as provided below, does not have any receivables
that are more than 180 days past due from the date of the
initial billing statement.
Eligible accounts may include accounts, the receivables of which have
been charged off, or with respect to which the servicer believes the related
cardholder is bankrupt, in each case as of the initial cut-off date or as of its
date of designation for inclusion in the trust, as applicable, if:
- the balance of all receivables included in those accounts is
reflected on the books and records of the transferor as
"zero"; and
- charging privileges on these accounts have been canceled in
accordance with the customary policies and procedures, as
amended from time to time, of the seller.
For each series of notes, an "ELIGIBLE RECEIVABLE" means each
receivable:
- which has arisen in an eligible account;
- which was created in compliance, in all material respects,
with all requirements of law applicable to the seller at the
time of its creation, and under the terms of a credit card
agreement which complies in all material respects with all
requirements of law applicable to the seller;
- for which all consents, licenses or authorizations of, or
registrations with, any governmental authority required to be
obtained or given in connection with the creation of the
receivable or the execution, delivery and performance by the
seller of the related credit card agreement have been duly
obtained or given and are in full force and effect;
- as to which, at the time of its transfer to the trust, the
transferor or the trust has good title, free and clear of all
liens and security interests arising under or through the
transferor, other than tax liens for taxes not then due or
which the transferor is contesting;
- which has been the subject of either a valid transfer and
assignment from the transferor to the trust of all of the
transferor's right, title and interest in the receivable
(including any proceeds of the receivable), or the grant of a
first priority perfected security interest in the receivable
(and in the proceeds of the receivable), effective until the
termination of the trust;
- which is the legal, valid and binding payment obligation of
the obligor under the receivable, legally enforceable against
that obligor in accordance with its terms, subject to some
bankruptcy- related exceptions;
- which, at the time of transfer to the trust, has not been
waived or modified except as permitted under the customary
policies and procedures, as amended from time to time, of the
seller, and then only if the waiver or modification is
reflected in the servicer's computer file of revolving credit
card accounts;
- which, at the time of transfer to the trust, is not subject to
any right of rescission, setoff, counterclaim or any other
defense (including defenses arising out of violations of usury
laws) of the obligor, other than defenses arising out of
bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights in general;
- which, at the time of transfer to the trust, the seller has
satisfied all of its obligations required to be satisfied by
that time;
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- which, at the time of transfer to the trust, none of the
transferor or the seller has taken any action, or omitted to
take any action, that would impair the rights of the trust or
the noteholders; and
- which constitutes an "account" or "general intangible" under
Article 9 of the Uniform Commercial Code as then in effect in
any state where the filing of a financing statement is
required to perfect the trust's interest in the receivables
and the proceeds thereof.
ADDITION OF TRUST ASSETS
As described above under "The Trust Portfolio," the transferor will
have the right to designate, from time to time, additional accounts to be
included as accounts for the trust. In addition, the transferor will be required
to designate additional accounts under the circumstances and in the amounts
specified in the accompanying prospectus supplement. The transferor will convey
to the trust its interest in all receivables of those additional accounts,
whether the receivables are then existing or subsequently created.
Each additional account must be an eligible account as of its date of
designation for inclusion in the trust. However, additional accounts may not be
of the same credit quality as the initial accounts. The seller will not use
selection procedures it believes are adverse to the interests of the noteholders
in selecting additional accounts from the available eligible accounts in the
Advanta Business Card Portfolio. However, since additional accounts may not have
been part of the Advanta Business Card Portfolio at the time of the initial
transfer of accounts to the trust, additional accounts may not be of the same
credit quality as the initial accounts. Additional accounts may have been
originated by the bank or other seller at a later date using credit criteria
different from those that were applied to the initial accounts or may have been
acquired by the bank or other seller from another credit card issuer that had
different credit criteria.
When the transferor transfers receivables in additional accounts it
must satisfy several conditions, including, as applicable:
- notice to the owner trustee, the indenture trustee, the
servicer and each rating agency;
- delivery and acceptance by the owner trustee of a written
assignment of receivables in the additional accounts to the
trust;
- delivery to the owner trustee of a computer file or microfiche
list with an accurate list of all additional accounts;
- delivery to the owner trustee and the indenture trustee of a
certificate of an authorized officer to the effect that:
- as of the date of assignment, called the "ADDITION
DATE," each additional account is an eligible
account;
- any action necessary to perfect the trust's interest
in the receivables arising in the additional accounts
has been taken;
- as of the addition date, none of the seller or the
transferor is insolvent; and
- in the transferor's reasonable belief, adding the
receivables in additional accounts will not have a
material adverse effect on the interests of the
noteholders;
- delivery of certain opinions of counsel with respect to the
transfer of the receivables in the additional accounts to the
trust;
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- in circumstances where the transferor, in its discretion,
designates additional accounts to be included as accounts for
the trust, written confirmation from each rating agency that
the addition will not result in the reduction or withdrawal of
its rating of any outstanding series or class; and
- in circumstances where the transferor is required to designate
additional accounts to be included as accounts for the trust,
each rating agency then rating any series or class of notes
outstanding under the trust shall have previously, or, in
certain limited circumstances, within a three-month period,
consented to the designation of the additional accounts.
In addition to the periodic reports otherwise required to be filed by
the servicer with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934, the servicer intends to file, on behalf of the
trust, a Report on Form 8-K with respect to any addition to the trust of
receivables in additional accounts that would have a material effect on the
composition of the assets of the trust.
The transferor may, from time to time, designate one or more of its
affiliates as additional transferors under the transfer and servicing agreement.
In connection with this designation, the transferor will exchange the transferor
certificate for a newly issued transferor certificate modified to reflect any
additional transferor's interest in the Transferor Interest. The transfer and
servicing agreement may be amended to permit the designation of these additional
transferors and the exchange of the transferor certificate without the consent
of noteholders of any series offered under this prospectus upon:
- delivery to the owner trustee and the indenture trustee of a
tax opinion regarding the exchange; and
- receipt of written confirmation from each rating agency that
the exchange will not result in a reduction or withdrawal of
its rating of any outstanding series or class.
AUTOMATIC ACCOUNT ADDITIONS
Each transferor may from time to time, in its sole discretion,
designate eligible accounts (called "AUTOMATIC ADDITIONAL ACCOUNTS") to be
included as accounts designated to the trust as of the applicable addition date.
Any delivery of Automatic Additional Accounts must satisfy the following
conditions:
- unless each rating agency otherwise consents, the number of
Automatic Additional Accounts designated for any of the three
consecutive monthly periods commencing in [_________],
[_________], and [_________] of each calendar year, commencing
in [_________], will not exceed 15% of the number of accounts
designated to the trust as of the first day of the calendar
year during which those monthly periods commence and the
number of Automatic Additional Accounts designated during any
calendar year will not exceed 20% of the number of accounts
designated to the trust as of the first day of that calendar
year;
- delivery to the owner trustee and each rating agency of an
opinion of counsel confirming the validity and perfection of
the transfer of those Automatic Additional Accounts;
- delivery to the indenture trustee of copies of UCC-1 financing
statements covering those Automatic Additional Accounts, if
necessary to perfect the trust's interest in the receivables
arising in those accounts;
- as of each of the related cut-off date and the addition date,
no bankruptcy, insolvency, reorganization or similar event
concerning any transferor shall have occurred nor will the
transfer of the receivables arising in the Automatic
Additional Accounts to the trust have been made in
contemplation of the occurrence of any bankruptcy, insolvency,
reorganization or similar event concerning any transferor;
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- delivery to the owner trustee of an officer's certificate,
dated the addition date, to the effect that:
- as of the applicable cut-off date, the Automatic
Additional Accounts are all eligible accounts;
- to the extent applicable, the conditions set forth
above have been satisfied;
- the transferor reasonably believes that the addition
by it of the receivables arising in the Automatic
Additional Accounts will not, based on the facts
known at the time of addition, then or thereafter
cause a pay out event to occur for any series and no
selection procedure was utilized by the transferor
which would result in a selection of Automatic
Additional Accounts, from among the available
eligible accounts owned by that transferor, that
would be materially adverse to the interests of the
noteholders of any series as of the addition date;
- delivery to the owner trustee of a computer file or microfiche
list of all Automatic Additional Accounts; and
- delivery and acceptance by the owner trustee of a written
assignment of receivables in the Automatic Additional Accounts
REMOVAL OF ACCOUNTS
The transferor has the right to designate certain accounts for removal
from the trust and to require the indenture trustee to transfer and reassign to
it or its designee all receivables in the removed account back to it, whether
the receivables already exist or arise after the designation. The transferor's
rights to removal are subject to satisfaction of several conditions, including:
- written notice to the owner trustee, the indenture trustee,
the servicer, each rating agency and each series enhancer;
- delivery to the owner trustee for execution of a written
reassignment of receivables in the removed accounts to the
transferor or its designee;
- delivery to the owner trustee of a computer file or microfiche
list with an accurate list of all removed accounts;
- written confirmation from each rating agency that the removal
will not result in the reduction or withdrawal of its rating
of any outstanding series or class;
- delivery to the owner trustee and the indenture trustee of a
certificate of an authorized officer to the effect that, in
the transferor's reasonable belief:
- the removal will not have a material adverse effect
on the interests of the noteholders;
- the removal will not cause a pay out event or event
of default; and
- the accounts to be removed were not selected through
a selection process believed to be materially adverse
to the interests of the noteholders; and
- any other conditions specified in the accompanying prospectus
supplement.
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Upon satisfaction of the above conditions, the indenture trustee will
execute and deliver to the transferor or its designee a written reassignment and
will, without further action, be deemed to sell, transfer, assign, set over and
otherwise convey to the transferor or its designee, effective as of the removal
date, without recourse, representation or warranty, all the right, title and
interest of the trust in and to the receivables arising in the removed accounts,
all moneys due and to become due and all amounts received with respect thereto
and all proceeds thereof.
The conditions described above relating to rating agency confirmation
and the delivery of an officer's certificate will not apply if the transferor is
purchasing receivables in accounts designated for re-purchase by a merchant or
co-branding participant upon termination of its affinity agreement with the
seller.
In all cases of removal, the transferor will purchase the related
receivables by directing the servicer to deduct the principal amount of those
receivables from the Transferor Interest. If this would reduce the Transferor
Interest below the Required Transferor Interest, the transferor will make a cash
deposit in the trust's Excess Funding Account in the amount by which the
Transferor Interest would have been reduced below the Required Transferor
Interest. Any deduction or deposit is considered a payment in full for those
receivables.
COLLECTION AND OTHER SERVICING PROCEDURES
For each series of notes, the servicer will be responsible for
servicing and administering the receivables in the trust in accordance with the
servicer's policies and procedures for servicing revolving business credit card
receivables comparable to the receivables in the trust and in accordance with
the customary guidelines of the servicer. The servicer will be required to
maintain fidelity bond coverage insuring against losses through wrongdoing of
its officers and employees who are involved in the servicing of credit card
receivables covering such actions and in amounts that the servicer believes are
reasonable. The bank as servicer or any new servicer is called the "SERVICER."
ADJUSTMENT
On each day that the servicer adjusts downward the amount of any
receivable because of a rebate, refund, unauthorized charge or billing error to
a cardholder, or because the receivable was created in respect of merchandise
which was refused or returned by a cardholder, or if the servicer otherwise
adjusts downward the amount of any receivable without receiving collections
therefor or charging off such amount as uncollectible, then, in any such case,
the amount of principal receivables used to calculate the Transferor Interest,
the Investor Percentage and any other percentages used to allocate within or
among series will be reduced by the amount of the adjustment. Similarly, the
amount of principal receivables used to calculate the Transferor Interest, the
series percentages and any other percentage used to allocate within or among
series will be reduced by the amount of any receivable discovered to have been
created through a fraudulent or counterfeit charge. Any of these adjustments
will be made on or prior to the end of the monthly period in which the
adjustment arises. If after the exclusion of the principal receivables from the
calculation of the Transferor Interest, the Transferor Interest would be less
than the Required Transferor Interest, or the aggregate amount of principal
receivables is less than the Required Minimum Principal Balance, the transferor
will be required to pay an amount equal to such deficiency into the Excess
Funding Account.
TRUST ACCOUNTS
The servicer will establish and maintain in the name of the indenture
trustee, for the benefit of noteholders of all series, a "COLLECTION ACCOUNT,"
which will be either (a) a segregated account with an eligible institution or
(b) a segregated trust account with the corporate trust department of a
depositary institution organized under the laws of the United States or any one
of the 50 states, the District of Columbia (or any domestic branch of a foreign
bank), and acting as a trustee for funds deposited in that account, so long as
any of the securities of this depository institution are rated at least
investment grade by each rating agency rating a class of notes. An account that
meets these requirements is called an "ELIGIBLE ACCOUNT."
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The collection account will initially be maintained with the indenture
trustee. If at any time the collection account ceases to be an eligible account,
the indenture trustee will move the collection account to another eligible
institution so that it will again be qualified as an eligible account.
The servicer will also establish and maintain with an eligible
institution in the name of the indenture trustee a "EXCESS FUNDING ACCOUNT,"
which also is required to be an eligible account.
An "ELIGIBLE INSTITUTION" is:
- a depository institution, including the owner trustee or the
indenture trustee;
- organized under the laws of the United States or any one of
the 50 states or the District of Columbia (or any domestic
branch of a foreign bank); and
- which at all times (i) is a member of the FDIC and (ii) has
either a long-term unsecured debt rating or a certificate of
deposit rating acceptable to each rating agency rating a
series or class of notes; or
- any other institution acceptable to each rating agency rating
a series or class of notes.
Funds in the collection account and the Excess Funding Account will be
assets of the trust and will be invested, at the direction of the servicer, in
"ELIGIBLE INVESTMENTS." Eligible investments are securities, instruments,
security entitlements or other investment property which evidence:
- direct obligations of, and obligations fully guaranteed as to
timely payment of principal and interest by, the United States
of America;
- 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 the District of Columbia (or domestic branches of foreign
banks) and subject to supervision and examination by federal
or state banking or depository institution authorities.
However, at the time of the trust's investment or contractual
commitment to invest, the short-term debt rating of that
depository institution or trust company must be in the highest
investment category of at least one of the rating agencies
rating a class of notes;
- commercial paper or other short-term obligations having
original or remaining maturities of no more than 30 days, and
having, at the time of the trust's investment or contractual
commitment to invest, a rating in the highest rating category
of at least one of the rating agencies rating a class of
notes;
- demand deposits, time deposits and certificates of deposit
which are fully insured by the FDIC having, at the time of the
trust's investment, a rating in the highest rating category of
at least one of the rating agencies rating a class of notes;
- notes or bankers' acceptances (having original maturities of
no more than 365 days) issued by any depository institution or
trust company referred to in the second clause above;
- money market funds having, at the time of the trust's
investment, a rating in the highest rating category of at
least one of the rating agencies rating a class of notes
(including funds for which the indenture trustee or any of its
affiliates is investment manager or advisor);
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- time deposits (having maturities not later than the next
payment date) other than those referred to in the fourth
clause above, with a person whose commercial paper has a
credit rating satisfactory to at least one of the rating
agencies rating a class of notes; or
- any other investment upon receipt of written confirmation from
each rating agency rating a class of notes that the additional
form of investment will not result in a reduction or
withdrawal of its rating of any outstanding series or class.
Any earnings (net of losses and investment expenses) on funds in the
collection account and the Excess Funding Account will be treated as collections
of finance charge and administrative receivables.
The indenture trustee, acting as the initial paying agent, will have
the revocable power to withdraw funds from the collection account for the
purpose of making payments to the noteholders of any series under the related
indenture supplement. The indenture trustee, acting as the initial paying agent,
together with any successor to the indenture trustee acting in that capacity,
and any entity specified in an indenture supplement to act in that capacity for
the related series, is referred to collectively as the "PAYING AGENT."
FUNDING PERIOD
For any series of notes, the total amount of principal receivables in
the trust available to that series may be less than the total principal balance
of the notes of that series. If this occurs, the initial Invested Amount for
that series of notes will be less than the principal amount of that series of
notes. In this case, the prospectus supplement for the series will set forth the
terms of the "FUNDING PERIOD," which is the period from that series' closing
date to the earlier of:
- the date that series' Invested Amount equals the principal
amount of that series of notes; and
- the date specified in the related prospectus supplement.
During the funding period, the portion of the Invested Amount not
invested in receivables will be maintained in a "PRE-FUNDING ACCOUNT," which is
a trust account established with the indenture trustee for the benefit of the
noteholders of that series. On the closing date for that series of notes, this
amount may be up to 100% of the principal balance of that series of notes. The
Invested Amount for that series will increase as new receivables are transferred
to the trust or as the Invested Amounts of other outstanding series are reduced.
The Invested Amount may decrease due to charge-offs allocated to the series.
During the funding period, funds on deposit in the pre-funding account
will be paid to the transferor as the Invested Amount increases. If the Invested
Amount for a series is not increased so that it equals the principal balance of
the notes of that series by the end of the funding period, any amount remaining
in the pre-funding account will be repaid to noteholders of that series. This
type of event may also cause repayment of other amounts to noteholders, as set
forth in the related prospectus supplement.
The prospectus supplement for a series with a funding period will set
forth:
- the series' initial Invested Amount;
- the series' full Invested Amount, which is the initial
principal balance of the series of notes;
- the date on which the series' Invested Amount is expected to
equal the full Invested Amount;
- the date by which the funding period will end; and
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- what other events, if any, will occur if the end of the
funding period is reached before the full Invested Amount is
funded.
INVESTOR PERCENTAGE AND TRANSFEROR PERCENTAGE
The servicer will allocate all collections of finance charge and
administrative receivables, all collections of principal receivables and all
defaulted receivables among:
- each series issued and outstanding;
- the Transferor Interest; and
- if the related prospectus supplement so states, to any series
enhancers.
All allocations of these amounts will be made through the respective Investor
Percentages for each series, the transferor percentage and, where applicable,
the percentage interest of certain series enhancers, called the "SERIES
ENHANCEMENT PERCENTAGE." The related prospectus supplements will set forth how
the Investor Percentages and series enhancement percentages are calculated.
The transferor percentage will equal 100% minus:
- the total Investor Percentages for all outstanding series;
minus
- the total series enhancement percentages for all outstanding
series.
APPLICATION OF COLLECTIONS
Except in the circumstances described below, the servicer must deposit
into the collection account, no later than two business days after processing,
all payments made on receivables in the trust portfolio. The servicer must also
allocate these deposits between accounts and to various parties, as described
below.
However, the servicer will be able to make these deposits on a monthly or other
periodic basis if one of the following is true:
- the bank remains the servicer under the transfer and servicing
agreement;
- no pay out event has occurred; and
- either: (i) the bank maintains a long or short term rating
which is satisfactory to each rating agency; or (ii) Advanta
Corp. has provided the indenture trustee a performance
guaranty covering collection risk of the servicer and written
confirmation is received from each rating agency that this
arrangement will not result in a reduction or withdrawal of
its rating of any outstanding series or class; or (iii) the
servicer delivers to the indenture trustee a letter of credit
or other guaranty covering collection risk and written
confirmation is received from each rating agency that this
arrangement will not result in a reduction or withdrawal of
its rating of any outstanding series or class.
The servicer must make daily or periodic deposits to the collection
account only to the extent that the funds are needed for deposit into other
trust accounts or distribution to noteholders or other parties. If the
collection account balance ever exceeds the amount needed for deposit or
distribution, the servicer will be able to withdraw the excess. The servicer may
retain its servicing fee for any series and will not be required to deposit it
in the collection account.
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Each time a collection account deposit is made, the servicer will
withdraw from, or retain in, the collection account, as applicable, the
following amounts and apply them as indicated:
- the transferor percentage of collections of finance charge and
administrative receivables and principal receivables in the
trust portfolio will be paid or held for payment to the
holders of the transferor certificates. However, collections
of principal receivables allocable to the holders of the
transferor certificates will be:
- paid to the holders of the transferor certificates
only if the Transferor Interest exceeds zero; or
- deposited in the Excess Funding Account;
- for each series, the relevant Investor Percentage of
collections of finance charge and administrative receivables
in the trust portfolio will be retained in the collection
account for allocation and payment as set forth in the related
prospectus supplement;
- if the series is in its revolving period, the applicable
Investor Percentage of collections of principal receivables in
the trust portfolio allocated to the series will be paid or
held for payment to the holders of the transferor
certificates. However, collections of principal receivables
will be:
- paid to the holders of the transferor certificates
only if the Transferor Interest is greater than a
specified minimum level, called the "REQUIRED
TRANSFEROR INTEREST;" or
- deposited in the Excess Funding Account;
- if the series is in (a) the period in which principal is
accumulated in specified amounts per month and paid on an
expected principal payment date, known as the "CONTROLLED
ACCUMULATION PERIOD," (b) the period in which principal is
paid in fixed amounts at scheduled intervals, known as the
"CONTROLLED AMORTIZATION PERIOD," or (c) the period in which
principal is paid or accumulated in varying amounts each month
based on the amount of principal receivables collected
following a pay out event, known as the "EARLY AMORTIZATION
PERIOD" or "EARLY ACCUMULATION PERIOD," respectively, the
applicable Investor Percentage of collections of principal
receivables in the trust portfolio allocated to the series up
to the amount, if any, specified in the accompanying
prospectus supplement will be retained in the collection
account or deposited in a principal funding account, as
applicable, for allocation and payment to noteholders as
described in the accompanying prospectus supplement. However,
if collections of principal receivables exceed the principal
payments which may be allocated or distributed to noteholders,
the excess will be paid to the holders of the transferor
certificates, subject to the limitations described in the
third clause above.
In the case of a series of notes having more than one class, the
amounts in the collection account will be allocated and applied to each class in
the manner and order of priority described in the accompanying prospectus
supplement.
Any amounts, called "UNALLOCATED PRINCIPAL COLLECTIONS," collected in
respect of principal receivables and not paid to the holders of the transferor
certificates because the Transferor Interest is less than the Required
Transferor Interest as described above, together with any adjustment payments as
described above, will be paid to and held in the Excess Funding Account and paid
to the holders of the transferor certificates if, and only to the extent that,
the Transferor Interest is greater than the Required Transferor Interest. If an
amortization period or accumulation period has commenced, unallocated
collections of principal receivables will be held for payment to the noteholders
on the dates specified in the accompanying prospectus supplement or accumulated
for payment on the Expected Principal Payment Date, as applicable, and paid to
the noteholders of each class or held for and paid to
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the noteholders of other series of notes issued by the trust in the manner and
order of priority specified in the accompanying prospectus supplement.
SHARED FINANCE CHARGE COLLECTIONS
If a series is identified in the prospectus supplement for that series
as included in a group, collections of finance charge and administrative
receivables in the trust portfolio allocated to the series in excess of the
amount needed to make deposits or payments may be shared with other series
identified in the prospectus supplements for those other series as included in
the same group. These shared collections are called "SHARED FINANCE CHARGE
COLLECTIONS." If one series requires more collections of finance charge and
administrative receivables than allocated through its Investor Percentage, it
will have access to all of these Shared Finance Charge Collections in other
series in its group. If two or more series require more collections of finance
charge and administrative receivables, Shared Finance Charge Collections in the
group will be shared among the series in the manner and priority set forth in
the related prospectus supplements.
SHARED PRINCIPAL COLLECTIONS
If a series is allocated principal in excess of the amount needed for
deposit or distribution, this excess amount will be available to make principal
payments or deposits required by other series. This excess amount which is made
available to other series is called "SHARED PRINCIPAL COLLECTIONS." These Shared
Principal Collections may be limited to series identified in the prospectus
supplements for those series as included in the same group. If collections of
principal receivables in the trust portfolio allocated to a series are shared
with another series, the Invested Amount for the series from which collections
were shared will not be reduced.
DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES; INVESTOR CHARGE-OFFS
Unless otherwise specified in the accompanying prospectus supplement,
for each series of notes, on the third business day preceding the fifteenth day
of each calendar month ( called the "DETERMINATION DATE"), the servicer will
calculate the aggregate Investor Default Amount for the preceding monthly
period. The "INVESTOR DEFAULT AMOUNT" will be equal to the aggregate amount of
the Investor Percentage of principal receivables that are defaulted receivables.
The term "DEFAULTED RECEIVABLES" means those principal receivables
which in that monthly period were written off as uncollectible in accordance
with the servicer's credit card guidelines and customary and usual servicing
procedures for servicing revolving credit card receivables comparable to the
receivables in the trust. However, in any event, a principal receivable will be
deemed a defaulted receivable if, by the 180th day following the due date of the
required minimum payment set forth in the related account's billing statement,
that minimum payment has not been received by the servicer. If provided in the
accompanying prospectus supplement for a series, an amount equal to the Investor
Default Amount for any monthly period may be paid from other amounts, including
from series enhancement, and applied to pay principal to noteholders or, subject
to certain limitations, the holder of the Transferor Interest, as appropriate.
The term "INVESTOR CHARGE-OFFS" means, for any monthly period, and for
any series or class, the amount by which:
(a) the related monthly interest and overdue monthly interest, together
with, if applicable, additional interest, the accrued and unpaid monthly
servicing fee payable from collections of finance charge and administrative
receivables and other amounts treated like collections of finance charge and
administrative receivables, the Investor Default Amount and any other required
fees exceeds
(b) amounts available to pay those amounts out of collections of
finance charge and administrative receivables and other amounts treated like
collections of finance charge and administrative receivables, any
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available series enhancement amounts and other sources specified in the
accompanying prospectus supplement, but not more than the Investor Default
Amount.
For each series of notes, the Invested Amount will be reduced by the
amount of Investor Charge-Offs for any monthly period. Investor Charge-Offs will
be reimbursed on any payment date to the extent amounts on deposit in the
collection account and otherwise available exceed the interest, fees and any
aggregate Investor Default Amount payable on that date. This reimbursement of
Investor Charge-Offs will result in an increase in the Invested Amount for that
series.
FINAL PAYMENT OF PRINCIPAL; TERMINATION
For each series, the transferor has the option to repurchase the notes
at any time after the remaining outstanding principal balance of that series is
10% or less of the initial principal amount of that series (as increased by the
principal amount of any notes of that series issued after the related closing
date) if certain conditions set forth in the related indenture supplement are
met. The repurchase price will equal:
- the outstanding principal amount of the notes of that series,
plus
- any accrued and unpaid interest through the day preceding the
payment date on which the repurchase occurs or, if the
repurchase occurs on any other date, through the day preceding
the payment date immediately following the repurchase date,
plus
- any amounts due the series enhancer, as specified in the
prospectus supplement for that series.
Any amounts on deposit in the principal funding account for that series
will be applied toward the repurchase price on behalf of the transferor.
For any series of notes, the related prospectus supplement may specify
different conditions to the transferor's repurchase option and a different
method for determining the repurchase price.
The notes of each series will be retired on the day on which the final
payment of principal is made to the noteholders, whether as a result of optional
reassignment to the transferor or otherwise. Each prospectus supplement will
specify the series termination date for the related series of notes. However,
the notes may be subject to prior termination as provided above and in the
prospectus supplement. For any series the failure to pay principal of the
related notes on the latest date by which principal and interest for that series
can be paid, called the "SERIES TERMINATION DATE," will be an event of default
and the indenture trustee or holders of a specified percentage of the notes of
that series will have certain rights described under "The Indenture -- Events of
Default; Rights upon Event of Default" in this prospectus.
Unless the servicer and the holder of the Transferor Interest instruct
the indenture trustee otherwise, the trust will terminate on the date designated
by the servicer, but no earlier than the day after the payment date on which the
Invested Amount and Enhancement Invested Amount, if any, for each series
outstanding is zero. This date is called the "TRUST TERMINATION DATE." Upon the
termination of the trust and the surrender of the transferor certificates, the
indenture trustee shall convey to the holders of the transferor certificates all
right, title and interest of the trust in and to the receivables and other funds
of the trust.
PAIRED SERIES
The prospectus supplement for a series of notes will specify whether
that series may be paired with a previously or later issued series so that a
decrease in the Invested Amount of the previously issued series results in a
corresponding increase in the Invested Amount of the later issued series. Each
of these series is called a "PAIRED SERIES." In general, a series may be issued
as a paired series so the trust can fund the amount by which the previously
issued series has amortized and will amortize in the future.
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If a pay out event occurs for the previously issued series or its
paired series when the previously issued series is amortizing, the Investor
Percentage for the allocation of collections of principal receivables for the
previously issued series may be reset to a lower percentage as described in the
prospectus supplement for that series and the period over which it will amortize
may be lengthened as a result. The extent to which the period over which it
amortizes is lengthened will depend on many factors, only one of which is the
reduction of its Investor Percentage. For a discussion of these factors, see
"Risk Factors -- Issuance of additional series by the trust may affect the
timing of payments to you." in this prospectus and "Maturity Considerations" in
the accompanying prospectus supplement.
PAY OUT EVENTS
The revolving period will continue through the date specified in the
accompanying prospectus supplement unless a pay out event occurs prior to that
date, unless otherwise specified in the accompanying prospectus supplement.
There are two types of pay out events: a trust pay out event and a series pay
out event.
A "TRUST PAY OUT EVENT" occurs with respect to all series issued by the
trust upon the occurrence of any of the following events:
- any servicer default occurs which would have a material
adverse effect on the noteholders;
- certain bankruptcy, insolvency, liquidation, conservatorship,
receivership or similar events relating to the transferor or
the seller unless, in the case of any of those events with
respect to a seller, the receivables originated by that seller
are no longer eligible and written confirmation is received
from each rating agency that the subsequent exclusion of that
seller's receivables from the trust portfolio will not result
in a reduction or withdrawal of its rating of any outstanding
series or class;
- the transferor is unable for any reason to transfer
receivables to the trust in accordance with the provisions of
the transfer and servicing agreement; or
- the trust becomes subject to regulation as an "investment
company" within the meaning of the Investment Company Act of
1940.
In addition, a "SERIES PAY OUT EVENT" may occur with respect to any
particular series upon the occurrence of any other event specified in the
prospectus supplement for that series.
On the date on which a pay out event is deemed to have occurred, the
early amortization period or, if specified in the accompanying prospectus
supplement, the early accumulation period will commence.
If, because of the occurrence of a pay out event, the early
amortization period begins earlier than the scheduled commencement of an
amortization period or prior to an Expected Principal Payment Date, noteholders
will begin receiving payments of principal earlier than they otherwise would
have, which may shorten the average life of the notes. A pay out event which
causes an early accumulation period to occur will not shorten the average life
of the notes.
In addition to the consequences of a pay out event discussed above,
unless otherwise specified in the accompanying prospectus supplement, if certain
bankruptcy, insolvency or similar proceedings under the Bankruptcy Code or
similar laws occur with respect to the transferor, on the day of that event the
transferor will immediately cease to transfer principal receivables to the trust
and will promptly give notice to the indenture trustee and the owner trustee of
this occurrence. Any principal receivables transferred to the trust prior to the
event, as well as collections on those principal receivables and finance charge
and administrative receivables accrued at any time with respect to those
principal receivables, will continue to be part of the trust assets and will be
applied as specified above in " -- Application of Collections" and in the
accompanying prospectus supplement.
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If the only pay out event to occur is either the insolvency of the
transferor or the commencement of a bankruptcy case by or against the
transferor, the bankruptcy court may have the power to require the continued
transfer of principal receivables to the trust. See "Risk Factors -- If a
receiver or conservator were appointed for a seller or a transferor that is a
bank, or if a seller or a transferor that is not a bank became a debtor in a
bankruptcy case, delays or reductions in payment of your notes could occur" in
this prospectus.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The servicer receives a fee for its servicing activities and
reimbursement of expenses incurred administering the trust. This servicing fee
accrues for each outstanding series in the amounts and is calculated on the
balances set forth in the related prospectus supplement. Each series' servicing
fee is payable each period from collections of finance charge and administrative
receivables allocated to the series; some series, however, may direct all or a
portion of the interchange arising from the accounts toward paying the servicing
fee. Neither the trust nor the noteholders are responsible for any servicing fee
allocable to the transferor interest.
The servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the receivables including, without
limitation, payment of the fees and disbursements of the indenture trustee, any
paying agent, transfer agent and registrar and independent accountants fees and
other fees which are not expressly stated in the indenture to be payable by the
trust or the noteholders of a series other than any Federal, state, local and
foreign income, franchise or other taxes, or any interest or penalties with
respect thereto, imposed upon the trust.
CERTAIN MATTERS REGARDING THE TRANSFEROR AND THE SERVICER
The servicer may not resign from its obligations and duties under the
transfer and servicing agreement, except:
- upon a determination that performance of its duties is no
longer permissible under applicable law; or
- upon assumption of its obligations and duties by one of its
affiliates that is a direct or indirect wholly-owned
subsidiary of Advanta Corp. or by appointment of any other
eligible successor if written confirmation is received from
each rating agency that the appointment will not result in a
reduction or withdrawal of its rating of any outstanding
series or class.
If:
- within 120 days of the determination that the servicer is no
longer permitted to act as servicer, and
- the indenture trustee is unable to appoint a successor,
then the indenture trustee will act as servicer. If the indenture trustee is
unable to act as servicer, it will petition an appropriate court to appoint an
eligible successor.
The servicer has the right to delegate any of its responsibilities and
obligations as servicer to any entity that agrees to conduct such duties in
accordance with the transfer and servicing agreement and the Credit Card
Guidelines. The servicer currently contracts and intends to continue to contract
with First Data Resources to perform certain of its servicing activities.
Notwithstanding any such delegation to any entity, the servicer will continue to
be liable for all of its obligations under the transfer and servicing agreement.
The servicer will indemnify the trust, the owner trustee and the
indenture trustee for any losses suffered as a result of (i) its actions or
omissions as servicer or (ii) the administration by the owner trustee of the
trust, except
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in each case, for losses resulting from the negligence or willful misconduct of
the owner trustee or the indenture trustee, as applicable.
Neither the servicer nor any of its directors, officers, employees or
agents will be under any other liability to the trust, the owner trustee, the
indenture trustee, the noteholders, any series enhancer or any other person for
any action taken, or for refraining from taking any action, in good faith under
the transfer and servicing agreement. However, none of them will be protected
against any liability resulting from willful wrongdoing, bad faith or gross
negligence in the performance of its duties or by reason of reckless disregard
of obligations and duties under the transfer and servicing agreement. In
addition, the transfer and servicing agreement provides that the servicer is not
under any obligation to appear in, prosecute or defend any legal action which is
not incidental to its servicing responsibilities under the transfer and
servicing agreement and which in its opinion may expose it to any expense or
liability.
Each transferor will be severally, but not jointly, liable for all of
its obligations, covenants, representations and warranties under the transfer
and servicing agreement. No transferor or seller or any of its directors,
officers, employees, incorporators or agents will be liable to the trust, the
owner trustee, the indenture trustee, the noteholders, any series enhancer or
any other person for any action taken, or for refraining from taking any action,
in good faith under the applicable transfer and servicing agreement or the
applicable receivables purchase agreement. However, none of them will be
protected against any liability resulting from willful wrongdoing, bad faith or
gross negligence in the performance of its duties or by reason of reckless
disregard of obligations and duties under the transfer and servicing agreement.
The trust agreement provides that the transferor may transfer its
interest in all or a portion of the transferor certificate by exchanging its
transferor certificate for a newly issued transferor certificate and a second
certificate, called a "SUPPLEMENTAL CERTIFICATE." The terms of the supplemental
certificate must be defined in a supplement to the trust agreement. Before a
supplemental certificate is issued, the following must occur:
- notice of the exchange to the owner trustee, the indenture
trustee, the servicer and each rating agency;
- delivery to the owner trustee and the indenture trustee of an
executed supplement to the trust agreement;
- written confirmation from each rating agency that the exchange
will not result in a reduction or withdrawal of its rating of
any outstanding series or class;
- delivery to the owner trustee and the indenture trustee of a
certificate of an authorized officer of the transferor to the
effect that it reasonably believes the exchange will not have
an adverse effect;
- delivery to the owner trustee and the indenture trustee of a
tax opinion regarding the exchange;
- the total amount of principal receivables in the trust
portfolio must exceed the Required Minimum Principal Balance
on the date of the exchange; and
- after giving effect to the issuance of the supplemental
certificate, the Transferor Interest must be at least equal to
the Required Transferor Interest.
No supplemental certificate may be transferred or exchanged except in a
transaction exempt from the registration requirements of the Securities Act of
1933 and unless a tax opinion is delivered to the owner trustee and the
indenture trustee regarding the exchange.
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The transferor or the servicer may consolidate with, merge into, or
sell its business to, another entity, in accordance with the transfer and
servicing agreement, and the surviving entity will be the successor to the
transferor or the servicer, as the case may be, on the following conditions:
- execution of an agreement relating to the succession that
supplements the transfer and servicing agreement;
- in the case of a succession relating to the transferor, (i)
delivery to the owner trustee and the indenture trustee of a
certificate of an authorized officer of the transferor and an
opinion of counsel, each addressing compliance with the
applicable provisions of the transfer and servicing agreement
and the validity and enforceability of the supplemental
agreement and (ii) written confirmation from each rating
agency that the succession will not result in a reduction or
withdrawal of its rating of any outstanding series or class;
and
- in the case of a succession relating to the servicer, (i)
delivery to the owner trustee and the indenture trustee of a
certificate of an authorized officer of the servicer and an
opinion of counsel, each addressing compliance with the
applicable provisions of the transfer and servicing agreement,
(ii) notification of the succession to each rating agency and
(iii) that the successor is eligible to act as servicer.
SERVICER DEFAULT
The transfer and servicing agreement specifies the duties and
obligations of the servicer. A failure by the servicer to perform its duties or
fulfill its obligations can result in a servicer default.
A "SERVICER DEFAULT" includes each of the following:
- failure by the servicer to make any payment, transfer
or deposit, or to give instructions or to give notice
to the indenture trustee to do so, on the required
date under the transfer and servicing agreement, the
indenture or any indenture supplement (or within the
applicable grace period, which shall not exceed 5
business days);
- failure on the part of the servicer to observe or
perform in any material respect any of its other
covenants or agreements set forth in the transfer and
servicing agreement, the indenture or any indenture
supplement, if the failure:
- will result in the occurrence of a pay out
event for any series or materially adversely
affects noteholders of any series issued and
outstanding under the trust; and
- continues unremedied for a period of 60 days
after written notice to (i) the servicer by
the owner trustee or the indenture trustee,
or (ii) the servicer, the owner trustee and
the indenture trustee by noteholders holding
50% or more of the then-outstanding
principal amount of all of the trust's
outstanding series (or, where the servicer's
failure does not relate to all series, 50%
or more of the then-outstanding principal
balance of all series affected); or
- the assignment or the delegation by the
servicer of its duties, except as
specifically permitted under the transfer
and servicing agreement;
- any representation, warranty or certification made by
the servicer in the transfer and servicing agreement,
or in any certificate delivered under the transfer
and servicing agreement, proves to have been
incorrect in any material respect when made if it:
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- materially adversely affects noteholders of
any series issued and outstanding under the
trust; and
- continues to be incorrect and to materially
adversely affect those noteholders for a
period of 60 days after written notice to
(i) the servicer by the owner trustee or the
indenture trustee, or (ii) the servicer, the
owner trustee and the indenture trustee by
noteholders holding 50% or more of the
then-outstanding principal amount of all of
the trust's outstanding series (or, where
the servicer's inaccuracy does not relate to
all series, 50% or more of the
then-outstanding principal balance of all
series affected);
- specific bankruptcy, insolvency, liquidation,
conservatorship, receivership or similar events
relating to the servicer; or
- any other event specified in the accompanying
prospectus supplement.
Notwithstanding the foregoing, a delay in or failure of performance
referred to in the first clause above for a period of 10 business days after the
applicable grace period, or referred to in the second or third clauses above for
a period of 60 business days after the applicable period, will not constitute a
servicer default if the delay or failure could not be prevented by the exercise
of reasonable diligence by the servicer and the delay or failure was caused by
an act of God or the public enemy, acts of declared or undeclared war,
terrorism, public disorder, rebellion or sabotage, epidemics, landslides,
lightning, fire, hurricanes, earthquakes, floods or other similar occurrence.
Upon the occurrence of any of the events identified above, the servicer
will not be relieved from using all commercially reasonable efforts to perform
its obligations in a timely manner in accordance with the terms of the transfer
and servicing agreement. The servicer must provide the indenture trustee, the
owner trustee, each transferor and any series enhancer with an officer's
certificate giving prompt notice of its failure or delay, together with a
description of its efforts to perform its obligations. If a servicer default
occurs, for as long as it has not been remedied, the indenture trustee or
noteholders holding more than 50% of the then-outstanding principal amount of
all of the trust's outstanding series may give a notice to the servicer and the
owner trustee (and to the indenture trustee if given by the noteholders)
terminating all of the rights and obligations of the servicer under the transfer
and servicing agreement. The indenture trustee will as promptly as possible
appoint an eligible successor to the servicer. If no successor has been
appointed or has accepted the appointment by the time the servicer ceases to act
as servicer, the indenture trustee will automatically become the successor. If
the indenture trustee is unable to obtain bids from eligible servicers and the
servicer delivers a certificate of an authorized officer to the effect that it
cannot in good faith cure the servicer default which gave rise to the transfer
of servicing, and if the indenture trustee is legally unable to act as
successor, then the indenture trustee will give the transferor a right of first
refusal to purchase the interests of the noteholders in the trust on the payment
date in the next calendar month at a price equal to the sum of the amounts
specified for each series outstanding in the related indenture supplement.
The rights and obligations of the transferor under the transfer and
servicing agreement and of the seller under the receivables purchase agreement
will be unaffected by any change in the person acting as servicer.
In the event of the appointment of a receiver or conservator of the
servicer, the receiver or conservator may have the power to prevent either the
indenture trustee or the noteholders from appointing a successor servicer.
REPORTS TO NOTEHOLDERS
Noteholders of each series issued by the trust will receive reports
with information on the series and the trust. The paying agent will forward to
each noteholder of record a report, prepared by the servicer, for its series on
the payment dates for that series. The report will set forth information as
specified in the related prospectus supplement. If a series has multiple
classes, information will be provided for each class, as specified in the
related prospectus supplement.
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Periodic information to noteholders generally will include:
- the total amount paid;
- the amount paid allocable to principal;
- the amount paid allocable to interest;
- collections of principal receivables and finance charge and
administrative receivables allocated to the series;
- the aggregate amount of principal receivables, the Invested
Amount and the Invested Amount as a percentage of the
aggregate amount of the principal receivables in the trust
portfolio;
- the aggregate outstanding balance of accounts broken out by
delinquency status;
- the aggregate defaults allocated to the series;
- Investor Charge-Offs for the series and any reimbursements of
previous Investor Charge-Offs;
- the servicing fee for that series;
- the amount available under any series enhancement for the
series or each class of the series;
- the "pool factor," which is the ratio of the current Invested
Amount to the initial Invested Amount;
- the Base Rate and Net Portfolio Yield (each as defined in the
accompanying prospectus supplement) for the series; and
- if the series or a class of the series bears interest at a
floating or variable rate, information relating to that rate.
By January 31 of each calendar year, the paying agent will also provide
to each person who at any time during the preceding calendar year was a
noteholder of record a statement, prepared by the servicer. The statement will
contain the type of information presented in the periodic reports, aggregated
for that calendar year or the portion of that calendar year that the person was
a noteholder, together with other information that is customarily provided to
holders of debt, to assist noteholders in preparing their United States tax
returns.
EVIDENCE AS TO COMPLIANCE
The transfer and servicing agreement provides that on or before April
30 of each calendar year, the servicer will have a firm of independent certified
public accountants furnish a report showing that, for the prior calendar year:
- the accounting firm has reviewed management's assertion that
the system of internal control over servicing of securitized
credit card receivables met the criteria for effective
internal control and that, in the accounting firm's opinion,
management's assertion is fairly stated in all material
respects, and
- the accounting firm has compared certain amounts set forth in
the periodic reports prepared by the servicer for the prior
calendar year with the servicer's computer reports and that,
in the accounting firm's opinion, the amounts are in
agreement, except for any discrepancies disclosed.
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The transfer and servicing agreement also provides that by April 30 of
each calendar year, the servicer will deliver to the owner trustee, the
indenture trustee and each rating agency a certificate of an authorized officer
to the effect that the servicer has fully performed its obligations under the
transfer and servicing agreement during the preceding year, or, if there has
been a default in the performance of any of its obligations, specifying the
nature and status of the default.
AMENDMENTS
The transfer and servicing agreement may be amended by the transferor,
the servicer and the owner trustee, without the consent of the indenture trustee
or the noteholders of any series offered under this prospectus, on the following
conditions:
- the transferor delivers to the owner trustee and the indenture
trustee a certificate of an authorized officer stating that,
in the transferor's reasonable belief, the amendment will not
have a material adverse effect on the interests of the
noteholders; and
- receipt of written confirmation from each rating agency that
the amendment will not result in a reduction or withdrawal of
its rating of any outstanding series or class.
The transfer and servicing agreement may also be amended by the
servicer and the owner trustee at the direction of the transferor, without the
consent of the indenture trustee, the noteholders of any series offered under
this prospectus or the series enhancers for any series to add, modify or
eliminate any provisions necessary or advisable in order to enable the trust or
any portion of the trust to (i) qualify as, and to permit an election to be made
for the trust to be treated as, a "financial asset securitization investment
trust" under the Internal Revenue Code of 1986 and (ii) avoid the imposition of
state or local income or franchise taxes on the trust's property or its income.
The following conditions apply for the amendments described in this paragraph:
- delivery to the owner trustee and the indenture trustee of a
certificate of an authorized officer of the transferor to the
effect that the requirements under the transfer and servicing
agreement applicable to the proposed amendments have been met;
- receipt of written confirmation from each rating agency that
the amendment will not result in a reduction or withdrawal of
its rating of any outstanding series or class; and
- the amendment must not affect the rights, duties or
obligations of the indenture trustee or the owner trustee
under the transfer and servicing agreement.
The amendments which the transferor may make without the consent of the
noteholders of any series offered under this prospectus or the series enhancers
for any series in accordance with the preceding paragraph may include, without
limitation, the addition of a sale of receivables in the trust portfolio.
The transfer and servicing agreement may also be amended by the
transferor, the servicer and the owner trustee with the consent of noteholders
holding at least 662/3% of the then-outstanding principal amount of the notes of
all series offered under this prospectus adversely affected by the amendment.
Even with consent, no amendment may occur if it:
- reduces the amount of, or delays the timing of:
- any payments to be made to noteholders of any series
(changes in pay out events or events of default that
decrease the likelihood of the occurrence of those
events will not be considered delays in the timing of
payments for purposes of this clause);
- deposits of amounts to be distributed; or
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- the amount available under any series enhancement,
without the consent of each affected noteholder,
- changes the manner of calculating the interests of any
noteholder, without the consent of each affected noteholder,
- reduces the percentage of the outstanding principal balance of
the notes required to consent to any amendment, without the
consent of each affected noteholder, or
- adversely affects the rating of any series or class by each
rating agency, without the consent of noteholders holding at
least 662/3% of the then-outstanding principal amount of the
notes of each affected series or class offered under this
prospectus.
THE INDENTURE
The following summarizes certain terms of the indenture and is
qualified in its entirety by reference to the indenture.
EVENTS OF DEFAULT; RIGHTS UPON EVENT OF DEFAULT
With respect to the notes of any series, "EVENTS OF DEFAULT" under the
indenture will be any of the following:
- the trust fails to pay principal when it becomes due and
payable on the series termination date for that series of
notes;
- the trust fails to pay interest when it becomes due and
payable and the default continues for a period of 35 days;
- certain bankruptcy, insolvency, conservatorship, receivership,
liquidation or similar events relating to the trust;
- the trust fails to observe or perform covenants or agreements
made in the indenture, and:
- the failure continues, or is not cured, for 60 days
after notice to the trust by the indenture trustee or
to the trust and the indenture trustee by noteholders
holding 25% or more of the then-outstanding principal
amount of all of the trust's outstanding series; and
- as a result, the interests of the noteholders are
materially and adversely affected, and continue to be
materially and adversely affected during the 60-day
period; or
- any additional events of default specified in the applicable
prospectus supplement.
Failure to pay the full principal amount of a note on its Expected
Principal Payment Date will not constitute an event of default.
An event of default with respect to one series of notes will not
necessarily be an event of default with respect to any other series of notes.
If an event of default occurs and continues with respect to the notes,
the indenture trustee or noteholders holding more than 50% of the
then-outstanding principal amount of the notes of the affected series may
declare the principal of the notes of that series to be immediately due and
payable. This declaration may, under certain
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circumstances, be rescinded by noteholders holding more than 50% of the
then-outstanding principal balance of the notes of that series.
Generally, in the case of any event of default, the indenture trustee
will be under no obligation to exercise any of the rights or powers under the
indenture if requested or directed by any of the holders of the notes of the
affected series if the indenture trustee reasonably believes it will not be
adequately indemnified against the costs, expenses and liabilities which might
be incurred by it in complying with that request. Subject to those provisions
for indemnification and certain limitations contained in the indenture,
noteholders holding more than 50% (or not less than 662/3% if an event of
default occurs and continues) of the then-outstanding principal amount of the
notes of the affected series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the indenture
trustee. Noteholders holding more than 50% of the then-outstanding principal
amount of the notes of the affected series may, in certain cases, waive any
default with respect to the notes, except a default in the payment of principal
or interest or a default relating to a covenant or provision of the indenture
that cannot be modified without the waiver or consent of all noteholders of the
affected series.
After acceleration of a series of notes, collections of principal
receivables and collections of finance charge and administrative receivables
allocated to those notes will be applied to make monthly principal and interest
payments on the notes until the earlier of the date the notes are paid in full
or the series termination date. Funds in the collection account, the Excess
Funding Account and other trust accounts for a series of notes that have been
accelerated will be applied immediately to pay principal of and interest on
those notes.
Upon acceleration of the maturity of a series of notes following an
event of default, the indenture trustee will have a lien on the collateral for
those notes for its unpaid fees and expenses that ranks senior to the lien of
those notes on the collateral.
In general, the indenture trustee will enforce the rights and remedies
of the holders of accelerated notes. However, noteholders will have the right to
institute any proceeding with respect to the indenture if the following
conditions are met:
- the noteholder gives the indenture trustee written notice of a
continuing event of default;
- noteholders holding at least 25% of the then-outstanding
principal amount of the notes of the affected series make a
written request of the indenture trustee to institute a
proceeding as indenture trustee;
- the noteholders offer reasonable indemnification to the
indenture trustee against the costs, expenses and liabilities
of instituting a proceeding;
- the indenture trustee has not instituted a proceeding within
60 days after receipt of the request and offer of
indemnification; and
- the indenture trustee has not received from noteholders
holding more than 50% of the then-outstanding principal amount
of the notes of that series a direction inconsistent with the
request.
If any series of notes has been accelerated following an event of
default, and the indenture trustee has not received any valid directions from
noteholders of that series, the indenture trustee may elect to continue to hold
the portions of the trust assets that secures those notes and apply
distributions on the trust assets to make payments on those notes to the extent
funds are available.
Subject to the provisions of the indenture relating to the duties of
the indenture trustee, in case any event of default occurs and is continuing
with respect to the notes, the indenture trustee:
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- may institute proceedings in its own name for the collection
of all amounts then payable on the notes of the affected
series; or
- may take any other appropriate action to protect and enforce
the rights and remedies of the indenture trustee and the
noteholders of the affected series.
Subject to the conditions described below, the indenture trustee also:
- may, at its own election, foreclose on the portion of the
receivables which secure a series of notes that have been
accelerated by causing the trust to issue a foreclosure
certificate to the holders of those notes;
- may, at its own election, foreclose on the portion of the
receivables which secure a series of notes that have been
accelerated by causing the trust to issue a foreclosure
certificate to a third party selected by the indenture
trustee, but only if it determines that the proceeds of the
issuance of the foreclosure certificate to that third party
will be sufficient to pay principal of and interest on the
notes that have been accelerated in full; and
- must, at the direction of noteholders holding more than 50% of
the then-outstanding principal amount of the series of notes
that have been accelerated, foreclose on the portion of the
receivables which secure that series of notes that have been
accelerated by causing the trust to issue a foreclosure
certificate to the holders of that series of notes or to one
or more third parties.
The conditions that must be satisfied for the indenture trustee to
exercise one of these foreclosure remedies include:
- satisfaction of at least one of the following three
conditions:
- the indenture trustee must receive the consent of all
noteholders of the affected series;
- the indenture trustee determines that any proceeds
from exercising the foreclosure remedy that are to be
distributed to the noteholders of that series are
sufficient to discharge in full all principal and
interest due on those notes; or
- the indenture trustee determines that the trust
assets may not continue to provide sufficient funds
for the payment of principal and interest on those
notes as they would have become due if the notes had
not been accelerated, and the indenture trustee
obtains the consent of noteholders holding at least
662/3% of the then outstanding principal amount of
each class of the notes of the affected series;
and
- the indenture trustee has obtained an opinion of counsel:
- that the exercise of the foreclosure remedy will not
cause the trust or any portion of the trust to be
classified as an association (or a publicly traded
partnership) taxable as a corporation for federal
income tax purposes; and
- that the exercise of the foreclosure remedy complies
with applicable federal and state securities laws.
A "FORECLOSURE CERTIFICATE" is an investor certificate issued by the
trust as a result of a foreclosure on a portion of the receivables that
corresponds to the portion of the receivables that secured the notes that have
been
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accelerated. The foreclosure certificate represents an undivided interest in the
assets of the trust. The principal amount of the foreclosure certificate would
be equal to the principal amount of the notes that have been accelerated, and
the Invested Amount of the foreclosure certificate would be equal to the
Invested Amount of the series of notes that have been accelerated.
When a foreclosure certificate is issued with respect to notes that
have been accelerated, those notes will be deemed to have been paid in full by
the trust and not outstanding, and the holders of the notes that have been
accelerated will no longer have any claim against the trust. Accordingly, the
Invested Amount of the notes that have been accelerated will be applicable to
the holders of the foreclosure certificate.
A foreclosure certificate held by a noteholder or a third party will be
subject to restrictions on transfer, including:
- restrictions required to prevent the trust from becoming a
publicly traded partnership taxable as a corporation for
federal income tax purposes, including a limitation on the
number of holders or interests in the foreclosure certificate
and restrictions on transfers to holders that are
partnerships, Subchapter S corporations or grantor trusts for
United States federal income tax purposes;
- restrictions on transfers of interest in the foreclosure
certificate to non-U.S. persons;
- restrictions on transfers to employee benefit plans, or any
entity whose underlying assets include "plan assets;" and
- other restrictions that counsel to the trust may require to
avoid adverse tax and other consequences to the trust or the
noteholders.
The indenture trustee and the noteholders will covenant that they will
not at any time institute against the trust or the transferor any bankruptcy,
reorganization or other proceeding under any federal or state bankruptcy or
similar law.
None of the transferor, the administrator, the owner trustee, the
indenture trustee, the servicer, the seller or the trust, in its individual
capacity, nor any holder of an ownership interest in the trust, nor any of their
respective owners, beneficiaries, agents, officers, directors, employees,
successors or assigns will, in the absence of an express agreement to the
contrary, be personally liable for the payment of the principal of or interest
on the notes or for the agreements of the trust contained in the indenture. The
notes will represent obligations solely of the trust, and the notes will not be
insured or guaranteed by the transferor, the servicer, the administrator, the
owner trustee, the indenture trustee, the seller or any other person or entity.
CERTAIN COVENANTS
The indenture provides that the trust may not consolidate with, merge
into or sell its business to, another entity, unless:
- the entity formed by or surviving the consolidation or merger,
or that acquires the trust's business, is organized under the
laws of the United States, any state thereof or the District
of Columbia;
- the entity is not subject to regulation as an investment
company under the Investment Company Act of 1940;
- the entity expressly assumes, by supplemental indenture, the
trust's obligation to make due and punctual payments upon the
notes and the performance of every covenant of the trust under
the indenture;
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- no pay out event or event of default has occurred and is
continuing immediately after the merger, consolidation or
sale;
- written confirmation is received from each rating agency that
the transaction will not result in a reduction or withdrawal
of its rating of any outstanding series or class;
- the trust has received an opinion of counsel to the effect
that the consolidation, merger or sale would have no material
adverse federal income tax consequence to any noteholder;
- any action as is necessary to maintain the lien and security
interest created by the indenture shall have been taken; and
- the trust has delivered to the indenture trustee an opinion of
counsel and officer's certificate each stating that the
consolidation, merger or sale satisfies all requirements under
the indenture and that the supplemental indenture is duly
authorized, executed and delivered and is valid, binding and
enforceable.
The trust will not, among other things:
- except as expressly permitted by the indenture, the transfer
and servicing agreement or certain related documents, sell,
transfer, exchange or otherwise dispose of any of the assets
of the trust, unless directed to do so by the indenture
trustee;
- claim any credit on or make any deduction from payments in
respect of the principal of and interest on the notes (other
than amounts withheld under the Internal Revenue Code or
applicable state law) or assert any claim against any present
or former noteholders because of the payment of taxes levied
or assessed upon the trust;
- voluntarily dissolve or liquidate in whole or in part; or
- permit: (i) the validity or effectiveness of the indenture to
be impaired, or permit the lien under the 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 the indenture
except as may be expressly permitted by the indenture; (ii)
any lien, charge, excise, claim, security interest, mortgage
or other encumbrance to be created on or extend to or
otherwise arise upon or burden the assets of the trust or any
part thereof, except as may be created by the terms of the
indenture; or (iii) the lien of the indenture not to
constitute a valid first priority perfected security interest
in the assets of the trust that secure the notes.
The trust may not engage in any activity other than as specified under
"The Issuer" in this prospectus. The trust will not incur, assume or guarantee
any indebtedness other than indebtedness incurred under the notes and the
indenture.
MODIFICATION OF THE INDENTURE
The trust and the indenture trustee may, without the consent of the
noteholders of any series offered under this prospectus, enter into one or more
supplemental indentures to add provisions to, change in any manner or eliminate
any provision of the indenture, or to change the rights of the noteholders under
the indenture, upon:
- receipt of written confirmation from each rating agency that
the action will not result in a reduction or withdrawal of its
rating of any outstanding series or class; and
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- delivery to the owner trustee and the indenture trustee of a
certificate of an authorized officer of the transferor to the
effect that the requirements under the indenture applicable to
the proposed amendments have been met.
The trust and the indenture trustee will not, without prior notice to
each rating agency and without the consent of the noteholders of any affected
series, enter into any supplemental indenture to:
- change the date of payment of any installment of principal of
or interest on any note or reduce the principal amount of a
note, the note interest rate or the redemption price of the
note or change any place of payment where, or the currency in
which, any note is payable;
- impair the right to institute suit for the enforcement of
specified payment provisions of the indenture;
- reduce the percentage of the aggregate principal amount of the
notes of any series whose consent is required (i) for
execution of any supplemental indenture or (ii) for any waiver
of compliance with specified provisions of the indenture or of
some defaults under the indenture and their consequences
provided in the indenture;
- reduce the percentage of the aggregate outstanding principal
amount of the notes required to direct the indenture trustee
to sell or liquidate the trust assets if the proceeds of the
sale would be insufficient to pay the principal amount and
interest due on those notes;
- decrease the percentage of the aggregate principal amount of
the notes required to amend the sections of the indenture that
specify the percentage of the principal amount of the notes of
a series necessary to amend the indenture or other related
agreements;
- modify any provisions of the indenture regarding the voting of
notes held by the trust, any other party obligated on the
notes, the seller or any of its affiliates; or
- permit the creation of any lien superior or equal to the lien
of the indenture with respect to any of the collateral for any
notes or, except as otherwise permitted or contemplated in the
indenture, terminate the lien of the indenture on the
collateral or deprive any noteholder of the security provided
by the lien of the indenture.
The trust and the indenture trustee may otherwise, with prior notice to
each rating agency and with the consent of noteholders holding more than 50% of
the then-outstanding principal amount of the notes of each adversely affected
series, enter into one or more supplemental indentures to add provisions to,
change in any manner or eliminate any provision of the indenture, or to change
the rights of the noteholders under the indenture.
ANNUAL COMPLIANCE STATEMENT
The trust will be required to present to the indenture trustee each
year a written statement as to the performance of its obligations under the
indenture.
INDENTURE TRUSTEE'S ANNUAL REPORT
The indenture trustee will be required to mail to the noteholders each
year a brief report relating to its eligibility and qualification to continue as
indenture trustee under the indenture, the property and funds physically held by
the indenture trustee and any action it took that materially affects the notes
and that has not been previously reported.
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LIST OF NOTEHOLDERS
Upon application of noteholders of record holding, in the aggregate,
not less than 10% of the then-outstanding principal amount of notes of any
series or all series, the indenture trustee will, having been adequately
indemnified by those noteholders, within 5 business days of the request, afford
those noteholders access during business hours to the current list of registered
noteholders of that series or all series, as applicable, for purposes of
communicating with other noteholders with respect to their rights under the
indenture or any indenture supplement or the notes. The indenture trustee may
elect not to allow the requesting noteholders access to the list of noteholders
if it agrees to mail the requested communication or proxy, on behalf and at the
expense of the requesting noteholders, to all noteholders of record.
SATISFACTION AND DISCHARGE OF INDENTURE
The indenture will be discharged with respect to the notes upon the
delivery to the indenture trustee for cancellation of all the notes or, with
specific limitations, upon deposit with the indenture trustee of funds
sufficient for the payment in full of all the notes.
THE INDENTURE TRUSTEE
The indenture trustee under the indenture will be named in the
accompanying prospectus supplement. The indenture trustee may transact business
with the servicer, the transferor or any series enhancer or their affiliates
with the same rights as if it were not the indenture trustee under the
indenture. The indenture trustee may become the owner or pledgee of notes. In
addition, for purposes of meeting the legal requirements of certain local
jurisdictions, the indenture trustee will have the power to appoint a co-trustee
or separate trustees of all or any part of the trust. In the event of such
appointment, all rights, powers, duties and obligations conferred or imposed
upon the indenture trustee by the indenture will be conferred or imposed upon
the indenture trustee and the separate indenture trustee or co-trustee jointly.
However, in any jurisdiction in which the indenture trustee is incompetent or
unqualified to perform certain acts, all rights, powers, duties and obligations
will be conferred or imposed upon the separate indenture trustee or co-trustee.
In this event, the separate indenture trustee or co-trustee will exercise and
perform the rights, powers, duties and obligations solely at the direction of
the indenture trustee.
The indenture trustee may resign at any time, in which event your
administrator will appoint a successor indenture trustee for your series. The
administrator may also remove the indenture trustee if it ceases to be eligible
to continue as an indenture trustee under the indenture or if the indenture
trustee becomes insolvent. The administrator will then be obligated to appoint a
successor indenture trustee for your series. If an event of default occurs under
the indenture and the accompanying prospectus supplement provides that a given
series or class of notes is subordinated to one or more other series or classes
of notes, under the Trust Indenture Act of 1939, the indenture trustee may be
deemed to have a conflict of interest and be required to resign as indenture
trustee for one of more of those series or classes of notes. In that case, a
successor indenture trustee will be appointed for one or more of those classes
of notes. The right of the senior noteholders to consent to or direct actions by
the indenture trustee may be in conflict with the interests of the subordinated
noteholders. Any resignation or removal of the indenture trustee and appointment
of a successor indenture trustee for any series of notes will not become
effective until the successor indenture trustee accepts its appointment for your
series.
CERTAIN MATTERS REGARDING THE ADMINISTRATOR
The administrator will, to the extent provided in the administration
agreement, provide the notices and perform on behalf of the trust other
administrative obligations required by the indenture.
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CREDIT ENHANCEMENT
GENERAL
For any series, credit enhancement may be provided for one or more of
its classes. Credit enhancement for a series is called "SERIES ENHANCEMENT."
Series enhancement may be in the form of the subordination of one or more
classes of the notes of that series, a letter of credit, the establishment of a
cash collateral guaranty or account, a surety bond, an insurance policy, a
spread account, a reserve account, the use of cross support features, an
interest rate swap agreement, interest rate cap agreement, currency exchange
agreement or other derivatives agreement, or another method of series
enhancement described in the accompanying prospectus supplement, or any
combination of these. If so specified in the accompanying prospectus supplement,
any form of series enhancement may be structured so as to be drawn upon by more
than one class to the extent described in that accompanying prospectus
supplement.
Unless otherwise specified in the accompanying prospectus supplement
for a series, the series enhancement will not provide protection against all
risks of loss and will not guarantee repayment of the entire principal balance
of the notes and interest thereon. If losses occur which exceed the amount
covered by the series enhancement or which are not covered by the series
enhancement, noteholders will bear their allocable share of deficiencies.
If series enhancement is provided with respect to a series, the
accompanying prospectus supplement will include a description of:
- the amount payable under that series enhancement;
- any conditions to payment not described here;
- the conditions, if any, under which the amount payable under
that series enhancement may be reduced and under which that
series enhancement may be terminated or replaced; and
- any material provision of any agreement relating to that
series enhancement.
Additionally, the accompanying prospectus supplement may set forth certain
information with respect to any provider of series enhancement, including:
- a brief description of its principal business activities;
- its principal place of business, place of incorporation and
the jurisdiction under which it is chartered or licensed to do
business;
- if applicable, the identity of regulatory agencies which
exercise primary jurisdiction over the conduct of its
business; and
- its total assets, and its stockholders' or policy holders'
surplus, if applicable, and other appropriate financial
information as of the date specified in the prospectus
supplement.
The provider of third party series enhancement is called the "SERIES
ENHANCER." If specified in the accompanying prospectus supplement, series
enhancement for a series may be available to pay principal of the notes of that
series following the occurrence of certain pay out events for that series. In
this event, the series enhancer will have an interest in certain cash flows in
respect of the receivables to the extent described in that prospectus
supplement. This interest is called the "ENHANCEMENT INVESTED AMOUNT."
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SUBORDINATION
If specified in the accompanying prospectus supplement, one or more
classes of notes of any series will be subordinated as described in the
accompanying prospectus supplement to the extent necessary to fund payments for
the more senior classes of notes. The rights of the holders of these
subordinated notes to receive payments of principal and/or interest on any
payment date for that series will be subordinate in right and priority to the
rights of the holders of senior notes, but only to the extent set forth in the
accompanying prospectus supplement. The amount of subordination will decrease
whenever certain amounts otherwise payable to the holders of subordinated notes
are paid to the holders of senior notes. If specified in the accompanying
prospectus supplement, subordination may apply only in the event of certain
types of losses not covered by other series enhancement.
The accompanying prospectus supplement will also set forth information
concerning:
- the amount of subordination of a class or classes of
subordinated notes in a series;
- the circumstances in which that subordination will be
applicable;
- the manner, if any, in which the amount of subordination will
decrease over time; and
- the conditions under which amounts available from payments
that would otherwise be made to holders of those subordinated
notes will be distributed to holders of senior notes.
If collections of receivables otherwise distributable to holders of a
subordinated class of a series will be used as series enhancement for a class of
another series, the accompanying prospectus supplement will specify the manner
and conditions for applying that cross-support feature.
LETTER OF CREDIT
If specified in the accompanying prospectus supplement, series
enhancement for a series or one or more of the classes of a series will be
provided by one or more letters of credit. A letter of credit may provide
limited protection against certain losses in addition to or in lieu of other
series enhancement. The series enhancer in this case, the issuer of the letter
of credit, called the "L/C BANK," will be obligated to honor demands under that
letter of credit, to the extent of the amount available, to provide funds under
the circumstances and subject to any conditions as are specified in the
accompanying prospectus supplement.
The maximum liability of an L/C bank under its letter of credit will
generally be an amount equal to a percentage of the initial Invested Amount of a
series or a class of that series. This percentage will be specified in the
accompanying prospectus supplement. The amount available under a letter of
credit will be reduced to the extent of its unreimbursed payments. The maximum
amount available at any time to be paid under a letter of credit will be set
forth in the accompanying prospectus supplement.
CASH COLLATERAL GUARANTY OR ACCOUNT
If specified in the accompanying prospectus supplement, series
enhancement for a series or one or more of the classes of a series will be
provided by a guaranty, called the "CASH COLLATERAL GUARANTY," secured by the
deposit of cash or certain permitted investments in an account, called the "CASH
COLLATERAL ACCOUNT," reserved for the beneficiaries of the cash collateral
guaranty or by a cash collateral account alone. The amount available under the
cash collateral guaranty or the cash collateral account will be the lesser of
amounts on deposit in the cash collateral account and an amount specified in the
accompanying prospectus supplement. The accompanying prospectus supplement will
set forth the circumstances under which payments are made to beneficiaries of
the cash collateral guaranty from the cash collateral account or from the cash
collateral account directly.
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COLLATERAL INTEREST
If specified in the accompanying prospectus supplement, series
enhancement for a series of notes or one or more of the classes of a series may
be provided initially by a subordinated interest in the trust, called the
"COLLATERAL INTEREST," in an amount initially equal to a percentage of the
initial Invested Amount of the series. The collateral interest may be
certificated or uncertificated. This percentage will be specified in the
accompanying prospectus supplement.
SURETY BOND OR INSURANCE POLICY
If specified in the accompanying prospectus supplement, insurance with
respect to a series or one or more of the classes of a series will be provided
by one or more insurance companies. The insurance will guarantee, with respect
to one or more classes of the series, payments of interest or principal in the
manner and amount specified in the accompanying prospectus supplement.
If specified in the accompanying prospectus supplement, a surety bond
will be purchased for the benefit of the holders of a series or one or more
classes of that series to assure payments of interest or principal for that
series or class of notes in the manner and amount specified in the accompanying
prospectus supplement.
SPREAD ACCOUNT
If specified in the accompanying prospectus supplement, series
enhancement for a series or one or more of the classes of a series will be
provided by the periodic deposit of certain available excess cash flow from the
trust assets into an account, called the "SPREAD ACCOUNT," intended to assist
with subsequent payment of interest and principal on the notes of that class or
series in the manner specified in the accompanying prospectus supplement.
RESERVE ACCOUNT
If so specified in the accompanying prospectus supplement, series
enhancement for a series or one or more of the classes of a series or support
for any related enhancement will be provided by the establishment of an account,
called the "RESERVE ACCOUNT." The reserve account may be funded, to the extent
provided in the accompanying prospectus supplement, by an initial cash deposit,
the retention of certain periodic payments of principal or interest or both
otherwise payable to one or more classes of notes, including the subordinated
notes, or the provision of a letter of credit, guarantee, insurance policy or
other form of series enhancement or any combination of these arrangements. The
reserve account will be established to assist with the subsequent payment of
principal or interest on the notes of that series or the related class or any
other amount owing on any related series enhancement in the manner provided in
the accompanying prospectus supplement.
INTEREST RATE SWAP AGREEMENTS AND INTEREST RATE CAP AGREEMENTS
If so specified in the accompanying prospectus supplement, the
indenture trustee, on behalf of the trust, or the transferor, seller or other
party may enter into one or more interest rate swap agreements, interest rate
floor and/or cap agreements, currency exchange agreements or other derivatives
securities agreements for the benefit of a class or series, the terms of which
will be specified in the accompanying prospectus supplement.
DESCRIPTION OF THE PURCHASE AGREEMENT
The following summary is qualified in its entirety by the receivables
purchase agreement entered into by the bank and ABRC. A form of this agreement
is filed as an exhibit to the registration statement which contains this
prospectus. Any receivables purchase agreement entered into by an additional
seller or an additional transferor will contain substantially similar provisions
as those discussed here. In addition, the bank and the owner trustee have
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entered, and each seller that is a bank and that is not a transferor will enter,
into a back-up security agreement under which the bank or other seller, as
applicable, has granted directly to the trust a security interest in the
receivables.
Sale of Receivables. The receivables transferred to the trust by ABRC
were acquired by ABRC from the bank under a receivables purchase agreement. In
connection with the sale of the receivables to ABRC, the bank has filed
appropriate UCC financing statements to evidence that sale and perfect ABRC's
right, title and interest in those receivables. In addition, the bank has
indicated in its computer files that the receivables have been sold to ABRC by
the bank.
Under the receivables purchase agreement, the bank sold and, in the
future, may sell to ABRC all of its right, title and interest in and to (i) all
of the receivables existing in the initial accounts as of the cut-off date and
in additional accounts as of their date of designation for inclusion in the
trust and (ii) recoveries allocable to those receivables and certain other
property.
Representations and Warranties. In the receivables purchase agreement,
the seller represents and warrants to the transferor to the effect that, among
other things, as of the date of the receivables purchase agreement and, with
respect to any receivables in any designated additional accounts, as of the date
of designation of those additional accounts, it is duly organized and in good
standing and has the authority to consummate the transactions contemplated by
the receivables purchase agreement. In the receivables purchase agreement, the
seller additionally represents and warrants that as of the initial cut-off date
and, with respect to any receivables in any designated additional accounts, as
of each date of designation of those additional accounts, each receivable
transferred thereunder is an eligible receivable. In the event of a breach of
any representation or warranty set forth in the receivables purchase agreement
which results in the requirement that the transferor accept re-transfer of an
ineligible receivable under the transfer and servicing agreement, then the
seller will repurchase that ineligible receivable from the transferor on the
date of the re-transfer. The purchase price for the ineligible receivables will
be the principal amount of those receivables plus applicable finance charges.
The seller also represents and warrants to the transferor in the
receivables purchase agreement that, among other things, as of the date of the
receivables purchase agreement and, with respect to any receivables in any
designated additional accounts, as of each date of designation of those
additional accounts (a) the receivables purchase agreement constitutes a valid
and binding obligation of the seller and (b) the receivables purchase agreement
constitutes a valid sale to the transferor of all right, title and interest of
the seller in and to the receivables existing in the accounts as of the initial
cut-off date and, with respect to any receivables in any designated additional
accounts, as of each date of designation of those additional accounts to the
trust portfolio and in the proceeds thereof. If the breach of any of the
representations or warranties described in this paragraph results in the
obligation of the transferor under the transfer and servicing agreement to
accept re-transfer of the receivables, the seller will repurchase the
receivables re-transferred to the transferor for an amount of cash at least
equal to the amount of cash the transferor is required to deposit under the
transfer and servicing agreement in connection with the re-transfer.
Amendments. The receivables purchase agreement may be amended by the
seller or the transferor without the consent of the holders of any notes offered
under this prospectus and the accompanying prospectus supplement. No amendment,
however, may have a materially adverse effect on the interest of the noteholders
and no amendment may change, modify, delete or add any other obligation of the
seller or the transferor unless written confirmation is received from each
rating agency that the amendment will not result in a reduction or withdrawal of
its rating of any outstanding series or class.
Termination. The receivables purchase agreement will terminate
immediately after the trust terminates. In addition, if a receiver or
conservator is appointed for any seller or transferor that is a bank or any
seller or transferor that is not a bank becomes a debtor in a bankruptcy case or
certain other liquidation, bankruptcy, insolvency or similar events occur, the
seller will immediately cease to sell receivables to the transferor and will
promptly give notice of that event to the transferor and the indenture trustee,
unless the bankruptcy court, receiver or conservator instructs otherwise.
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NOTE RATINGS
Any rating of the notes by a rating agency will indicate:
- its view on the likelihood that noteholders will receive
required interest and principal payments; and
- its evaluation of the receivables and the availability of any
series enhancement for the notes.
Among the things a rating will not indicate are:
- the likelihood that interest or principal payments will be
paid on a scheduled date;
- the likelihood that a pay out event will occur;
- the likelihood that a U.S. 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 a recommendation to buy, sell or hold the notes. A
rating may be lowered or withdrawn at any time by a rating agency.
The transferor will request a rating 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, if so assigned, that rating could be lower than any rating assigned
by a rating agency chosen by the transferor. Except as otherwise expressly
stated, any reference in this prospectus or the accompanying prospectus
supplement to a "RATING AGENCY" refers to a rating agency selected by the
transferor to rate the notes of a series or class issued by the trust.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
Each seller will represent in the receivables purchase agreement that
its transfer of receivables constitutes a valid sale and assignment of all its
right, title and interest in and to the receivables to the transferor. In the
transfer and servicing agreement, the transferor will represent and warrant that
its transfer of receivables constitutes a valid sale and assignment of all of
its right, title and interest in and to the receivables, except for its interest
as the holder of the transferor certificate, or creates in favor of the trust a
valid first-priority perfected security interest in the transferor's rights in
the receivables in existence at the time that the trust is formed or at the time
that receivables in additional accounts are transferred, as the case may be, and
a valid first-priority perfected security interest in the transferor's rights in
the receivables arising in accounts already designated for the trust on and
after their creation, in each case until termination of the trust.
Each seller and transferor will represent that the receivables
attributed to it are either "accounts" or "general intangibles" within the
meaning of the UCC as in effect in the States of New York, Utah and Nevada. To
the extent the receivables constitute accounts, both the sale of the receivables
and the transfer of the receivables as security for an obligation are governed
by Article 9 of the UCC as in effect in the States of New York, Utah and Nevada,
and to the extent that Article 9 is applicable, the filing of appropriate
financing statements is required to
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perfect the sale of such receivables by a seller to a transferor, and by a
transferor to the trust. Appropriate financing statements covering the
receivables have been or will be filed in Utah and Nevada.
To the extent the receivables constitute general intangibles and the
transfer of the receivables is deemed to be a transfer as security for an
obligation, the provisions of Article 9 of the UCC relating to the perfection of
the transfer are applicable. If the transfer of receivables constituting general
intangibles is deemed to be a sale, then the UCC is not applicable and no
further action is required to protect the trust's interest from third parties.
Although, to the extent the transfer is deemed to be a sale, the priority of
general intangibles is not as clear as the priority of interests governed by the
UCC, the bank and ABRC believe that it would be inconsistent for a court to
afford the trust less favorable treatment if the transfer of the receivables is
deemed to be a sale than if it were deemed to be a security interest and that a
court should conclude that a sale of receivables consisting of general
intangibles would be deemed to have occurred as of the applicable transfer date.
There are certain limited circumstances under the UCC and applicable
Federal law in which prior or subsequent transferees of receivables coming into
existence after a series closing date could have an interest in those
receivables with priority over the trust's interest. A tax or other government
lien on property of a seller or transferor arising prior to the time a
receivable comes into existence may also have priority over the interest of the
trust in that receivable. Under the receivables purchase agreement, a seller
will warrant to the transferor, and under the transfer and servicing agreement,
a transferor will warrant to the indenture trustee, that it has transferred the
receivables free and clear of the lien of any third party. Furthermore, if the
FDIC were appointed as a receiver or conservator of a seller or transferor that
is a bank, some administrative expenses of the receiver or conservator may have
priority over the interest of the trust in the receivables.
BORROWER PROTECTION LAWS
Application of federal and state bankruptcy and debtor relief laws
would affect the interests of the holders of notes if the protection provided to
debtors under those laws result in any receivables of the trust being written
off as uncollectible when there are insufficient funds available from
collections of finance charge and administrative receivables and under any
series enhancement.
CLAIMS AND DEFENSES OF CARDHOLDERS AGAINST THE TRUST
The UCC would be applicable to the trust if the trust were deemed to
have acquired a security interest in the receivables. The UCC provides that
unless a cardholder has made an enforceable agreement not to assert defenses or
claims arising out of a transaction, the rights of the trust, as assignee, are
subject to all the terms of the cardholder agreement between the seller and the
cardholder and any defense or claim arising therefrom, to rights of set off and
to any other defense or claim of the cardholder against the seller that accrues
before the cardholder receives notification of the assignment. The UCC also
provides that any cardholder is authorized to continue to pay the seller until
(a) the cardholder receives notification, reasonably identifying the rights
assigned, that the amount due or to become due has been assigned and that
payment is to be made to the indenture trustee or the servicer and (b) if
requested by the cardholder, the indenture trustee or the servicer has furnished
reasonable proof of assignment. No agreement not to assert defenses has been
entered into and no notice of the assignment of the receivable to the trust will
be sent to the cardholders obligated on the accounts in connection with the
transfer of the receivables to the trust.
CERTAIN MATTERS RELATING TO CONSERVATORSHIP, RECEIVERSHIP AND BANKRUPTCY
The receivables purchase agreement, the transfer and servicing
agreement, the indenture and related agreements contemplate a number of
transfers of receivables, including transfers by the seller to the transferor
and transfers by the transferor to the trust.
The seller and the transferor intend to treat the transfers between the seller
and the transferor under the
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receivables purchase agreement as absolute conveyances. It is possible that a
creditor, trustee, receiver or conservator of such a party, or such party as
debtor-in-possession, may at some time take a contrary position. The
implications of such action are discussed below.
The seller and the transferor intend to treat transfers of receivables
from the transferor to the trust either as an absolute transfer or as the grant
of a first perfected security interest. The implications of characterization of
a transfer as a security interest are also discussed below.
The bank is chartered as a Utah industrial loan corporation and is
regulated and supervised by the FDIC. The FDIC may act as conservator or
receiver for the bank and any other seller or transferor that is a bank the
deposits of which are issued by the FDIC, if certain events occur relating to
the bank's financial condition or the propriety of its actions.
To the extent that (i) the applicable receivables purchase agreement
complies with the regulatory requirements of the FDIA, (ii) the security
interest granted under the applicable receivables purchase agreement and back-up
security agreement was perfected before the FDIC is appointed as conservator or
receiver for a seller or transferor that is a bank, and (iii) the security
interest was not taken in contemplation of that seller's or transferor's
insolvency or with the intent to hinder, delay or defraud that seller or
transferor or its creditors, 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 a seller or transferor
that is a bank in the receivables. Nevertheless, if the FDIC were to assert a
contrary position, or were to require the owner trustee or indenture trustee to
go through the administrative claims procedure established by the FDIC in order
to obtain payments on the notes, or were to request a stay of any actions by the
indenture trustee to enforce the applicable receivables purchase agreement or
back-up security agreement against a seller or transferor that is a bank, delays
in payments on outstanding series of notes and possible reductions in the amount
of those payments could occur.
In addition, the FDIC as conservator or receiver for a seller or
transferor that is a bank could repudiate the applicable receivables purchase
agreement and back-up security agreement. The FDIA would limit the damages for
any such repudiation to the trust's "actual direct compensatory damages"
determined as of the date that the FDIC were appointed as conservator or
receiver for that seller or transferor. The FDIC, moreover, could delay its
decision whether to repudiate the applicable receivables purchase agreement and
back-up security agreement for a reasonable period following its appointment as
conservator or receiver for the seller or transferor. Therefore, if the FDIC as
conservator or receiver for a seller or transferor that is a bank were to
repudiate the applicable receivables purchase agreement and back-up security
agreement, the amount payable to you could be lower than the outstanding
principal and accrued interest on the notes, thus resulting in losses to you.
In addition, regardless of the terms of the indenture, the FDIC as
conservator or receiver for a seller or transferor that is a bank may have the
power to prevent the commencement of an early amortization period or to prevent
or limit the early liquidation of the receivables and termination of the trust,
or to require the continued transfer of new principal receivables. Regardless of
the instructions of those authorized to direct the indenture trustee's action,
moreover, the FDIC as conservator or receiver for a seller or transferor that is
a bank may have the power to require the early liquidation of the receivables,
to require the early termination of the trust and the retirement of the notes,
or to prohibit or limit the continued transfer of new principal receivables.
ABRC has been structured so that (i) the filing of a voluntary or
involuntary petition for relief by or against it under the Bankruptcy Code and
(ii) the substantive consolidation of its assets and liabilities with those of a
seller is unlikely. ABRC is a separate, limited purpose corporation, and its
certificate of incorporation contains limitations on the nature of its business
and restrictions on its ability to commence a voluntary case or proceeding under
the Bankruptcy Code or similar laws without the prior unanimous consent of all
of its directors. In addition, the indenture trustee will covenant in the
indenture that it will not at any time institute against ABRC or any additional
transferor any bankruptcy, insolvency or similar proceedings under the
Bankruptcy Code or similar laws. Nevertheless, if ABRC or any additional
transferor that is not a bank were to become a debtor in a bankruptcy case
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and if (a) its bankruptcy trustee or creditor or (b) it, as
debtor-in-possession, were to take the position that the transfer of the
receivables by it to the trust or transferor, as applicable, should be
characterized as a pledge of those receivables, or if the assets and liabilities
of ABRC or any additional transferor that is not a bank were substantively
consolidated with those of an entity in bankruptcy, then delays in payments on
the notes and possible reductions in the amount of those payments could result.
If bankruptcy, insolvency or similar proceedings under the Bankruptcy
Code or similar laws occur with respect to ABRC or any additional transferor
that is not a bank, then ABRC or that additional transferor, as the case may be,
will promptly notify the indenture trustee and a pay out event will occur with
respect to each series. Under the transfer and servicing agreement, newly
created receivables will not be transferred to the trust on and after any such
event. Any principal receivables transferred to the trust prior to the event, as
well as collections on those principal receivables and finance charge and
administrative receivables related to those principal receivables, will continue
to be part of the trust assets and will be applied as specified above in
Description of the Notes --Application of Collections" and in the accompanying
prospectus supplement.
The bankruptcy court, however, may have the power to delay any such
procedure or to require the continued transfer of principal receivables to the
trust.
Application of Federal and state bankruptcy and debtor relief laws
would affect the interests of the noteholders in the receivables, if these laws
result in any receivables being written off as uncollectible.
If a receiver or conservator were appointed for the servicer and no
servicer default other than the insolvency of the servicer exists, the receiver
or conservator may have the power to prevent either the indenture trustee or the
noteholders from appointing a new servicer.
See "Risk Factors--If a receiver or conservator were appointed for a
seller or a transferor that is a bank, or if a seller or a transferor that is
not a bank became a debtor in a bankruptcy case, delays or reductions in payment
of your notes could occur" in this prospectus.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following summary describes generally the material United States
federal income tax consequences of an investment in the notes. Additional
federal income tax considerations relevant to a particular series may be set
forth in the accompanying prospectus supplement. The following summary has been
prepared and reviewed by Wolf, Block, Schorr and Solis-Cohen LLP, as special tax
counsel to the issuer ("SPECIAL TAX COUNSEL"). The summary is based on the
Internal Revenue Code of 1986, as amended (the "CODE"), as of the date hereof,
and existing final, temporary and proposed Treasury regulations, revenue rulings
and judicial decisions, all of which are subject to prospective and retroactive
changes. The summary is addressed only to original purchasers of the notes,
deals only with notes held as capital assets within the meaning of Section 1221
of the Code and, except as specifically set forth below, does not address tax
consequences of holding notes that may be relevant to investors in light of
their own investment circumstances or their special tax situations, such as
certain financial institutions, tax-exempt organizations, life insurance
companies, dealers in securities, non-U.S. persons, or investors holding the
notes as part of a conversion transaction, as part of a hedge or hedging
transaction, or as a position in a straddle for tax purposes. Further, this
discussion does not address alternative minimum tax consequences or any tax
consequences to holders of interests in a noteholder. Special tax counsel is of
the opinion that the following summary of federal income tax consequences is
correct in all material respects. An opinion of special tax counsel, however, is
not binding on the Internal Revenue Service 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 in this prospectus.
Accordingly, persons considering the purchase of notes should consult their own
tax advisors with regard to the United States federal
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income tax consequences of an investment in the notes and the application of
United States federal income tax laws, as well as the laws of any state, local
or foreign taxing jurisdictions, to their particular situations.
TAX CHARACTERIZATION OF THE TRUST AND THE NOTES
Treatment of the Trust as an Entity Not Subject to Tax. Special tax
counsel is of the opinion that, although no transaction closely comparable to
that contemplated herein has been the subject of any Treasury regulation,
revenue ruling or judicial decision, the trust will not be classified as an
association or as a publicly traded partnership taxable as a corporation for
federal income tax purposes. As a result, the trust will not be subject to
federal income tax. However, as discussed above, this opinion is not binding on
the IRS and no assurance can be given that this characterization will prevail.
The precise tax characterization of the trust for federal income tax
purposes is not certain. It might be viewed as merely holding assets on behalf
of the transferor as collateral for notes issued by the transferor. On the other
hand, the trust could be viewed as a separate entity for tax purposes issuing
its own notes. This distinction, however, should not have a significant tax
effect on noteholders except as stated below under "Possible Alternative
Characterizations."
Treatment of the Notes as Debt. Special tax counsel is of the opinion
that, although no transaction closely comparable to that contemplated herein has
been the subject of any Treasury regulation, revenue ruling or judicial
decision, the notes will be characterized as debt for United States federal
income tax purposes. Additionally, the trust will agree by entering into the
indenture, and the noteholders will agree by their purchase and holding of
notes, to treat the notes as debt for United States federal income tax purposes.
Possible Alternative Characterizations. If, contrary to the opinion of
special tax counsel, the IRS successfully asserted that a series or class of
notes did not represent debt for United States federal income tax purposes,
those notes might be treated as equity interests in the trust 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 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 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; further, noteholders might not be
entitled to any dividends received deduction in respect of payments of interest
on notes treated as dividends. In addition, even if the notes are treated as
debt, the trust is also able to issue other securities which may be treated as
debt or as equity interests in the trust. The issuance of such securities
requires the delivery of a new opinion of counsel generally to the effect that
such issuance will not cause the trust to become taxable as a separate entity
for federal income tax purposes; however, any such new opinion would not bind
the IRS, and the trust could become taxable as a corporation as a result of such
issuance, potentially diminishing cash available to make payments on the notes.
Prospective investors should consult with their own tax advisors with regard to
the consequences of each such possible alternative characterization to them in
their particular circumstances; the following discussion assumes that the
characterization of the notes as debt is correct.
CONSEQUENCES TO HOLDERS OF THE NOTES
Interest and Original Issue Discount. In general, stated interest on a
note will be includible in gross income as it accrues or is received in
accordance with a noteholder's usual method of tax accounting. If a class of
notes is issued with original issue discount ("OID"), the provisions of Sections
1271 through 1273 and 1275 of the Code will apply to those notes. Under those
provisions, a holder of such a note (including a cash basis holder) generally
would be required to include the OID on a note in income for federal income tax
purposes on a constant yield basis, resulting in the inclusion of OID in income
in advance of the receipt of cash attributable to that income. In general,
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a note will be treated as having OID to the extent that its "stated redemption
price" exceeds its "issue price," if such excess equals or exceeds 0.25 percent
multiplied by the weighted average life of the note (determined by taking into
account the number of complete years following issuance until payment is made
for each partial principal payment). Under Section 1272(a) (6) of the Code,
special provisions apply to debt instruments on which payments may be
accelerated due to prepayments of other obligations securing those debt
instruments. However, no regulations have been issued interpreting those
provisions, and the manner in which those provisions would apply to the notes is
unclear, but the application of Section 1272(a) (6) could affect the rate of
accrual of OID and could have other consequences to holders of the notes.
Additionally, the IRS could take the position based on Treasury regulations that
none of the interest payable on a note is "unconditionally payable" and hence
that all of such interest should be included in the note's stated redemption
price at maturity. If sustained, such treatment should not significantly affect
tax liabilities for most holders of the notes, but prospective noteholders
should consult their own tax advisors concerning the impact to them in their
particular circumstances. The trust intends to take the position that interest
on the notes constitutes "qualified stated interest" and that the above
consequences do not apply.
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 are treated as ordinary
income to the extent of accrued market discount. The market discount rules also
provide for deferral of interest deductions with respect to debt incurred to
purchase or carry a note that has market discount.
Market Premium. A holder of a note who purchases an interest in a note
at a premium may elect to amortize the premium against interest income over the
remaining term of the note in accordance with the provisions of Section 171 of
the Code.
Disposition of the Notes. Upon the sale, exchange or retirement of a
note, the holder of the note generally will recognize taxable gain or loss in an
amount equal to the difference between the amount realized on the disposition
(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. 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 trust 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 transferor or
the trust, (b) a "controlled foreign corporation" with respect to which the
transferor or the trust is a "related person" within the meaning of the Code, or
(c) a bank extending credit under a loan agreement entered into in the ordinary
course of its trade or business, and (ii) provides the person who is otherwise
required to withhold United States tax with respect to the notes with an
appropriate statement (on IRS Form W-8 or a substitute form), signed under
penalties of perjury, certifying that the beneficial owner of the note is a
foreign person and providing the foreign person's name and address. If a note is
held through a securities clearing organization or certain other financial
institutions (as is expected to be the case unless definitive notes are issued),
the organization or institution may provide the relevant signed statement
generally to the withholding agent; in that case, however, the signed statement
generally must be accompanied by an IRS Form W-8 or substitute form provided by
the foreign person that owns the note. If such interest is not portfolio
interest, then it will be subject to United States federal income and
withholding tax at a rate of 30%, unless reduced or eliminated under 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
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provided. The U.S. Treasury Department recently issued final Treasury
regulations which will revise some of the foregoing procedures whereby a foreign
person may establish an exemption from withholding generally beginning January
1, 2001; foreign persons should consult their tax advisors concerning the impact
to them, if any, of such revised procedures.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a foreign person will be exempt from United
States federal income tax and withholding tax, provided that (i) such gain is
not effectively connected with the conduct of a trade or business in the United
States by the foreign person, and (ii) in the case of an individual foreign
person, such individual is not present in the United States for 183 days or more
in the taxable year.
Backup Withholding. Payments of principal and interest, as well as
payments of proceeds from the sale, retirement or disposition of a note, may be
subject to "backup withholding" tax under Section 3406 of the Code at a rate of
31% if a recipient of such payments fails to furnish to the payor certain
identifying information. Any amounts deducted and withheld would be allowed as a
credit against such recipient's United States federal income tax, provided
appropriate proof is provided under rules established by the IRS. Furthermore,
certain penalties may be imposed by the IRS on a recipient of payments that is
required to supply information but that does not do so in the proper manner.
Backup withholding will not apply with respect to payments made to certain
exempt recipients, such as corporations and financial institutions. Holders of
the notes should consult their tax advisors regarding their qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption.
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 AND LOCAL TAX CONSEQUENCES
The discussion above does not address the taxation of the trust or the
tax consequences of the purchase, ownership or disposition of an interest in the
notes under any state or local tax law. Each investor should consult its own tax
adviser regarding state and local tax consequences.
ERISA CONSIDERATIONS
Subject to the considerations described below and in the accompanying
prospectus supplement, the notes may be purchased by, on behalf of, or with
"plan assets" of, any employee benefit or other plan that is subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
Section 4975 of the Code (each is called a "PLAN"). Any plan fiduciary that
proposes to cause a plan to acquire any of the notes should consult with its
counsel concerning the potential consequences under ERISA and the Code of the
plan's acquisition and ownership of notes. See "ERISA Considerations" in the
accompanying prospectus supplement.
Section 406 of ERISA and Section 4975 of the Code prohibit plans from
engaging in certain transactions involving plan assets with persons that are
"parties in interest" under ERISA or "disqualified persons" under the Code
(referred to together as "PARTIES IN INTEREST") with respect to the plan. A
violation of these "prohibited transaction" rules may generate excise tax and
other liabilities under ERISA and Section 4975 of the Code for these persons,
unless a statutory, regulatory or administrative exemption is available.
Certain employee benefit plans, such as governmental plans (as defined
in Section 3(32) of ERISA) and certain church plans (as defined in Section 3(33)
of ERISA), are not subject to the requirements of ERISA or Section 4975 of the
Code. Accordingly, assets of these plans may be invested in the notes without
regard to the
68
<PAGE> 119
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.
Fiduciaries or other persons contemplating purchasing the notes on
behalf of or with plan assets of any plan should consult their own counsel
regarding whether the trust assets represented by the notes would be considered
plan assets, the consequences that would apply if the trust's assets were
considered plan assets, and the availability of exemptive relief from the
prohibited transaction rules.
Finally, plan fiduciaries and other plan investors should consider the
fiduciary standards under ERISA or other applicable law in the context of the
plan's particular circumstances before authorizing an investment of a portion of
the plan's assets in the notes. Among other factors, plan fiduciaries and other
plan investors should consider whether the investment (i) satisfies the
diversification requirement of ERISA or other applicable law, (ii) is in
accordance with the plan's governing instruments, and (iii) is prudent in light
of the "Risk Factors" and other factors discussed in this prospectus and the
accompanying prospectus supplement.
PLAN OF DISTRIBUTION
The transferor and the seller and one or more underwriters named in the
prospectus supplement will enter into an underwriting agreement for each series
of notes. Under each underwriting agreement, the transferor will cause the notes
to be sold by the trust to the underwriters named in that underwriting agreement
and in the accompanying prospectus supplement. Each of those underwriters will
severally agree to purchase from the trust the principal balance of notes set
forth in that underwriting agreement and in the accompanying prospectus
supplement (subject to proportional adjustment on the terms and conditions set
forth in the underwriting agreement in the event of an increase or decrease in
the aggregate balance of notes offered by this prospectus and by the
accompanying prospectus supplement).
In each underwriting agreement, the underwriters will agree, subject to
the terms and conditions set forth in that underwriting agreement, to purchase
all the notes offered by this prospectus and by the accompanying prospectus
supplement if any of those notes are purchased. In the event of a default by any
underwriter, each underwriting agreement will provide that, in certain
circumstances, purchase commitments of the nondefaulting underwriters may be
increased or the underwriting agreement may be terminated.
Each prospectus supplement will set forth the price at which each
series of notes or class being offered initially will be offered to the public
and any concessions that may be offered to certain dealers participating in the
offering of those notes. After the initial public offering, the public offering
price and such concessions may be changed.
Each underwriting agreement will provide that the transferor and the
seller will indemnify the related underwriters against certain liabilities,
including liabilities under the Securities Act of 1933.
The place and time of delivery for any series of notes for which this
prospectus is delivered will be set forth in the accompanying prospectus
supplement.
LEGAL MATTERS
Legal matters relating to the issuance of the notes will be passed upon
for the transferor and the seller by Wolf, Block, Schorr and Solis-Cohen LLP,
New York, New York, special counsel to the transferor and the seller. Legal
matters relating to the federal tax consequences of the issuance of the notes
will be passed upon for the transferor and the seller by Wolf, Block, Schorr and
Solis-Cohen LLP, New York, New York.
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<PAGE> 120
REPORTS TO NOTEHOLDERS
The servicer will prepare monthly and annual reports that will contain
information about the trust. The financial information contained in the reports
will not be prepared in accordance with generally accepted accounting
principles. Unless and until definitive notes are issued, the reports will be
sent to Cede & Co. which is the nominee of DTC and the registered holder of the
notes. No financial reports will be sent to you. See "Description of the Notes
- -- Book-Entry Registration," -- "Reports to Noteholders" and "-- Evidence as to
Compliance" in this prospectus.
WHERE YOU CAN FIND MORE INFORMATION
The trust filed a registration statement relating to the notes with the
SEC. This prospectus is part of the registration statement, but the registration
statement includes additional information.
The servicer will file with the SEC all required annual, monthly and
special SEC reports and other information about the trust.
You may read and copy any reports, statements or other information the
trust files 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. The trust's SEC filings are also
available to the public on the SEC Internet site http://www.sec.gov.
The SEC allows the trust to "incorporate by reference" information the
trust files with it, which means that the trust can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus.
Information that the trust files later with the SEC will automatically update
the information in this prospectus. In all cases, you should rely on the later
information over different information included in this prospectus or the
accompanying prospectus supplement. The trust incorporates by reference any
future annual, monthly and special SEC reports and proxy materials filed by or
on behalf of the trust until the trust terminates its offering of the notes.
As a recipient of this prospectus, you may request a copy of any
document the trust incorporates by reference, except exhibits to the documents
(unless the exhibits are specifically incorporated by reference), at no cost, by
writing or calling the servicer at: 11850 South Election Road, Draper, Utah
84020, Attention: Treasury Department, Telephone: (801) 523-0858.
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<PAGE> 121
INDEX OF TERMS FOR PROSPECTUS
<TABLE>
<CAPTION>
TERMS PAGE
- ----- ----
<S> <C>
ABRC............................................................................................................. 1
addition date.................................................................................................... 34
additional issuance.............................................................................................. 29
administrator.................................................................................................... 12
Advanta Business Card Portfolio.................................................................................. 13
adverse effect................................................................................................... 29
Automatic Additional Accounts.................................................................................... 35
bank............................................................................................................. 1
cash collateral account.......................................................................................... 59
cash collateral guaranty......................................................................................... 59
Code............................................................................................................. 65
collateral interest.............................................................................................. 60
collection account............................................................................................... 37
controlled accumulation period................................................................................... 41
controlled amortization period................................................................................... 41
cut-off date..................................................................................................... 19
defaulted receivables............................................................................................ 42
definitive notes................................................................................................. 26
depositaries..................................................................................................... 23
determination date............................................................................................... 42
early accumulation period........................................................................................ 41
early amortization period........................................................................................ 41
eligible account................................................................................................. 32
eligible account................................................................................................. 37
eligible institution............................................................................................. 38
eligible investments............................................................................................. 38
eligible receivable.............................................................................................. 33
Enhancement Invested Amount...................................................................................... 58
ERISA............................................................................................................ 68
events of default................................................................................................ 51
Excess Funding Account........................................................................................... 38
Expected Principal Payment Date.................................................................................. 27
FDIA............................................................................................................. 8
FDIC............................................................................................................. 8
finance charge and administrative
receivables................................................................................................... 19
foreclosure certificate.......................................................................................... 53
funding period................................................................................................... 39
initial designated accounts...................................................................................... 19
interchange...................................................................................................... 16
Invested Amount.................................................................................................. 21
Investor Charge-Offs............................................................................................. 42
Investor Default Amount.......................................................................................... 42
Investor Percentage.............................................................................................. 21
issuer........................................................................................................... 12
L/C bank......................................................................................................... 59
member bank...................................................................................................... 16
note owner....................................................................................................... 23
owner trustee.................................................................................................... 12
paired series.................................................................................................... 43
parties in interest.............................................................................................. 68
paying agent..................................................................................................... 39
plan............................................................................................................. 68
pre-funding account.............................................................................................. 39
principal funding account........................................................................................ 27
principal receivables............................................................................................ 19
rating agency.................................................................................................... 62
recoveries....................................................................................................... 19
required minimum principal balance............................................................................... 2
required transferor interest..................................................................................... 2
Required Minimum Principal Balance............................................................................... 29
Required Transferor Interest..................................................................................... 41
reserve account.................................................................................................. 60
revolving period................................................................................................. 27
seller........................................................................................................... 27
series enhancement............................................................................................... 58
series enhancement percentage.................................................................................... 40
series enhancer.................................................................................................. 58
series pay out event............................................................................................. 44
series termination date.......................................................................................... 43
servicer......................................................................................................... 37
servicer default................................................................................................. 47
Shared Finance Charge Collections................................................................................ 42
Shared Principal Collections..................................................................................... 42
special tax counsel.............................................................................................. 65
spread account................................................................................................... 60
supplemental certificate......................................................................................... 46
tax opinion...................................................................................................... 29
transferor....................................................................................................... 27
transferor certificate........................................................................................... 22
transferor percentage............................................................................................ 22
Transferor Interest.............................................................................................. 22
trust............................................................................................................ 12
trust pay out event.............................................................................................. 44
</TABLE>
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<PAGE> 122
<TABLE>
<S> <C>
trust portfolio.................................................................................................. 19
trust termination date........................................................................................... 43
unallocated principal collections................................................................................ 41
</TABLE>
72
<PAGE> 123
ANNEX I
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in certain limited circumstances, the globally offered Advanta
Business Card Master Trust Asset Backed Notes (the "global securities") to be
issued in series from time to time (each, a "series") will be available only in
book-entry form. Investors in the global securities may hold those global
securities through any of The Depository Trust Company ("DTC"), Clearstream
Banking or Euroclear. The global securities will be tradable 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 Banking 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 Banking or Euroclear and
DTC participants holding notes will be effected on a delivery-against-payment
basis through the respective depositaries of Clearstream Banking 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 certain 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 Banking 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 Banking or Euroclear) will follow the settlement
practices applicable to U.S. corporate debt obligations. Investor securities
custody accounts will be credited with their holdings against payment in
same-day funds on the settlement date.
Investors electing to hold their global securities through Clearstream
Banking 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 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.
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<PAGE> 124
Trading between DTC Participants. Secondary market trading between DTC
participants (other than Citibank, N.A. ("Citibank") and Morgan Guaranty Trust
Company of New York ("Morgan") as depositories for Clearstream Banking and
Euroclear, respectively) will be settled using the procedures applicable to U.S.
corporate debt obligations in same-day funds.
Trading between Clearstream Banking Customers and/or Euroclear Participants.
Secondary market trading between Clearstream Banking customers or Euroclear
participants will be settled using the procedures applicable to conventional
eurobonds in same-day funds.
Trading between DTC seller and Clearstream Banking 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
Banking and Euroclear, respectively) to the account of a Clearstream Banking
customer or a Euroclear participant, the purchaser must send instructions to
Clearstream Banking prior to settlement date 12:30. Clearstream Banking or
Euroclear, as the case may be, will instruct Citibank or Morgan, respectively,
to receive the global securities for 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
Banking customer's or Euroclear participant's account. Credit for the global
securities will appear the next day (European time) and the cash debit will be
backvalued 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 Banking or Euroclear cash debit will be valued
instead as of the actual settlement date.
Clearstream Banking 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 Banking or Euroclear.
Under this approach, they may take on credit exposure to Clearstream Banking or
Euroclear until the global securities are credited to their accounts one day
later.
As an alternative, if Clearstream Banking or Euroclear has extended a line of
credit to them, Clearstream Banking 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 Banking 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 Banking 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 Banking 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 Banking or Euroclear seller and DTC purchaser.
Due to time zone differences in their favor, Clearstream Banking 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 Banking before settlement date 12:30. In these
cases, Clearstream Banking 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 Banking customer or Euroclear participant the following day, and
receipt of the cash proceeds in the Clearstream Banking customer's or Euroclear
participant's account would be back-valued to the
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<PAGE> 125
value date (which would be the preceding day, when settlement occurred in New
York). If the Clearstream Banking customer or Euroclear participant has a line
of credit with its respective clearing system and elects to draw on such line of
credit in anticipation of receipt of the sale proceeds in its account, the
back-valuation may substantially reduce or offset any overdraft charges incurred
over that one-day period. If settlement is not completed on the intended value
date (i.e., the trade fails), receipt of the cash proceeds in the Clearstream
Banking customer's or Euroclear participant's account would instead be valued as
of the actual settlement date.
CERTAIN U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of global securities holding securities through
Clearstream Banking 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 notes 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 note 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 note 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 note owner of a global
security or, in the case of a Form 1001 or a Form 4224 filer, his agent, files
by submitting the appropriate form to the person through whom it holds (the
clearing agency, in the case of persons holding directly on the books of the
clearing agency). Form W-8 and Form 1001 are effective for three calendar years
and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United States,
(ii) a corporation or partnership organized in or under the laws of the United
States, any state thereof, or any political subdivision of either (including the
District of Columbia), 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.
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<PAGE> 126
ADVANTA BUSINESS CARD MASTER TRUST
Issuer
ADVANTA BUSINESS RECEIVABLES CORP.
Transferor
ADVANTA BANK CORP.
Servicer
Series 2000-
$
Class A Floating Rate Asset Backed Notes
$
Class B Floating Rate Asset Backed Notes
$
Class C Floating Rate Asset Backed Notes
--------------
PROSPECTUS SUPPLEMENT
---------------
Underwriters of the Class A Notes
Underwriters of the Class B Notes
Underwriters of the Class C Notes
You should rely only on the information contained or incorporated by reference
in this prospectus supplement and the accompanying prospectus. We have not
authorized anyone to provide you with different information.
We are not offering the notes in any state where the offer is not permitted.
We do not claim the accuracy of the information in this prospectus supplement
and the accompanying prospectus as of any date other than the dates stated on
their respective covers.
Dealers will deliver a prospectus supplement and prospectus when acting as
underwriters of the notes and with respect to their unsold allotments or
subscriptions. In addition, all dealers selling the notes will deliver a
prospectus supplement and prospectus until , 2000
<PAGE> 127
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses to be incurred in
connection with the offering of the securities being offered hereunder, other
than underwriting discounts and commissions.
<TABLE>
<CAPTION>
<S> <C>
Registration Fee..................................................................................... $264*
Printing and Engraving Expenses...................................................................... **
Trustee's Fees and Expenses.......................................................................... **
Legal Fees and Expenses.............................................................................. **
Accountants' Fees and Expenses....................................................................... **
Blue Sky Fees and Expenses .......................................................................... **
Rating Agency Fees................................................................................... **
Miscellaneous Expenses .............................................................................. **
Total **
</TABLE>
- ----------------------
* Actual
** To be provided by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.7502 of the Nevada Revised Statutes (the "Nevada Law")
empowers a Nevada corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of such corporation), by reason of the
fact that such person is or was a director, officer, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that such person acted
in good faith and in a manner he or she reasonably believed to be in or not
opposed to the corporation's best interests, and, for criminal proceedings, had
no reasonable cause to believe his or her conduct was unlawful. A Nevada
corporation may indemnify any person against expenses (including attorneys'
fees) in connection with the defense or settlement of an action by or in the
right of the corporation under the same conditions, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where a director, officer,
employee or agent is successful on the merits or otherwise in the defense of any
action referred to above, the corporation must indemnify him or her against the
expenses which such officer or director actually and reasonably incurred in
connection with the defense.
In accordance with the Nevada Law, the Articles of Incorporation of
Advanta Business Receivables Corp. ("ABRC") contains a provision to limit the
personal liability of the directors (and to the extent specified from time to
time by the Board of Directors, the officers) of ABRC for violations of their
fiduciary duty except for (i) acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law or (ii) the payment of dividends
in violation of Section 78.300 of the Nevada Law. To the extent that
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<PAGE> 128
the Nevada Law is amended to authorize the further elimination or limitation of
liability of directors or officers, then the provision shall also be so amended
to provide for the elimination or limitation of liability to the fullest extent
permitted by the Nevada Law. The effect of this provision is to eliminate the
personal liability of directors for monetary damages for actions involving a
breach of their fiduciary duty of care, including any such actions involving
gross negligence.
The Articles of Incorporation of ABRC provides for indemnification of
the officers and directors of ABRC to the fullest extent permitted by the Nevada
Law, as it may be amended from time to time. The Articles of Incorporation
further require ABRC to pay the expenses incurred by an officer or director in
defending any civil, criminal, administrative, or investigative action, suit or
proceeding in advance of the final disposition thereof upon receipt of an
undertaking by or on behalf of such officer to repay such amount if it is
ultimately determined that such person is not entitled to indemnification.
The By-laws of ABRC also contain provisions regarding indemnification
and limitation of liability of directors for breach of fiduciary duty and
payment of unlawful distributions similar to those contained in the Articles of
Incorporation.
Pursuant to underwriting agreements filed as exhibits to registration
statements relating to underwritten offerings of securities, the underwriters
parties thereto have agreed to indemnify each officer and director of ABRC and
each person, if any, who controls ABRC within the meaning of the Securities Act
of 1933, against certain liabilities, including liabilities under said Act.
ITEM 16. EXHIBITS.
(a) Exhibits.
<TABLE>
<S> <C>
1.1 ----Form of Underwriting Agreement*
4.1 ----Form of Master Indenture*
4.2 ----Form of Indenture Supplement, including form of Notes*
4.3 ----Form of Transfer and Servicing Agreement*
4.4 ----Certificate of Trust of Advanta Business Card Master Trust*
4.5 ----Form of Trust Agreement of Advanta Business Card Master
Trust*
4.6 ----Form of Administration Agreement*
5.1 ----Opinion of Wolf, Block, Schorr and
Solis-Cohen LLP with respect to legality*
8.1 ----Opinion of Wolf, Block, Schorr and Solis-Cohen LLP with respect to
tax matters*
23.1 ----Consent of Wolf, Block, Schorr and Solis-Cohen LLP (included in
Exhibit 5. 1 and Exhibit 8.1)*
24.1 ----Powers of Attorney (included on page II-5)
25.1 ----Form T-1 Statement of Eligibility and
Qualification under the Trust Indenture Act of
1939, as amended, of [___________], as indenture
trustee under the Indenture*
</TABLE>
- ----------------------
* To be filed by amendment.
II-2
<PAGE> 129
(b) Financial Statements
All financial statements, schedules and historical information have
been omitted as they are not applicable.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a) (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 this 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 this registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Securities and Exchange Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) to include any material information with
respect to the plan of distribution not previously disclosed in this
registration statement or any material change to such information in
this registration statement;
provided, however, that (a)(1)(i) and (a)(1)(ii) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Securities and
Exchange Commission by the registrant 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) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered 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.
(b) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be
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<PAGE> 130
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.
(c) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under Item 15
above, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(d)(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424 (b)(1) or (4) or
497 (h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
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<PAGE> 131
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3, has reasonable grounds to believe
that the security rating requirement contained in Transaction Requirement B.5.
of Form S-3 will be met by the time of the sale of the securities registered
hereunder and has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Spring
House, state of Pennsylvania, on February 29, 2000.
ADVANTA BUSINESS
RECEIVABLES CORP.,
AS ORIGINATOR OF THE TRUST AND REGISTRANT
By: /s/ Mark Shapiro
-------------------------------------------
Name: Mark Shapiro
Title: Treasurer
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Mark B. Hales, Michael Coco and Cole B.
Silver, and each of them, his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for and in his own name, place
and stead, in any and all capacities to sign any and all amendments (including
post-effective amendments) to this registration statement, any registration
statement for additional Asset Backed Notes that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act of 1933, and any or all other
documents in connection therewith, and to file the same, with all exhibits
thereto, with the Securities and Exchange Commission, granting unto said persons
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as
might or could be done in person, hereby ratifying and confirming all said
attorneys-in-fact and agents or any of them, or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on February 29, 2000 by the following
persons in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Mark B. Hales President, Director
-----------------------------------------
Mark B. Hales (Principal Executive Officer and Chief
Financial Officer)
/s/ Michael Coco Vice President of Finance, Director
-----------------------------------------
Michael Coco (Principal Accounting Officer)
</TABLE>
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<PAGE> 132
<TABLE>
<S> <C>
/s/ Mark Shapiro Treasurer
-----------------------------------------
Mark Shapiro
/s/ Janice C. George Director
-----------------------------------------
Janice C. George
/s/ Francis B. Jacobs, II Director
-----------------------------------------
Francis B. Jacobs, II
/s/ Cole B. Silver Director
-----------------------------------------
Cole B. Silver
</TABLE>
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<PAGE> 133
EXHIBIT INDEX
<TABLE>
<S> <C>
1.1 - Form of Underwriting Agreement*
4.1 - Form of Master Indenture*
4.2 - Form of Indenture Supplement, including form of Notes*
4.3 - Form of Transfer and Servicing Agreement*
4.4 - Certificate of Trust of Advanta Business Card Master
Trust*
4.5 - Form of Trust Agreement of Advanta Business Card Master Trust*
4.6 - Form of Administration Agreement*
5.1 - Opinion of Wolf, Block, Schorr and Solis-Cohen LLP with respect to
legality*
8.1 - Opinion of Wolf, Block, Schorr and Solis-Cohen LLP with respect to tax
matters*
23.1 - Consent of Wolf, Block, Schorr and Solis-Cohen LLP (included in Exhibit 5.
1 and Exhibit 8.1)*
24.1 - Powers of Attorney (included on page II-5)
25.1 - Form T-1 Statement of Eligibility and Qualification under the Trust
Indenture Act of 1939, as amended, of [__________], as indenture trustee
under the Indenture*
</TABLE>
- ----------------------
* To be filed by amendment.
II-7
