1
Filed Pursuant to Rule 424b2
Registration No. 333-32874
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MARCH 30, 2001
[ADVANTA LOGO]
Advanta Business Card Master Trust
Issuer
Advanta Business Receivables Corp.
Transferor
Advanta Bank Corp.
Servicer
$289,500,000 Series 2001-A Asset Backed Notes
- ----------------------------------------------------------------------------------------------------------------------
CLASS A NOTES CLASS B NOTES CLASS C NOTES
------------------------- ------------------------- -------------------------
Principal Amount $240,000,000 $28,500,000 $21,000,000
Interest Rate LIBOR plus 0.30% per year LIBOR plus 0.85% LIBOR plus 1.55% per year
per year
Interest Payment Dates June 20, 2001 and June 20, 2001 and June 20, 2001 and
thereafter monthly on the thereafter monthly on the thereafter monthly on the
20th 20th 20th
Expected Principal
Payment Date April 20, 2008 April 20, 2008 April 20, 2008
Legal Maturity Date October 20, 2010 October 20, 2010 October 20, 2010
Price to Public $240,000,000 $28,500,000 $21,000,000
(or 100.000%) (or 100.000%) (or 100.000%)
Underwriting Discount $780,000 (or 0.325%) $106,875 (or 0.375%) $94,500 (or
0.450%)
Proceeds to Issuer $239,220,000 (or 99.675%) $28,393,125 (or 99.625%) $20,905,500 (or 99.550%)
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The notes will be paid from the assets of the trust consisting primarily of
receivables in a portfolio of MasterCard(R) business revolving credit card
accounts.
We expect to issue your series of notes on or about April 17, 2001. 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.
BARCLAYS CAPITAL MORGAN STANLEY DEAN WITTER
April 3, 2001
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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.
Whenever the information in this prospectus supplement is more specific
than the information in 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
glossary of terms under the caption "Glossary of Terms for Prospectus
Supplement" beginning on page S-52 in this prospectus supplement and under the
caption "Glossary of Terms for Prospectus" beginning on page 79 in the
accompanying prospectus.
FORWARD-LOOKING STATEMENTS
If and when included in this prospectus supplement and the accompanying
prospectus or in documents incorporated herein or therein by reference, the
words "expects," "intends," "anticipates," "estimates" and analogous expressions
are intended to identify forward-looking statements. Any such statements, which
may include statements contained in "Recent Developments Relating to Advanta
Corp. and Subsidiaries," inherently are subject to a variety of risks and
uncertainties that could cause actual results to differ materially from those
projected. Such risks and uncertainties include, among others, general economic
and business conditions, competition, changes in foreign, political, social and
economic conditions, regulatory initiatives and compliance with governmental
regulations, customer preferences and various and other matters, many of which
are beyond our control. These forward-looking statements speak only as of the
date of this prospectus supplement. We expressly disclaim any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statement contained herein to reflect any change in our expectations with regard
thereto or any change in events, conditions or circumstances on which any such
statement is based.
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TABLE OF CONTENTS
PAGE
----
Transaction Summary................ S-4
Summary of Terms................... S-6
The Issuer....................... S-6
Seller, Servicer and
Transferor.................... S-6
The Series 2001-A Notes.......... S-6
Credit Enhancement............... S-7
Events of Default................ S-8
Other Interests in the Trust..... S-9
The Receivables.................. S-9
Allocations of Collections....... S-9
Application of Collections....... S-10
Optional Redemption.............. S-11
Group One........................ S-11
Denominations.................... S-11
Registration, Clearance and
Settlement.................... S-11
Tax Status....................... S-12
ERISA Considerations............. S-12
Note Ratings..................... S-12
Exchange Listing................. S-12
The Seller's Business Card
Portfolio........................ S-13
Delinquency and Loss
Experience.................... S-13
Receivable Yield
Considerations................ S-16
Recoveries....................... S-16
Payment Rates.................... S-16
Recent Developments Relating to
Advanta Corp. and Subsidiaries... S-17
Strategic Alternatives........... S-17
Regulatory Matters............... S-18
Litigation....................... S-18
The Trust Portfolio................ S-19
Maturity Considerations............ S-26
Controlled Accumulation Period... S-26
Early Amortization Period........ S-27
Description of Series Provisions... S-27
Issuance......................... S-28
Interest Payments................ S-28
PAGE
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Principal Payments............... S-31
Postponement of Controlled
Accumulation Period........... S-33
Allocation Percentages........... S-33
Floating Allocation
Definitions................... S-33
Fixed Allocation Definitions..... S-34
Reallocated Principal
Collections................... S-35
Application of Collections....... S-36
Subordination.................... S-38
Shared Finance Charge
Collections................... S-38
Shared Principal Collections..... S-39
Defaulted Receivables; Investor
Charge-Offs................... S-40
Principal Funding Account........ S-40
Reserve Account.................. S-40
Cash Collateral Account.......... S-42
Cash Collateral Account
Distributions................. S-44
Additional Series Enhancement.... S-44
Pay Out Events................... S-44
Events of Default................ S-47
Servicing Compensation and
Payment of Expenses........... S-47
Reports to Noteholders........... S-47
ERISA Considerations............... S-47
Use of Proceeds.................... S-49
Underwriting....................... S-49
Legal Matters...................... S-51
Glossary of Terms for Prospectus
Supplement....................... S-52
Annex I
Other Series Issued and
Outstanding...................... A-1
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TRANSACTION SUMMARY
This Transaction Summary lists certain information concerning the Advanta
Business Card Master Trust, Series 2001-A notes. Only the Class A, the Class B
and the Class C notes are offered by this prospectus supplement and the
accompanying prospectus. 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 of the transferor or sold to investors in private
transactions.
Trust: Advanta Business Card Master Trust
Transferor: Advanta Business Receivables Corp.
Seller: Advanta Bank Corp.
Servicer: Advanta Bank Corp.
Indenture Trustee: Bankers Trust Company
Owner Trustee: Wilmington Trust Company
Closing Date: April 17, 2001
Clearance and Settlement: DTC/Clearstream/Euroclear
Primary Trust Assets: Receivables generated under unsecured lines of
credit with small businesses
Offered Notes: Class A, Class B and Class C
NOTE STRUCTURE AMOUNT % OF TOTAL SERIES
- -------------- ------ -----------------
Class A $240,000,000 80.00%
Class B $ 28,500,000 9.50%
Class C $ 21,000,000 7.00%
Class D $ 10,500,000 3.50%
Invested Amount: $300,000,000
Servicing Fee Rate: 2.0% per
annum
CLASS A CLASS B CLASS C
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Anticipated Ratings:* AAA/Aaa A/A2 BBB/Baa2
(Standard & Poor's/ Moody's)
Credit Enhancement: subordination of subordination of subordination of
Class B, Class C Class C and Class D; shared
and Class D Class D cash collateral
account
Interest Rate: One-Month LIBOR One-Month LIBOR One-Month LIBOR
plus 0.30% per plus 0.85% per plus 1.55% per
year year year
Interest Accrual Method: actual/360 actual/360 actual/360
Interest Payment Dates: monthly (20th) monthly (20th) monthly (20th)
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* It is a condition to issuance that at least one of these ratings for each
class be obtained.
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Interest Rate Index Reset
Date: 2 London 2 London 2 London
business days business days business days
before each before each before each
interest payment interest payment interest payment
date date date
First Interest Payment Date: June 20, 2001 June 20, 2001 June 20, 2001
Expected Principal Payment Date: April 20, 2008 April 20, 2008 April 20, 2008
Commencement of Accumulation Period
(subject to adjustment): July 31, 2007 July 31, 2007 July 31, 2007
Legal Maturity Date: October 20, 2010 October 20, 2010 October 20, 2010
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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
common law 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 information concerning Advanta Bank Corp. as a seller, servicer and
administrator and Advanta Business Receivables Corp. as a transferor, see
"Recent Developments Relating to Advanta Corp. and Subsidiaries" in this
prospectus supplement and see "Advanta Bank Corp., Advanta Business Receivables
Corp. and Advanta Corp." in the accompanying prospectus.
THE SERIES 2001-A NOTES
Only the Class A notes, the Class B notes and the 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 0.30% per annum.
The Class B notes will bear interest at one-month LIBOR as determined each
month plus 0.85% per annum.
The Class C notes will bear interest at one-month LIBOR as determined each
month plus 1.55% per annum.
For each class of the Series 2001-A notes, interest will be calculated as
follows:
Principal balance Number of
on related X days in interest X Interest
record date 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 and end on but exclude June 20, 2001.
Interest on the Series 2001-A notes will be paid on each payment date,
which will be June 20, 2001 and the 20th day of each following month if the 20th
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
(800) 735-7777.
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, the Class B notes, the Class C notes and
the
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Class D notes is expected to be paid in full on the April 2008 payment date,
which is the expected principal 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 Notes
and the Class B notes are paid in full; and
- no principal will be paid on the Class D notes until the Class A notes,
the Class B notes and the Class C notes are paid in full.
We are scheduled to begin accumulating collections of principal receivables
starting at the close of business on July 31, 2007 for payment to the Series
2001-A noteholders on the expected principal payment date, but we may begin
accumulating at a later date.
Principal of the Series 2001-A 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 2001-A
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
2001-A notes until the notes are paid or until the legal maturity date of
October 20, 2010, whichever occurs first.
For more information about principal payments, see "Maturity
Considerations," "Description of Series Provisions -- Principal Payments," --
Payments of Principal" 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, the Class C notes and the Class D notes.
Credit enhancement for the Class B notes is provided by the subordination
of the Class C notes and the 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 will initially be funded with a deposit of
$5,250,000 on the closing date. After the Series 2001-A 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
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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.
EVENTS OF DEFAULT
The Series 2001-A notes are subject to specified events of default
described under "Description of Series Provisions -- Events of Default" in this
prospectus 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 concerning failure to pay interest or principal or
observe or perform covenants and agreements occurs and continues with respect to
the Series 2001-A notes, the indenture trustee or holders of more than 50% of
the then-outstanding principal balance of the Series 2001-A 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 2001-A notes if the related event of default has
been cured, subject to the conditions described under "The Indenture -- Events
of Default; Rights Upon Event of Default" in the accompanying prospectus.
After an event of default and the acceleration of the Series 2001-A notes,
the indenture trustee may apply funds allocated to Series 2001-A and on deposit
in the collection account, the principal funding account, the reserve account,
the excess funding account and, for the Class C notes and the Class D notes, the
cash collateral account, to pay principal of and interest on the Series 2001-A
notes to the extent permitted by law. Collections of principal receivables and
collections of finance charge and administrative receivables allocated to the
Series 2001-A notes will be applied to make the monthly principal and interest
payments on the Series 2001-A notes until the earlier of the date those notes
are paid in full or the legal maturity of those notes.
If the Series 2001-A notes are accelerated or the issuer fails to pay the
principal of the Series 2001-A notes on the legal maturity date, once certain
conditions described under "The Indenture -- Events of Default; Rights upon
Event of Default" in the accompanying prospectus are satisfied, the indenture
trustee may:
- institute proceedings in its own name for the collection of all amounts
then payable on the Series 2001-A notes or under the indenture; or
- take any other appropriate action to protect and enforce the rights and
remedies of the indenture trustee and the Series 2001-A noteholders.
The indenture trustee may foreclose on a portion of the trust receivables
which secure the Series 2001-A notes by causing the trust to issue a foreclosure
certificate to the holders of the notes or to a third party, subject to the
conditions in the Series 2001-A indenture supplement and the indenture.
A foreclosure certificate is an investor certificate issued by the trust
representing ownership of an interest in the assets of the trust securing the
Series 2001-A 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.
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If the Series 2001-A notes are accelerated, you may receive principal prior
to the expected principal payment date for your notes.
OTHER INTERESTS IN THE TRUST
OTHER SERIES OF NOTES
The trust has issued other series of notes secured by the assets of the
trust and 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. The issuance of future series will occur without prior
review or consent by you or any other noteholder.
THE TRANSFEROR BENEFICIAL INTEREST
The transferor beneficial interest is the interest in the trust not
securing your series or any other series and is owned by the transferor. The
transferor may, however, sell all or a portion of its interest in the transferor
beneficial interest. The transferor beneficial interest does not provide series
enhancement for your series or any other series.
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 the opening of business on March 1,
2001:
- Receivables to be included in the trust: $1,690,786,973
- Cardholder Accounts designated to be included in the trust: 1,037,071
- Businesses having Accounts designated to be included in the trust:
598,857
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 collections of finance
charge and administrative receivables and collections of 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 2001-A,
the invested amount for your series will be $300,000,000.
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.
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* MasterCard(R) is a federally registered trademark of MasterCard International
Inc.
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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 monthly 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 after the reserve account funding date but
prior to termination of the reserve account to cover interest payment
shortfalls for the Series 2001-A notes during the controlled
accumulation period;
- to pay interest on the Class D notes;
- to make a deposit to the cash collateral account for the Class C notes
and the Class D notes up to the required cash collateral account amount;
- to other series in group one; and
- to the holders of the transferor interest.
For a more detailed description of these applications, see "Description of
Series Provisions -- Application of Collections" in this prospectus supplement.
COLLECTIONS OF PRINCIPAL RECEIVABLES
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 or will be paid to the holders of the transferor
interest or deposited in the excess funding account.
- The controlled accumulation period is scheduled to begin at the close of
business on July 31, 2007, but may begin at a later date. During the
controlled 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 2001-A or to all series
occurs, the early amortization pe-
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riod 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 and required servicing fee payments, 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, for any monthly period, the sum
of these reallocated principal collections cannot exceed the sum of (i)
for the required interest payments on the Class A notes, 20% of the
initial invested amount of your series, (ii) for the required interest
payments on the Class B notes, 10.50% of the initial invested amount of
your series, and (iii) for the required interest payments on the Class C
notes and the required servicing fee payments, 3.50% of the initial
invested amount of your series, in each case after the initial invested
amount has been 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 interest 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.
OPTIONAL REDEMPTION
The servicer has the option to repurchase your notes when the total note
principal balance for your series has been reduced to 10% or less of the initial
total note principal balance. See "Description of the Notes -- Final Payment of
Principal; Termination" in the accompanying prospectus.
GROUP ONE
Series 2001-A is part of group one, and shares collections of finance
charge and administrative receivables and principal receivables in specified
circumstances. See "Description of Series Provisions -- Shared Finance Charge
Collections" and "-- Shared Principal Collections" in this prospectus
supplement.
DENOMINATIONS
Beneficial interests in the Class A notes, the Class B notes and the Class
C 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 2001-A notes will be in book-entry form and will be registered
in the name of Cede & Co., as the nominee
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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 2001-A 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 2001-A notes will be characterized as debt for federal
income tax purposes and that the trust will not be an association or publicly
traded partnership taxable as a corporation for U.S. federal income tax
purposes. By your acceptance of a Class A note, Class B note or Class C note,
you will agree to treat your 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 Class A
notes, the Class B notes and the Class C notes are eligible for purchase by
persons investing assets of employee benefit plans or individual retirement
accounts. We suggest that a fiduciary or other person contemplating purchasing a
Class A note, Class B note or Class C note on behalf of or with plan assets of
any plan or account consult with its counsel regarding whether the purchase or
holding of an offered Series 2001-A note could give rise to a transaction
prohibited or not otherwise permissible under ERISA or Section 4975 of the
Internal Revenue Code.
NOTE RATINGS
The notes offered by this prospectus supplement and the accompanying
prospectus will be rated in one of the four highest rating categories by at
least one nationally recognized rating organization.
EXCHANGE LISTING
We will apply to list the Class A notes, the Class B notes and the Class C
notes on the Luxembourg Stock Exchange. We cannot guaranty that the application
for the listing will be accepted.
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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 the
beginning of the day on March 1, 2001, the Advanta Business Card Portfolio
included receivables from accounts designated to the trust and forming the trust
assets in an aggregate amount equal to $1,690,786,973, including accounts
designated to the trust on March 23, 2001. 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 loss 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.
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We expect the delinquency and loss rates for the Advanta Business Card
Portfolio to trend higher in 2001 for a variety of factors including but not
limited to general economic conditions, higher trends in bankruptcy filings and
the seasoning of the portfolio.
ADVANTA BUSINESS CARD PORTFOLIO
DELINQUENCY EXPERIENCE(1)
(DOLLARS IN THOUSANDS)
AS OF DECEMBER 31,
---------------------------------------------------------------------------------------------
2000 1999 1998 1997
RECEIVABLES OUTSTANDING: --------------------- --------------------- --------------------- ---------------------
RECEIVABLES DELINQUENT $1,659,224 $1,040,114 $814,734 $663,087
AND NUMBER OF DEL. % OF REC. DEL. % OF REC. DEL. % OF REC. DEL. % OF REC.
DAYS DELINQUENT AMOUNT OUTSTANDING AMOUNT OUTSTANDING AMOUNT OUTSTANDING AMOUNT OUTSTANDING
---------------------- ------- ----------- ------- ----------- ------- ----------- ------- -----------
30 to 59 days......... $27,104 1.63% $13,050 1.25% $11,600 1.42% $ 9,894 1.49%
60 to 89 days......... $18,347 1.11% $ 8,300 0.80% $ 8,007 0.98% $ 7,110 1.07%
90 to 119 days........ $14,274 0.86% $ 6,650 0.64% $ 6,347 0.78% $ 4,988 0.75%
120 to 149 days....... $12,303 0.74% $ 5,523 0.53% $ 5,312 0.65% $ 4,035 0.61%
150 to 179 days....... $10,742 0.65% $ 4,633 0.45% $ 4,462 0.55% $ 3,260 0.49%
180 or more days...... $ 145 0.01% $ 280 0.03% $ 172 0.02% $ 54 0.01%
------- ---- ------- ---- ------- ---- ------- ----
TOTAL................. $82,915 5.00% $38,437 3.70% $35,900 4.41% $29,340 4.42%
======= ==== ======= ==== ======= ==== ======= ====
AS OF DECEMBER 31,
--------------------
1996
RECEIVABLES OUTSTANDING: --------------------
RECEIVABLES DELINQUENT $305,962
AND NUMBER OF DEL. % OF REC.
DAYS DELINQUENT AMOUNT OUTSTANDING
---------------------- ------ -----------
30 to 59 days......... $4,725 1.54%
60 to 89 days......... $2,777 0.91%
90 to 119 days........ $1,345 0.44%
120 to 149 days....... $ 105 0.03%
150 to 179 days....... $ 0 0.00%
180 or more days...... $ 0 0.00%
------ ----
TOTAL................. $8,952 2.93%
====== ====
- ---------------
(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.
Since 1996, changes in the delinquency rates for the Advanta Business Card
Portfolio have been driven by the rate of growth and the seasoning of the
portfolio, the mix of businesses in the portfolio and the general economic
environment. The delinquency rate in 1996 was relatively low due to the rate of
growth in the portfolio and the resultant low seasoning. In 1997, the
delinquency rate was affected by the level of bankruptcies in the economy. In
1998, the mix of the businesses changed to include a greater number of customers
who pay their balances in full each month. The trends in the delinquency rates
during 1998, 1999 and 2000 were the result of changes in the growth rates in the
portfolio, the maturation of accounts originated in previous years, changes in
the mix of businesses and usage patterns and changes in the economic
environment.
We expect that the delinquency rates for the Advanta Business Card
Portfolio will increase if the rate of growth in the portfolio slows down. We
also expect that the delinquency rates would increase if the general economic
environment in the United States deteriorates.
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ADVANTA BUSINESS CARD PORTFOLIO
LOSS EXPERIENCE
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
------------------------------------------------------
2000 1999 1998 1997 1996
---------- -------- -------- -------- --------
Average Receivables
Outstanding(1).................. $1,371,109 $893,006 $743,940 $504,360 $159,939
Gross Losses(2)................... $ 77,948 $ 53,268 $ 51,060 $ 20,744 $ 4,548
Interest Charged-Off(3)........... $ 7,746 $ 4,091 $ 3,400 $ 1,147 $ 208
Recoveries........................ $ 5,566 $ 4,868 $ 3,890 $ 732 $ 101
---------- -------- -------- -------- --------
Net Losses(4)..................... $ 64,636 $ 44,309 $ 43,720 $ 18,865 $ 4,238
========== ======== ======== ======== ========
Net Losses as a Percentage of
Average Receivables
Outstanding(4).................. 4.71% 4.96% 5.88% 3.74% 2.65%
- ---------------
(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 Charged-Off includes charge-offs of finance charge and
administrative receivables.
(4) Net Losses are calculated as gross losses less interest charged-off less
recoveries.
Since 1996, changes in the loss experience for the Advanta Business Card
Portfolio have been driven by the rate of growth and the seasoning of the
portfolio, the mix of businesses in the portfolio and the general economic
environment. The changes in the loss experience have been similar to the changes
in the delinquency rates but have lagged due to the timing of charge-offs. The
net loss rates in 1996 and 1997 were relatively low due to the rate of growth in
the portfolio and the resultant low seasoning. In 1998, the net loss rate was
affected by the level of bankruptcies in the economy during 1997. The trends in
the net loss rates during 1998, 1999 and 2000 were the result of changes in the
growth rates in the portfolio, the maturation of accounts originated in previous
years, changes in the mix of businesses and usage patterns and changes in the
economic environment.
We expect that the net loss rate for the Advanta Business Card Portfolio
will increase if the rate of growth in the portfolio slows down. We also expect
that the net loss rate would increase if the general economic environment in the
United States deteriorates.
Beginning in the fourth quarter of 2000, the bank changed its charge-off
policy for accounts for which the bank has received a notice of an obligor's
bankruptcy. In the past, the bank used a 90-day investigation period prior to
charge-off to determine whether the bank should challenge the obligor's
bankruptcy. Under the new policy, the accounts of obligors who declare
bankruptcy are charged-off within 60 days of receipt of notification of filing
from the bankruptcy court, or within the time frames adopted in the FFIEC
Uniform Retail Credit Classification and Account Management Policy, whichever is
shorter. The change resulted in additional gross losses in the Advanta Business
Card Portfolio during the fourth quarter of 2000 of $2,422,448.
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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 customers, the
percentage of customers 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 FINANCE CHARGES AND FEES(1)
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
2000 1999 1998 1997 1996
--------- ------- ------- ------- -------
Average Monthly Accrued Fees
and Charges(2)(3)......... $ 81.45 $ 76.28 $ 73.35 $ 71.62 $ 52.83
Average Account
Balance(4)................ $ 3,854 $ 4,168 $ 4,470 $ 4,725 $ 3,833
Yield From Fees and Finance
Charges(2)(3)............. 25.36% 21.96% 19.69% 18.19% 16.54%
- ---------------
(1) The figures shown include revenue attributable to interchange.
(2) Fees and Charges are comprised of finance charges, annual cardholder fees
and certain other service charges.
(3) Average Monthly Accrued Fees and 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.
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 monthly payment rates
for the Advanta Business Card Portfolio during any month in the periods shown
and the average 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
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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
MONTHLY PAYMENT RATES
YEAR ENDED DECEMBER 31,
-----------------------------------------
2000 1999 1998 1997 1996
----- ----- ----- ----- -----
Lowest Month(1)............................ 17.91% 15.97% 12.32% 11.84% 14.99%
Highest Month(1)........................... 21.30% 19.10% 17.64% 14.80% 17.38%
Monthly Average............................ 19.26% 17.85% 15.23% 13.44% 16.07%
- ---------------
(1) The monthly payment rates are calculated as the total amount of payments
received during the month divided by the total opening monthly account
balance.
The amount of collections on receivables may vary from month to month due
to seasonal variations, general economic conditions and payment habits. 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.
RECENT DEVELOPMENTS RELATING TO ADVANTA CORP. AND SUBSIDIARIES
STRATEGIC ALTERNATIVES
Pursuant to the terms of the Purchase and Sale Agreement, dated January 8,
2001, by and between Advanta Corp. and Chase Manhattan Mortgage Corporation
("CHASE"), Advanta Corp. and certain of its subsidiaries transferred and
assigned to Chase and its affiliates substantially all of the assets and
operating liabilities associated with its mortgage business (the "MORTGAGE
TRANSACTION"). The Mortgage Transaction was consummated on March 1, 2001,
effective as of February 28, 2001 (the "MORTGAGE CLOSING DATE").
The purchase price for the assets, net of the related operating liabilities
assumed by Chase that appeared on Advanta Corp.'s balance sheet associated with
its mortgage business, was approximately $1.02 billion. This net purchase price
resulted in a gain to Advanta Corp., before Mortgage Transaction expenses and
other costs, of approximately $59.7 million. Advanta Corp. anticipates recording
a restructuring charge associated with its intention to substantially reduce
corporate expenses after the Mortgage Closing Date.
Advanta Corp. will use the proceeds from the sale of the mortgage business
to reduce debt and enhance the company's funds available to invest in its
business credit card business. On March 7, 2001, Advanta announced an offer to
purchase all of its currently outstanding Medium-Term Notes at their face value,
plus accrued and unpaid interest. Advanta Corp. also intends to use the proceeds
to reduce a significant portion of its outstanding retail investment notes.
As a result of the Mortgage Transaction, Advanta Corp. no longer operates a
mortgage business. However, Advanta Corp. did retain contingent liabilities,
primarily relating to litigation, arising out of its operation of the mortgage
business before the Mortgage Closing Date that were not specifically assumed by
Chase in the Mortgage Transaction. Following the Mortgage
S-17
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Transaction, Advanta Corp. continues to operate its other financial services
businesses, the products of which include business credit cards, insurance and
deposit products, and to make venture capital investments through its
affiliates, including Advanta Partners LP. As indicated below, Advanta Corp. is
also continuing to service the existing leases in its small ticket equipment
leasing portfolio.
On January 23, 2001, Advanta Corp. announced that after a thorough review
of strategic alternatives available to its leasing business, it decided to cease
originating leases. Advanta Corp. intends to continue to service the existing
leasing portfolio rather than sell the business or the portfolio.
REGULATORY MATTERS
Beginning in the fourth quarter of 2000, the bank changed its charge-off
policy for accounts for which the bank has received a notice of an obligor's
bankruptcy. In the past, the bank used a 90-day investigation period prior to
charge-off to determine whether the bank should challenge the obligor's
bankruptcy. Under the new policy, the accounts of obligors who declare
bankruptcy are charged-off within 60 days of receipt of notification of filing
from the bankruptcy court, or within timeframes adopted in the FFIEC Uniform
Retail Credit Classification and Account Management Policy, whichever is
shorter. This change resulted in additional losses in the Advanta business card
portfolio during the fourth quarter of 2000 of $2,422,448.
On June 2, 2000, Advanta announced that its banking subsidiaries, Advanta
National Bank and the bank, had each reached agreements with their respective
bank regulatory agencies. The agreements primarily relate to the banks' subprime
lending operations, which includes a segment of the business credit card account
program. The agreements outlined a series of steps to modify processes and
formalize and document certain practices and procedures for the banks' subprime
lending operations. The bank's agreement with the FDIC establishes deposit
growth limits at the bank and prohibits the payment of dividends by the bank
without prior regulatory approval.
On February 28, 2001, in connection with the Mortgage Transaction, Advanta
National Bank received approval from its regulator for a return of capital to
Advanta Corp. in the amount of $261 million. At the same time Advanta National
Bank entered into an agreement with its regulator regarding restrictions on new
business activities and product lines at Advanta National Bank after the
Mortgage Transaction and the resolution of outstanding Advanta National Bank
liabilities. The agreement also reduces the existing capital requirements for
Advanta National Bank and provides for prior regulatory approval of any future
dividends. The bank is unaffected by Advanta National Bank's agreement with its
regulator.
The bank does not expect that any of its agreements with bank regulatory
agencies will have an impact on noteholders.
LITIGATION
On January 22, 1999, Fleet Financial Group, Inc. ("FLEET") and some of its
affiliates filed a complaint against Advanta Corp. and some of its subsidiaries
in Delaware Chancery court bringing a lawsuit relating to a transaction between
Advanta Corp. and some of its affiliates and Fleet and some of its affiliates
which closed on February 20, 1998. Pursuant to the transaction Advanta Corp.
contributed substantially all of its consumer credit card business to a limited
liability company controlled by Fleet. Fleet's allegations, which Advanta
denies, center around Fleet's assertions that Advanta has failed to complete
certain post-closing adjustments to the
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19
value of the assets and liabilities that Advanta contributed in the transaction.
Fleet seeks damages of approximately $141 million.
On February 16, 1999 Advanta Corp. filed an answer to the complaint denying
the material allegations of the complaint. Advanta Corp. also filed
counterclaims against Fleet and some of its affiliates seeking damages of
approximately $101 million from Fleet. Formal discovery has begun and is
ongoing. Although the outcome of this litigation cannot be determined, Advanta
Corp. does not expect this litigation to have a material adverse effect on the
financial position or future operating results of Advanta Corp., the bank or the
transferor.
On December 5, 2000, a former executive of Advanta Corp. obtained a jury
verdict against Advanta Corp. in the amount of $3.9 million, in connection with
various claims against Advanta Corp. related to the executive's termination of
employment. Both parties filed post-trial motions. The former executive is
seeking, among other things, an award of approximately $6 million based on the
jury verdict and additional amounts, including attorney's fees and costs.
Advanta Corp. will vigorously pursue its post-trial motions. Advanta Corp. does
not expect this litigation to have a material adverse effect on the financial
position or future operating results of Advanta Corp., the bank or the
transferor.
On December 21, 2000, Banc One Financial Services, Inc. and Bank One, N.A.
filed a complaint that alleges, among other things, that Advanta Corp. breached
two mortgage loan servicing agreements by wrongfully withholding as termination
fees, an amount in excess of $23 million from amounts that had been collected
under the loan servicing agreements, and by failing to perform under those
agreements in certain respects. Advanta Corp. disputes these claims and
allegations. Advanta Corp. does not expect this litigation to have a material
adverse effect on the financial position or future operating results of Advanta
Corp., the bank or the transferor.
On February 1, 2001, Fleet and certain of its affiliates filed a complaint
in an attempt to block the sale of Advanta Corp.'s mortgage business to Chase.
The complaint alleged that the terms of the proposed sale breached a provision
of Fleet's 1998 agreement to acquire Advanta Corp's consumer credit card
business. In February 2001 Advanta Corp. announced that it had reached an
agreement with Fleet with regard to Fleet's attempt to block the sale of
Advanta's mortgage business. The effect of the agreement was that Fleet's motion
for an injunction was moot and the case was dismissed. Under the agreement,
Advanta Corp. funded $70 million of its reserves in connection with its
long-standing litigation with Fleet.
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
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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 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.
Non-performing accounts will not be included in the trust at its formation
or in an account addition. The transferor currently considers an account to be
non-performing if the receivables in the account have been charged-off, if its
receivables have been determined to be fraudulent or if the account's card or
cards have been reported as lost or stolen. While non-performing accounts will
not be included at the trust's formation or in an account addition, the
transferor expects that some accounts will become non-performing after they have
been designated to the trust. To the extent an account is non-performing, the
transferor and the servicer will treat the receivables balance on that account
as a zero balance, for all purposes, including in all disclosures about the
asset pool. Less than 20% of the trust receivables, by outstanding principal
balance, at the time the trust was formed, were, or immediately following any
account addition and at the time of the initial issuance of any series of notes
publicly offered by means of the accompanying prospectus, will be, 30 or more
days delinquent. The servicer will consider an account as to which less than the
minimum payment is received on the scheduled due date as delinquent.
Under the bank's card agreement with a business, one or more persons
designated by the business may have cardholder privileges. The first set of
tables that follow show various criteria by number of persons with cardholder
privileges and each is referred to as a cardholder. The second set of tables
show the same criteria by the number of relationships with distinct businesses.
The following information and tables summarize the trust portfolio
(including accounts designated to the trust on March 23, 2001) by various
criteria as of the beginning of the day on March 1, 2001. Because the future
composition of the trust portfolio may change over time, this information and
these tables are not necessarily indicative of the composition of the trust
portfolio at any subsequent time.
The following is selected information about the receivables, as they relate
to the cardholders:
- The receivables in the trust portfolio (including accounts designated to
the trust on March 23, 2001), as of the beginning of the day on March 1,
2001, consisted of $1,690,786,973 of principal receivables and finance
charge and administrative receivables.
- The accounts of the cardholders designated for the trust portfolio had an
average principal receivable balance of $1,630 and an average credit
limit of $10,257.
- The average total receivable balance of the accounts of the cardholders
designated for the trust portfolio expressed as a percentage of the
average total credit limit was 15.89%. The
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average age of the accounts of the cardholders designated for the trust
portfolio was approximately 28.8 months.
- As of the beginning of the day on March 1, 2001, the accounts of the
cardholders designated for the trust portfolio (including accounts
designated to the trust on March 23, 2001) had billing addresses in all
50 states and other U.S. territories and possessions.
ACCOUNT BALANCE BY CARDHOLDER
TRUST PORTFOLIO
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF TOTAL
ACCOUNT BALANCE RANGE CARDHOLDERS CARDHOLDERS TOTAL RECEIVABLES RECEIVABLES
- --------------------- ----------- ------------- ----------------- -------------
Less than $0.00.............. 8,421 0.81% $ (2,244,034) -0.13%
$0.00........................ 600,342 57.89% $ 0 0.00%
$0.01-$5,000................. 314,154 30.30% $ 501,595,491 29.67%
$5,000.01-$10,000............ 68,673 6.62% $ 486,123,048 28.75%
$10,000.01-$20,000........... 37,992 3.66% $ 520,625,886 30.79%
$20,000.01-$25,000........... 4,763 0.46% $ 105,567,737 6.24%
Over $25,000.00.............. 2,726 0.26% $ 79,118,845 4.68%
--------- ------ -------------- ------
Total............. 1,037,071 100.00% $1,690,786,973 100.00%
========= ====== ============== ======
CREDIT LIMIT BY CARDHOLDER
TRUST PORTFOLIO
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF TOTAL
CREDIT LIMIT BALANCE RANGE CARDHOLDERS CARDHOLDERS TOTAL RECEIVABLES RECEIVABLES
- -------------------------- ----------- ------------- ----------------- -------------
$0........................... 15 0.00% $ 240 0.00%
$1-$1,500.................... 25,674 2.48% $ 3,079,573 0.18%
$1,501-$5,000................ 250,495 24.15% $ 234,277,681 13.86%
$5,001-$10,000............... 385,579 37.18% $ 386,572,689 22.86%
$10,001-$15,000.............. 244,589 23.58% $ 420,518,576 24.87%
$15,001-$25,000.............. 105,640 10.19% $ 434,712,585 25.71%
Over $25,000.00.............. 25,079 2.42% $ 211,625,628 12.52%
--------- ------ -------------- ------
Total............. 1,037,071 100.00% $1,690,786,973 100.00%
========= ====== ============== ======
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ACCOUNT AGE BY CARDHOLDER
TRUST PORTFOLIO
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF TOTAL
ACCOUNT AGE CARDHOLDERS CARDHOLDERS TOTAL RECEIVABLES RECEIVABLES
- ----------- ----------- ------------- ----------------- -------------
0 Months to 3 Months......... 40,530 3.91% $ 74,208,622 4.39%
4 Months to 6 Months......... 53,592 5.17% $ 107,863,199 6.39%
7 Months to 9 Months......... 58,243 5.62% $ 127,540,360 7.54%
10 Months to 12 Months....... 69,502 6.70% $ 177,605,683 10.50%
13 Months to 18 Months....... 123,130 11.87% $ 274,160,150 16.22%
19 Months to 24 Months....... 123,324 11.89% $ 118,556,638 7.01%
25 Months to 36 Months....... 249,692 24.08% $ 237,298,922 14.03%
37 Months to 48 Months....... 171,833 16.57% $ 267,711,856 15.83%
49 Months to 60 Months....... 113,899 10.98% $ 239,912,701 14.19%
Over 60 Months............... 33,326 3.21% $ 65,928,843 3.90%
--------- ------ -------------- ------
Total............. 1,037,071 100.00% $1,690,786,973 100.00%
========= ====== ============== ======
STATE COMPOSITION BY CARDHOLDER
TRUST PORTFOLIO
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF TOTAL
STATE CARDHOLDERS CARDHOLDERS TOTAL RECEIVABLES RECEIVABLES
- ----- ----------- ------------- ----------------- -------------
California................... 137,024 13.21% $ 217,168,073 12.84%
Florida...................... 74,047 7.14% $ 131,939,613 7.80%
Texas........................ 70,534 6.80% $ 119,422,163 7.06%
New York..................... 68,161 6.57% $ 109,348,525 6.47%
Illinois..................... 46,038 4.44% $ 75,793,391 4.48%
Pennsylvania................. 43,398 4.18% $ 66,618,061 3.94%
Michigan..................... 35,544 3.43% $ 62,526,144 3.70%
New Jersey................... 38,524 3.71% $ 58,925,520 3.49%
Ohio......................... 33,522 3.23% $ 57,069,433 3.38%
Georgia...................... 25,202 2.43% $ 44,869,941 2.65%
Massachusetts................ 27,572 2.66% $ 41,120,444 2.43%
Virginia..................... 23,164 2.23% $ 38,854,011 2.30%
North Carolina............... 22,682 2.19% $ 38,453,909 2.27%
Washington................... 21,676 2.09% $ 37,208,681 2.20%
Colorado..................... 23,983 2.32% $ 36,610,403 2.17%
All Others................... 346,000 33.37% $ 554,858,661 32.82%
--------- ------ -------------- ------
Total............. 1,037,071 100.00% $1,690,786,973 100.00%
========= ====== ============== ======
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DELINQUENCY BY CARDHOLDER
TRUST PORTFOLIO
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF TOTAL
NUMBER OF DAYS DELINQUENT CARDHOLDERS CARDHOLDERS TOTAL RECEIVABLES RECEIVABLES
- ------------------------- ----------- ------------- ----------------- -------------
Current...................... 1,004,954 96.91% $1,494,173,564 88.38%
1 to 29 days................. 19,307 1.86% $ 108,543,188 6.42%
30 to 59 days................ 4,708 0.45% $ 29,455,716 1.74%
60 to 89 days................ 2,797 0.27% $ 19,140,802 1.13%
90 to 119 days............... 2,088 0.20% $ 15,117,800 0.89%
120 to 149 days.............. 1,719 0.17% $ 12,817,563 0.76%
150 to 179 days.............. 1,470 0.14% $ 11,313,293 0.67%
180 or more days............. 28 0.00% $ 225,047 0.01%
--------- ------ -------------- ------
Total............. 1,037,071 100.00% $1,690,786,973 100.00%
========= ====== ============== ======
The following is selected information about the receivables, as they relate
to the business relationships:
- The receivables in the trust portfolio (including accounts designated to
the trust on March 23, 2001), as of the beginning of the day on March 1,
2001, consisted of $1,690,786,973 of principal receivables and finance
charge and administrative receivables.
- The accounts of businesses designated for the trust portfolio had an
average principal receivable balance of $2,823 and an average credit
limit of $10,123.
- The average total receivable balance of the accounts of businesses
designated for the trust portfolio expressed as a percentage of the
average total credit limit was 27.89%. The average age of the accounts of
businesses designated for the trust portfolio was approximately 23.11
months.
- As of the beginning of the day on March 1, 2001, the accounts of
businesses designated for the trust portfolio (including business
relationships designated to the trust on March 23, 2001) had billing
addresses in all 50 states and other U.S. territories and possessions.
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ACCOUNT BALANCE BY BUSINESS RELATIONSHIP
TRUST PORTFOLIO
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF TOTAL
ACCOUNT BALANCE RANGE RELATIONSHIPS RELATIONSHIPS TOTAL RECEIVABLES RECEIVABLES
- --------------------- ------------- ------------- ----------------- -------------
Less than $0.00.............. 8,416 1.40% $ (2,238,455) -0.13%
$0.00........................ 162,155 27.07% $ 0 0.00%
$0.01-$5,000................. 314,131 52.46% $ 501,577,740 29.67%
$5,000.01-$10,000............ 68,675 11.47% $ 486,133,935 28.75%
$10,000.01-$20,000........... 37,990 6.34% $ 520,596,538 30.79%
$20,000.01-$25,000........... 4,763 0.80% $ 105,567,759 6.24%
Over $25,000.00.............. 2,727 0.46% $ 79,149,456 4.68%
------- ------ -------------- ------
Total............. 598,857 100.00% $1,690,786,973 100.00%
======= ====== ============== ======
CREDIT LIMIT BY BUSINESS RELATIONSHIP
TRUST PORTFOLIO
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF TOTAL
CREDIT LIMIT BALANCE RANGE RELATIONSHIPS RELATIONSHIPS TOTAL RECEIVABLES RECEIVABLES
- -------------------------- ------------- ------------- ----------------- -------------
$0........................ 3 0.00% $ 240 0.00%
$1-$1,500................. 4,845 0.81% $ 3,079,515 0.18%
$1,501-$5,000............. 164,067 27.40% $ 234,277,101 13.86%
$5,001-$10,000............ 216,162 36.10% $ 386,572,621 22.86%
$10,001-$15,000........... 142,693 23.83% $ 420,518,631 24.87%
$15,001-$25,000........... 58,133 9.71% $ 434,713,131 25.71%
Over $25,000.00........... 12,954 2.15% $ 211,625,733 12.52%
------- ------ -------------- ------
Total.......... 598,857 100.00% $1,690,786,973 100.00%
======= ====== ============== ======
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ACCOUNT AGE BY BUSINESS RELATIONSHIP
TRUST PORTFOLIO
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF TOTAL
ACCOUNT AGE RELATIONSHIPS RELATIONSHIPS TOTAL RECEIVABLES RECEIVABLES
- ----------- ------------- ------------- ----------------- -------------
0 Months to 3 Months...... 39,635 6.62% $ 74,208,622 4.40%
4 Months to 6 Months...... 51,156 8.54% $ 107,863,199 6.39%
7 Months to 9 Months...... 57,485 9.60% $ 127,539,815 7.54%
10 Months to 12 Months.... 69,496 11.60% $ 177,605,683 10.50%
13 Months to 18 Months.... 100,503 16.78% $ 274,160,150 16.21%
19 Months to 24 Months.... 50,647 8.46% $ 118,557,885 7.01%
25 Months to 36 Months.... 96,481 16.11% $ 237,300,943 14.03%
37 Months to 48 Months.... 71,397 11.92% $ 267,709,063 15.83%
49 Months to 60 Months.... 48,089 8.03% $ 239,912,772 14.19%
Over 60 Months............ 13,968 2.34% $ 65,928,843 3.90%
------- ------ -------------- ------
Total.......... 598,857 100.00% $1,690,786,973 100.00%
======= ====== ============== ======
STATE COMPOSITION BY BUSINESS RELATIONSHIP
TRUST PORTFOLIO
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF TOTAL
STATE RELATIONSHIPS RELATIONSHIPS TOTAL RECEIVABLES RECEIVABLES
- ----- ------------- ------------- ----------------- -------------
California................ 80,932 13.51% $ 217,168,073 12.84%
Florida................... 46,200 7.71% $ 131,939,613 7.80%
Texas..................... 43,567 7.28% $ 119,422,163 7.06%
New York.................. 40,620 6.78% $ 109,348,525 6.47%
Illinois.................. 25,300 4.22% $ 75,793,391 4.48%
Pennsylvania.............. 24,129 4.03% $ 66,618,061 3.94%
Michigan.................. 19,874 3.32% $ 62,526,144 3.70%
New Jersey................ 21,667 3.62% $ 58,925,520 3.49%
Ohio...................... 18,783 3.14% $ 57,069,433 3.38%
Georgia................... 15,428 2.58% $ 44,869,941 2.65%
Massachusetts............. 15,391 2.57% $ 41,120,444 2.43%
Virginia.................. 12,986 2.17% $ 38,854,011 2.30%
North Carolina............ 13,151 2.20% $ 38,453,909 2.27%
Washington................ 12,529 2.09% $ 37,208,681 2.20%
Colorado.................. 13,567 2.27% $ 36,610,403 2.17%
All Others................ 194,733 32.51% $ 554,858,661 32.82%
------- ------ -------------- ------
Total.......... 598,857 100.00% $1,690,786,973 100.00%
======= ====== ============== ======
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DELINQUENCY BY BUSINESS RELATIONSHIP TRUST PORTFOLIO
PERCENTAGE OF PERCENTAGE OF
NUMBER OF NUMBER OF TOTAL
NUMBER OF DAYS DELINQUENT RELATIONSHIPS RELATIONSHIPS TOTAL RECEIVABLES RECEIVABLES
- ------------------------- ------------- ------------- ----------------- -------------
Current................... 566,746 94.64% $1,494,176,880 88.38%
1 to 29 days.............. 19,304 3.22% $ 108,540,334 6.42%
30 to 59 days............. 4,708 0.79% $ 29,455,968 1.74%
60 to 89 days............. 2,795 0.47% $ 19,140,507 1.13%
90 to 119 days............ 2,088 0.35% $ 15,117,866 0.89%
120 to 149 days........... 1,718 0.29% $ 12,817,078 0.76%
150 to 179 days........... 1,470 0.24% $ 11,313,293 0.67%
180 or more days.......... 28 0.00% $ 225,047 0.01%
------- ------ -------------- ------
Total.......... 598,857 100.00% $1,690,786,973 100.00%
======= ====== ============== ======
MATURITY CONSIDERATIONS
You are expected to receive payment of principal in full on April 20, 2008.
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 the 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, the Class B notes and
the Class C notes have been made.
CONTROLLED ACCUMULATION PERIOD
Principal for payment to the Series 2001-A 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 July 31, 2007, 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, the Class B notes, the Class C notes and the 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.
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Your series of notes may be paired with one or more series of notes issued
at a later time once the controlled accumulation period for your series begins.
We cannot assure you that the terms of any paired series will not have an impact
on the calculation of the Investor Percentage or the timing or amount of
payments received by you as a Series 2001-A noteholder. The extent to which the
timing or amount of payments received by you may be affected will depend on many
factors, only one of which is a change in the calculation of the Investor
Percentage. See "Description of Series Provisions -- Allocation Percentages,"
"-- Fixed Allocation Definitions" in this prospectus supplement and "Description
of the Notes -- Paired Series" in the accompanying prospectus.
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:
- 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; and
- then to 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, after distribution of any amount on deposit in the
Principal Funding Account, Available Principal Collections in an amount not to
exceed the Invested Amount 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
- October 20, 2010, called the "SERIES 2001-A TERMINATION DATE."
After the Class A notes have been paid in full, and if the Series 2001-A
termination date has not occurred, Available Principal Collections in an amount
not to exceed the Invested Amount will be paid to the Class B noteholders on
each payment date until the date the Class B notes are paid in full.
After the Class B notes have been paid in full, and if the Series 2001-A
termination date has not occurred, Available Principal Collections in an amount
not to exceed the Invested Amount will be paid to the Class C noteholders on
each payment date until the date the Class C notes are paid in full.
After the Class C notes have been paid in full, and if the Series 2001-A
termination date has not occurred, Available Principal Collections in an amount
not to exceed the Invested Amount will be paid to the Class D noteholders on
each payment date until the date the Class D notes are paid in full.
DESCRIPTION OF SERIES PROVISIONS
The following is a summary of the material provisions of the Series 2001-A
notes. This summary is not a complete description of the terms of the Series
2001-A notes. You should refer
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to "Description of the Notes" in the accompanying prospectus as well as to the
transfer and servicing agreement, the indenture and the Series 2001-A 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, the Class B notes, the Class C notes and the Class D
notes comprise the "SERIES 2001-A NOTES." Only the Class A notes, the Class B
notes and the Class C notes are offered by this prospectus supplement and the
accompanying prospectus. We call these notes the "OFFERED NOTES." The Series
2001-A notes will be issued under the indenture, as supplemented by the
indenture supplement relating to the Series 2001-A notes (the "SERIES 2001-A
indenture supplement"), in each case between the trust and the indenture
trustee. As described under "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 2001-A notes is April 17, 2001. The
offered 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 2001-A notes were registered on
the record date for that payment date. The "RECORD DATE" for the Series 2001-A
notes is the business day immediately preceding a payment date.
INTEREST PAYMENTS
The Class A notes will accrue interest from and including the closing date
through but excluding June 20, 2001, and for each following interest period, at
a rate of 0.30% 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 June 20, 2001, and for each following interest period, at
a rate of 0.85% 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 June 20, 2001, and for each following interest period, at
a rate of 1.55% 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 June 20, 2001, and for each following interest period, at
a rate of not more than 5.00% per annum above LIBOR for the related LIBOR
determination date for each interest period (the "CLASS D NOTE INTEREST RATE").
However, the Series 2001-A indenture supplement allows the transferor to cause
the trust to change the spread above LIBOR on the Class D notes with the prior
written consent of each rating agency rating a class of notes and without the
prior consent
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of any noteholder, so long as the Class D notes are held by the transferor or an
affiliate of the transferor.
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. However,
for the first interest period, the indenture trustee will determine LIBOR for
the period from the Closing Date through May 20, 2001 on April 13, 2001 and for
the period from May 21, 2001 through June 19, 2001 on May 17, 2001. The sum of
the interest accrued during each of these periods will be paid on June 20, 2001.
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 and end on June 20, 2001.
"LIBOR" means, for any LIBOR determination date, other than the first 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 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, the Class B note interest rate, the Class C
note interest rate and the 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 (800)
735-7777.
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 June 20, 2001
and the 20th day of each following month. If the 20th 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
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banking institutions in 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, the Class B notes, the Class C
notes and the Class D notes on any payment date will be calculated on the
outstanding principal balance of the Class A notes, the Class B notes, the Class
C notes and the 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,
the Class B notes, the Class C notes and the Class D notes, as applicable, from
the closing date.
Interest due on the Class A notes, the Class B notes, the Class C notes and
the 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 2001-A 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 2001-A 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 collection
account and the Excess Funding Account treated as collections of finance
charge and administrative receivables and allocated to Series 2001-A;
- 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 2001-A
indenture supplement for the related payment date.
For purposes of the Series 2001-A notes, "FINANCE CHARGE AND ADMINISTRATIVE
RECEIVABLES" are periodic finance charges, annual membership fees and service
charges, late fees, overlimit fees, cash advance fees, 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" in the accompanying prospectus 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
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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.
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 May 31, 2001.
PRINCIPAL PAYMENTS
Principal payments on the Series 2001-A notes will be paid from "AVAILABLE
PRINCIPAL COLLECTIONS" which, for any monthly period, equal:
- the Investor Percentage of collections of principal receivables 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; plus
- the amount of Available Finance Charge Collections to be treated as
Available Principal Collections as described under "Application of
Collections -- Payment of Interest, Fees and Other Items."
REVOLVING PERIOD
The "REVOLVING PERIOD" for the Series 2001-A 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 Interest or deposited in the Excess Funding Account.
CONTROLLED ACCUMULATION PERIOD
The "CONTROLLED ACCUMULATION PERIOD" for the Series 2001-A notes is
scheduled to begin at the close of business on July 31, 2007, 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 outstanding aggregate principal balance of the
Series 2001-A notes; and
- the Series 2001-A termination date.
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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 at the written direction of the servicer 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; and
- 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 and used to pay principal to other
series in group one or will be paid to the holders of the Transferor Interest or
deposited in the Excess Funding Account.
EARLY AMORTIZATION PERIOD
The "EARLY AMORTIZATION PERIOD" for the Series 2001-A notes will begin on
the day on which a pay out event for Series 2001-A occurs.
The early amortization period ends on the earliest of:
- the payment in full of the outstanding aggregate principal balance of the
Series 2001-A notes; and
- the Series 2001-A 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,
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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 8 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 conditions specified in the Series 2001-A
Indenture Supplement are satisfied.
On each determination date beginning on the Reserve Account Funding Date,
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
2001-A.
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.
ALLOCATION PERCENTAGES
Under the indenture, for each monthly period, the servicer will allocate
among the Invested Amount, the invested amounts 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 to Series 2001-A based on the Investor Percentage for Series 2001-A.
FLOATING ALLOCATION DEFINITIONS
Defaulted Amounts and collections of finance charge and administrative
receivables at any time 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
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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 opening 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.
FIXED ALLOCATION DEFINITIONS
Collections of 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 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 principal receivables 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)(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
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(2) the aggregate amount of principal receivables in the trust as of
the opening 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.
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 noteholder 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 monthly interest on the Class C notes and the Class D notes, 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 or 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
- 20.00% 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 and Shared Finance Charge Collections allocated to
cover these amounts; and
- 10.50% 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
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
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- 3.50% 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
allocated to Series 2001-A 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;
- 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;
- 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, but prior to the
termination of the reserve account, 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;
- 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 Interest.
In the event that Available Finance Charge Collections and Shared Finance
Charge Collections allocated to Series 2001-A 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 made from amounts
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available in the cash collateral account to the extent of that insufficiency and
will be paid first to the Class C noteholders and then to the Class D
noteholders on the related payment date.
PAYMENT 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;
- 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 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, zero; and
(b) on each subsequent payment date during the controlled accumulation
period, any excess of the Controlled Deposit Amount for the previous
monthly period over the amount deposited in the Principal Funding Account
for the previous monthly period.
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"CONTROLLED ACCUMULATION AMOUNT" for any payment date during the controlled
accumulation period means $37,500,000. 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 2001-A 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.
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 2001-A 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, to the Class B notes before any
remaining net proceeds would be available for payments due to the Class C notes
and the Class D notes and to the Class C notes before any remaining net proceeds
would be available for payments due to the Class D notes.
SHARED FINANCE CHARGE COLLECTIONS
Collections of finance charge and administrative receivables and other
amounts treated as collections of finance charge and administrative receivables
in excess of the amount required to
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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. Similarly, if collections of finance charge and administrative
receivables allocated through the Investor Percentage to Series 2001-A are
insufficient to make specified 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 other series in group one for that
payment date, if any, to the extent they exceed the amounts necessary to make
required payments for those series. We call these collections that are available
for sharing between series "SHARED FINANCE CHARGE COLLECTIONS." For each payment
date, Shared Finance Charge Collections will be allocated to Series 2001-A in an
amount equal to the product of (1) the total amount of Shared Finance Charge
Collections for that payment date for all series in group one that are
designated to share excess finance charge and administrative receivables and (2)
a fraction, the numerator of which is the Finance Charge Shortfall for Series
2001-A for that payment date and the denominator of which is the total amount of
shortfalls in collections of finance charge and administrative receivables for
that payment date for all series in group one that are designated to share
excess finance charge and administrative receivables. The "FINANCE CHARGE
SHORTFALL" for Series 2001-A for any payment date will be equal to any excess of
the full amount required to be paid as described in the first eight bullet
points under "-- Application of Collections -- Payment of Interest, Fees and
Other Items" in this prospectus supplement over the amount of collections of
finance charge and administrative receivables and amounts treated as collections
of finance charge and administrative receivables, other than Shared Finance
Charge Collections, allocated through the Investor Percentage to Series 2001-A.
The amount of the shortfall for each other 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 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.
This remaining amount constitutes "SHARED PRINCIPAL COLLECTIONS." The servicer
will make a similar determination for all other series in group one. The
servicer will allocate the Shared Principal Collections of all series 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 that 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 Interest or deposited in the Excess Funding Account.
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Shared principal collections for series in group one for each payment date
will be allocated to Series 2001-A in an amount equal to (1) the total of Shared
Principal Collections for all series in group one for that payment date,
multiplied by (2) a fraction, the numerator of which is the Series 2001-A
Principal Shortfall for that payment date and the denominator of which is the
total amount of Principal Shortfalls for that payment date for all series of
group one that are principal sharing series.
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.
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 as an
"INVESTOR CHARGE-OFF." 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, (ii) the weighted
average of the Class A note interest rate, the Class B note interest rate and
the Class C 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
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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 2001-A 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) the product of (i) 0.50% of
the outstanding aggregate principal balance of the Class A notes, the Class B
notes, the Class C notes and the Class D notes as of the preceding payment date
and (ii) a fraction the numerator of which is the number of monthly periods
scheduled to be included in the controlled accumulation period as of that date,
and the denominator of which is eight (except that if the numerator is one, the
Required Reserve Account Amount determined as described above will be $0) or (b)
any other amount selected by the transferor. However, if the amount designated
by the transferor under clause (b) 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 2001-A.
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 Interest. 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 Interest 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.
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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 2001-A 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 Interest. 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 Interest 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 the Series 2001-A 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 be funded with a deposit of
$5,250,000 on the Closing Date, and will be funded thereafter 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, 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" is, for each payment date, in
general 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
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balance over the sum of the outstanding principal balances of the Class A notes
and the Class B notes on that date. The Required Cash Collateral Account Amount
will be determined on each payment date.
Upon an event of default for your series, the Required Cash Collateral
Account Amount for any payment date will be equal 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.
However, following an event of default for your series, if the maturity of your
notes is not accelerated, the Required Cash Collateral Account Amount will be
limited to an amount equal to the outstanding principal amount of your series of
notes.
The "CASH COLLATERAL ACCOUNT PERCENTAGE" will be determined as follows:
IF THE QUARTERLY EXCESS THEN, THE
SPREAD PERCENTAGE IS CASH COLLATERAL ACCOUNT
GREATER THAN OR EQUAL TO: AND LESS THAN PERCENTAGE WILL EQUAL:
- ------------------------- ------------- -----------------------
4.50% -- 1.75%
4.00% 4.50% 2.75%
3.50% 4.00% 3.75%
3.00% 3.50% 4.25%
2.00% 3.00% 4.75%
0.00% 2.00% 5.75%
-- 0.00% 10.50%
However, if a pay out event, other than a pay out event resulting from the
occurrence of an event of default for Series 2001-A has occurred, the Cash
Collateral Account Percentage will be 10.50%.
The Cash Collateral Account Percentage will remain at the specified
percentage until further increased to a higher required percentage as specified
in the table above or decreased to a lower required percentage as described in
the series 2001-A indenture supplement.
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 SPREAD PERCENTAGE" WILL BE DETERMINED AS FOLLOWS:
For the June 2001 payment date The Excess Spread Percentage for the June
2001 payment date
For the July 2001 payment date The Excess Spread Percentage for the June
2001 payment date, plus the Excess Spread
Percentage for the July 2001 payment date
-------------------------------------------
2
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For the August 2001 payment date The Excess Spread Percentage for the June
2001 payment date, plus the Excess Spread
Percentage for the July 2001 payment date,
plus the Excess Spread Percentage for the
August 2001 payment date
-------------------------------------------
3
For each following payment date The sum of the Excess Spread Percentages
for the then-current payment date and the 2
prior payment dates
-------------------------------------------
3
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 least of (i) the amount on deposit in the cash collateral
account, including investment earnings, (ii) the Required Cash Collateral
Account Amount and (iii) the amount of the shortfall, 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 2001-A 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 Interest. 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
Interest.
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 2001-A 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.
PAY OUT EVENTS
As described above, the revolving period will continue through the close of
business on July 31, 2007, unless that date is postponed as described under
"-- Postponement of Controlled
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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 2001-A notes; and trust pay out events that apply to notes of
all series.
A "SERIES 2001-A PAY OUT EVENT" refers to any of the following events:
(a) failure by the transferor (i) to make any payment or deposit
required under the transfer and servicing agreement, the indenture or the
Series 2001-A indenture supplement within 5 business days of the date
required to be made or (ii) to observe or perform any other covenants or
agreements of the transferor set forth in the transfer and servicing
agreement, the indenture or the Series 2001-A indenture supplement, which
failure has a material adverse effect on the Series 2001-A 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;
(b) any representation or warranty made by the transferor in the
transfer and servicing agreement, the indenture or the Series 2001-A
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 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;
(d) an event of default for Series 2001-A occurs under the indenture;
or
(e) the outstanding principal balances of all the Series 2001-A notes
are not paid on the Expected Principal Payment Date.
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, the seller or
the servicer;
(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 2001-A pay out events and trust pay out events together are called
"PAY OUT EVENTS."
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In the case of any Series 2001-A 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 holders of Series
2001-A notes evidencing interests aggregating not less than 50% of the then
outstanding principal balance of the Series 2001-A notes, by written notice to
the transferor and the servicer, and to the indenture trustee if given by the
Series 2001-A noteholders, declare that a pay out event has occurred with
respect to the Series 2001-A 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), (d) or (e), a pay out event with respect to only
the Series 2001-A notes, will occur without any notice or other action on the
part of the indenture trustee or the Series 2001-A 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, for any monthly period, the per annum rate
calculated on the basis of a 360-day year consisting of twelve 30-day months
equal to the product of the 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;
multiplied by 12.
The term "NET PORTFOLIO YIELD" means, for any monthly period, the per annum
rate calculated on the basis of a 360-day year consisting of twelve 30-day
months equal to the product of the 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, any net investment earnings on funds
deposited in the Principal Funding Account and the Excess Funding Account
and any amounts withdrawn from the Reserve Account and deposited in the
collection account and allocable to the Series 2001-A 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;
multiplied by 12. However, Shared Finance Charge Collections that are allocated
to Series 2001-A for any Monthly Period may be added to the numerator if the
transferor provides ten business days prior written notice to each Rating Agency
and written notice is received that using Shared Finance Charge Collections in
the calculation will not result in any Rating Agency
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reducing or withdrawing its then existing rating of the notes or any outstanding
series or class of notes.
EVENTS OF DEFAULT
The events of default for Series 2001-A, as well as the rights and remedies
available to the indenture trustee and the Series 2001-A 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 2001-A occurs, the indenture trustee or
the holders of a majority of the then-outstanding principal balance of the
Series 2001-A notes may declare the Series 2001-A notes to be immediately due
and payable. If the Series 2001-A 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 servicing fee allocable to Series 2001-A for any payment
date will be equal to one-twelfth of the product of (a) the "SERVICING FEE RATE"
of 2.0% per anum 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 Floating Investor Percentage
of collections of finance charge and administrative receivables for that monthly
period. This is called the "MONTHLY SERVICING FEE." However, for the first
payment date, the monthly servicing fee will equal $500,000.
On each payment date, the Servicer will deposit into the collection account
the amount of interchange estimated by it attributable to the designated
accounts for the prior monthly period to be treated as collections of finance
charge and administrative receivables. The amount allocated to Series 2001-A
will be equal to the product of the estimated interchange and the Floating
Investor Percentage.
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
2001-A 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
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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 offered notes are eligible for purchase with plan assets of any
plan.
Any fiduciary or other plan investor considering whether to purchase the
offered 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 to the investing plan and may be deemed to be benefitting
from the issuance of the offered 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 offered 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 offered 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 offered 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, at the time of
initial issuance, to
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have any "substantial equity features," purchases of the offered 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 offered notes, including the
reasonable expectation of purchasers of the offered notes that the offered notes
will be repaid when due, as well as the absence of conversion rights, warrants
and other typical equity features.
The offered 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 offered notes or any
interest in the offered notes will be deemed to have represented by its purchase
and holding of the notes that it is not subject to the foregoing limitations.
We suggest that any fiduciary or other plan investor considering whether to
purchase any notes on behalf of or with plan assets of any plan 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.
USE OF PROCEEDS
A portion of the net proceeds of the sale of the offered notes will be used
to reduce the outstanding principal amount of the Series 1997-A Class A and
Class B Notes previously issued by the trust.
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement,
dated April 3, 2001, relating to the Class A notes, the Class B notes and the
Class C notes (the "UNDERWRITING AGREEMENT"), among the transferor, the bank and
the underwriters named below (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:
PRINCIPAL PRINCIPAL PRINCIPAL
AMOUNT OF AMOUNT OF AMOUNT OF
UNDERWRITERS CLASS A NOTES CLASS B NOTES CLASS C NOTES
- ------------ ------------- ------------- -------------
Barclays Capital Inc...................... $120,000,000 $21,375,000 $15,750,000
Morgan Stanley & Co. Incorporated......... $120,000,000 $ 7,125,000 $ 5,250,000
------------ ----------- -----------
Total.......................... $240,000,000 $28,500,000 $21,000,000
============ =========== ===========
In the underwriting agreement, the underwriters have agreed, subject to the
terms and conditions set forth in that agreement, to purchase all of the notes
offered hereby if any of the notes are purchased.
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The underwriters propose initially to offer the Class A notes to the public
at 100.000% of their principal balance and to certain dealers at that price less
concessions not in excess of 0.195% of the principal balance of the Class A
notes. The underwriters may allow, and the dealers may reallow, concessions not
in excess of 0.098% 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 underwriters.
The underwriters propose initially to offer the Class B notes to the public
at 100.000% of their principal balance and to certain dealers at that price less
concessions not in excess of 0.225% of the principal balance of the Class B
notes. The underwriters may allow, and the dealers may reallow, concessions not
in excess of 0.113% 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 underwriters.
The underwriters propose initially to offer the Class C notes to the public
at 100.000% of their principal balance and to certain dealers at that price less
concessions not in excess of 0.270% of the principal balance of the Class C
notes. The underwriters may allow, and the dealers may reallow, concessions not
in excess of 0.135% 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 underwriters.
We will receive proceeds of approximately $288,518,625 from the sale of the
notes (representing 99.675% of the principal balance of each Class A note,
99.625% of the principal balance of each Class B note and 99.550% of the
principal balance of each Class C note) after paying the underwriting discount
of $981,375 (representing 0.325% of the principal balance of each Class A note,
0.375% of the principal balance of each Class B note and 0.450% of the principal
balance of each Class C note). Additional offering expenses are estimated to be
$400,000. The underwriters have agreed to reimburse certain offering expenses of
the transferor.
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;
- 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;
- it has not offered or sold and, prior to the expiry of six months from
the closing date, will not offer or sell, any offered notes to persons in
the United Kingdom, except to persons whose ordinary activities involve
them in acquiring, holding, managing or disposing of investments (as
principal or agent) for purposes of their business, or otherwise in
circumstances which have not resulted and will not result in an offer to
the public in the United Kingdom within the meaning of the Public Offers
of Securities Regulations 1995; and
- it is a person of a kind described in Article 11(3) of the Financial
Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996.
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The transferor and the bank 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.
In the ordinary course of business, one or more of the underwriters or
their affiliates have engaged, and may engage in the future, in certain
investment banking or commercial banking transactions with the bank or its
affiliates. As discussed under "Use of Proceeds" in this prospectus supplement,
a portion of the net proceeds of the sale of the offered notes will be used to
reduce the outstanding principal amount of the Series 1997-A Class A and Class B
Notes previously issued by the trust. The Series 1997-A Notes are held by a
conduit investor for which Barclays Bank PLC, New York Branch, an affiliate of
Barclays Capital Inc., provides liquidity lines and acts as agent. Barclays
Capital Inc. is one of the underwriters of the offered notes.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Series 2001-A 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 2001-A 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 2001-A notes will
be passed upon for the underwriters by Orrick, Herrington & Sutcliffe LLP.
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GLOSSARY OF TERMS FOR PROSPECTUS SUPPLEMENT
"ACCUMULATION SHORTFALL" means: (a) on the first payment date zero; and (b)
on each subsequent payment date during the controlled accumulation period, any
excess of the applicable Controlled Deposit Amount for the previous monthly
period over the amount deposited in the Principal Funding Account for the
previous monthly period.
"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.
"AVAILABLE PRINCIPAL COLLECTIONS" means, for any monthly period, the sum
of: (i) the Investor Percentage of collections of principal receivables for that
monthly period; minus (ii) the amount of Reallocated Principal Collections for
that monthly period; plus (iii) any Shared Principal Collections from other
series in group one allocated to your series, from which principal payments on
the Series 2001-A notes will be paid; plus (iv) the amount of Available Finance
Charge Collections to be treated as Available Principal Collections as described
under "Description of Series Provisions -- Application of Collections -- Payment
of Interest, Fees and Other Items."
"AVAILABLE FINANCE CHARGE COLLECTIONS" means, for any monthly period, an
amount equal to the sum of: (i) the Investor Percentage of collections of
finance charge and administrative receivables deposited in the collection
account for that monthly period; (ii) any net investment earnings on amounts on
deposit in the collection account and the Excess Funding Account treated as
collections of finance charge and administrative receivables and allocated to
Series 2001-A; (iii) any net investment earnings on amounts on deposit in the
Principal Funding Account for that monthly period; and (iv) any amounts
withdrawn from the reserve account which are required to be included in
Available Finance Charge Collections under the Series 2001-A Indenture
Supplement for the related payment date.
"BASE RATE" means, for any monthly period, the per annum rate calculated on
the basis of a 360-day year consisting of twelve 30-day months equal to the
product of the percentage equivalent of a fraction: (a) the numerator of which
is the sum of the Monthly Interest and the monthly servicing fee, each for the
related payment date; and (b) the denominator of which is the Invested Amount as
of the close of business on the last day of the prior monthly period; multiplied
by 12.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day on
which banking institutions in 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.
"CASH COLLATERAL ACCOUNT" means a segregated account established and
maintained by the servicer with an eligible institution for the benefit of the
Class C noteholders and the Class D noteholders that will be used to fund
shortfalls in interest payments on the Class C notes and the Class D notes and
on the Series 2001-A termination date to fund any shortfall in payment of the
outstanding principal balance of the Class C notes and the Class D notes.
"CASH COLLATERAL ACCOUNT PERCENTAGE" means an amount determined as
described in the prospectus supplement under "Description of Series
Provisions -- Cash Collateral Account."
"CLASS A ADDITIONAL INTEREST" means interest due on the Class A notes but
not paid on any payment date and payable on the following payment date, together
with additional interest on that amount at the Class A note interest rate.
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"CLASS A MONTHLY INTEREST" means, for any payment date, 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 A NOTE INTEREST RATE" means a rate of 0.30% per annum above LIBOR
for the related LIBOR determination date for each interest period.
"CLASS A UNDERWRITERS" means the Class A underwriters named in this
prospectus supplement.
"CLASS B ADDITIONAL INTEREST" means interest due on the Class B notes but
not paid on any payment date and payable on the following payment date, together
with additional interest on that amount at the Class B note interest rate.
"CLASS B MONTHLY INTEREST" means, for any payment date, 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 B NOTE INTEREST RATE" means a rate of 0.85% per annum above LIBOR
for the related LIBOR determination date for each interest period.
"CLASS B UNDERWRITERS" means the Class B underwriters named in this
prospectus supplement.
"CLASS C ADDITIONAL INTEREST" means interest due on the Class C notes but
not paid on any payment date and payable on the following payment date, together
with additional interest on that amount at the Class C note interest rate.
"CLASS C MONTHLY INTEREST" means, for any payment date, 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 C NOTE INTEREST RATE" means a rate of 1.55% per annum above LIBOR
for the related LIBOR determination date for each interest period.
"CLASS C UNDERWRITERS" means the Class C underwriters named in this
prospectus supplement.
"CLASS D ADDITIONAL INTEREST" means interest due on the Class D notes but
not paid on any payment date and payable on the following payment date, together
with additional interest on that amount at the Class D note interest rate.
"CLASS D MONTHLY INTEREST" means, for any payment date, 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.
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"CLASS D NOTE INTEREST RATE" means a rate of not in excess of 5.00% per
annum above LIBOR for the related LIBOR determination date for each interest
period. However, the Series 2001-A indenture supplement allows the transferor to
cause the trust to change the spread above LIBOR on the Class D notes with the
prior written consent of each rating agency rating a class of notes and without
the prior consent of any noteholder, so long as the Class D notes are held by
the transferor or an affiliate of the transferor.
"CLOSING DATE" means, for the Series 2001-A notes, April 17, 2001.
"CODE" means the Internal Revenue Code of 1986.
"CONTROLLED ACCUMULATION AMOUNT" means, for any payment date during the
controlled accumulation period, $37,500,000. However, if the commencement of the
controlled accumulation period is postponed as described under "Description of
Series Provisions -- 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 2001-A 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 ACCUMULATION PERIOD" means the period that is scheduled to
begin on the close of business on July 31, 2007 (but may be postponed, as
discussed in this prospectus supplement) under "Description of Series
Provisions -- Postponement of Controlled Accumulation Period" and ends on the
earliest of: (i) the beginning of the early amortization period; (ii) the
payment in full of the outstanding amount of the Series 2001-A notes; or (iii)
the Series 2001-A termination date.
"CONTROLLED DEPOSIT AMOUNT" means, for any payment date during the
controlled accumulation period, the sum of (i) the Controlled Accumulation
Amount for that payment date, plus (ii) any Accumulation Shortfall.
"DEFAULTED AMOUNT" means, for any monthly period, the total amount of
principal receivables, other than ineligible receivables, in the trust that were
charged-off for that month.
"EARLY AMORTIZATION PERIOD" means the period that begins on the day on
which a pay out event for Series 2001-A occurs and ends on the earliest of (i)
the payment in full of the outstanding amount of the Series 2001-A notes, or
(ii) the Series 2001-A termination date.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"EXCESS SPREAD PERCENTAGE" means a percentage equal to the Net Portfolio
Yield minus the Base Rate.
"EXPECTED PRINCIPAL PAYMENT DATE" means the date on which the Series 2001-A
noteholders are expected to receive payment in full of principal, which is April
20, 2008.
"FINANCE CHARGE AND ADMINISTRATIVE RECEIVABLES" means periodic finance
charges, annual membership fees and service charges, late fees, overlimit fees,
cash advance fees, 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, so designated by the transferor.
"FINANCE CHARGE SHORTFALL" means, for Series 2001-A, for any payment date,
the excess of the full amount required to be paid as described under the first
eight bullet points under
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"-- Application of Collections -- Payment of Interest, Fees and Other Items" in
this prospectus supplement over the amount of collections of finance charge and
administrative receivables and amounts treated as collections of finance charge
and administrative receivables, other than Shared Finance Charge Collections,
allocated through the Investor Percentage to Series 2001-A.
"FIXED INVESTOR PERCENTAGE" means, for any monthly period, the percentage
equivalent of a fraction that is defined in this prospectus supplement under
"Description of Series Provisions -- Fixed Allocation Definitions."
"FLOATING INVESTOR PERCENTAGE" means, for any monthly period, the
percentage equivalent of a fraction that is defined in this prospectus
supplement under "Description of Series Provisions -- Floating Allocation
Definitions."
"INTEREST PERIOD" means the period that begins on and includes a payment
date and ends on but excludes the next payment date, except that the first
interest period begins on and includes the closing date.
"INVESTED AMOUNT" means, for any date of determination, an amount equal to
(a) the initial outstanding principal amount of the Series 2001-A notes, minus
(b) the amount of principal previously paid to the Series 2001-A noteholders,
minus (c) the amount of unreimbursed Investor Charge-Offs and Reallocated
Principal Collections.
"INVESTOR CHARGE-OFF" means, for any payment date, the reduction to the
Invested Amount in an amount equal to the excess of the Investor Default Amount
over the amount of collections of finance charge and administrative receivables
allocated to cover such excess.
"INVESTOR DEFAULT AMOUNT" means the series' share of losses from the trust
portfolio, which, as of each payment date, is equal to the Floating Investor
Percentage for that month multiplied by the Defaulted Amount for that payment
date.
"INVESTOR PERCENTAGE" means, for any monthly period, (a) for Defaulted
Amounts and for collections of finance charge and administrative receivables at
any time and for principal receivables during the revolving period, the Floating
Investor Percentage, and (b) for collections of principal receivables during the
controlled accumulation period and the early amortization period, the Fixed
Investor Percentage.
"LIBOR DETERMINATION DATE" means the day on which the indenture trustee
will determine LIBOR for each interest period, which is the day two London
business days before the related interest period commences. However, for the
first interest period, the indenture trustee will determine LIBOR for the period
from the Closing Date through May 20, 2001, on April 13, 2001, and for the
period from May 21, 2001 through June 19, 2001, on May 17, 2001.
"LIBOR" means, for any LIBOR determination date, other than the first 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 and which appears on Telerate Page 3750 as of 11:00 a.m.,
London time, on that LIBOR determination date, except that if that rate does not
appear on Telerate Page 3750, then as otherwise stated in the prospectus
supplement under "Description of Series Provisions -- Interest Payments."
"LONDON BUSINESS DAY" means any business day on which dealings in deposits
in United States dollars are transacted in the London interbank market.
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"MONTHLY PERIOD" means 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 May 31, 2001.
"MONTHLY INTEREST" means, for any payment date, 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.
"MONTHLY PRINCIPAL" means, for any payment date, an amount equal to 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.
"NET PORTFOLIO YIELD" means, for any monthly period, the per annum rate
calculated on the basis of a 360-day year consisting of twelve 30-day months
equal to the product of the percentage equivalent of a fraction: (a) 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, 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 2001-A notes
for that monthly period, calculated on a cash basis after subtracting the
Investor Default Amount for that monthly period; and (b) the denominator of
which is the Invested Amount as of the last day of the prior monthly period;
multiplied by 12. However, Shared Finance Charge Collections that are allocated
to Series 2001-A for any Monthly Period may be added to the numerator if the
transferor provides ten business days prior written notice to each Rating Agency
and written notice is received that using Shared Finance Charge Collections in
the calculation will not result in any Rating Agency reducing or withdrawing its
then existing rating of the notes or any outstanding series or class of notes.
"OFFERED NOTES" means the Class A notes, the Class B notes and the Class C
notes that are offered by this prospectus supplement and the accompanying
prospectus.
"ONE-MONTH INDEX MATURITY" means a maturity of one month commencing on the
related LIBOR determination date.
"PARTIES IN INTEREST" means persons (called "parties in interest" under
ERISA and "disqualified persons" under the Code) who have specified
relationships to a plan or its plan assets.
"PAY OUT EVENTS" means, collectively, Series 2001-A pay out events and
trust pay out events.
"PAYMENT DATE" means June 20, 2001 and the 20th day of each following
month. If the 20th day is not a business day, then the payment date will be the
following business day.
"PLAN ASSET REGULATION" means Department of Labor Regulation Section
2510.3-101.
"PLANS" means 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.
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"PRINCIPAL FUNDING ACCOUNT" means the eligible deposit account established
and maintained by the indenture trustee with an eligible institution for the
benefit of the noteholders. 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.
"PRINCIPAL SHORTFALLS" means the amount by which 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 that series in group one is less than the
collections of principal receivables allocable to that series and certain other
amounts for those series.
"PTCE" means a United States Department of Labor Prohibited Transaction
Class Exemption.
"QUARTERLY EXCESS SPREAD PERCENTAGE" means an amount determined as
described in this prospectus supplement under "Description of Series
Provisions -- Cash Collateral Account."
"REALLOCATED PRINCIPAL COLLECTIONS" means, for any monthly period,
Available Principal Collections used to pay interest on the Class A notes, the
Class B notes or the Class C notes or used to pay the monthly servicing fee in
an amount not to exceed the amount specified in this prospectus supplement under
"Description of Series Provisions -- Reallocated Principal Collections."
"RECORD DATE" means, for the Series 2001-A notes, the business day
immediately preceding a payment date.
"RECOVERIES" means 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.
"REQUIRED MINIMUM PRINCIPAL BALANCE" means, as of any date, for all
outstanding series, unless otherwise provided in the related indenture
supplement for a series having a paired series (a) the sum of the invested
amounts for each series outstanding on that date, plus (b) the Required
Transferor Interest on that date, minus (c) the amounts on deposit in the Excess
Funding Account on that date.
"REQUIRED RESERVE ACCOUNT AMOUNT" means, for any payment date on or after
the reserve account funding date, an amount equal to (a) the product of (i)
0.50% of the outstanding aggregate principal balance of the Class A notes, the
Class B notes, the Class C notes and the Class D notes as of the preceding
payment date and (ii) a fraction the numerator of which is the number of monthly
periods scheduled to be included in the controlled accumulation period as of
that date, and the denominator of which is eight (except that if the numerator
is one, the Required Reserve Account Amount determined as described above will
be $0) or (b) any other amount selected by the transferor. However, if the
amount designated by the transferor under clause (b) is less than the amount in
clause (a), the transferor will provide the servicer and the indenture trustee
with certain written confirmation as described in the prospectus supplement
under "Description of Series Provisions -- Reserve Account."
"REQUIRED CASH COLLATERAL ACCOUNT AMOUNT" means, for each payment date, in
general 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
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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.
"REQUIRED TRANSFEROR INTEREST" is an amount equal to (a) the Required
Transferor Percentage multiplied by (b) the total amount of principal
receivables in the trust portfolio.
"RESERVE ACCOUNT" means the segregated trust account established and
maintained by the indenture trustee with an eligible institution for the benefit
of the noteholders, 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.
"RESERVE ACCOUNT FUNDING DATE" means 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.
"RESERVE DRAW AMOUNT" means, for any payment date, the draw made by the
indenture trustee from the reserve account of funds to be used as Available
Finance Charge Collections and deposited in the collection account in an amount
equal to the shortfall, if any, that results if the net investment earnings on
funds on deposit in the Principal Funding Account are less than the product of
(i) the balance of the Principal Funding Account, (ii) the weighted average of
the Class A note interest rate, the Class B note interest rate, and the Class C
note interest rate for the related interest period and (iii) the number of days
in the related interest period divided by 360.
"RESET DATE" means 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.
"REVOLVING PERIOD" means the period that begins on the closing date and
ends on the earlier of the date the controlled accumulation period or the early
amortization period begins.
"SERIES 2001-A PAY OUT EVENT" means any of the following events:
(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 2001-A 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 2001-A indenture supplement, which failure has a material adverse
effect on the Series 2001-A 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;
(b) any representation or warranty made by the transferor in the
transfer and servicing agreement, the indenture or the Series 2001-A
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
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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;
(d) an event of default for Series 2001-A occurs under the indenture;
or
(e) insufficient funds are available to pay in full the outstanding
principal balance of all the Series 2001-A notes on the Expected Principal
Payment Date.
"SERIES 2001-A INDENTURE SUPPLEMENT" means the indenture supplement
relating to the Series 2001-A notes between the trust and the indenture trustee.
"SERIES 2001-A NOTES" means the Class A notes, the Class B notes, the Class
C notes and the Class D notes.
"SERIES 2001-A PRINCIPAL SHORTFALL" means an amount equal to (a) for any
payment date during the revolving period or the early amortization period, zero,
and (b) for any payment date during the controlled accumulation period, any
excess of the Controlled Deposit Amount for that payment date over the amount of
Available Principal Collections for that payment date (excluding any portion
attributable to Shared Principal Collections).
"SERIES 2001-A TERMINATION DATE" means October 20, 2010.
"SERVICING FEE RATE" means 2.0% per annum.
"SHARED FINANCE CHARGE COLLECTIONS" means, for any series of notes in group
one, 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
that series and 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.
"SHARED PRINCIPAL COLLECTIONS" means the balance of collections of
principal receivables for any monthly period after allocation to the Invested
Amount and used first to cover, for any monthly period during the controlled
accumulation period, deposits of the Controlled Deposit Amount to the Principal
Funding Account, and during the early amortization period, payments to the
noteholders, as determined by the servicer. The servicer will allocate the
Shared Principal Collections of all series 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 that series in group one and certain other
amounts for those series.
"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.
"TRANSFEROR INTEREST" is the interest in the trust not securing your series
or any other series of notes and is equal to (a) the sum of the total amount of
principal receivables in the trust and the Excess Funding Account balance, minus
(b) the total adjusted invested amounts of all series of notes then outstanding.
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"TRUST PAY OUT EVENT" means 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, the seller or
the servicer;
(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.
"TRUST PORTFOLIO" consists of the accounts selected by the transferor from
the Advanta Business Card Portfolio at the time the trust was established, and
additional accounts selected since that time, on the basis of criteria described
in the transfer and servicing agreement, the receivables of which have been
transferred to the trust.
"UNDERWRITERS" means, collectively, the underwriters of the Class A notes,
the Class B notes and the Class C notes.
"UNDERWRITING AGREEMENT" means the underwriting agreement, dated April 3,
2001, relating to the Class A notes, the Class B notes and the Class C notes,
among the transferor, the bank and the underwriters.
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ANNEX I
OTHER SERIES ISSUED AND OUTSTANDING
The table below sets forth the principal characteristics of the other
series previously issued by the 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 (801)523-0858, facsimile (801)523-2920. 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.
Series 1997-A
Initial Class A Invested Amount $243,275,000
Current Class A Invested Amount $193,275,000*
Maximum Class A Invested Amount $243,275,000
Class A note interest rate Commercial Paper Index
Initial Class B Invested Amount $36,975,000
Current Class B Invested Amount $36,975,000*
Maximum Class B Invested Amount $36,975,000
Class B note interest rate one-month LIBOR plus 1.0% per annum
Annual servicing fee percentage 2.0% per annum
Enhancement for the Class A notes subordination of Class B notes and Class
C notes
Enhancement for the Class B notes subordination of Class C notes and Cash
Collateral Account
Series 1997-A Final Maturity Date July, 2007 payment date
Series Issuance Date August 18, 2000
Series 2000-A
Initial Class A Invested Amount $150,000,000
Current Class A Invested Amount $150,000,000
Maximum Class A Invested Amount $150,000,000
Class A note interest rate less than one-month LIBOR plus 0.50% per
annum
Annual servicing fee percentage 2.0% per annum
Enhancement for the Class A notes subordination of Class B notes and Cash
Collateral Account
- ---------------
* The outstanding principal amount of the Series 1997-A Class A Notes and Class
B Notes will be reduced using a portion of the net proceeds of the sale of the
Series 2001-A Notes.
A-1
62
Series 2000-A Final Maturity Date April, 2005 payment date
Series Issuance Date September 15, 2000
Series 2000-B
Initial Class A Invested Amount $480,000,000
Current Class A Invested Amount $480,000,000
Class A note interest rate one-month LIBOR plus 0.17% per annum
Initial Class B Invested Amount $57,000,000
Current Class B Invested Amount $57,000,000
Class B note interest rate one-month LIBOR plus 0.55% per annum
Initial Class C Invested Amount $42,000,000
Current Class C Invested Amount $42,000,000
Class C note interest rate one-month LIBOR plus 1.25% per annum
Annual servicing fee percentage 2.0% per annum
Enhancement for the Class A notes subordination of Class B notes and 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 shared
Cash Collateral Account
Series 2000-B Final Maturity Date January, 2006 payment date
Series Issuance Date August 18, 2000
Series 2000-C
Initial Class A Invested Amount $320,000,000
Current Class A Invested Amount $320,000,000
Class A note interest rate one-month LIBOR plus 0.25% per annum
Initial Class B Invested Amount $38,000,000
Current Class B Invested Amount $38,000,000
Class B note interest rate one-month LIBOR plus 0.70% per annum
Initial Class C Invested Amount $28,000,000
Current Class C Invested Amount $28,000,000
Class C note interest rate one-month LIBOR plus 1.45% per annum
Annual servicing fee percentage 2.0% per annum
Enhancement for the Class A notes subordination of Class B notes and Class
C notes and Class D notes
Enhancement for the Class B notes subordination of Class C notes and Class
D notes
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Enhancement for the Class C notes subordination of Class D notes and shared
Cash Collateral Account
Series 2000-C Final Maturity Date April, 2008 payment date
Series Issuance Date November 16, 2000
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PROSPECTUS
[ADVANTA LOGO]
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 have an interest in
- receivables in a portfolio of MasterCard(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.
March 30, 2001
65
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.
The accompanying supplement to this prospectus may update or modify this
prospectus. Whenever the information in the prospectus supplement is more
specific than the information in this prospectus, 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.
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TABLE OF CONTENTS
PAGE
----
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......................... 3
Events of Default................ 4
Event of Default Remedies........ 5
Shared Finance Charge
Collections................... 5
Shared Principal Collections..... 5
Paired Series.................... 5
Series Enhancement............... 5
Tax Status....................... 6
ERISA Considerations............. 6
Note Ratings..................... 6
Risk Factors..................... 6
Risk Factors....................... 7
The Issuer......................... 13
Advanta Bank Corp., Advanta
Business Receivables Corp. and
Advanta Corp..................... 14
The Bank's Credit Card
Activities....................... 14
Advanta Business Card
Portfolio..................... 14
Acquisition and Use of Credit
Cards......................... 15
Partnerships..................... 16
Underwriting and Credit Risk..... 16
Risk Based Pricing............... 17
Interchange...................... 18
Operations....................... 18
Billing and Payments............. 19
Key Supplier Relationships....... 20
PAGE
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Credit Card Association
Relationships................. 20
Description of First Data
Resources..................... 20
The Trust Portfolio................ 20
Maturity Considerations............ 22
Use of Proceeds.................... 23
Description of the Notes........... 23
General.......................... 23
Securities Depository............ 25
Book-Entry Registration.......... 25
Definitive Notes................. 28
Interest Payments................ 29
Principal Payments............... 30
Transfer and Assignment of
Receivables................... 30
Issuance of Additional Series.... 31
Issuance of Additional Notes..... 33
Representations and Warranties... 34
Addition of Trust Assets......... 37
Removal of Accounts.............. 39
Collection and Other Servicing
Procedures.................... 40
Adjustments...................... 40
Trust Accounts................... 40
Funding Period................... 42
Investor Percentage and
Transferor Percentage......... 43
Application of Collections....... 43
Shared Finance Charge
Collections................... 45
Shared Principal Collections..... 46
Defaulted Receivables; Rebates
and Fraudulent Charges;
Investor Charge-Offs.......... 46
Final Payment of Principal;
Termination................... 47
Paired Series.................... 47
Pay Out Events................... 48
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PAGE
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Servicing Compensation and
Payment of Expenses........... 49
Certain Matters Regarding the
Transferor and the Servicer... 49
Servicer Default................. 52
Reports to Noteholders........... 53
Evidence as to Compliance........ 54
Amendments....................... 55
The Indenture...................... 56
Events of Default; Rights upon
Event of Default.............. 56
Certain Covenants................ 59
Modification of the Indenture.... 60
Annual Compliance Statement...... 62
Indenture Trustee's Annual
Report........................ 62
List of Noteholders.............. 62
Satisfaction and Discharge of
Indenture..................... 63
The Indenture Trustee............ 63
Certain Matters Regarding the
Administrator................. 63
Series Enhancement................. 63
General.......................... 63
Subordination.................... 64
Letter of Credit................. 65
Cash Collateral Guaranty or
Account....................... 65
Collateral Interest.............. 66
Surety Bond or Insurance
Policy........................ 66
Spread Account................... 66
Reserve Account.................. 66
Interest Rate Swap Agreements and
Interest Rate Cap
Agreements.................... 66
PAGE
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Description of the Receivables
Purchase Agreement............... 67
Note Ratings....................... 68
Material Legal Aspects of the
Receivables...................... 69
Transfer of Receivables.......... 69
Borrower Protection Laws......... 70
Claims and Defenses of Account
Obligors Against the Trust.... 70
Certain Matters Relating to
Conservatorship, Receivership
and Bankruptcy................ 70
Federal Income Tax Consequences.... 72
General.......................... 72
Tax Characterization of the Trust
and the Notes................. 73
Consequences to Holders of the
Notes......................... 74
State, Local and Foreign Tax
Consequences.................. 76
ERISA Considerations............... 76
Plan of Distribution............... 77
Legal Matters...................... 77
Reports to Noteholders............. 77
Where You Can Find More
Information...................... 77
Glossary of Terms for Prospectus... 79
Annex I
Global Clearance, Settlement and
Tax Documentation Procedures..... A-1
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68
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 common law trust, is the
issuer of the notes. The trust's principal place of business is located at
Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890. Its telephone number is (302) 651-8951.
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.
The issuance of future series will occur without your prior review or
consent.
INDENTURE TRUSTEE
Bankers Trust Company, a New York banking corporation.
TRANSFEROR
Advanta Business Receivables Corp. 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. It
is a wholly-owned subsidiary of Advanta Bank Corp. Additional transferors that
are affiliates of the initial transferor may be designated.
SELLER, SERVICER AND ADMINISTRATOR
The bank is the initial seller of the credit card receivables to the
transferor. Additional sellers that are affiliates of the bank 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 and will continue to own the accounts after the
receivables generated in those accounts have been transferred to the trust. The
seller's portfolio of accounts represents agreements between the seller and
small businesses governing the extension of unsecured revolving lines of credit
that can be used through
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the MasterCard(R)* or VISA(R)* payment-processing systems. The seller has
designated selected MasterCard(R) business revolving 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. If the seller
has sold receivables to the transferor, then the transferor has, in turn,
transferred the receivables to the trust under the transfer and servicing
agreement. In the future, receivables in VISA(R) business revolving 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 "Summary of Terms -- 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 and the accompanying prospectus supplement.
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 beneficial 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 amount of
cashflows from the trust assets the transferor beneficial interest is entitled
to receive is called the transferor interest.
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 beneficial interest by
issuing a supplemental beneficial interest. 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.
- ---------------
* MasterCard(R) and VISA(R) are federally registered trademarks of Mastercard
International Inc. and VISA U.S.A., Inc., respectively.
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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 the transferor as holder of the transferor beneficial
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:
- a controlled accumulation period, during which principal is accumulated
in specified amounts per month and paid on an expected principal payment
date;
- a controlled amortization period, during which principal is paid in fixed
amounts at scheduled intervals; or
- an 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
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- 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 business day
before the date on which 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 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, the seller or
the servicer;
- 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,
under certain circumstances, 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 notes;
- the occurrence of certain bankruptcy, insolvency, reorganization or
similar events relating to the trust; or
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- 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 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
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. Once principal receivables are transferred from one
series to another, the series providing the principal receivables is not
entitled to recoup these amounts. 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
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- cash collateral guaranty
- reserve account
- cash collateral account
- swap arrangement
- interest rate cap agreement
- cross support feature
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 "Series 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.
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 and the notes may be purchased by employee benefit plans 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. We suggest that fiduciaries or other persons
contemplating purchasing notes of any series with "plan assets" of any employee
benefit plan 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.
RISK FACTORS
Investment in the notes will be subject to one or more risk factors. We
suggest that you read "Risk Factors" beginning on page 7 in this prospectus and
any risk factors discussion in the accompanying prospectus supplement for a
discussion of risk factors that you may wish to consider before investing in the
notes.
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RISK FACTORS
The following is a summary of the material risks that apply to an
investment in the notes. The remainder of this prospectus and the attached
prospectus supplement provide more detailed information about these risks. 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 amounts 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.
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. In
addition, the trust may not have a first-priority security interest in
collections commingled and used for the benefit of the bank as servicer if (a) a
receiver or conservator were appointed for the bank or (b) a ten-day period were
to elapse after receipt by the servicer of collections that have been commingled
with other funds. If any of these events occur, payments to you could be delayed
or reduced. See "Material Legal Aspects of the Receivables -- Transfer of
Receivables" and "Description of the Notes -- Representations and Warranties" in
this prospectus.
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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.
The Federal Deposit Insurance Act, as amended by the Financial Institutions
Reform, Recovery and Enforcement Act of 1989 provides that a security interest
granted by 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 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 in the receivables granted by any seller or transferor that is
a bank. 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.
Advanta Business Receivables Corp. 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, 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 applicable
receivables purchase agreement or
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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.
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 "Material 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 charges 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
customers 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 and as to the perfection and priority of the trust'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
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customer 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 customers. 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.
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 and 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.
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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 contain 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,
in the case of voluntary additions, that 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 collections,
amounts on deposit in specified accounts and funds provided by any series
enhancer 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
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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 an obligor on
an account sought protection under federal or state bankruptcy or debtor relief
laws, a court could reduce or discharge completely the obligor's obligations to
repay amounts due on its account and, as a result, the related receivables would
be written off as uncollectible. See "Material 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
increases, collections of finance charge and administrative receivables may not
support the note interest rate. This could result in delayed or reduced payments
to you.
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 then-existing 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.
This prospectus uses some defined terms. You can find a glossary of terms
under the caption "Glossary of Terms for Prospectus" beginning on page 79 in
this prospectus.
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THE ISSUER
Advanta Business Card Master Trust is a common law trust created under the
laws of the State of Delaware. It is operated under a trust agreement, dated as
of August 1, 2000, between ABRC, as transferor, and Wilmington Trust Company, as
owner trustee. Advanta Business Card Master Trust is called the "ISSUER" or the
"TRUST" and Wilmington Trust Company, 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 August 1, 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 Wilmington Trust
Company, as owner trustee, at the following address: Rodney Square North, 1100
North Market Street, Wilmington, Delaware 19890.
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 corporation incorporated under the laws of the State of Nevada in
May, 1996. The articles of incorporation of ABRC limit its purpose and
activities to reduce the likelihood that a bankruptcy petition will be filed
concerning it. An entity which is structured in this manner is frequently called
bankruptcy remote. 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.
THE BANK'S CREDIT CARD ACTIVITIES
ADVANTA BUSINESS CARD PORTFOLIO
The receivables have been generated from transactions made by holders of
MasterCard(R) credit cards relating to accounts selected from 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 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 applicant. 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 customer's business 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
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- access to cash advances up to the full credit line at the same interest
rate as the interest rate on card purchases.
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. Purchase protection service is a form of warranty which
protects the customer from defective merchandise. The service is provided by an
independent third party. The receivables subject to this service do not differ
from other receivables. The provider of the purchase protection service will
reimburse the customer for the defective merchandise, if warranted. The customer
is still obligated to make payments on amounts due on its account.
The bank also offers on a limited basis for an annual fee a bonus miles
program whereby the customer 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 customer 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 applicants.
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.
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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.
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 applicants. 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 applicants 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 customer 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. These applicants 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 &
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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 an applicant, the bank's profile of that
applicant is limited to the information outlined above, including the FICO score
and possibly historical business information. As the bank compiles information
regarding the account obligor's 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 applicants. Hence, the bank periodically re-scores the
authorizing officer of the business who is an undersignor to the account 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 customer.
The bank does not report credit information on its cardholders and
customers 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 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
applicants, establishing the initial credit assessment of those applicants, and
monitoring cardholder and customer performance and behavior throughout the
account's life.
RISK BASED PRICING
Upon the completion of credit assessment and identification of potential
applicants 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
applicant may be eligible. The offer is not pre-approved and is subject to
verification of information provided by the applicant 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 applicant'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 22%. 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 17% and 21%.
With minimal notice, any account may be subject to re-pricing at the bank's
discretion, typically based upon changes in an account obligor's credit
standing. The credit line size may
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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 customer 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 customer, 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 customer provides that the
relevant seller may, after notice to a customer 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-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, collections of finance
charge and administrative receivables for any monthly period will be deemed to
include any interchange allocated to the receivables.
OPERATIONS
The bank's operations are organized and designed to support rapid product
introduction and customer 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.
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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
customer'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 customers as early as the first day the
customer 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 customer by telephone and by mail. Although such arrangements are
made infrequently, the bank may also enter into arrangements with customers to
extend or otherwise change payment schedules. Delinquency levels are monitored
by management of both the collections and asset quality departments 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 customers 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.
Beginning in the fourth quarter of 2000, the bank changed its charge off
policy for accounts for which the bank has received a notice of an obligor's
bankruptcy. In the past, the bank used a 90-day investigation period prior to
charge-off to determine whether the bank should challenge the obligor's
bankruptcy. Under the new policy, the accounts of obligors who declare
bankruptcy are charged-off within 60 days of receipt of notification of filing
from the bankruptcy court, or within the time frames adopted in the FFIEC
Uniform Retail Credit Classification and Account Management Policy, whichever is
shorter. Once an account is charged-off, it cannot revert to non-charged-off
status. 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.
BILLING AND PAYMENTS
First Data Resources, as the bank's service bureau, generates and mails to
customers monthly statements summarizing account activity. For the majority of
accounts, customers receive a 25-day grace period on purchases. All customers
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 customer's balance plus fees and any amounts past due.
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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 actual 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 customers without an annual fee. The
bank does, however, assess miscellaneous transaction fees, including cash
advance and draft fees, late and over-limit 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(R) 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.
THE TRUST PORTFOLIO
The assets of the trust include receivables generated through accounts
selected from the Advanta Business Card Portfolio owned by the bank or accounts
owned by another seller affiliated with the bank the receivables of which have
been transferred to the trust. These
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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, consisting of interest rate swaps,
currency swaps, credit swaps, interest rate caps or instruments called
bankruptcy options, under which a counterparty assumes the risk of an
increase in bankruptcies in exchange for payment, each such contract
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, over-limit 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 was selected on August 1, 2000 (the "INITIAL
CUT-OFF DATE") and designated to the trust. These accounts are the "INITIAL
DESIGNATED ACCOUNTS." On one or more future dates (each, an "ADDITIONAL CUT-OFF
DATE"), additional accounts may be designated for inclusion in the trust. The
initial cut-off date and each additional cut-off date are called "CUT-OFF DATES"
in this prospectus. The initial designated accounts and any additional 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 in additional
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
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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.
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
customers. 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 the
material 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 qualified by reference to 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 will be allocated collections of principal receivables, finance charge
and administrative receivables and defaulted receivables based on a specified
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.
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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 and reallocated principal
collections for notes of that series prior to that date.
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 of interest and principal will be made on payment dates to
noteholders in whose names the notes were registered on the business day prior
to 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 BENEFICIAL INTEREST"
which is an undivided beneficial interest in the trust and 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. We call the amount of
those cashflows the "TRANSFEROR INTEREST." The holder of the Transferor
Beneficial Interest, subject to certain limitations, will have the right to a
percentage, called the "TRANSFEROR PERCENTAGE," of all customer payments from
the receivables in the trust. The Transferor Beneficial 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 Beneficial Interest may be held either in
uncertificated form or in the form of a certificate representing the Transferor
Beneficial 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
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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 "-- Issuance of Additional
Series" and -- "Issuance of Additional Notes" 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.
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 or delivery 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.
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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 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
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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 notes 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 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 Euroclear Bank S.A./N.V. as
the Euroclear operator. All operations are conducted by the
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Euroclear operator, and all Euroclear securities clearance accounts and
Euroclear cash accounts are accounts with the Euroclear operator. 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.
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.
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 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 more
than 50% (or another percentage specified in the accompanying prospectus
supplement) of the then-outstanding principal amount of the notes of that
series 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
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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 twenty
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, to the
extent described in the accompanying prospectus supplement;
- 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
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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, principal will be
distributed to any class of the series in the amounts and on the dates specified
in the accompanying prospectus supplement.
During the controlled accumulation period, or, if specified in the
accompanying prospectus supplement, the early accumulation period, principal
will be accumulated in a trust account, called a "PRINCIPAL FUNDING ACCOUNT,"
established for the benefit of one or more specified classes 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 that are affiliates of the
bank 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 that are affiliates of the initial transferor
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.
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
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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 applicable cut-off date.
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 "Material 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
master trust has issued asset-backed securities in private transactions.
Receivables in that master trust will be conveyed to the trust that is the
issuer of the notes offered by this prospectus on or before the initial issuance
of a series of notes. Additional receivables in the predecessor master trust may
be conveyed to the trust in the future. Holders of one series of previously
issued securities, prior to the initial issuance of notes offered under this
prospectus, will receive in exchange for their old securities, notes issued by
the trust in a private transaction. In the future, other series of securities
privately-issued by the predecessor master trust may be exchanged for notes
issued by the trust. 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.
The issuance of future series will occur without prior review or consent by
you or any other noteholder. Upon the issuance of an additional series of notes,
none of the transferor, the servicer, the indenture trustee, the owner trustee
or the trust will be required or 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 then-existing 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,
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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 new 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;
- 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;
- 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
outstanding principal receivables previously transferred to the trust
exceeds the Required Minimum Principal Balance and (b) the Transferor
Interest exceeds the Required Transferor Interest.
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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 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.
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 an Adverse Effect on 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;
- 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.
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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:
(1) 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
(2) 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.
(3) as of the closing date, the transferor is validly existing and in good
standing and has the authority to consummate the issuance;
(4) the transfer and servicing agreement, the applicable receivables
purchase agreement and the order to the owner trustee to authenticate
and deliver the notes have been duly authorized by the transferor;
(5) the transfer and servicing agreement, the applicable receivables
purchase agreement and any assignment of additional accounts to which
it is a party constitutes a legal, valid and binding obligation
enforceable against the transferor;
(6) 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; and
(7) no selection procedures believed by such transferor to be materially
adverse to the interests of the noteholders have been used in selecting
the accounts designated to the trust.
In the event:
- any representation or warranty described in clauses (3), (4), (5), (6) or
(7) above is materially incorrect; and
- such breach has a material adverse effect on the receivables conveyed to
the trust;
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 on any day within the
applicable 60-day to 120-day cure period, the relevant representation and
warranty is then true and correct in all material respects and the 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 the 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 or transferred. If a
receivable in the trust portfolio is found to be ineligible when created or
transferred, and, as a result, the breach has a material adverse effect on the
interests of the noteholders in the receivables, the transferor must accept
reassignment of the receivables in the related account. 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 such reassigned ineligible
receivable will be treated as collected in full. 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
trust 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 applicable
cut-off date, each customer account originated by the seller:
- which was in existence and maintained by the seller;
- which is payable in United States dollars;
- the holder 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;
- the holder of which 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 not been sold or pledged to any other party except for any sale
to another account owner that has either entered into a receivables
purchase agreement or is an additional transferor;
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- which does not have receivables which have been sold or pledged by the
seller to any party other than the transferor or the trust under a
receivables purchase agreement or a transfer and servicing agreement;
- which does not have any receivables that are defaulted receivables; and
- which does not have any receivables that have been identified by the
servicer or the relevant customer as having been incurred as a result of
fraudulent use of any credit card.
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 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
and equitable considerations;
- 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, 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 in the
receivable; 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.
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ADDITION OF TRUST ASSETS
As described above under "The Trust Portfolio," the transferor will have
the right to voluntarily 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 below. In both cases, 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.
The transferor is required to designate additional eligible accounts to the
trust on a monthly basis, to the extent available, (a) to maintain the
Transferor Interest so that, during each period of 30 consecutive days specified
in the transfer and servicing agreement, the Transferor Interest averaged over
that period equals or exceeds the Required Transferor Interest for that same
period and (b) to maintain, for so long as notes of any series remain
outstanding, a total amount of principal receivables in the trust equal to or
greater than the Required Minimum Principal Balance, as adjusted for any series
having a paired series as described in the indenture supplement for that series.
The transferor has the right, from time to time, to designate, in its sole
discretion, additional eligible accounts to the trust.
Each additional account must be an eligible account on the applicable
cut-off date. 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 materially adverse to the interests of the noteholders in selecting
additional accounts from the available eligible accounts in the Advanta Business
Card Portfolio. Each seller will designate additional accounts on a random basis
from all available eligible accounts owned by that seller. 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.
The Transferor Interest on any date is equal to the difference between:
(a) the sum of
(i) the total amount of and (ii) the Excess Funding
principal Account balance on
receivables the immediately
in the trust on the prior day
immediately prior
day
minus
(b) the total Adjusted Invested Amounts of all series of notes then
outstanding.
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The "REQUIRED TRANSFEROR INTEREST" on any date will be calculated as
follows:
Required total amount
Transferor X of principal
Percentage receivables
in the trust
The "REQUIRED TRANSFEROR PERCENTAGE" initially is 7%, but the transferor
may reduce the percentage by giving 30 days prior notice to the indenture
trustee and each rating agency if (a) written confirmation is received from each
rating agency that such action will not result in a reduction or withdrawal of
its then-existing rating of any outstanding series or class of notes and (b) the
transferor delivers to the indenture trustee a certificate of an authorized
officer to the effect that the transferor reasonably believes that such
reduction will not have an Adverse Effect. In no event may the Required
Transferor Percentage be less than 2%.
The "REQUIRED MINIMUM PRINCIPAL BALANCE" is, unless otherwise provided in
the related indenture supplement, on any date, an amount equal to the sum of the
Invested Amounts for all outstanding series on that date, plus the Required
Transferor Interest on that date, minus the amount on deposit in the Excess
Funding Account.
In the case of both required additions of accounts and discretionary
additions of accounts, when the transferor transfers 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 applicable cut-off date, each additional account is an
eligible account;
- the transferor has delivered to the Indenture Trustee copies of UCC
financing statements, if necessary to perfect the trust's interest in
the receivables arising in the additional accounts;
- as of the date of assignment, called the "ADDITION DATE," and the
applicable cut-off 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 an Adverse Effect;
- delivery of certain opinions of counsel with respect to the transfer of
the receivables in the additional accounts to the trust;
- in circumstances where the transferor, in its discretion, designates
additional accounts to be included as accounts for the trust that are not
business revolving credit card accounts initially originated by the bank,
written confirmation from each rating agency that the addition will not
result in the reduction or withdrawal of its then-existing rating of any
outstanding series or class; and
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- in circumstances where the transferor, in its discretion, designates
additional accounts to be included as accounts for the trust, unless each
rating agency then rating any series or class of notes outstanding under
the trust shall have consented, (a) the number of additional accounts
designated during any of the three-month periods commencing in December,
March, June and September of each calendar year will not exceed the
percentage of the number of accounts as of the beginning of such calendar
year specified in the transfer and servicing agreement and (b) the number
of additional accounts designated during any calendar year will not
exceed the percentage of the number of accounts as of the beginning of
such calendar year specified in the transfer and servicing agreement.
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.
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 accounts 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 then-existing 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 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.
Removed accounts usually will be selected on a random basis from all previously
designated accounts. A non-random basis of selection for removal will be used
only in special circumstances, such as the end of a co-branding program, when
those accounts may be removed.
Upon satisfaction of the above conditions, the trust will execute and
deliver to the transferor or its designee a written reassignment and will,
without further action, be deemed to 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
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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.
On the date on which a receivable becomes a defaulted receivable, the trust
will automatically be deemed to transfer that receivable to the transferor.
Recoveries on any defaulted receivable will be treated as collections of finance
charge and administrative receivables.
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 bank as servicer or any new servicer is called
the "SERVICER."
ADJUSTMENTS
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 customer,
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 percentage or amount required in the transfer and
servicing agreement, the indenture or the indenture supplement to be calculated
by reference to the amount of principal receivables 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 or amount required in the transfer and servicing agreement, the
indenture or the indenture supplement to be calculated by reference to the
amount of principal receivables 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, 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,"
into which the servicer will deposit collections on the receivables and other
amounts described herein. The collection account will be either (a) a segregated
account with an eligible institution or (b) a segregated trust account with the
corporate trust department of a depository institution organized under the laws
of the United
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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 series or class
of notes. An account that meets these requirements is called a "QUALIFIED
ACCOUNT."
The collection account will initially be maintained with the indenture
trustee. If at any time the collection account ceases to be a qualified account,
the indenture trustee will move the collection account to another eligible
institution so that it will again be a qualified account.
The servicer will also establish and maintain with an eligible institution
in the name of the indenture trustee for the benefit of noteholders of all
series, an "EXCESS FUNDING ACCOUNT," which also is required to be a qualified
account.
An "ELIGIBLE INSTITUTION" is either:
- a depository institution, including the owner trustee or the indenture
trustee
- that is 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) has FDIC deposit insurance 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 the appointment of which would not result in the
reduction or withdrawal by any rating agency of its then-existing rating
of any outstanding series or class.
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:
(1) direct obligations of, or obligations fully guaranteed as to timely
payment of principal and interest by, the United States of America;
(2) 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 of the 50 states 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 rating
category of at least one of the rating agencies rating each series or
class of notes;
(3) 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 each series or a class of notes;
(4) 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 each series or class of notes;
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(5) notes or bankers' acceptances (having original maturities of no more
than 365 days) issued by any depository institution or trust company
referred to in clause (2) above;
(6) 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 each series or class of notes (including funds for
which the indenture trustee or any of its affiliates is investment
manager or advisor);
(7) time deposits (having maturities not later than the next payment date)
other than those referred to in clause (4) above, with a person whose
commercial paper has a credit rating satisfactory to at least one of
the rating agencies rating each series or class of notes; or
(8) any other investment upon receipt of written confirmation from each
rating agency rating a series or class of notes that the additional
form of investment will not result in a reduction or withdrawal of its
then-existing 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 which have been added to the
account in the related monthly period 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 at the time of its issuance 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 commencement of an early amortization period;
- 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 and maintained 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. The funding period will not be longer than one year.
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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
- what other events, if any, will occur if the end of the funding period is
reached before the full Invested Amount is funded.
The monthly reports provided to noteholders will include a line item which will
describe the balance in the pre-funding account as of the end of the monthly
period, any amounts withdrawn from the pre-funding account during the monthly
period, and the interest earned on the pre-funding account during the monthly
period. The Servicer will file a Form 8-K with the SEC following termination of
the funding period containing updated trust portfolio composition information.
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
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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:
- no pay out event has occurred; and
- either: (i) the servicer maintains a long or short term rating which is
satisfactory to each rating agency; or (ii) 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 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 and pay such amount pursuant to the transaction
documents. The servicer may retain its servicing fee for any series and will not
be required to deposit it in the collection account.
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 Beneficial Interest. However, collections of principal
receivables allocable to the holders of the Transferor Beneficial
Interest will be:
- paid to the holders of the Transferor Beneficial Interest 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:
- first, if the series is identified in the prospectus supplement for
that series as part of a group of series that shares principal
collections, paid as shared principal collections to other series in
that group to the extent specified in the prospectus supplement; and
- second, paid or held for payment to the holders of the Transferor
Beneficial Interest; provided that collections of principal receivables
will be:
- paid to the holders of the Transferor Beneficial Interest only if the
Transferor Interest is greater than the Required Transferor Interest;
or
- otherwise 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
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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:
- first, if the series is identified in the prospectus supplement for
that series as part of a group of series that shares principal
collections, paid as shared principal collections to other series in
that group to the extent specified in the prospectus supplement; and
- second, paid or held for payment to the holders of the Transferor
Beneficial Interest; provided that collections of principal receivables
will be:
- paid to the holders of the Transferor Beneficial Interest only if
the Transferor Interest is greater than the Required Transferor
Interest; or
- otherwise deposited in the Excess Funding Account.
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
Beneficial Interest because the Transferor Interest is less than the Required
Transferor Interest as described above, together with any adjustment payments as
described under "-- Adjustments" above, will be paid to and held in the Excess
Funding Account and paid to the holders of the Transferor Beneficial Interest
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
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
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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. Once principal
receivables from one series are made available to another series, the series
providing the excess principal receivables is not entitled to recoup those
amounts. 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. 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 Beneficial 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 Investor Default Amount 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
available series enhancement amounts and other sources specified in the
accompanying prospectus supplement, but not more than the lesser of the
Investor Default Amount and the Invested Amount.
For each series of notes, the Invested Amount will be reduced by the amount
of Investor Charge-Offs for any monthly period, but not by more than the lesser
of the Investor Default Amount and the Invested Amount. 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.
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FINAL PAYMENT OF PRINCIPAL; TERMINATION
For each series, the servicer 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 (a) if the repurchase occurs on a payment
date, the sum of the following amounts on the payment date and (b) if the
repurchase occurs on any other day, the sum of the following amounts on the
payment date following such day:
- 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 servicer's repurchase option.
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 payment
of the repurchase price, optional reassignment of the receivables 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.
Upon the retirement of a series of notes, upon optional repurchase or
otherwise, there will be no continuing direct or indirect liability of the trust
or noteholders to the holders of the Transferor Beneficial Interest.
Unless the servicer and the holder of the Transferor Beneficial Interest
instruct the indenture trustee otherwise, the trust will terminate on the
earlier of (a) the date designated by the transferor, but no earlier than the
day on which the rights of all series to receive payments from the trust have
terminated and (b) the date of dissolution of the trust in accordance with
applicable law. This date is called the "TRUST TERMINATION DATE." Upon the
termination of the trust and the surrender of the Transferor Beneficial
Interest, the indenture trustee shall convey to the holders of the Transferor
Beneficial Interest 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
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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 or accumulated funds for a
principal payment and will amortize or accumulate in the future.
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.
We cannot assure you that the terms of a paired series will not have an
adverse impact on the timing or amount of payments allocated to your series. If
an early amortization period or an early accumulation period occurs for a paired
series while your series is outstanding, the percentage of receivables allocated
to your series may be reduced if the terms of the indenture supplement relating
to the paired series requires that the paired series also receive its share of
principal collections. In addition, if an early amortization period or early
accumulation period occurs for your series, the percentage of receivables
allocated to the paired series may be reduced until your series is paid in full.
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, the seller or
the servicer;
- 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 business day before 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
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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.
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
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will not result in a reduction or withdrawal of its then-existing 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, 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. The
servicer also has the right to appoint one or more sub-servicers in accordance
with the terms of the transfer and servicing agreement. Notwithstanding any such
delegation to any entity or sub-servicing arrangement, 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 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.
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 cause the owner trustee
to note on the books and records of the trust the new percentage of the
Transferor Beneficial Interest owned by it and owned by the additional
transferor or the transferor will exchange the transferor certificate for a
newly issued transferor certificate modified to reflect any additional interest
in the Transferor Beneficial Interest. The transfer and servicing agreement may
be amended to permit the designation of these additional transferors and the
division of the Transferor Beneficial Interest or 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 certificate
of an authorized officer of the transferor to the effect that in the
transferor's reasonable belief, such amendment will not have an Adverse
Effect; 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.
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 any
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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 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.
The trust agreement provides that the transferor may transfer its interest
in all or a portion of the Transferor Beneficial Interest by exchanging its
interest for a new Transferor Beneficial Interest and a second interest, called
a "SUPPLEMENTAL BENEFICIAL INTEREST." The Supplemental Beneficial Interest may
be held either in an uncertificated form or in the form of a certificate
representing the Supplemental Beneficial Interest, called a "supplemental
certificate." The terms of the Supplemental Beneficial Interest must be defined
in a supplement to the trust agreement. Except for transfers to affiliates of
the transferor, before a Supplemental Beneficial Interest 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 then-existing rating of any
outstanding series or class;
- The exchange will not result in an Adverse Effect and 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;
and
- the total amount of principal receivables in the trust portfolio must
exceed the Required Minimum Principal Balance on the date of the
exchange.
Except for transfers to affiliates of the transferor, no Supplemental
Beneficial Interest 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.
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, on the following conditions:
- if the transferor or servicer, as the case may be, is not the surviving
entity, execution of an agreement relating to the succession that
supplements the transfer and servicing agreement;
- in the case of a transaction 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 then-existing rating of any outstanding series or class; and
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- in the case of a transaction 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) the successor must be 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:
(1) 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,
within 5 business days of the required date under the transfer and
servicing agreement, the indenture or any indenture supplement;
(2) 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, if the failure:
(a) has an Adverse Effect; and
(b) 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 10% 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, 10% or more of the
then-outstanding principal balance of all series affected);
(3) the servicer assigns or delegates its duties, except as specifically
permitted under the transfer and servicing agreement;
(4) 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:
(a) has an Adverse Effect; and
(b) continues to have an Adverse Effect 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 10% 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, 10% or more of the then-outstanding principal balance of all
series affected);
(5) specific bankruptcy, insolvency, liquidation, conservatorship,
receivership or similar events relating to the servicer; or
(6) any other event specified in the accompanying prospectus supplement.
Notwithstanding the foregoing, a delay in or failure of performance
referred to in clause (1) above for a period of 10 business days after the
applicable grace period, or referred to in
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clause (2), (3) or (4) 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 upon the written direction of
noteholders holding more than 50% of the then-outstanding amount of the notes.
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 within sixty days of notice of termination of the servicer
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 a
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.
Periodic information to noteholders generally will include:
- the total amount paid;
- the amount paid allocable to principal;
- the amount paid allocable to interest;
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- 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;
- if the series or a class of the series bears interest at a floating or
variable rate, information relating to that rate, and
- if the series has a funding period, the period ending balance in the
pre-funding account, the amount withdrawn from the pre-funding account to
date and the amount of interest earned on the pre-funding account during
the monthly period.
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 September
30 of each calendar year, the servicer will have a firm of independent certified
public accountants furnish reports showing that, for the prior one-year period
ending June 30 of such calendar year:
- the accounting firm has applied certain agreed upon procedures and has
examined certain documents and records pertaining to the servicing of the
accounts and that nothing has come to that firm's attention that has
caused it to believe that the servicing has not been conducted in
compliance with the transfer and servicing agreement, except for
specified exceptions, and
- the accounting firm has compared certain amounts set forth in the
periodic reports prepared by the servicer for the prior one-year period
ending June 30 of such calendar year with the servicer's computer reports
and that, in the accounting firm's opinion, the amounts are in agreement,
except for any specified exceptions,
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The transfer and servicing agreement also provides that by September 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 trust, without the consent of the indenture trustee, any series
enhancer 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 an Adverse Effect; and
- receipt of written confirmation from each rating agency that the
amendment will not result in a reduction or withdrawal of its
then-existing rating of any outstanding series or class.
The transfer and servicing agreement may also be amended by the servicer
and the trust 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 (the "CODE") 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
then-existing 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 transfer and servicing agreement may also be amended by the transferor,
the servicer and the trust with the consent of noteholders holding at least
66 2/3% of the then-outstanding principal amount of the notes of all series
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) or deposits of amounts to be
distributed; or
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- the amount available under any series enhancement, in each case,
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 66 2/3% of
the then-outstanding principal amount of the notes of each affected
series or class offered under this prospectus.
THE INDENTURE
The following summarizes the material terms of the indenture and is
qualified in its entirety by reference to the indenture. The laws of the State
of New York will govern 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:
(1) the trust fails to pay principal when it becomes due and payable on the
series termination date for that series of notes;
(2) the trust fails to pay interest when it becomes due and payable and the
default continues for a period of 35 days;
(3) certain bankruptcy, insolvency, conservatorship, receivership,
liquidation or similar events relating to the trust;
(4) 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
(5) 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, other than an event of default described in clause
(3) above, 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 all the notes of that series to be
immediately due and payable. If an event of default described in clause (3)
above should occur and be continuing, the unpaid principal and interest due on
the
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notes shall be immediately due and payable. These declarations may, under
certain circumstances, be rescinded by noteholders holding more than 50% of the
then-outstanding principal amount 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 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 66 2/3% 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. The indenture trustee may apply funds in the
collection account, the Excess Funding Account and other trust accounts for a
series of notes that have been accelerated 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 indemnification satisfactory 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.
However, notwithstanding the foregoing, each noteholder has the absolute
and unconditional right to receive payment of the principal of and interest on
its notes at the time principal or interest is due and to institute suit for the
enforcement of payment. This right may not be impaired without the consent of
each noteholder.
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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, if any series of notes has been accelerated following an
event of default, the indenture trustee may:
- institute proceedings in its own name for the collection of all amounts
then payable on the notes of the affected series; or
- 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
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 two conditions:
- the indenture trustee receives the consent of all noteholders of the
affected series; or
- 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.
The indenture trustee must also have 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
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 being deemed an
association or 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
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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.
The remedies described above are the exclusive remedies available to the
noteholders upon an event of default. The indenture trustee and each noteholder,
by its acceptance of an interest in any note, waive any other remedy that may be
available under the Uniform Commercial Code as then in effect in any applicable
jurisdiction.
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 or transfer its properties or assets to, another entity, unless:
- the entity formed by or surviving the consolidation or merger, or that
acquires the trust's properties or assets, is organized under the laws of
the United States, any state thereof or the District of Columbia;
- the successor entity is not subject to regulation as an investment
company under the Investment Company Act of 1940;
- the successor 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 and to
make all required filings with the Securities and Exchange Commission;
- 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
then-existing rating of any outstanding series or class;
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- the trust has received a tax opinion and an opinion of counsel to the
effect that the transaction 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;
- the trust has delivered to the indenture trustee an opinion of counsel
and officer's certificate each stating that the transaction satisfies all
requirements under the indenture and that the supplemental indenture is
duly authorized, executed and delivered and is valid, binding and
enforceable;
- in the case of a sale or transfer of the trust's properties or assets,
the acquiring entity expressly agrees, by supplemental indenture, that
all right, title and interest so acquired shall be subject and
subordinate to the rights of noteholders, to indemnify the trust and to
make all required filings with the Securities and Exchange Commission;
As long as the notes are outstanding, the trust will not:
- 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 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 any
noteholders but with prior written notice to each rating agency, enter into one
or more supplemental indentures for any of the following purposes:
- to correct or enhance the description of any property subject to the lien
of the indenture, or to take any action that will enhance the indenture
trustee's lien under the indenture, or to add to the property pledged to
secure the notes;
- to reflect the agreement of another person to assume the role of the
trust.
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- to add to the covenants of the trust, for the benefit of the noteholders,
or to surrender any right or power of the trust;
- to transfer or pledge any property to the indenture trustee;
- to cure any ambiguity, to correct or supplement any provision in the
indenture or in any supplemental indenture that may be inconsistent with
any other provision in the indenture or in any supplemental indenture as
long as that action would not adversely affect the interests of the
noteholders;
- to appoint a successor to the indenture trustee with respect to the notes
and to add to or change any of the provisions of the indenture to allow
more than one indenture trustee to act under the indenture;
- to modify, eliminate or add to the provisions of the indenture as
necessary to qualify the indenture under the Trust Indenture Act of 1939
or any similar federal statute later enacted;
- to permit the issuance of one or more new series of notes in accordance
with the indenture; or
- to terminate any interest rate swap agreement or other credit enhancement
in accordance with the related indenture supplement.
The trust and the indenture trustee may also, without the consent of any
noteholders, 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 a certificate of an authorized officer of the transferor to
the effect that the requirements under the indenture applicable to the
proposed amendment have been met and in the transferor's reasonable
belief, the amendment will not have an Adverse Effect; and
- delivery of a tax opinion to each rating agency.
The trust and the indenture trustee may also, without the consent of the
noteholders of any series or the series enhancers for any series, enter into one
or more supplemental indentures 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 Code
and (ii) to 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 indenture 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
then-existing 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 indenture.
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The trust and the indenture trustee will not, without the receipt of
written confirmation from each rating agency that the amendment will not result
in a reduction or withdrawal of its then-existing rating of any outstanding
series or class and without the consent of each noteholder affected, 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 (a) for execution of any
supplemental indenture or (b) 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 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 provisions of the indenture prohibiting the voting of notes held
by the trust, any other party obligated on the notes, the seller or any
other account owner or any of their affiliates; or
- permit the creation of any lien superior or equal to the lien of the
indenture with respect to any of the trust assets or, except as otherwise
permitted or contemplated in the indenture, terminate the lien of 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.
LIST OF NOTEHOLDERS
Under the indenture, noteholders have the right to communicate with other
noteholders in accordance with the requirements of the Trust Indenture Act of
1939.
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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 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, if the indenture
trustee becomes insolvent or otherwise becomes legally unable to act as
indenture trustee. 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.
SERIES 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
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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."
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
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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. Any guaranty will be a guaranty of payment on the underlying
receivables, not a guaranty of payment on the notes.
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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.
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DESCRIPTION OF THE RECEIVABLES PURCHASE AGREEMENT
Following is a summary of the material terms of the receivables purchase
agreement entered into by the bank and ABRC. The summary is qualified in its
entirety by reference to the receivables purchase agreement. 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 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 indenture trustee 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 initial closing date and
in additional accounts as of the applicable addition date 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 applicable
addition date, 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 additional
cut-off date, 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 to be
paid by the seller for the ineligible receivables will be equal to the purchase
price to be paid by the transferor for such ineligible receivables under the
transfer and servicing agreement.
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 the applicable addition date (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 closing date and, with
respect to any receivables in any designated additional accounts, as of the
applicable addition date 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 retransfer 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.
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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 change or modify the purchase price to be paid to the seller for
the receivables 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 then-existing rating of any outstanding series or
class and the seller has delivered to the transferor a certificate of an
authorized officer of the seller to the effect that the seller reasonably
believes that such action will not have an Adverse Effect, unless the owner
trustee and the indenture trustee have consented to the amendment.
Termination. The receivables purchase agreement will terminate immediately
after the trust terminates. In addition, if a receiver or conservator is
appointed for any seller that is a bank or any seller 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
principal receivables to the transferor and will promptly give notice of that
event to the transferor, the owner trustee and the indenture trustee.
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.
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MATERIAL 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 Beneficial Interest, 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, Delaware, 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, Delaware, Utah and
Nevada, and to the extent that Article 9 is applicable, the filing of
appropriate financing statements is required to perfect the sale of such
receivables or the transfer of such receivables as security for an obligation 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.
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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 ACCOUNT OBLIGORS 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 an
obligor, such as a customer, 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 obligor and any defense or claim arising therefrom, to rights of
set off and to any other defense or claim of the obligor against the seller that
accrues before the obligor receives notification of the assignment. The UCC also
provides that any obligor, such as a customer, is authorized to continue to pay
the seller until (a) the obligor 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 obligor, 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 obligors 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 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
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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 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
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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 the material United States federal income
tax consequences of the purchase, ownership and disposition of 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 Code, as amended 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, we suggest that persons considering
the purchase of notes consult their own tax advisors with regard to the United
States federal income tax consequences of an investment in
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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, special tax counsel is of the opinion
that 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 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.
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CONSEQUENCES TO HOLDERS OF THE NOTES
Interest and Original Issue Discount. In general, stated interest on a
note will be includable in gross income as it accrues or is received in
accordance with a noteholder's usual method of tax accounting. If a class of
notes is issued with original issue discount ("OID"), the provisions of Sections
1271 through 1273 and 1275 of the Code will apply to those notes. Under those
provisions, a holder of such a note (including a cash basis holder) generally
would be required to include the OID on a note in income for federal income tax
purposes on a constant yield basis, resulting in the inclusion of OID in income
in advance of the receipt of cash attributable to that income. In general, a
note will be treated as having OID to the extent that its "stated redemption
price" exceeds its "issue price," if such excess equals or exceeds 0.25 percent
multiplied by the weighted average life of the note (determined by taking into
account the number of complete years following issuance until payment is made
for each partial principal payment). Under Section 1272(a) (6) of the Code,
special provisions apply to debt instruments on which payments may be
accelerated due to prepayments of other obligations securing those debt
instruments. However, no regulations have been issued interpreting those
provisions, and the manner in which those provisions would apply to the notes is
unclear, but the application of Section 1272(a) (6) could affect the rate of
accrual of OID and could have other consequences to holders of the notes.
Additionally, the IRS could take the position based on Treasury regulations that
none of the interest payable on a note is "unconditionally payable" and hence
that all of such interest should be included in the note's stated redemption
price at maturity. If sustained, such treatment should not significantly affect
tax liabilities for most holders of the notes, but prospective noteholders
should consult their own tax advisors concerning the impact to them in their
particular circumstances. The 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 includable 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.
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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 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. WE SUGGEST THAT PROSPECTIVE PURCHASERS CONSULT THEIR
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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, LOCAL AND FOREIGN 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, local or foreign tax law. We suggest that each investor
consult its own tax adviser regarding state, local and foreign 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 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.
We suggest that fiduciaries or other persons contemplating purchasing the
notes on behalf of or with plan assets of any plan 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 persons using plan assets to purchase
notes 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.
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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.
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
ABRC 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.
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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 and ABRC 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 and
ABRC'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 and ABRC 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 and ABRC 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 and ABRC incorporate by reference
any future annual, monthly and special SEC reports and proxy materials filed by
or on behalf of the trust and ABRC until the trust terminates its offering of
the notes. The documents incorporated by reference will be filed with the SEC
under the name of Advanta Business Card Master Trust and Advanta Business
Receivables Corp.
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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GLOSSARY OF TERMS FOR PROSPECTUS
"ABRC" means Advanta Business Receivables Corp., a Nevada corporation.
"ADDITION DATE" means the date of assignment of receivables in each additional
account to the trust.
"ADDITIONAL ISSUANCE" means each issuance of additional notes of an outstanding
series of notes.
"ADJUSTED INVESTED AMOUNT" means on any date for any series the Invested Amount
on that date, minus the amount on deposit in the specified trust account, as
described in the indenture supplement for that series.
"ADMINISTRATOR" means the bank, in its capacity as administrator under the
administration agreement, dated as of August 1, 2000, between the administrator
and the trust.
"ADVANTA BUSINESS CARD PORTFOLIO" means the portfolio of credit card accounts
originated by the bank.
"ADVERSE EFFECT" means, with respect to any action, that the action will (a)
materially and adversely affect the amount or timing of payments made to the
noteholders of any series or class or (b) result in the occurrence of a Pay Out
Event or an Event of Default.
"BANK" means Advanta Bank Corp., a Utah industrial loan corporation.
"CASH COLLATERAL ACCOUNT" means either an account securing a cash collateral
guaranty into which cash or permitted investments are held or an account that is
series enhancement for a series of notes.
"CASH COLLATERAL GUARANTY" means series enhancement in the form of a guaranty
secured by the deposit of cash or certain permitted investments for a series or
one or more classes.
"CODE" means the Internal Revenue Code of 1986.
"COLLECTION ACCOUNT" means an account established and maintained by the servicer
in the name of the indenture trustee, for the benefit of noteholders of all
series, into which the servicer will deposit collections on the receivables and
other specified amounts. The collection account will be a qualified account.
"CONTROLLED AMORTIZATION PERIOD" means the period during which principal is paid
on the notes in fixed amounts at scheduled intervals.
"CONTROLLED ACCUMULATION PERIOD" means the period during which principal is
accumulated in specified amounts per month and paid on an Expected Principal
Payment Date.
"DEFAULTED RECEIVABLES" means principal receivables which in a monthly period
are 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.
"DEFINITIVE NOTES" means notes that are issued in fully registered, certificated
form.
"DEPOSITARIES" means DTC, Clearstream Banking or Euroclear.
"DETERMINATION DATE" means the third business day preceding the fifteenth day of
each calendar month, unless otherwise specified in the prospectus supplement for
a series of notes.
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"EARLY ACCUMULATION PERIOD" means the period during which principal on the
receivables is accumulated each month based on the amount of principal
receivables collected following a pay out event.
"EARLY AMORTIZATION PERIOD" means the period during which principal is paid each
month based on the amount of principal receivables collected following a pay out
event.
"ELIGIBLE ACCOUNT" means, for each series of notes, as of the cut-off date, each
account originated by the seller
- which was in existence and maintained by the seller;
- 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;
- the cardholder of which 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 does not have any receivables that are defaulted receivables;
- which has not been sold or pledged to any other party except for any sale
to another account owner that has either entered into a receivables
purchase agreement or is an additional transferor;
- which does not have receivables which have been sold or pledged by the
seller to any party other than the transferor or the trust under a
receivables purchase agreement or a transfer and servicing agreement; and
- 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.
"ELIGIBLE INSTITUTION" means either:
- a depository institution, including the owner trustee or the indenture
trustee, that is 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) has FDIC deposit insurance 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 the appointment of which would not result in the
reduction or withdrawal by any rating agency of its then-existing rating
of any outstanding series or class.
"ELIGIBLE INVESTMENTS" means securities, instruments, security entitlements or
other investment property which evidence:
- direct obligations of, or 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
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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 rating
category of at least one of the rating agencies rating each series or
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
each series or 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 each series or 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 each series or class of notes (including funds for which
the indenture trustee or any of its affiliates is investment manager or
advisor);
- 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 each series or class of notes; or
- any other investment upon receipt of written confirmation from each
rating agency rating a series or 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.
"ELIGIBLE RECEIVABLE" means, for each series of notes, 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
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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
and equitable considerations;
- 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, 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.
"ENHANCEMENT INVESTED AMOUNT" means the interest the series enhancer will have
in certain cash flows in respect of the receivables to the extent described in
the applicable prospectus supplement, if the prospectus supplement specifies
that series enhancement may be available to pay principal of the notes following
the occurrence of certain pay out events.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"EVENTS OF DEFAULT" means, under the indenture, and with respect to the notes of
any series, 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.
"EXCESS FUNDING ACCOUNT" means an account established and maintained by the
servicer in the name of the indenture trustee, which will be a qualified
account.
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"EXPECTED PRINCIPAL PAYMENT DATE" means the date specified in the prospectus
supplement for a class of notes on which amounts on deposit in the principal
funding account will be paid to the noteholders.
"FDIA" means the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989.
"FDIC" means the Federal Deposit Insurance Corporation.
"FINANCE CHARGE AND ADMINISTRATIVE RECEIVABLES" are periodic finance charges,
and annual membership fees and service charges, late fees, over-limit 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."
"FORECLOSURE CERTIFICATE" means 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 accelerated.
"FUNDING PERIOD" means the period from a series' closing date to the earlier of
(i) the date that series' Invested Amount equals the principal amount of that
series of notes, or (ii) the date specified in the related prospectus
supplement.
"INITIAL DESIGNATED ACCOUNTS" means the group of eligible accounts that were
designated on the initial cut-off date to the trust.
"INITIAL CUT-OFF DATE" means August 1, 2000.
"INTERCHANGE" means certain fees received by creditors participating in the
Mastercard and VISA associations as partial compensation for taking credit risk,
absorbing fraud losses and funding receivables for a limited period prior to
initial billing.
"INVESTED AMOUNT" for a series of notes on any date will mean a sum 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;
and minus
- - the amount of unreimbursed Investor Charge-Offs and reallocated principal
collections for notes of that series prior to that date.
"INVESTOR CHARGE-OFFS" means, for any monthly period, and for any series or
class, the amount by which: (a) the Investor Default Amount 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 available series enhancement amounts
and other sources specified in the accompanying prospectus supplement, but not
more than the lesser of the Investor Default Amount and the Invested Amount.
"INVESTOR DEFAULT AMOUNT" means the aggregate amount of the Investor Percentage
of principal receivables that are defaulted receivables.
"INVESTOR PERCENTAGE" means a specified percentage of collections of principal
receivables, finance charge and administrative receivables and defaulted
receivables allocated to each series of notes.
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"ISSUER" means Advanta Business Card Master Trust, a Delaware common law trust.
"L/C BANK" means the issuer of a letter of credit, if a series enhancer has
issued a letter of credit.
"MEMBER BANK" means a bank under contract with MasterCard or VISA to issue
credit cards.
"NOTE OWNER" means the owner of beneficial interests in the notes of a series
held in book-entry form.
"OWNER TRUSTEE" means Wilmington Trust Company, a Delaware banking corporation,
in its capacity as owner trustee of the issuer.
"PAIRED SERIES" means each of the series specified in the applicable prospectus
supplements as being 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.
"PARTIES IN INTEREST" means persons that are "parties in interest" under ERISA
or "disqualified persons" under the Code.
"PAYING AGENT" means 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.
"PLAN" means any employee benefit or other plan that is subject to ERISA or
Section 4975 of the Code.
"PRE-FUNDING ACCOUNT" means a trust account established and maintained with the
indenture trustee for the benefit of the noteholders of a series that has a
funding period into which the portion of the Invested Amount not invested in
receivables will be maintained.
"PRINCIPAL FUNDING ACCOUNT" means the trust account, established for the benefit
of one or more specified classes of noteholders in which principal is
accumulated for later distribution to noteholders.
"PRINCIPAL RECEIVABLES" are amounts charged by cardholders for merchandise,
services, cash advances and balance transfers.
"QUALIFIED ACCOUNT" means an 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 such 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.
"RATING AGENCY" means a rating agency selected by the transferor to rate the
notes of a series or class issued by the trust.
"RECOVERIES" means net recovery amounts for defaulted receivables.
"REQUIRED MINIMUM PRINCIPAL BALANCE" means on any date for all series (unless
otherwise specified in the related indenture supplement for any series which is
a paired series) (i) the sum of the Invested Amounts for all series on that
date, plus (ii) the Required Transferor Interest on that date, minus (iii) the
amount on deposit in the Excess Funding Account.
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"REQUIRED TRANSFEROR INTEREST" means on any date, the Required Transferor
Percentage times the total amount of principal receivables in the trust.
"REQUIRED TRANSFEROR PERCENTAGE" initially means 7%; but the transferor may
reduce the percentage by giving 30 days prior notice to the indenture trustee
and each rating agency if (a) written confirmation is received from each rating
agency that such action will not result in a reduction or withdrawal of its
then-existing rating of any outstanding series or class of notes and (b) the
transferor delivers to the indenture trustee a certificate of an authorized
officer to the effect that the transferor reasonably believes that such
reduction will not have an Adverse Effect. In no event may the Required
Transferor Percentage be less than 2%.
"RESERVE ACCOUNT" means an account established as credit enhancement for a
series of notes to assist with payment of principal or interest on a series or
class of notes or any other amount owing on any series enhancement in the manner
described in a prospectus supplement.
"REVOLVING PERIOD" means the period, for each series, when no principal is paid
or accumulated, which begins on the closing date for a series and ends on the
day before an amortization period or accumulation period begins.
"SELLER" means, collectively, the bank and any additional sellers.
"SERIES TERMINATION DATE" means the latest date by which principal and interest
for that series can be paid.
"SERIES ENHANCEMENT PERCENTAGE" means the payments made by the servicer to any
series enhancer, as may be described in the related prospectus supplement.
"SERIES ENHANCER" means the provider of third party series enhancement.
"SERIES PAY OUT EVENT" means, with respect to any particular series, the
occurrence of any event, in addition to a trust pay out event, specified as a
pay out event in the prospectus supplement for that series.
"SERIES ENHANCEMENT" means credit enhancement for a series.
"SERVICER DEFAULT" means the following:
(1) 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, within 5
business days of the required date under the transfer and servicing
agreement, the indenture or any indenture supplement;
(2) 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:
(a) has an Adverse Effect; and
(b) 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 10% 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, 10% or more of the then-outstanding principal
balance of all series affected);
(3) the service assigns or delegates its duties, except as specifically
permitted under the transfer and servicing agreement;
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(4) 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 when made if
it:
(a) has an Adverse Effect; and
(b) continues to have an Adverse Effect 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 10% 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, 10% or more of the
then-outstanding principal balance of all series affected);
(5) specific bankruptcy, insolvency, liquidation, conservatorship, receivership
or similar events relating to the servicer; or
(6) any other event specified in the accompanying prospectus supplement.
Notwithstanding the foregoing, a delay in or failure of performance referred to
in clause (1) above for a period of 10 business days after the applicable grace
period, or referred to in clause (2), (3) or (4) 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.
"SERVICER" means the bank or any successor servicer that is responsible for
servicing and administering the receivables in the trust.
"SHARED FINANCE CHARGE COLLECTIONS" means, for a series identified in a
prospectus supplement as included in a group, collections of finance charge and
administrative receivables in the trust portfolio allocated to that series in
excess of the amount needed to make deposits or payments for that series that
may be shared with other series identified in the prospectus supplements for
those other series as included in the same group.
"SHARED PRINCIPAL COLLECTIONS" means an amount of principal receivables
allocated to a series in excess of the amount needed for deposit or distribution
that is made available to other series to make principal payments or deposits
required by those other series.
"SPECIAL TAX COUNSEL" means Wolf, Block, Schorr and Solis-Cohen LLP, as special
tax counsel to the issuer.
"SPREAD ACCOUNT" means an account that provides series enhancement for a series
or class of notes that is intended to assist with payment of interest and
principal in the manner described in a prospectus supplement and funded by the
periodic deposit of certain available excess cash flow from the trust assets.
"SUPPLEMENTAL BENEFICIAL INTEREST" means an undivided beneficial interest in the
trust created in exchange, in part, upon the surrender by the transferor of its
Transferor Beneficial Interest.
"SUPPLEMENTAL CERTIFICATE" means a certificate issued in exchange, in part, for
a transferor certificate.
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"TAX OPINION" means we respect to any action, an opinion of counsel to the
effect that, for federal income tax purposes, (a) such action will not adversely
affect the tax characterization as debt of the notes of any outstanding series
or class that were characterized as debt at the time of their issuance, (b) such
action will not cause the trust to be deemed an association (or publicly traded
partnership) taxable as a corporation and (c) such action will not cause or
constitute an event in which gain or loss would be recognized by any noteholder.
"TRANSFEROR" means, collectively, ABRC, any additional transferors and any
sellers that transfer receivables directly to the trust.
"TRANSFEROR BENEFICIAL INTEREST" means an undivided beneficial interest in the
trust initially owned by the transferor which entitles the holder 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.
"TRANSFEROR CERTIFICATE" means a certificate representing the Transferor
Beneficial Interest if the Transferor Beneficial Interest is held in
certificated form.
"TRANSFEROR INTEREST" means on any date an amount equal to the aggregate balance
of principal receivables at the end of the prior day, plus the amount on deposit
in the Excess Funding Account at the end of the prior day, minus the total
Adjusted Invested Amounts of all then-outstanding series of notes.
"TRANSFEROR PERCENTAGE" means the percentage of all customer payments from the
receivables in the trust the right to which is owned by the holder of the
Transferor Beneficial Interest. 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.
"TRUST" means Advanta Business Card Master Trust, a Delaware common law trust.
"TRUST PAY OUT EVENT" means, with respect to all series issued by the trust, 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, the seller or the servicer;
- - 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.
"TRUST PORTFOLIO" means designated accounts selected from the Advanta Business
Card Portfolio owned by the bank or another seller that generates receivables
transferred to the trust.
"TRUST TERMINATION DATE" means the earlier of (a) the date designated by the
transferor, which may be no earlier than the day on which the rights of all
series to receive payments from the trust have terminated and (b) the date of
dissolution of the trust.
"UNALLOCATED PRINCIPAL COLLECTIONS" means any amounts 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.
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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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Trading between DTC Participants. Secondary market trading between DTC
participants (other than the depositaries for Clearstream Banking and Euroclear)
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 the depositaries for Clearstream Banking and
Euroclear) to the account of a Clearstream Banking customer or a Euroclear
participant, as the case may be, the purchaser must send instructions to
Clearstream Banking or Euroclear, as the case may be, prior to 12:30 p.m. on the
settlement date. Clearstream Banking or Euroclear, as the case may be, will
instruct the respective depositary to receive the global securities for payment.
Payment will then be made by the respective depositary, 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
the respective European depositary 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
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may employ their customary procedures for transactions in which global
securities are to be transferred by the respective clearing system, through the
respective depositary, to another DTC participant. The seller will send
instructions to Clearstream Banking or Euroclear, as the case may be, before
12:30 p.m. on the settlement date. In these cases, Clearstream Banking or
Euroclear will instruct the respective depositary 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 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 BEN). 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 BEN (Certificate of Foreign Status
of Beneficial Owner for United States Tax Withholding). If the information shown
on Form W-8 BEN 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 W-8
ECI). 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 W-8 ECI (Certificate of Foreign Person's Claim to
Exemption from Withholding 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 W-8 BEN). 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 W-8 BEN.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding and, generally, backup withholding tax by filing
Form W-9 (Payer's Request for Taxpayer Identification Number and Certification).
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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 includable 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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PROSPECTUS SUPPLEMENT
[ADVANTA LOGO]
Advanta Business Card Master Trust
Issuer
Advanta Business Receivables Corp.
Transferor
Advanta Bank Corp.
Servicer
Series 2001-A
$240,000,000
Class A Asset Backed Notes
$28,500,000
Class B Asset Backed Notes
$21,000,000
Class C Asset Backed 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 JULY 2, 2001.
Barclays Capital Morgan Stanley Dean Witter
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