<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, VIA THE EDGAR SYSTEM, ON
JULY 12, 1995
REGISTRATION NO. 33-60419
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ADVANTA CORP. ADVANTA CAPITAL L.L.C.
(EXACT NAMES OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
DELAWARE DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
23-1462070 51-0366786
(IRS EMPLOYER IDENTIFICATION NO.) (IRS EMPLOYER IDENTIFICATION NO.)
BRANDYWINE CORPORATE CENTER 501 CARR ROAD
650 NAAMANS ROAD WILMINGTON, DELAWARE 19809
CLAYMONT, DELAWARE 19703 (302) 791-4400
(302) 791-4400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
EACH REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
------------------------
GENE S. SCHNEYER, ESQ.
ADVANTA CORP.
FIVE HORSHAM BUSINESS CENTER
300 WELSH ROAD
HORSHAM, PENNSYLVANIA 19044-9808
(215) 657-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. /X/
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Proposed Proposed
Maximum Maximum
Amount Offering Aggregate Amount of
Title of Each Class of to be Price Offering Registration
Securities Being Registered Registered(1) Per Unit(1)(2) Price(1)(2) Fee
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Advanta Corp. Debt Securities(3)(4).........
Advanta Corp. Class B Preferred Stock(5)....
Advanta Corp. Depositary Shares(5)(6).......
Advanta Corp. Debt Warrants(7)..............
Advanta Corp. Preferred Stock Warrants(7)...
Advanta Corp. Common Stock Warrants(7)...... $500,000,000 100% $500,000,000 $172,415
Advanta Corp. Class B Common Stock, par
value $.01 per share(5)...................
Advanta Corp. Stock Purchase Contracts(8)...
Advanta Corp. Stock Purchase Units(9).......
Advanta Corp. Guarantees(10)................
Advanta Capital L.L.C. Preferred
Shares(5).................................
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(Footnotes on following page)
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
- ---------------
(1) Not specified as to each class of Securities to be registered pursuant to
General Instruction II.D of Form S-3. In no event will the aggregate
initial offering price of the Securities issued under this Registration
Statement exceed $500,000,000 or the equivalent thereof in one or more
foreign currencies or composite currencies, including European currency
units. Securities registered hereby may be sold separately, together or in
units with other Securities registered hereunder.
(2) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(o). The proposed maximum offering price per unit will be
determined from time to time by the Registrants in connection with the
issuance by the Registrants of the Securities registered hereunder.
(3) If any Advanta Corp. Debt Securities are issued at an original issue
discount, then the amount to be registered shall be equal to such amount as
may result in the initial offering prices for Advanta Corp. Debt Securities
and Advanta Corp. Debt Warrants, if any.
(4) In addition to any Advanta Corp. Debt Securities that may be issued
directly under this Registration Statement, there is being registered
hereunder an indeterminate amount of Advanta Corp. Debt Securities that may
be issued upon conversion or exchange of other Debt Securities or Class B
Preferred Stock of Advanta Corp. or Preferred Shares of Advanta Capital
L.L.C., and an indeterminate amount of subordinated debt securities which
may be issued by Advanta Corp. to evidence the loan by Advanta Capital
L.L.C. to Advanta Corp. of any proceeds from the offer and sale of Advanta
Capital L.L.C. Preferred Shares and other capital contributions to Advanta
Capital L.L.C., for which no separate consideration will be received.
(5) In addition to any Advanta Corp. Class B Preferred Stock, Depositary Shares
or Advanta Corp. Class B Common Stock that may be issued directly under
this Registration Statement, there are being registered hereunder an
indeterminate amount and number of shares of Advanta Corp. Class B
Preferred Stock, Advanta Corp. Class B Common Stock or Advanta Corp.
Depositary Shares that may be issued upon conversion or exchange, either at
the option of the holder or the Registrants, of Advanta Corp. Debt
Securities, Advanta Corp. Class B Preferred Stock, Advanta Corp. Depositary
Shares or Advanta Capital L.L.C. Preferred Shares, as the case may be, for
which no separate consideration will be received.
(6) There are being registered hereunder an indeterminate number of Advanta
Corp. Depositary Shares to be evidenced by depositary receipts issued
pursuant to a Deposit Agreement. In the event the Registrants elect to
offer to the public fractional interests in shares of the Advanta Corp.
Class B Preferred Stock registered hereunder, depositary receipts will be
distributed to those persons purchasing such fractional interests and the
shares of Advanta Corp. Class B Preferred Stock will be issued to the
depositary under the Deposit Agreement.
(7) There are being registered hereunder Advanta Corp. Debt Warrants, Advanta
Corp. Preferred Stock Warrants and Advanta Corp. Common Stock Warrants
(collectively, "Advanta Corp. Securities Warrants") entitling the holder to
purchase Advanta Corp. Debt Securities, Advanta Corp. Class B Preferred
Stock and Advanta Corp. Class B Common Stock, respectively, which may be
sold separately or as units with Advanta Corp. Debt Securities, Advanta
Corp. Class B Preferred Stock or Advanta Corp. Class B Common Stock. The
Advanta Corp. Securities Warrants will represent rights to purchase only
Advanta Corp. Debt Securities, Advanta Corp. Class B Preferred Stock and
Advanta Corp. Class B Common Stock covered by this Registration Statement.
(8) There are being registered hereunder an indeterminate amount and number of
Advanta Corp. Stock Purchase Contracts, representing rights to purchase
Advanta Corp. Class B Preferred Stock or Advanta Corp. Class B Common
Stock.
(9) There are being registered hereunder an indeterminate amount and number of
Advanta Corp. Stock Purchase Units, representing ownership of Advanta Corp.
Stock Purchase Contracts and debt obligations of the United States of
America or agencies or instrumentalities thereof. The registration fee has
been calculated based upon a maximum offering price not including such debt
obligations.
(10) No separate consideration will be received for any Advanta Corp. Guarantee.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED , 1995
PROSPECTUS
US$500,000,000
[ADVANTA LOGO]
DEBT SECURITIES
CLASS B PREFERRED STOCK
CLASS B COMMON STOCK
DEPOSITARY SHARES
WARRANTS
STOCK PURCHASE CONTRACTS
STOCK PURCHASE UNITS
ADVANTA CAPITAL L.L.C.
PREFERRED SHARES
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
ADVANTA CORP.
Advanta Corp., a Delaware corporation ("Advanta"), may offer from time to
time in one or more series hereunder, together or separately, at prices and on
terms to be determined at the time of offering (i) its debt securities ("Debt
Securities"), consisting of debentures, notes and/or other evidences of
indebtedness representing unsecured obligations of Advanta, which may be either
senior or subordinated and which may be convertible into or exchangeable for
Class B Common Stock (as defined below), Class B Preferred Stock (as defined
below) or other Debt Securities issued hereunder, (ii) shares of its Class B
Preferred Stock, par value $.01 per share ("Class B Preferred Stock"), which may
be issued in the form of depositary shares evidenced by depositary receipts (the
"Depositary Shares") and which may be convertible into or exchangeable for Class
B Common Stock or Debt Securities issued hereunder, (iii) shares of its Class B
Common Stock, par value $.01 per share (the "Class B Common Stock"), (iv) its
warrants to purchase Debt Securities ("Debt Warrants"), shares of Class B
Preferred Stock ("Preferred Stock Warrants") or shares of Class B Common Stock
("Common Stock Warrants"), (v) its Stock Purchase Contracts ("Stock Purchase
Contracts") to purchase Class B Preferred Stock or Class B Common Stock and (vi)
Stock Purchase Units ("Stock Purchase Units"), each representing ownership of a
Stock Purchase Contract and debt obligations of the United States of America or
agencies or instrumentalities thereof securing the holder's obligation to
purchase the Class B Preferred Stock or Class B Common Stock under the Stock
Purchase Contract. The Debt Warrants, Preferred Stock Warrants and Common Stock
Warrants are herein referred to as the "Securities Warrants" and together with
the Debt Securities, Class B Preferred Stock, Depositary Shares, Class B Common
Stock, Stock Purchase Contracts and Stock Purchase Units and the Preferred
Shares and Backup Undertakings referred to below, the "Securities."
Advanta Capital L.L.C., a limited liability company formed under the laws
of the State of Delaware and a special purpose finance subsidiary of Advanta
("Advanta Capital"), may also offer from time to time in one or more series, at
prices and on terms to be determined at the time of offering, its Preferred
Shares (the "Preferred Shares") representing preferred limited liability company
interests in Advanta Capital which may be convertible into or exchangeable for
Class B Common Stock, Class B Preferred Stock or Depository Shares (the "Capital
Securities") of Advanta. In connection therewith, Advanta may offer backup
undertakings ("Backup Undertakings") with respect to the Preferred Shares, as
described herein under "Description of Preferred Shares of Advanta Capital." Any
issue of Preferred Shares and related Backup Undertakings shall correspondingly
reduce the amount of other Securities available for offer and sale hereunder.
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in an accompanying Prospectus Supplement (the
"Prospectus Supplement") which will describe, without limitation and where
applicable, terms such as (i) in the case of Debt Securities, the specific
designation, aggregate principal amount, currency, denomination, maturity,
priority, rate of interest (which may be fixed or variable), time and place of
payment of interest, terms for optional redemption or repayment by Advanta or
any holder or for sinking fund payments, terms for conversion or exchange into
Capital Securities or other Debt Securities, if any, the initial public offering
price, any stock exchange listings, any special
(continued on following page)
<PAGE> 4
(continued from previous page)
provisions related to Debt Securities denominated in a foreign currency or
issued as medium term notes, original issue discount or other special terms, and
the designation of the Trustee, Security Registrar and Paying Agent, (ii) in the
case of Class B Preferred Stock, the specific title and stated value, number of
shares or fractional interests therein, any dividend, liquidation, redemption,
sinking fund, voting or other rights, the terms for conversion or exchange into
other Capital Securities or Debt Securities, any stock exchange listings, and
the initial public offering price, (iii) in the case of the Depositary Shares,
the fraction of a share of Class B Preferred Stock represented by one Depositary
Share, (iv) in the case of the Class B Common Stock, the aggregate number of
shares offered, initial public offering price and other terms thereof, (v) in
the case of Securities Warrants, where applicable, the duration, offering price,
exercise price, terms of the Securities for which they are exercisable, any
listing on a securities exchange and detachability and other terms thereof, (vi)
in the case of Stock Purchase Contracts, the designation and number of shares of
Class B Preferred Stock or Class B Common Stock issuable thereunder, the
purchase price of the Class B Preferred Stock or Class B Common Stock, the date
or dates on which the Class B Preferred Stock or Class B Common Stock is
required to be purchased by the holders of the Stock Purchase Contracts, any
periodic payments required to be made by Advanta to the holders of the Stock
Purchase Contracts or vice versa, and the terms of the offering and sale
thereof, (vii) in the case of Stock Purchase Units, the specific terms of the
Stock Purchase Contracts and any debt obligations securing the holder's
obligation to purchase the Class B Preferred Stock or Class B Common Stock under
the Stock Purchase Contracts, and the terms of the offering and sale thereof,
and (viii) in the case of the Preferred Shares and Backup Undertakings, the
specific designation, stated value and liquidation preference per share or
security and number of shares or securities offered, the initial public offering
price, dividend rate (which may be fixed or variable), method of calculating
payment of dividends, dates on which dividends will be payable, place or places
where dividends will be payable, the terms of redemption, the terms for
conversion or exchange into Capital Securities of Advanta, any listing on a
securities exchange and the terms of the Backup Undertakings. The Prospectus
Supplement will also contain information, where applicable, about certain U.S.
federal income tax, accounting or other considerations relating to the
Securities covered thereby.
The initial offering price to the public of the Securities will be limited
to US $500,000,000 in the aggregate (or its equivalent based on the applicable
exchange rate at the time of issue, if Securities are offered for consideration
denominated in one or more foreign currencies or currency units as shall be
designated by Advanta). The Debt Securities may be denominated in United States
dollars or, at the option of Advanta if so specified in the applicable
Prospectus Supplement, in one or more foreign currencies or currency units. The
Debt Securities may be issued in registered form or bearer form, or both. If so
specified in the applicable Prospectus Supplement, Debt Securities of a series
may be issued in whole or in part in the form of one or more temporary or
permanent global securities.
The Securities may be sold to or through dealers or underwriters, directly
to other purchasers or through agents. If an agent of Advanta or Advanta Capital
or a dealer or an underwriter is involved in the sale of the Securities in
respect of which this Prospectus is being delivered, the agent's commission or
dealer's purchase price or underwriter's discount will be set forth in, or may
be calculated from, the Prospectus Supplement. Any underwriters, dealers or
agents participating in the offering of Securities may be deemed "underwriters"
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"). The Securities may also be used as all or part of the consideration to be
paid by Advanta for property or assets. See "Plan of Distribution" for possible
indemnification arrangements for any agents, dealers or underwriters.
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
THE DEBT SECURITIES WILL NOT BE SAVINGS ACCOUNTS, DEPOSITS OR OTHER
OBLIGATIONS OF ANY BANK OR NON-BANK SUBSIDIARY OF ADVANTA, AND WILL NOT BE
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER FEDERAL OR
STATE AGENCY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is , 1995.
<PAGE> 5
AVAILABLE INFORMATION
Advanta is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of
the Commission: Seven World Trade Center, 13th Floor, New York, N.Y. 10048; and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material may also be obtained at prescribed rates from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
Advanta and Advanta Capital have filed with the Commission a registration
statement on Form S-3 (together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act with respect to the
Securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement. For further information
with respect to Advanta, Advanta Capital and the Securities offered hereby,
reference is made to the Registration Statement. Statements contained herein
concerning any document are not necessarily complete and, in each instance,
reference is made to the copy of such document filed as an exhibit to the
Registration Statement. Each such statement is qualified in its entirety by such
reference. Copies of all or any part of the Registration Statement, including
exhibits thereto, may be obtained, upon payment of the prescribed fees, at the
offices of the Commission as set forth above.
No separate financial statements of Advanta Capital have been included
herein. Advanta and Advanta Capital do not consider that such financial
statements would be material to holders of any Preferred Shares which may be
offered hereby because Advanta Capital is a newly organized special purpose
subsidiary, has no operating history or independent operations, is not engaged
in and does not propose to engage in any activity other than the issuance of its
common and preferred limited liability company interests and the lending of the
proceeds thereof to Advanta and because Advanta will issue a full and
unconditional guarantee of any Preferred Shares, as described in the
accompanying Prospectus Supplement. See "Description of Preferred Shares of
Advanta Capital." Advanta Capital is a limited liability company organized under
the laws of the State of Delaware and will be managed by Advanta, which directly
or indirectly beneficially owns all of Advanta Capital's common limited
liability company interests, which are non-transferable. Financial statements of
Advanta Capital will be made available to the holders of Preferred Shares
annually as soon as practicable after the end of Advanta Capital's fiscal year.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
As required by the Commission, Advanta hereby incorporates by reference:
1. Advanta's Annual Report on Form 10-K for the fiscal year ended December
31, 1994;
2. Advanta's Current Reports on Form 8-K dated January 24, April 19, and
July 12, 1995;
3. Advanta's Quarterly Report on Form 10-Q for the quarter ended March 31,
1995; and
4. The descriptions of Advanta's Class A Common Stock and Class B Common
Stock which are contained in the Registration Statements on Form 8-A
filed by Advanta to register such securities under Section 12 of the
Exchange Act, File No. 0-14120, including any amendment or report filed
for the purpose of updating such descriptions.
All documents filed by Advanta pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering described herein shall be deemed to be
incorporated by reference in the Registration Statement and to be a part hereof
from the date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for
2
<PAGE> 6
purposes hereof to the extent that a statement contained herein or any
subsequently filed document which is deemed to be incorporated by reference
herein modifies or supersedes such document. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part hereof.
Advanta will provide without charge to each person to whom a copy of this
Prospectus is delivered, upon written or oral request, a copy of any document
incorporated herein by reference (other than exhibits to such document which are
not specifically incorporated by reference in such document). Requests for such
documents should be directed to: Investor Relations, Advanta Corp., Five Horsham
Business Center, 300 Welsh Road, Horsham, Pennsylvania 19044-2209, telephone
(215) 784-5335.
ADVANTA CORP.
GENERAL
Advanta is a highly focused direct marketer of select consumer financial
services. Advanta primarily originates and services credit cards and mortgage
loans. Other businesses include small ticket equipment leasing, credit insurance
and deposit products. At December 31, 1994, assets under management totaled $9.3
billion.
Approximately 78% of total revenues are derived from credit cards marketed
through carefully targeted direct mail campaigns. By focusing primarily on the
no fee gold card, Advanta has successfully grown to one of the ten largest
issuers of gold cards. Mortgage services contribute 9% of total revenues.
Advanta's principal executive office is located at Brandywine Corporate
Center, 650 Naamans Road, Claymont, Delaware 19703. Its principal operating
office is located at Five Horsham Business Center, 300 Welsh Road, Horsham,
Pennsylvania 19044-9808. Advanta's telephone numbers at its principal executive
and operating offices are, respectively, (302) 791-4400 and (215) 657-4000.
CREDIT CARDS
Advanta, which has been in the credit card business since 1983, issues gold
and standard MasterCard(R)* and VISA(R)* credit cards nationwide. Advanta has
built a substantial cardholder base which, as of December 31, 1994, totaled 3.8
million accounts and $6.5 billion in managed receivables.
In 1982, Advanta acquired Colonial National Bank USA ("Colonial National").
As a national bank, Colonial National has the ability to make loans to consumers
without many of the restrictions found in various state usury and licensing
laws, to negotiate variable rate loans, to generate funds economically in the
form of deposits insured by the Federal Deposit Insurance Corporation ("FDIC"),
and to include in its product mix a MasterCard(R) and VISA(R) credit card
program. Substantially all of Advanta's credit card receivables and bank
deposits are originated by Colonial National.
Advanta believes that its targeted marketing strategy and its emphasis on
satisfying customers have enabled it to attract and retain a portfolio of credit
card accounts with a loss ratio which, based on reports published by
MasterCard(R) and VISA(R), has been below industry averages for the past three
years. Colonial National's net credit loss on average managed credit card
receivables outstanding for the year ended December 31, 1994 was 2.5%, and the
percentage of managed credit card receivables that were delinquent 30 or more
days was 2.0%. With customers in all 50 states, Advanta's credit card portfolio
is geographically diversified. At December 31, 1994, the states with the highest
aggregate managed loans outstanding were California, New York, Texas, Florida
and Illinois, with approximately
- ---------------
* MasterCard(R) is a federally registered servicemark of MasterCard
International, Inc.; VISA(R) is a federally registered servicemark of VISA
U.S.A., Inc.
3
<PAGE> 7
17.2%, 7.0%, 6.4%, 5.7% and 4.7%, respectively, of Colonial National's total
managed credit card receivables.
Since 1988, Colonial National has been active in the credit card
securitization market, selling $2.8 billion of card asset-backed certificates in
1994 and $6.6 billion since 1988.
In February 1995, Advanta National Bank ("ANB"), a new federally chartered
institution organized by Advanta, opened for business. Currently, ANB assets do
not represent a significant portion of Advanta's assets. However, Advanta
anticipates that ANB will, in the future, become the originator of a substantial
portion of Advanta's credit card assets.
MORTGAGE LOANS
Advanta's subsidiary, Advanta Mortgage Corp. USA ("Advanta Mortgage"),
originates, purchases, securitizes and services non-conforming credit first and
second mortgage loans for itself and for Colonial National's "Advanta Mortgage
USA" Division. Loan production is generated through a centralized direct
origination center, a broker network serviced by selected sales locations, and
correspondent relationships.
Advanta Mortgage and Colonial National originate or purchase loans and then
sell or securitize them, generally retaining servicing rights and the related
excess cash flows. Consequently, the mortgage loan receivables on Advanta's
balance sheet are generally its most recently originated loans being held for
sale. Thus, while mortgage loan receivables owned at December 31, 1994 were $143
million, during 1994 Advanta originated or purchased $493 million and
securitized $456 million of such receivables. Advanta Mortgage services Colonial
National's mortgage loan portfolio, packages Colonial National's mortgage loans
for sale, and performs the servicing on loans sold by Colonial National where
Colonial National retains the servicing rights and obligations. In addition,
Advanta Mortgage performs fee-based servicing on loans originated and owned by
unrelated third party mortgage lenders. As of December 31, 1994, Advanta
Mortgage was servicing approximately $1.2 billion in mortgage loans sold by
Advanta's subsidiaries, as well as $190 million of "contract servicing"
receivables.
Approximately 71% of the managed portfolio is secured by first mortgages
and the balance is secured by second mortgages. At December 31, 1994, the states
with the highest managed loans outstanding were California, New York, New
Jersey, Maryland, and Pennsylvania, with approximately 23.5%, 12.3%, 11.4%,
10.3% and 8.0%, respectively.
While Advanta has not historically offered mortgage lines of credit, which
involve the extension of a revolving amount of credit to a borrower, Advanta is
planning to offer a home equity line of credit product beginning in 1995.
Advanta has established a new consumer finance company, Advanta Finance Corp.,
which will provide another loan origination source, with loans marketed directly
to the consumer through a branch office system. The first Advanta Finance Corp.
branch offices opened in the first quarter of 1995.
EQUIPMENT LEASING AND OTHER SMALL BUSINESS SERVICES
Advanta's subsidiary, Advanta Business Services Corp. ("ABS"), formerly
Advanta Leasing Corp., engages primarily in non-cancelable financing leases of
equipment, including computers, security systems, copiers and telephone systems,
primarily to professionals and small businesses. The average initial cost of
leased equipment is approximately $7,000. Costs relating to equipment
maintenance, insurance and personal property taxes are the responsibility of the
lessee. ABS securitized $68 million and $102 million of lease receivables in
1993 and 1994, respectively.
In the third quarter of 1994, ABS began marketing business credit cards
which are issued through Advanta Financial Corp. ("AFC"), formerly Colonial
National Financial Corp., to its small business customers. As of December 31,
1994, the receivables on these cards issued were immaterial to Advanta.
4
<PAGE> 8
ABS's 1994 originations, including $29 million of portfolio acquisitions,
totaled $190 million. At December 31, 1994, ABS serviced a portfolio of $265
million of net lease receivables, including $179 million of securitized
receivables.
CREDIT INSURANCE AND CREDIT PROTECTION
Through unaffiliated insurance carriers, Advanta offers credit life,
disability and unemployment insurance to its credit cardholders and credit life
insurance and a limited life/disability/unemployment insurance product to its
mortgage loan customers. The unaffiliated insurers reinsure 100% of the risk on
the credit card credit and limited mortgage life, disability and unemployment
insurance (but not the mortgage loan credit life insurance) with one or more of
Advanta's insurance subsidiaries. Such subsidiaries receive reinsurance premiums
approximating 94% of the net premiums written. The subsidiaries are obligated to
pay all losses and refunds, and have amounts withheld by the insurance carriers
or maintain amounts in separate trust accounts for the benefit of these
insurance carriers in an amount equal to statutory reserves as defined by the
reinsurance agreements. In addition, in 1992, one of the insurance subsidiaries
began direct underwriting of an indemnity policy protecting certain interests in
the business equipment leased to customers of ABS against sudden and accidental
loss.
ADVANTA CAPITAL L.L.C.
Advanta Capital L.L.C. is a limited life special purpose finance subsidiary
of Advanta organized in May 1995 as a limited liability company under the laws
of the State of Delaware. All of Advanta Capital's common limited liability
company interests are directly or indirectly beneficially owned by Advanta and
are non-transferable. Advanta Capital has no board of directors or officers, and
all of its business and affairs are conducted by Advanta, as the manager (the
"Manager") appointed in Advanta Capital's Limited Liability Company Agreement.
Advanta Capital exists solely for the purpose of issuing its common and
preferred limited liability company interests and lending the proceeds thereof
to Advanta to finance Advanta's or its subsidiaries' business operations. The
principal office of Advanta Capital is 501 Carr Road, Wilmington, Delaware
19809.
CERTAIN RATIOS
The following table sets forth the ratio of earnings to fixed charges of
Advanta and its subsidiaries and the ratio of earnings to combined fixed charges
and preferred stock dividends of Advanta and its subsidiaries for the periods
indicated:
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
----------- --------------------------------
1995 1994 1994 1993 1992 1991 1990
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges................ 2.26 2.85 2.71 2.52 1.81 1.36 1.20
Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends....................... 2.25 2.83 2.71 2.52 1.81 1.35 1.20
</TABLE>
5
<PAGE> 9
REGULATION
ADVANTA
Advanta owns Colonial National, which is a "bank" as defined under the Bank
Holding Company Act of 1956, as amended (the "BHCA"), as further amended by the
Competitive Equality Banking Act of 1987 ("CEBA"). However, under certain
grandfathering provisions of CEBA, Advanta is not required to register as a bank
holding company under the BHCA, because Colonial National, which takes demand
deposits but does not make commercial loans, did not come within the BHCA's
definition of the term "bank" prior to the enactment of CEBA and it complies
with certain restrictions set forth in CEBA, such as limiting its activities to
those in which it was engaged prior to March 5, 1987 and limiting its growth
rate to not more than 7% per annum. Such restrictions also prohibit Colonial
National from cross-marketing products or services of an affiliate that are not
permissible for bank holding companies under the BHCA. In addition, Advanta
complies with certain other restrictions set forth in CEBA, such as not
acquiring control of more than 5% of the stock or assets of an additional "bank"
or "savings association" as defined for these purposes under the BHCA.
Consequently, Advanta is not subject to examination by the Federal Reserve Board
(other than for purposes of assuring continued compliance with the CEBA
restrictions referenced in this paragraph). Should Advanta or Colonial National
cease to comply with the restrictions set forth in CEBA, registration as a bank
holding company under the BHCA would be required.
Registration as a bank holding company is not automatic. The Federal
Reserve Board may deny an application if it determines that control of a bank by
a particular company will cause undue interference with competition or that such
company lacks the financial or managerial resources to serve as a source of
strength to its subsidiary bank. While Advanta believes that it meets the
Federal Reserve Board's managerial standards and that its ownership of Colonial
National has improved the bank's competitiveness, should Advanta be required to
apply to become a bank holding company the outcome of any such application
cannot be certain.
Registration as a bank holding company would subject Advanta and its
subsidiaries to inspection and regulation by the Federal Reserve Board. Although
Advanta has no plans to register as a bank holding company at this time, Advanta
believes that registration would not restrict, curtail, or eliminate any of its
activities at current levels, except that some portions of the current business
operations of Advanta's insurance subsidiaries would have to be discontinued,
the effects of which would not be material.
COLONIAL NATIONAL
Advanta conducts substantially all of its deposit-taking activities and
credit card lending business, as well as a large portion of its mortgage lending
business, through Colonial National. Under federal law, Colonial National may
"export" (i.e., charge its customers resident in other states) the finance
charges permissible under the law of its state of domicile, Delaware, which has
no usury statute applicable to banks. Consistent with prevailing industry
practice, Colonial National exports credit card fees (including, for example,
annual fees, late charges, NSF (returned check) charges and fees for exceeding
credit limits) permitted under Delaware law. Nevertheless, certain jurisdictions
and individuals domiciled therein are attempting to require out-of-state credit
card issuers and consumer lenders to comply with such jurisdictions' laws
limiting the fees and charges which may be imposed on residents thereof by
credit card issuers and consumer lenders. Litigation involving such exportation
of fees and charges has been initiated against many credit card issuers in
several states, including Colonial National in Pennsylvania. While Advanta
believes that Colonial National's exportation of such fees from Delaware is
permissible under the federal banking laws, Advanta cannot quantify what the
impact on its business might be if there were to be an adverse determination of
this exportation issue nationwide, or in a number of the states in which such
litigation has been initiated against credit card issuers.
6
<PAGE> 10
Colonial National is subject to regulation and periodic examination
primarily by the Office of the Comptroller of the Currency (the "Comptroller").
Such regulation relates to the maintenance of reserves for certain types of
deposits, the maintenance of certain financial ratios, transactions with
affiliates and a broad range of other banking practices. As a national bank,
Colonial National is subject to provisions of federal law which restrict its
ability to extend credit to its affiliates or pay dividends to its parent
company. See "Dividends and Transfers of Funds."
Colonial National is subject to capital adequacy guidelines approved by the
Comptroller. These guidelines make regulatory capital requirements more
sensitive to differences in risk profiles among banking organizations and
consider off-balance sheet exposures in determining capital adequacy. As of
December 31, 1994, the minimum required ratio of total capital to risk-weighted
assets (including certain off-balance sheet items) was 8%. At least half of the
total capital is to be comprised of common equity, retained earnings and a
limited amount of non-cumulative perpetual preferred stock ("Tier 1 capital").
The remainder may consist of other preferred stock, certain hybrid debt/equity
instruments, a limited amount of term subordinated debt or a limited amount of
the reserve for possible credit losses ("Tier 2 capital"). In addition, the
Comptroller has adopted a minimum leverage ratio (Tier 1 capital divided by
total average assets) of 3% for national banks that meet certain specified
criteria, including the requirement that they have the highest regulatory
rating. Under this guideline, the minimum leverage ratio would be at least 1 or
2 percentage points higher for national banks that do not have the highest
regulatory rating, for national banks undertaking major expansion programs, and
for other national banks in certain circumstances. As of December 31, 1994,
Colonial National's Tier 1 capital ratio was 7.95%. The combined Tier 1 and Tier
2 capital ratio was 12.04%, and the leverage ratio was 8.15%.
The Comptroller of the Currency and the other federal banking regulators
have proposed for comment regulations establishing new risk-based requirements
for recourse arrangements and direct credit substitutes. The effect of these
regulations may be to increase the cost of credit enhancement provided by banks
in connection with the securitization of credit card and other consumer
receivables. Also, the Comptroller has proposed regulations that would add an
additional risk-based capital requirement based upon the amount of an
institution's exposure to interest rate risk. In addition, bank regulators have
the ability to raise capital requirements applicable to banking organizations
beyond current levels. However, Advanta is unable to predict whether and when
higher capital requirements may be imposed.
Pursuant to certain provisions of the FDIC Improvement Act of 1991
("FDICIA") and regulations promulgated thereunder, FDIC insured institutions
such as Colonial National may accept brokered deposits without FDIC permission
only if they meet certain capital standards, and are subject to restrictions
with respect to the interest they may pay on deposits unless they are
"well-capitalized." To be "well-capitalized," a bank must have a ratio of total
capital to risk-weighted assets of not less than 10%, Tier 1 capital to
risk-weighted assets of not less than 6%, and a Tier 1 leverage ratio of not
less than 5%. Based on the applicable standards under these regulations,
Colonial National is currently "well-capitalized," and Advanta intends to
maintain Colonial National as a "well-capitalized" institution.
OTHER FDIC-INSURED DEPOSITORY INSTITUTIONS
In January 1992, Advanta Financial Corp. ("AFC") opened for business and
began taking deposits. AFC is an FDIC-insured industrial loan corporation
organized under the laws of the State of Utah and is subject to examination and
regulation by both the FDIC and the Utah Department of Financial Institutions.
At December 31, 1994, AFC had deposits of $33 million and total assets of $49
million. Currently, AFC's principal activity consists of small ticket equipment
lease financing. AFC is also the issuer of the small business credit cards
marketed by ABS.
Pursuant to certain provisions of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989, an insured depository institution which
is commonly controlled with another insured
7
<PAGE> 11
depository institution is generally liable for any loss incurred, or reasonably
anticipated to be incurred, by the FDIC in connection with the default of such
commonly controlled institution, or any assistance provided by the FDIC to such
commonly controlled institution, which is in danger of default. The term
"default" is defined to mean the appointment of a conservator or receiver for
such institution and "in danger of default" is defined generally as the
existence of certain conditions indicating that "default" is likely to occur in
the absence of regulatory assistance. Thus, each of Colonial National, AFC, and
ANB could incur liability to the FDIC pursuant to this statutory provision in
the event of the default of one of the others. Such liability is subordinated in
right of payment to deposit liabilities, secured obligations, any other general
or senior liabilities and any obligation subordinate in depositors or other
general creditors other than obligations owed to any affiliate of the depository
institution (with certain exceptions) and any obligations to shareholders in
such capacity.
LENDING AND LEASING ACTIVITIES
Advanta's activities as a lender are also subject to regulation under
various federal and state laws including the Truth-in-Lending Act, the Equal
Credit Opportunity Act, the Home Mortgage Disclosure Act, the Community
Reinvestment Act, the Electronic Funds Transfer Act, and the Fair Credit
Reporting Act. Provisions of those statutes and related regulations, among other
matters, require disclosure to borrowers of finance charges in terms of an
annual percentage rate, prohibit certain discriminatory practices in extending
credit, require Advanta's FDIC-insured depository institutions to serve the
banking needs of their local communities, and regulate the dissemination and use
of information relating to a borrower's creditworthiness. Certain of these
statutes and regulations also apply to Advanta's leasing activities. In
addition, Advanta Mortgage and its subsidiaries are subject to licensure and
regulation in various states as mortgage bankers, mortgage brokers, and
originators, sellers and servicers of mortgage loans.
DIVIDENDS AND TRANSFERS OF FUNDS
There are various legal limitations on the extent to which Colonial
National, AFC or ANB can finance or otherwise supply funds through dividends,
loans or otherwise to Advanta and its affiliates. The prior approval of the
Comptroller is required if the total of all dividends declared by Colonial
National in any calendar year exceeds its net profits (as defined for such
purposes) for that year combined with its retained net profits for the preceding
two years, less any required transfers to surplus accounts. In addition,
Colonial National may not pay a dividend in an amount greater than its undivided
profits then on hand after deducting its losses and bad debts. The Comptroller
also has authority under the Financial Institutions Supervisory Act to prohibit
a national bank from engaging in any unsafe or unsound practice in conducting
its business. It is possible, depending upon the financial condition of the bank
in question and other factors, that the Comptroller could claim that a dividend
payment might under some circumstances be an unsafe or unsound practice. All of
these restrictions also apply to ANB.
Colonial National, AFC and ANB are also subject to restrictions under
Sections 23A and 23B of the Federal Reserve Act. These restrictions limit the
transfer of funds by each of the depository institutions to Advanta and certain
other affiliates, as defined in that Act, in the form of loans, extensions of
credit, investments or purchases of assets, and they require generally that each
such depository institution's transactions with its affiliates be on terms no
less favorable to the depository institution than comparable transactions with
unrelated third parties. These transfers by any one depository institution to
Advanta or any single affiliate are limited in amount to 10% of the depository
institution's capital and surplus, and transfers to all affiliates are limited
in the aggregate to 20% of the depository institution's capital and surplus.
Furthermore, such loans and extensions of credit are also subject to various
collateral requirements. In addition, in order for Advanta to maintain its
grandfathered exemption under CEBA, neither Colonial National nor ANB may make
any loans to Advanta or any of its subsidiaries.
8
<PAGE> 12
Advanta's insurance subsidiaries are insurance companies organized under
and regulated by Arizona law. Arizona insurance regulations restrict the amount
of dividends which an insurance company may distribute without the prior consent
of the Director of Insurance.
GENERAL
Because the banking and finance businesses in general are the subject of
such extensive regulation at both the state and federal levels, and because
numerous legislative and regulatory proposals are advanced each year which, if
adopted, could affect Advanta's profitability or the manner in which Advanta
conducts its activities, Advanta cannot now predict the extent of the impact of
any such new laws or regulations.
Various legislative proposals have been introduced in Congress in recent
years, including, among others, proposals relating to imposing a statutory cap
on credit card interest rates, permitting affiliations between banks and
commercial or securities firms, proposals placing new restrictions on a lender's
ability to utilize prescreening of consumers' credit reports through credit
reporting agencies (credit bureaus) in connection with the lender's direct
marketing efforts and proposals eliminating the 7% per annum limit on the growth
rate applicable to grandfathered CEBA "nonbank" banks, such as Colonial
National. It is impossible to determine whether any of these proposals will
become law and, if so, what impact they will have on Advanta.
In September 1992, the Federal Communications Commission established rules
implementing the Telephone Consumer Protective Act of 1991 which limits
telephone solicitations to residences. Because the statute exempts telemarketing
to existing or former customers, it does not materially impact Advanta's current
business operations. These rules could, however, impair Advanta's ability to
generate new business or expand its customer base through telephone
solicitation.
In 1994, Congress adopted the Interstate Banking and Branching Efficiency
Act, which permits nationwide interstate bank acquisitions beginning in 1995,
and interstate bank branching in 1997 (or earlier at a state's option). Advanta
does not currently believe that the changes in the country's banking system
brought about by this statute will materially impact Advanta's business.
USE OF PROCEEDS
Unless otherwise provided in the applicable Prospectus Supplement, the net
proceeds from the sale of the Securities will be used: (i) by Advanta, for
general corporate purposes, including the purchase of assets from, investments
in and extensions of credit to, subsidiaries and affiliates of Advanta which
will use the proceeds for general corporate purposes; and, possibly, for
financing future acquisitions by Advanta, including without limitation,
acquisitions of credit card, mortgage and equipment lease portfolios; and (ii)
by Advanta Capital, for loans to Advanta for the purposes described above. At
the date hereof, no specific proposed acquisitions have been identified as
probable. The amount of Securities offered from time to time pursuant to this
Prospectus and the precise amounts and timing of the application of proceeds
will depend upon funding requirements of Advanta and its subsidiaries and
affiliates. If Advanta elects at the time of issuance of Securities to make
different or more specific use of proceeds other than as set forth herein, such
use will be described in the applicable Prospectus Supplement.
In view of its anticipated requirements, Advanta expects to engage, on a
recurring basis, in additional private or public financings of a character and
amount to be determined as the need arises.
DESCRIPTION OF DEBT SECURITIES OF ADVANTA
The Debt Securities are to be issued in one or more series under either (i)
a senior indenture (the "Senior Indenture"), a copy of which is filed as an
exhibit to the Registration Statement, or (ii) a subordinated indenture (the
"Subordinated Indenture"), a copy of which is filed as an exhibit to the
9
<PAGE> 13
Registration Statement. The following summaries of certain provisions of the
Senior Indenture and the Subordinated Indenture (collectively, the "Indentures")
do not purport to be complete and are subject to, and qualified in their
entirety by reference to, all provisions of the Indentures, including the
definitions therein of certain terms. Wherever particular Sections or defined
terms of the Indentures are referred to herein or in a Prospectus Supplement, it
is intended that such Sections or defined terms (including, unless otherwise
indicated herein, definitions of terms capitalized in these summaries) shall be
incorporated herein or therein by reference. The following sets forth certain
general terms and provisions of the Debt Securities to which any Prospectus
Supplement may relate. The particular terms of the Debt Securities offered by
any Prospectus Supplement and the extent, if any, to which such general
provisions may apply to the Debt Securities so offered, will be described in the
Prospectus Supplement relating to such Debt Securities.
Advanta's rights and the rights of its creditors, including the holders of
the Debt Securities offered hereby, to participate in the assets of any
subsidiary upon the latter's liquidation or recapitalization will be subject to
the prior claims of the subsidiary's creditors except to the extent that Advanta
may itself be a creditor with recognized claims against the subsidiary.
GENERAL
The Indentures do not limit the aggregate principal amount of Debt
Securities which may be issued thereunder and provide that Debt Securities may
be issued from time to time in one or more series. The Debt Securities will be
direct unsecured obligations of Advanta. Neither the Indentures nor the Debt
Securities will limit or otherwise restrict the amount of other indebtedness
which may be incurred or other securities which may be issued by Advanta or any
of its subsidiaries. The Debt Securities issued under the Senior Indenture will
rank on a parity with all other unsecured unsubordinated indebtedness of
Advanta. The Debt Securities issued under the Subordinated Indenture will be
subordinate and junior in right of payment to all Senior Indebtedness of
Advanta, to the extent and in the manner set forth in the Subordinated
Indenture. See "Special Terms Relating to Subordinated Debt Securities".
Reference is made to the Prospectus Supplement relating to the particular
series of Debt Securities offered thereby for the following terms: (1) the title
and series of such Debt Securities; (2) any limit on the aggregate principal
amount of such Debt Securities; (3) the price or prices (expressed as a
percentage of the aggregate principal amount thereof) at which such Debt
Securities will be issued; (4) the date or dates on which such Debt Securities
will mature, or the method or methods, if any, by which such date or dates shall
be determined; (5) the rate or rates (which may be fixed or variable) per annum
at which such Debt Securities will bear interest, if any, or the method or
methods, if any, by which such rate or rates are to be determined; (6) the date
or dates from which such interest, if any, on such Debt Securities will accrue
or the method or methods, if any, by which such date or dates are to be
determined, the dates on which such interest, if any, will be payable, the date
on which payment of such interest, if any, will commence and the Regular Record
Dates for such Interest Payment Dates, if any; (7) the dates, if any, on which
and the price or prices at which the Debt Securities will, pursuant to any
mandatory sinking fund provisions, or may, pursuant to any optional sinking fund
or purchase fund provisions, be redeemed by Advanta, and the other detailed
terms and provisions of such sinking and/or purchase funds; (8) the date, if
any, after which and the price or prices at which the Debt Securities may,
pursuant to any optional redemption provisions, be redeemed at the option of
Advanta or of the holder thereof and the other detailed terms and provisions of
such optional redemption; (9) the extent to which any of the Debt Securities
will be issuable in temporary or permanent global form and, if so, the identity
of the depositary for such global Debt Security, or the manner in which any
interest payable on a temporary or permanent global Debt Security will be paid;
(10) the denomination or denominations in which such Debt Securities are
authorized to be issued; (11) whether any of the Debt Securities will be issued
in bearer form and, if so, any limitations on issuance or conversion of such
bearer Debt Securities (including exchange for registered Debt Securities of the
same series); (12) information with respect to book-entry proce-
10
<PAGE> 14
dures; (13) whether any of the Debt Securities will be issued as Original Issue
Discount Securities; (14) each office or agency where, subject to the terms of
the Indenture, such Debt Securities may be presented for registration of
transfer or exchange; (15) the currencies or currency units in which such Debt
Securities are issued and in which the principal of, interest on and additional
amounts, if any, in respect of such Debt Securities will be payable; (16)
whether the amount of payments of principal of, and interest and additional
amounts, if any, on such Debt Securities may be determined with reference to an
index, formula or other method (which index, formula or method may, but need not
be, based on one or more currencies, currency units or composite currencies,
commodities, equity indices or other indices) and the manner in which such
amounts shall be determined; (17) whether Advanta or a holder may elect payment
of the principal of or interest on such Debt Securities in a currency,
currencies, currency unit or units or composite currency or currencies other
than that in which such Debt Securities are denominated or stated to be payable,
the period or periods within which, and the terms and conditions upon which,
such election may be made, and the time and manner of determining the exchange
rate between the currency, currencies, currency unit or units, or composite
currency or currencies in which such Debt Securities are denominated or stated
to be payable and the currency, currencies, currency unit or units or composite
currency or currencies in which such Debt Securities are to be so payable; (18)
the identity of the Trustee, and if other than the applicable Trustee, the
identity of each Security Registrar, Paying Agent and Authenticating Agent and
the designation of the initial Exchange Rate Agent; (19) if applicable, the
defeasance of certain obligations by Advanta pertaining to Debt Securities of
the series; (20) the person to whom any interest on any registered Debt Security
of the series shall be payable, if other than the person in whose name that Debt
Security (or one or more predecessor Debt Securities) is registered at the close
of business on the Regular Record Date for such interest, the manner in which,
or the person to whom, any interest on any bearer Debt Security of the series
shall be payable, if otherwise than upon presentation and surrender of the
coupons appertaining thereto as they severally mature, and the extent to which,
or the manner in which, any interest payable on a temporary global Debt Security
on an Interest Payment Date will be paid if other than in the manner provided in
the Indenture; (21) whether and under what circumstances Advanta will pay
additional amounts as contemplated by Section 1004 of the Indenture (the term
"interest," as used in this Prospectus, shall include such additional amounts)
on such Debt Securities to any holder who is not a United States person
(including any modification to the definition of such term as contained in the
Indenture as originally executed) in respect of any tax, assessment or
governmental charge and, if so, whether Advanta will have the option to redeem
such Debt Securities rather than pay such additional amounts (and the terms of
any such option); (22) any deletions from, modifications of or additions to the
Events of Default or covenants of Advanta with respect to any of such Debt
Securities; (23) whether such Debt Securities shall be convertible or
exchangeable for Capital Securities or other Debt Securities and, if so, the
terms of any such conversion or exchange and the terms of such other Securities;
and (24) any other terms of the series (which will not be inconsistent with the
provisions of the applicable Indenture).
Debt Securities may be issued as Original Issue Discount Securities to be
sold at a substantial discount below their principal amount. In the event of an
acceleration of the maturity of any Original Issue Discount Security, the amount
payable to the holder of such Original Issue Discount Security upon such
acceleration will be determined in accordance with the applicable Prospectus
Supplement, the terms of such Debt Security and the applicable Indenture, but
will be an amount less than the amount payable at the maturity of such Original
Issue Discount Security. In the event that any of the Debt Securities are to be
issued as Original Issue Discount Securities, all material federal income tax,
accounting and other considerations applicable thereto will be described in the
Prospectus Supplement relating thereto.
Debt Securities may also be issued under the Indentures upon exercise of
Debt Warrants. See "Description of Securities Warrants of Advanta."
The provisions of the Indentures described below under "Restrictive
Covenants" are the only provisions which would afford holders of Debt Securities
protection in the event of a highly leveraged transaction involving Advanta.
11
<PAGE> 15
REGISTRATION, TRANSFER, PAYMENT AND PAYING AGENT
Unless otherwise indicated in the applicable Prospectus Supplement, each
series of Debt Securities will be issued in registered form only, without
coupons. The Indentures, however, provide that Advanta may also issue Debt
Securities in bearer form only, or in both registered and bearer form. Debt
Securities issued in bearer form shall have interest coupons attached, unless
issued as Original Issue Discount Securities. Debt Securities in bearer form
shall not be offered, sold, resold or delivered in connection with their
original issuance in the United States or to any United States person (as
defined below) other than through offices located outside the United States of
certain United States financial institutions. As used herein, "United States
person" means any citizen or resident of the United States, any corporation,
partnership or other entity created or organized in or under the laws of the
United States, or any estate or trust, the income of which is subject to United
States federal income taxation regardless of its source, and "United States"
means the United States of America (including the States and the District of
Columbia), its territories, its possessions and other areas subject to its
jurisdiction. Purchasers of Debt Securities in bearer form will be subject to
certification procedures and may be affected by certain limitations under United
States tax laws. Such procedures and limitations will be described in the
Prospectus Supplement relating to the offering of the Debt Securities in bearer
form.
Unless otherwise indicated in the applicable Prospectus Supplement, Debt
Securities will be issued in denominations of $1,000 or any integral multiple
thereof. No service charge will be made for any transfer, exchange or conversion
of the Debt Securities but Advanta may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Unless otherwise described in the Prospectus Supplement relating thereto,
the principal, premium, if any, and interest, if any, of or on the Debt
Securities will be payable, transfer of the Debt Securities will be registrable,
and, if applicable, any Convertible Debt Securities (as hereinafter defined)
will be convertible, at the office or agency of Advanta maintained for that
purpose, as Advanta may designate from time to time, in The City of New York,
New York, provided that payments of interest may be made at the option of
Advanta by check mailed to the address appearing in the Security Register of the
person in whose name such registered Debt Security is registered at the close of
business on the Regular Record Date (Sections 305 and 307 of each Indenture).
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of, premium, if any, and interest, if any, on Debt Securities in
bearer form will be made payable, subject to any applicable laws and
regulations, at such office outside the United States as specified in the
Prospectus Supplement and as Advanta may designate from time to time, at the
option of the holder, by check or by transfer to an account maintained by the
payee with a bank located outside the United States. Unless otherwise indicated
in the applicable Prospectus Supplement, payment of interest and certain
additional amounts on Debt Securities in bearer form will be made only against
surrender of the coupon relating to such Interest Payment Date. No payment with
respect to any Debt Security in bearer form will be made at any office or agency
of Advanta in the United States or by check mailed to any address in the United
States or by transfer to an account maintained with a bank located in the United
States.
GLOBAL DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities ("Global Debt Securities") that will be
deposited with, or on behalf of, a depositary (the "Depositary") identified in
the Prospectus Supplement relating to such series. Global Debt Securities may be
issued in either registered or bearer form and in either temporary or permanent
form. Unless and until it is exchanged in whole or in part for individual
certificates evidencing Debt Securities in definitive form represented thereby,
a Global Debt Security may not be transferred except as a whole by the
Depositary for such Global Debt Security to a nominee of such Depositary or by a
nominee of
12
<PAGE> 16
such Depositary to such Depositary or another nominee of such Depositary or by
such Depositary or any such nominee to a successor of such Depositary or a
nominee of such successor.
The specific terms of the depositary arrangement with respect to a series
of Global Debt Securities and certain limitations and restrictions relating to a
series of bearer Global Debt Securities, will be described in the Prospectus
Supplement relating to such series.
RESTRICTIVE COVENANTS
Each of the Indentures contains a covenant by Advanta limiting its ability
to dispose of the Voting Stock of a Significant Subsidiary. A "Significant
Subsidiary" is defined to mean any Subsidiary of Advanta the Consolidated Assets
of which constitute 20% or more of Advanta's Consolidated Assets. Such covenant
provides that, subject to certain exceptions, so long as any of the Debt
Securities are outstanding, Advanta: (a) will not, nor will it permit any
Subsidiary to, sell, assign, transfer or otherwise dispose of any shares of, or
securities convertible into, or options, warrants or rights to subscribe for or
purchase shares of, Voting Stock of a Significant Subsidiary, nor will Advanta
permit a Significant Subsidiary to issue any shares of, or securities
convertible into, or options, warrants or rights to subscribe for or purchase
shares of, Voting Stock of a Significant Subsidiary, unless Advanta will own,
directly or indirectly, at least 80% of the issued and outstanding Voting Stock
of such Subsidiary after giving effect to such transaction; and (b) will not
permit a Significant Subsidiary to either (i) merge or consolidate with or into
any corporation (other than Advanta), unless at least 80% of the surviving
corporation's Voting Stock is, or upon consummation of the merger or
consolidation will be, owned, directly or indirectly, by Advanta, or (ii) lease,
sell or transfer all or substantially all of its properties or assets to any
corporation or other person (other than Advanta), unless 80% of the Voting Stock
of such corporation or other person is owned, or will be owned, upon such lease,
sale or transfer, directly or indirectly, by Advanta (Section 1005 of each
Indenture).
In addition, each of the Indentures contains a covenant prohibiting Advanta
from creating or permitting, or permitting any Subsidiary to create or permit,
any liens upon 20% or more of the Voting Stock of any Significant Subsidiary to
secure any indebtedness without securing the Debt Securities equally and ratably
with all indebtedness secured thereby (Section 1006 of each Indenture).
OUTSTANDING DEBT SECURITIES
In determining whether the holders of the requisite principal amount of
Outstanding Debt Securities have given any request, demand, authorization,
direction, notice, consent or waiver under the Indenture, (i) the portion of the
principal amount of an Original Issue Discount Security that shall be deemed to
be Outstanding for such purposes shall be that portion of the principal amount
thereof that could be declared to be due and payable pursuant to the terms of
such Original Issue Discount Security as of the date of such determination, (ii)
the principal amount of any Indexed Security shall be the principal face amount
of such Indexed Security determined on the date of its original issuance and
(iii) any Debt Security owned by Advanta or any obligor on such Debt Security or
any Affiliate of Advanta or such other obligor, shall be deemed not to be
Outstanding (Section 101 of each Indenture).
MODIFICATION AND WAIVER
Modifications and amendments of each of the Indentures may be made by
Advanta and the applicable Trustee with the consent of the holders of 66 2/3% in
aggregate principal amount of the Outstanding Debt Securities of each series
affected by such modification or amendment; provided, however, that no such
modification or amendment may, without the consent of the holder of each
Outstanding Debt Security affected thereby: (a) change the stated maturity date
of the principal of, or any installment of principal or interest on, any Debt
Security; (b) reduce the principal amount of, or any premium or interest on, any
Debt Security; (c) reduce the amount of principal of an Original Issue Discount
Security payable upon acceleration of the maturity thereof or the amount thereof
provable in bankruptcy; (d) adversely affect the right of repayment at the
option of any holder; (e) change the
13
<PAGE> 17
place of payment of, currency of payment of principal of, or any premium or
interest on, any Debt Security; (f) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security; (g) reduce
the percentage in principal amount of Outstanding Debt Securities of any series
the consent of whose holders is required for modification or amendment of the
Indenture or for waiver of compliance with certain provisions of the applicable
Indenture or for waiver of certain defaults; (h) in the case of Convertible Debt
Securities, adversely affect the right to convert any such Debt Security; or (i)
in the case of the Subordinated Indenture, adversely change the subordination
provisions thereof (Section 902 of each Indenture).
The holders of a majority in aggregate principal amount of the Outstanding
Debt Securities of each series may, on behalf of all holders of Debt Securities
of that series, waive, insofar as that series is concerned, compliance by
Advanta with certain restrictive provisions of the applicable Indenture (Section
1008 of each Indenture). The holders of a majority in aggregate principal amount
of the Outstanding Debt Securities of each series may, on behalf of all holders
of Debt Securities of that series, waive any past default under the applicable
Indenture with respect to Debt Securities of that series, except a default in
the payment of principal or any premium or interest, or a default in respect of
a provision which under the Indenture cannot be modified or amended without the
consent of the holder of each affected Outstanding Debt Security of that series
(Section 513 of each Indenture).
Modification and amendment of each of the Indentures may be made by Advanta
and the applicable Trustee without the consent of any holder for any of the
following purposes: (i) to evidence the succession of another corporation to
Advanta; (ii) to add to the covenants of Advanta for the benefit of the holders
of all or any series of Debt Securities; (iii) to add Events of Default; (iv) to
add or change any provisions of the Indenture to facilitate the issuance of
bearer Debt Securities; (v) to add to, delete from or revise the conditions,
limitations and restrictions on the authorized amount, terms or purposes of
issue, authentication and delivery of Debt Securities; (vi) to establish the
form or terms of Debt Securities of any series and any related coupons; (vii) to
provide for the acceptance of appointment by a successor Trustee; (viii) to cure
any ambiguity, defect or inconsistency in the Indenture, provided such action
does not adversely affect the interests of holders of Debt Securities of any
series or any related coupons in any material respect; (ix) to supplement any of
the provisions of the Indenture to such extent as shall be necessary to permit
or facilitate the defeasance and discharge of any series of Debt Securities,
provided such action does not adversely affect the interests of holders of Debt
Securities of such series or any related coupons in any material respect; (x) to
secure the Debt Securities; and (xi) to amend or supplement any provision
contained in the Indenture or in any supplemental indenture, provided that such
amendment or supplement does not materially adversely affect the interests of
the holders of any Debt Securities then Outstanding (Section 901 of each
Indenture).
CONSOLIDATION, MERGER AND SALE OF ASSETS
Advanta may consolidate or merge with or into, or transfer its assets
substantially as an entirety to, any corporation organized under the laws of any
domestic jurisdiction, provided that the successor corporation assumes Advanta's
obligations on the Debt Securities and under each of the Indentures, that after
giving effect to the transaction no Event of Default, and no event which, after
notice or lapse of time, would become an Event of Default, shall have occurred
and be continuing, and that certain other conditions are met (Section 801 of
each Indenture).
EVENTS OF DEFAULT AND CERTAIN RIGHTS ON DEFAULT
The following are Events of Default under each of the Indentures with
respect to Debt Securities of any series: (a) failure to pay principal of or any
premium on any Debt Security of that series when due; (b) failure to pay any
interest on any Debt Security of that series when due, continued for 30 days;
(c) failure to deposit any sinking fund payment, when due, in respect of any
Debt Security of that series; (d) breach of any other covenant or warranty of
Advanta in the applicable Indenture (other than a covenant or warranty included
in such Indenture solely for the benefit of a series of Debt
14
<PAGE> 18
Securities other than that series), continued for 60 days after written notice
as provided in the applicable Indenture; (e) certain events in bankruptcy,
insolvency or reorganization involving Advanta or any Significant Subsidiary;
(f) acceleration of indebtedness in a principal amount in excess of $10,000,000
for money borrowed by Advanta or any Significant Subsidiary under the terms of
the instrument under which such indebtedness was issued or secured, if such
acceleration is not annulled within 30 days after written notice as provided in
the applicable Indenture; and (g) any other Event of Default provided with
respect to Debt Securities of that series (Section 501 of each Indenture). If an
Event of Default with respect to Debt Securities of any series at the time
Outstanding occurs and is continuing, either the applicable Trustee or the
holders of at least 25% in aggregate principal amount of the Outstanding Debt
Securities of that series may declare the principal amount of all the Debt
Securities of that series to be due and payable immediately. At any time after a
declaration of acceleration with respect to Debt Securities of any series has
been made, but before a judgment or decree based on acceleration has been
obtained, the holders of a majority in aggregate principal amount of Outstanding
Senior Debt Securities of that series may rescind and annul such acceleration,
provided that, among other things, all Events of Default with respect to such
series, other than payment defaults caused by such acceleration, have been cured
or waived as provided in the applicable Indenture (Section 502 of each
Indenture).
ADDITIONAL PROVISIONS
Each Indenture provides that, subject to the duty of the applicable Trustee
during default to act with the required standard of care, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request or direction of any of the holders, unless such holders shall
have offered to the Trustee reasonable indemnity (Section 601 of each
Indenture). Subject to such provisions for the indemnification of the Trustee
and certain other conditions, the holders of a majority in aggregate principal
amount of the Outstanding Debt Securities of any series will have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee, with respect to the Debt Securities of that series (Section 512 of each
Indenture).
No holder of any Debt Security of any series will have any right to
institute any proceeding with respect to the applicable Indenture or for any
remedy thereunder, unless: (i) such holder shall have previously given to the
applicable Trustee written notice of a continuing Event of Default with respect
to Debt Securities of that series; (ii) the holders of not less than 25% in
aggregate principal amount of the Outstanding Debt Securities of that series
shall have made written request, and offered reasonable indemnity, to the
applicable Trustee to institute such proceeding as trustee; (iii) the Trustee
shall have failed to institute such proceeding within 60 days after receipt of
such written request; and (iv) the Trustee shall not have received from the
holders of a majority in principal amount of the Outstanding Debt Securities of
that series a direction inconsistent with such request (Section 507 of each
Indenture). However, the holder of any Debt Security will have an absolute right
to receive payment of the principal of (and premium, if any) and interest on
such Debt Security on or after the due dates expressed in such Debt Security and
to convert any Debt Security which is a Convertible Debt Security (as
hereinafter defined), and to institute suit for the enforcement of any such
rights to payment or conversion (Section 508 of each Indenture).
Advanta is required to furnish to each Trustee annually a statement as to
performance by Advanta of certain of its obligations under the applicable
Indenture and as to any default in such performance. Advanta is also required to
deliver to each Trustee, within five days after the occurrence thereof, written
notice of any event which after notice or lapse of time or both would constitute
an Event of Default (Section 1009 of each Indenture).
SPECIAL TERMS RELATING TO SUBORDINATED DEBT SECURITIES
Upon any distribution of assets of Advanta resulting from any dissolution,
winding up, liquidation or reorganization, payments on Subordinated Debt
Securities are to be subordinated, to the extent
15
<PAGE> 19
provided in the Subordinated Indenture, in right of payment to the prior payment
in full of all Senior Indebtedness, but the obligation of Advanta to make
payments on the Subordinated Debt Securities will not otherwise be affected. No
payment on Subordinated Debt Securities may be made at any time when there is a
default in the payment of any principal, premium, interest, Additional Amounts
or sinking fund of or on any Senior Indebtedness. Holders of Subordinated Debt
Securities will be subrogated to the rights of holders of Senior Indebtedness to
the extent of payments made on Senior Indebtedness upon any distribution of
assets in any such proceedings out of the distributive shares of Subordinated
Debt Securities. By reason of such subordination, in the event of a distribution
of assets upon insolvency, certain creditors of Advanta may recover more,
ratably, than holders of Subordinated Debt Securities (Article Sixteen of the
Subordinated Indenture).
Senior Indebtedness is defined in the Subordinated Indenture as the
principal of, premium, if any, and unpaid interest on (a) indebtedness of
Advanta (including indebtedness of others guaranteed by Advanta), other than the
Subordinated Debt Securities, whether outstanding on the date of execution of
the Subordinated Indenture or thereafter created, incurred, assumed or
guaranteed, (i) for money owing to banks, (ii) for money borrowed from sources
other than banks, or (iii) in connection with the acquisition by Advanta or a
subsidiary of assets of any kind except in the ordinary course of business,
unless in the instrument creating or evidencing the same or pursuant to which
the same is outstanding it is provided that such indebtedness is not superior in
right of payment to the Subordinated Debt Securities; and (b) renewals,
extensions, modifications and refundings of any such indebtedness (Section 101
of the Subordinated Indenture).
CONVERSION
The holders of Debt Securities of a specified series that are convertible
into Capital Securities or other Debt Securities ("Convertible Debt Securities")
will be entitled at certain times specified in the Prospectus Supplement
relating to such Convertible Debt Securities, subject to prior redemption,
exchange, repayment or repurchase, to convert any Convertible Debt Securities of
such series into Capital Securities or other Debt Securities, at the conversion
price set forth in such Prospectus Supplement, subject to adjustment and to such
other terms as are set forth in such Prospectus Supplement.
EXCHANGEABILITY
The holders of Debt Securities of any series may be obligated at any time
or at Maturity to exchange them for Capital Securities or other Debt Securities
of Advanta. The terms of any such exchange and any such Capital Securities or
other Debt Securities will be described in the Prospectus Supplement relating to
such series of Debt Securities. The Capital Securities of Advanta are described
below under "Description of Class B Common Stock," "Description of Class B
Preferred Stock," and "Issuance of Capital Securities of Advanta upon Conversion
or Exchange."
DESCRIPTION OF CLASS B PREFERRED STOCK OF ADVANTA
GENERAL
The Board of Directors has authority to issue 1,000,000 authorized but
unissued shares of Class B Preferred Stock, par value $.01 per share, without
further approval of the stockholders.
Any Class B Preferred Stock offered hereby will be fully paid and
nonassessable. The rights, preferences, privileges and restrictions of the Class
B Preferred Stock in respect of which this Prospectus is delivered shall be
described in an accompanying Prospectus Supplement. Except as otherwise provided
in any Prospectus Supplement, the Class B Preferred Stock offered hereby will
rank on a parity in all respects with the outstanding Class A Preferred Stock of
Advanta. Among the terms of the Class B Preferred Stock which would be specified
in an accompanying Prospectus Supplement are the following: (i) the annual
dividend rate, if any, or the means by which such
16
<PAGE> 20
dividend rate may be calculated (including without limitation the possibility
that the rate of such dividends may bear an inverse relationship to some index
or standard) and the date or dates from which such dividends shall accrue and
the date or dates on which such dividends shall be paid and whether such
dividends shall be cumulative; (ii) the price at which and the terms and
conditions on which the shares of such series of Preferred Stock may be
redeemed, including the period of time during which such shares may be redeemed,
any premium to be paid over and above the par value of such shares of Preferred
Stock, whether and to what extent accumulated dividends on such shares of
Preferred Stock will be paid upon the redemption of such shares; (iii) the
liquidation preference, if any, over and above the par value of such shares of
Preferred Stock and whether and to what extent the holders of such shares of
Preferred Stock shall be entitled to accumulated dividends in the event of the
voluntary or involuntary liquidation, dissolution or winding-up of the affairs
of Advanta; (iv) whether the shares of Class B Preferred Stock shall be subject
to the operation of a retirement or sinking fund and, if so, a description of
the operation of such retirement or sinking fund; (v) the terms and conditions,
if any, on which the shares of Class B Preferred Stock may be convertible into,
or exchangeable for, shares of any other class or classes of stock of Advanta,
including the price or rate of conversion or exchange and the method for
effecting such conversion or exchange, provided that no shares of Class B
Preferred Stock will be convertible into shares of a class that has superior
rights or preferences as to dividends or distribution of assets of Advanta upon
the voluntary or involuntary dissolution or liquidation of Advanta; (vi) a
description of the voting rights, if any, of the shares of Class B Preferred
Stock; and (vii) other preferences, rights, qualifications or restrictions or
material terms of such shares of Preferred Stock.
The description of the foregoing provisions of Class B Preferred Stock as
set forth in the related Prospectus Supplement does not purport to be complete
and is subject to and qualified in its entirety by reference to the definitive
Certificate of Amendment to Advanta's Certificate of Incorporation relating to
such series of Class B Preferred Stock. The definitive Certificate of Amendment
to Advanta's Certificate of Incorporation relating to Class B Preferred Stock
will be filed with the Commission in connection with the offering of Class B
Preferred Stock.
DEPOSITARY SHARES
Advanta may, at its option, elect to offer fractional shares of Class B
Preferred Stock, rather than full shares of Class B Preferred Stock. In the
event such option is exercised, Advanta will issue receipts for Depositary
Shares, each of which will represent a fraction (to be set forth in the
Prospectus Supplement relating to the Class B Preferred Stock) of a share of
such Preferred Stock.
The shares of Class B Preferred Stock represented by Depositary Shares will
be deposited under a Deposit Agreement (the "Deposit Agreement") between Advanta
and a bank or trust company selected by Advanta having its principal office in
the United States and having a combined capital and surplus of at least
$50,000,000 (the "Depositary"). Subject to the terms of the Deposit Agreement,
each owner of a Depositary Share will be entitled, in proportion to the
applicable fraction of a share of Class B Preferred Stock represented by such
Depositary Share, to all the rights and preferences of the Class B Preferred
Stock represented thereby (including dividend, voting, redemption, conversion
and liquidation rights).
The above description of the Depositary Shares is not complete and is
subject to, and qualified in its entirety by, the description in the applicable
Prospectus Supplement and the provisions of the Deposit Agreement (which will
contain the form of Depositary Receipt), a copy of which will be filed with the
Commission as an exhibit to the Registration Statement of which this Prospectus
constitutes a part.
OUTSTANDING PREFERRED STOCK
The authorized capital stock of Advanta includes 1,010 shares of Class A
Preferred Stock, par value $1,000 per share. All of such shares are held by J.R.
Alter, Advanta's founder. The Class A Preferred
17
<PAGE> 21
Stock is entitled to one-half of a vote per share on all matters on which
stockholders are entitled to vote. No dividends may be declared or paid on
Advanta's outstanding common stock unless and until non-cumulative dividends of
$140 per share, payable as and when declared, which are required to be paid on
the Class A Preferred Stock for the applicable year (a total of $141,400) have
been paid. The holder of the Class A Preferred Stock is not otherwise entitled
to participate in the earnings or profits of Advanta. Upon the liquidation of
Advanta, the holder of the Class A Preferred Stock is entitled to receive $1,000
per share ($1,010,000 in the aggregate) before any distributions are made to the
holders of Advanta's common stock.
DESCRIPTION OF CLASS B COMMON STOCK OF ADVANTA
CLASS B COMMON STOCK -- GENERAL
The authorized capital of Advanta includes 200,000,000 shares of Class B
Common Stock, par value $.01 per share, of which 23,281,895 shares were
outstanding on March 31, 1995. All outstanding shares are fully paid and
non-assessable. The holders of Advanta's Class B Common Stock are entitled to
the same rights as the holders of Advanta's Class A Common Stock described
below, except that the holders of Class B Common Stock may not vote (i) in the
election of directors, (ii) on an amendment to Advanta's Certificate of
Incorporation (including an amendment to increase the authorized shares of Class
B Common Stock), (iii) on a proposed merger or consolidation, (iv) on a proposed
dissolution of Advanta, or (v) on any other matter except to the extent
described below or as required under the General Corporation Law of the State of
Delaware. Holders of Class B Common Stock are entitled to vote on proposals to
change the par value of the Class B Common Stock or to alter or change the
powers, preferences or special rights of the shares of Class B Common Stock,
including the dividend and Class B protection features described below, which
proposals may affect them adversely. Holders of the Class B Common Stock are
also entitled to the additional rights described in the following subsections.
Only Class B Common Stock may be offered pursuant to this Prospectus and the
accompanying Prospectus Supplement.
CLASS A COMMON STOCK -- GENERAL
The authorized capital of Advanta includes 200,000,000 shares of Class A
Common Stock, par value $.01 per share, of which 17,410,718 shares were
outstanding on March 31, 1995. All outstanding shares are fully paid and
non-assessable. The holders of Advanta's Class A Common Stock are entitled to
one vote per share; to receive such dividends, in conjunction with dividends to
holders of Advanta's Class B Common Stock, as legally may be declared by the
Board of Directors, after dividends are paid to holders of preferred stock, as
described below; and upon liquidation, to receive any net assets of Advanta
after the liquidation rights of all holders of preferred stock, if any, have
been satisfied. There are no preemptive, conversion, cumulative voting, or
redemption rights applicable to the Class A Common Stock. No Class A Common
Stock may be offered pursuant to this Prospectus and the accompanying Prospectus
Supplement.
DIVIDENDS AND OTHER DISTRIBUTIONS
Any cash dividend with respect to either Class A Common Stock or Class B
Common Stock must be accompanied by a dividend on the other class of common
stock. The Board of Directors may, however, in its discretion, declare a
dividend per share with respect to the Class B Common Stock which can be up to
20% higher (but under no circumstances lower) than the dividend declared with
respect to the Class A Common Stock. In all other respects the dividends and
other distributions, including the per share consideration in the event of a
merger or consolidation, with respect to Class A Common Stock and Class B Common
Stock are equal, except that dividends or other distributions payable in shares
of common stock may be made only as follows: (i) in shares of Class B Common
Stock to the holders of both Class A Common Stock and Class B Common Stock, (ii)
in shares of Class A Common Stock to the holders of Class A Common Stock and in
shares of Class B Common Stock to
18
<PAGE> 22
the holders of Class B Common Stock, or (iii) in any other authorized class or
series of capital stock to the holders of both classes of common stock. Neither
the Class A Common Stock nor the Class B Common Stock may be split, subdivided
or combined unless the other is proportionately split, subdivided or combined.
Although it is the present intention of the Board to maintain a higher
dividend on the Class B Common Stock, the Board of Directors is not required to
declare a higher dividend on the Class B Common Stock and the amount of future
dividends, if any, on each class of common stock will depend on circumstances
existing at the time, including the sufficiency of funds legally available for
the payment of dividends.
CLASS B PROTECTION
Because of the existence of the two classes of common stock, one class with
voting rights and the other with no voting rights, voting rights
disproportionate to equity ownership could be acquired through acquisitions of
Class A Common Stock. The Board of Directors was advised that, while either
class of common stock might trade at a premium relative to the other, the
non-voting or lesser-voting common stocks of public companies with dual class
capital structures frequently trade at a discount from the full voting common
stocks of such companies. Advanta therefore adopted the "Class B Protection"
features described below as a means of helping to reduce or eliminate the
economic reasons for the Class A Common Stock and Class B Common Stock to trade
at disparate market prices, and to give holders of Class B Common Stock the
opportunity to participate in any premium paid in the future for a significant
block (10% or more) of the Class A Common Stock by a buyer who has not acquired
a proportionate share of the Class B Common Stock. Although Advanta adopted the
"Class B Protection" features and has paid a higher dividend on the Class B
Common Stock in an attempt to minimize any price differential between the
classes of common stock, in fact the Class A Common Stock and the Class B Common
Stock generally have traded at disparate market prices. During the period in
which the two classes of common stock have existed, this differential has been
as much as $8.50 and as low as zero. Advanta adopted the division of the common
stock into two classes with the expressed expectation that Advanta generally
would issue shares of Class B Common Stock rather than Class A Common Stock in
the future to raise equity, to finance acquisitions or pursuant to incentive
compensation plans, even if the market price per share of the Class B Common
Stock was lower at the relevant time than the market price per share of Class A
Common Stock. There can be no assurance that the price differential between the
Class A Common Stock and the Class B Common Stock will be reduced or eliminated
or as to the extent or continuation of any such price differential in the
future.
Pursuant to the applicable provisions of Advanta's Restated Certificate of
Incorporation, if any person or group acquires (other than upon issuance or sale
by Advanta, by operation of law, by will or the laws of descent and
distribution, by gift, or by foreclosure of a bona fide loan) beneficial
ownership of shares of Class A Common Stock constituting 10% or more of the then
issued and outstanding shares of Class A Common Stock (any person or group
making such acquisition being defined as a "Significant Stockholder"), and such
person or group does not then own shares of Class B Common Stock constituting an
equal or greater percentage of all then issued and outstanding shares of Class B
Common Stock, such Significant Stockholder must, within a 90-day period
beginning the day after becoming a Significant Stockholder, commence a public
tender offer to acquire additional shares (as described below) of Class B Common
Stock (a "Class B Protection Transaction"). For purposes of this provision, the
terms "beneficial ownership" and "group" have the same meanings as used in
Regulation 13D promulgated under the Exchange Act. The Class B Protection
feature does not change the ability of Dennis Alter or any member of his family
or other management stockholder to transfer a significant voting interest in
Advanta to another person or group by the sale of their voting shares to such
person or group. However, such person or group may also be required to purchase
a proportionate amount of Class B Common Stock either concurrently from such
stockholder or other persons or pursuant to a Class B Protection Transaction, as
described below.
19
<PAGE> 23
In a Class B Protection Transaction, the Significant Stockholder must offer
to acquire from the holders of the Class B Common Stock that additional number
of shares of Class B Common Stock (the "Additional Shares") determined by (i)
multiplying the percentage of issued and outstanding shares of Class A Common
Stock beneficially owned by such Significant Stockholder which were acquired
after April 24, 1992 by the total number of shares of Class B Common Stock
outstanding on the date such person or group became a Significant Stockholder,
and (ii) subtracting therefrom the total number of shares of Class B Common
Stock beneficially owned by such Significant Stockholder on such date which were
acquired after the initial distribution of Class B Common Stock to stockholders
on May 5, 1992 pursuant to the Certificate of Amendment to Advanta's Restated
Certificate of Incorporation (including shares acquired on such date at or prior
to the time such person or group became a Significant Stockholder). The
Significant Stockholder must acquire all shares validly tendered or, if the
number of shares tendered exceeds the number determined pursuant to such
formula, a pro rata amount from each tendering holder.
The offer price for any shares of Class B Common Stock required to be
purchased by the Significant Stockholder pursuant to a Class B Protection
Transaction is the greater of (i) the highest price per share paid by the
Significant Stockholder for any share of Class A Common Stock in the six-month
period ending on the date such person or group became a Significant Stockholder
or (ii) the highest price of a share of Class A Common Stock or Class B Common
Stock (whichever is higher) as reported on the Nasdaq National Market (or such
other quotation system or securities exchange constituting the principal trading
market for either class of common stock) on the date such person or group became
a Significant Stockholder.
A Class B Protection Transaction is also required each time a Significant
Stockholder acquires an additional 10% of the then issued and outstanding Class
A Common Stock (other than upon issuance or sale by Advanta, by operation of
law, by will or the laws of descent and distribution, by gift, or by foreclosure
of a bona fide loan) after the last acquisition by such person or group which
triggered the requirement for a Class B Protection Transaction, if such
Significant Stockholder does not then beneficially own shares of Class B Common
Stock acquired after the initial distribution of Class B Common Stock to
stockholders on May 5, 1992 constituting an equal or greater percentage of all
then issued and outstanding shares of Class B Common Stock. Such Significant
Stockholder would be required to offer to buy that number of Additional Shares
prescribed by the formula set forth above, even if a previous Class B Protection
Transaction resulted in fewer shares of Class B Common Stock being tendered than
such previous offer included.
The requirement to engage in a Class B Protection Transaction is satisfied
by making the requisite offer and purchasing validly tendered shares, even if
the number of shares tendered is less than the number of shares included in the
required offer. The penalty applicable to any Significant Stockholder that fails
to make the required offer, or to purchase shares validly tendered (after
proration, if any), is to automatically suspend the voting rights of the shares
of Class A Common Stock owned by such Significant Stockholder until consummation
of an offer as required or until divestiture of the shares of Class A Common
Stock that triggered the offer requirement. To the extent that the voting power
of any shares of Class A Common Stock is so suspended, such shares will not be
included in the determination of aggregate voting shares for any purpose.
Neither the Class B Protection Transaction requirement nor the related penalty
applies to any increase in percentage ownership of Class A Common Stock
resulting solely from a change in the total amount of Class A Common Stock
outstanding.
The Class B Protection provision does not prevent any person or group from
acquiring a significant or controlling interest in Advanta, provided such person
or group acquires a proportionate percentage of the Class B Common Stock. If a
Class B Protection Transaction is prescribed, the purchase price required to be
paid in such offer may be higher than the price at which a Significant
Stockholder might otherwise be able to acquire an identical amount of Class B
Common Stock. Such requirement, therefore, could make an acquisition of a
significant or controlling interest in Advanta more expensive and more time
consuming than if such requirement did not exist. Consequently, a
20
<PAGE> 24
person or group might be deterred from acquiring a significant or controlling
interest in Advanta as a result of such requirement. Moreover, by restricting
the ability of an acquiror to acquire a significant interest in the Class A
Common Stock by paying a "control premium" for such stock without acquiring, or
paying a similar premium for, Class B Common Stock, the Class B Protection
provision should reduce or eliminate the economic reasons for the Class A Common
Stock and Class B Common Stock to trade at disparate market prices.
CONVERTIBILITY
Except as described below, neither the Class A Common Stock nor the Class B
Common Stock is convertible into another class of common stock or any other
security of Advanta.
The Class B Common Stock could be converted into Class A Common Stock on a
share-for-share basis by resolution of the Board of Directors if, as a result of
the existence of the Class B Common Stock, the Class A Common Stock or the Class
B Common Stock or both become excluded from quotation on the Nasdaq National
Market, or, if such shares are then listed on a national securities exchange,
from trading on the principal national securities exchange on which the shares
are then traded.
In addition, if at any time, as a result of additional issuances by Advanta
of Class B Common Stock, repurchases by Advanta of Class A Common Stock or a
combination of such issuances and repurchases, the number of outstanding shares
of Class A Common Stock as reflected on the stock transfer books of Advanta
falls below 10% of the aggregate number of outstanding shares of Class A Common
Stock and Class B Common Stock, then, immediately upon the occurrence of such
event, all the outstanding shares of Class B Common Stock will be automatically
converted into shares of Class A Common Stock, on a share-for-share basis. For
purposes of the immediately preceding sentence, any shares of Class A Common
Stock or Class B Common Stock repurchased by Advanta will no longer be deemed
"outstanding" from and after the date of repurchase. Advanta has no present
intention to repurchase any shares of its common stock. In view of the absence
of a present intention by Advanta to purchase any shares of common stock and the
substantial number of shares of Class B Common Stock that would be required to
be issued to reach the 10% threshold, Advanta believes it unlikely that this
provision will be triggered in the foreseeable future.
ISSUANCE OF CAPITAL SECURITIES OF ADVANTA UPON CONVERSION OR EXCHANGE
GENERAL
A Prospectus Supplement may provide that Capital Securities will be
issuable in exchange for or upon conversion of Debt Securities, Class B
Preferred Stock, Depositary Shares or Preferred Shares.
TENDER OFFER RULES
Rules 13e-4 and 14e-1 of the Commission's rules and regulations relating to
tender offers by issuers, as currently in effect and interpreted, may be
applicable to exchanges or conversions such as that of Capital Securities for
Debt Securities, Class B Preferred Stock or Preferred Shares. If, at the time of
any such exchange or conversion, Rule 13e-4 or Rule 14e-1 (or any successor rule
or rules) applies to such transaction, Advanta will comply with such rule (or
any successor rule or rules), and will afford holders of such Debt Securities,
Class B Preferred Stock or Preferred Shares, all rights and will make all
filings required by such rule (or successor rule or rules).
21
<PAGE> 25
DESCRIPTION OF SECURITIES WARRANTS OF ADVANTA
Advanta may issue, together with any Debt Securities or Class B Preferred
Stock or Class B Common Stock offered by any Prospectus Supplement or
separately, Securities Warrants for the purchase of other Debt Securities or
Class B Preferred Stock or Class B Common Stock. The Securities Warrants are to
be issued under warrant agreements (each a "Securities Warrant Agreement") to be
entered into between Advanta and a bank or trust company, as warrant agent
("Securities Warrant Agent"), all as set forth in the Prospectus Supplement
relating to the particular series of Securities Warrants. The form of Securities
Warrant Agreement, including the form of certificates representing the
Securities Warrants ("Securities Warrant Certificates"), reflecting the
alternative provisions to be included in the Securities Warrant Agreements that
will be entered into with respect to particular offerings of Securities
Warrants, will be filed as an exhibit to the Registration Statement of which
this Prospectus forms a part. The following summaries of certain provisions of
the Securities Warrant Agreement and the Securities Warrant Certificates do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all the provisions of the Securities Warrant Agreement and the
Securities Warrant Certificates, respectively, including the definitions therein
of certain terms. Wherever defined terms of the Securities Warrant Agreement are
referred to, it is intended that such defined terms shall be incorporated herein
by reference.
GENERAL
The Prospectus Supplement relating to the particular series of Securities
Warrants offered thereby will describe the terms of the offered Securities
Warrants, the Securities Warrant Agreement relating to the offered Securities
Warrants and the Securities Warrant Certificates representing the offered
Securities Warrants, including the following: (i) if the Securities Warrants are
offered for separate consideration, the offering price and the Currency for
which Securities Warrants may be purchased; (ii) if applicable, the designation,
aggregate principal amount, purchase price, Currency and terms of the series of
Debt Securities purchasable upon exercise of the offered Securities Warrants;
(iii) if applicable, the designation, number, stated value and terms (including,
without limitation, liquidation, dividend, conversion and voting rights) of the
shares of Class B Preferred Stock purchasable upon exercise of Preferred Stock
Warrants and the price at which such number of shares of Class B Preferred Stock
may be purchased upon such exercise; (iv) if applicable, the number of shares of
Class B Common Stock purchasable upon exercise of Common Stock Warrants and the
price at which such number of shares of Class B Common Stock may be purchased
upon such exercise; (v) the date, if any, on and after which the offered
Securities Warrants and the related Debt Securities and/or Class B Preferred
Stock and/or Class B Common Stock will be separately transferable; (vi) the date
on which the right to exercise the offered Securities Warrants shall commence
and the date ("Expiration Date") on which such right shall expire; (vii) a
discussion of the specific U.S. federal income tax, accounting and other
considerations applicable to the Securities Warrants or to any Debt Securities
(including Original Issue Discount Debt Securities) purchasable upon exercise of
such Securities Warrants; (viii) whether the offered Securities Warrants
represented by the Securities Warrant Certificates will be issued in registered
or bearer form, and if registered, where they may be transferred and registered;
(ix) any applicable anti-dilution provisions; (x) any applicable redemption or
call provisions; (xi) any applicable book entry provisions; and (xii) any other
terms of the offered Securities Warrants.
Securities Warrant Certificates will be exchangeable on the terms specified
in the Prospectus Supplement for new Securities Warrant Certificates of
different denominations and Securities Warrants may be exercised at the
corporate trust office of the Securities Warrant Agent or any other office
indicated in the Prospectus Supplement relating thereto. Prior to the exercise
of their Securities Warrants, holders of Securities Warrants will not have any
of the rights of holders of the Debt Securities or Class B Preferred Stock or
Class B Common Stock purchasable upon such exercise, including the right in the
case of Debt Warrants to payments of principal of or any premium or interest, if
any, on the Debt Securities purchasable upon such exercise, or to enforce
covenants in the applicable Indenture and in the case of Preferred Stock
Warrants and Common Stock Warrants, the
22
<PAGE> 26
right to receive payments of dividends or distributions of any kind, if any, on
the Class B Preferred Stock and Class B Common Stock, respectively, purchasable
upon exercise or to exercise any applicable right to vote.
EXERCISE OF WARRANTS
Each Securities Warrant will entitle the holder thereof to purchase such
principal amount of Debt Securities or such number of shares of Class B
Preferred Stock or Class B Common Stock, as the case may be, at such exercise
price as shall in each case be set forth in, or be determinable from, the
Prospectus Supplement relating to the Securities Warrants, by payment of such
exercise price in full in the Currency and in the manner specified in the
Prospectus Supplement. Securities Warrants may be exercised at any time up to
the close of business on the Expiration Date (or such later date to which such
Expiration Date may be extended by Advanta); unexercised Securities Warrants
will become void.
Upon receipt at the corporate trust office of the Securities Warrant Agent
or any other office indicated in the Prospectus Supplement of (i) payment of the
exercise price and (ii) the Securities Warrant Certificate properly completed
and duly executed, Advanta will, as soon as practicable, forward the Debt
Securities or shares of Class B Preferred Stock or Class B Common Stock
purchasable upon such exercise to the holder of such Securities Warrant. If less
than all of the Securities Warrants represented by such Warrant Certificate are
exercised, a new Securities Warrant Certificate will be issued for the remaining
number of Securities Warrants.
DESCRIPTION OF STOCK PURCHASE CONTRACTS
AND STOCK PURCHASE UNITS OF ADVANTA
Advanta may issue Stock Purchase Contracts, including contracts obligating
holders to purchase from Advanta, and Advanta to sell to the holders, a
specified number of shares of Class B Common Stock or Class B Preferred Stock at
a future date or dates specified in the Stock Purchase Contracts. The price per
share and the number of shares of Class B Common Stock or Class B Preferred
Stock may be fixed at the time the Stock Purchase Contracts are issued or may be
determined by reference to a specific formula set forth in the Stock Purchase
Contracts. Any such formula may include anti-dilution provisions to adjust the
number of shares issuable pursuant to the Stock Purchase Contracts upon certain
events.
The Stock Purchase Contracts may be issued separately or as a part of units
("Stock Purchase Units"), each consisting of a Stock Purchase Contract and debt
obligations of the United States of America or agencies or instrumentalities
thereof. Such debt obligations would be pledged with a collateral agent to
secure the holders' obligations to purchase the Class B Common Stock or the
Class B Preferred Stock under the Stock Purchase Contracts. Any such debt
obligations will be obligations of the United States Government and not of
Advanta. Unless a holder of Stock Purchase Units settles its Stock Purchase
Contracts early through the delivery of consideration to Advanta or its agent in
the manner described below, the principal of such debt obligations, when paid at
maturity, will automatically be applied to satisfy in full the holder's
obligation to purchase Class B Common Stock or Class B Preferred Stock under the
Stock Purchase Contracts. The Stock Purchase Contracts may require Advanta to
make periodic payments to the holders of the Stock Purchase Units or vice versa,
and such payments may be unsecured or prefunded on some basis.
Holders of Stock Purchase Units may be entitled to settle the underlying
Stock Purchase Contracts prior to the stated settlement date by surrendering the
certificate evidencing the Stock Purchase Units, accompanied by the payment due,
in such form and calculated pursuant to such formula as may be prescribed in the
Stock Purchase Contracts and described in the applicable Prospectus Supplement.
Upon settlement, the holder would receive the number of shares of Class B Common
Stock or Class B Preferred Stock deliverable under such Stock Purchase
Contracts, subject to adjustment in certain cases. In such event, the debt
obligations that were pledged as security for the obligation of the holder to
perform under the Stock Purchase Contracts would be transferred to the holder
free and clear of Advanta's security interest therein.
23
<PAGE> 27
The applicable Prospectus Supplement will describe the terms of any Stock
Purchase Contracts or Stock Purchase Units. The description in the Prospectus
Supplement will not purport to be complete and will be qualified in its entirety
by reference to the Stock Purchase Contracts, and, if applicable, collateral
arrangements and depositary arrangements, relating to such Stock Purchase
Contracts or Stock Purchase Units.
DESCRIPTION OF PREFERRED SHARES OF ADVANTA CAPITAL
GENERAL
Advanta Capital may from time to time issue Preferred Shares, in one or
more series, having terms described in the Prospectus Supplement relating
thereto, including any terms relating to the redemption of the Preferred Shares
upon the occurrence of certain events described in the Prospectus Supplement.
Under Advanta Capital's Limited Liability Company Agreement, the Manager may
establish one or more classes or series of Preferred Shares, having such terms,
including dividends, redemption, voting, liquidation rights and such other
preferred or other special rights or such restrictions, as the Manager may
determine, to be set forth in a Prospectus Supplement. All Preferred Shares of
Advanta Capital offered by any Prospectus Supplement will be guaranteed by
Advanta to the extent set forth below under "Guarantee" and in the Prospectus
Supplement and may also be entitled to the benefits of certain undertakings of
Advanta as described below under "Backup Undertakings" and in the Prospectus
Supplement. Any special federal income tax, accounting and other considerations
applicable to any offering of Preferred Shares and related Backup Undertakings
will be described in the Prospectus Supplement relating thereto.
The holders of Preferred Shares of a specified series that are convertible
into Capital Securities of Advanta ("Convertible Preferred Shares") will be
entitled at certain times specified in the Prospectus Supplement relating to
such Convertible Preferred Shares, subject to prior redemption, exchange,
repayment or repurchase, to convert any Convertible Preferred Shares of such
series into Capital Securities, at the conversion price set forth in such
Prospectus Supplement, subject to adjustment and to such other terms as are set
forth in such Prospectus Supplement.
The holders of Preferred Shares of any series may be obligated at any time
or at Maturity to exchange them for Capital Securities of Advanta. The terms of
any such exchange and any such Capital Securities will be described in the
Prospectus Supplement relating to such series of Preferred Shares. The Capital
Securities of Advanta are described above under "Description of Class B Common
Stock of Advanta," "Description of Class B Preferred Stock of Advanta," and
"Issuance of Capital Securities of Advanta upon Conversion or Exchange."
GUARANTEE
Unless otherwise specified in the applicable Prospectus Supplement, Advanta
will irrevocably and unconditionally agree, to the extent set forth in a Payment
and Guarantee Agreement (the "Guarantee"), to pay in full, to the holders of
Preferred Shares of any class or series, the Guarantee Payments (as defined
below), as and when due, regardless of any defense, right of setoff or
counterclaim which Advanta Capital may have or assert. The Guarantee will
constitute a guarantee of payment and not of collection, and may be enforced by
holders of Preferred Shares directly against Advanta. The following payments, to
the extent not paid by Advanta Capital (the "Guarantee Payments"), will be
subject to the Guarantee: (i) any arrears and accruals of unpaid dividends which
have theretofore been declared on the Preferred Shares of such class or series
out of moneys legally available therefor; (ii) the redemption price including
all arrears and accruals of unpaid dividends payable, out of moneys legally
available therefor with respect to any Preferred Shares of such class or series
called for redemption; and (iii) upon a liquidation of Advanta Capital, the
lesser of (a) the liquidation preference and all arrears and accruals of unpaid
dividends (whether or not declared) on the Preferred Shares of such class or
series to the date of payment or (b) the amount of assets of Advanta Capital
legally available for distribution in such liquidation. In addition, the
Prospectus Supplement relating to a class or series
24
<PAGE> 28
of Preferred Shares will describe the rank of the Guarantee and any additional
covenants or other terms of the Guarantee with respect to such class or series.
BACKUP UNDERTAKINGS
In connection with any class or series of Preferred Shares, Advanta may
enter into additional arrangements with Advanta Capital, including intercompany
loan agreements and amendments to Advanta Capital's Limited Liability Company
Agreement and Certificate of Formation, that operate directly or indirectly for
the benefit of holders of the Preferred Shares. The Guarantee and any such other
arrangements are herein collectively referred to as "Backup Undertakings" of
Advanta and will be described in the Prospectus Supplement relating to any class
or series of Preferred Shares to which they apply.
PLAN OF DISTRIBUTION
Advanta and/or Advanta Capital, as the case may be, may sell the Securities
being offered hereby: (i) directly to purchasers; (ii) through agents; (iii)
through underwriters; (iv) through dealers; or (v) through a combination of any
such methods of sale. The Securities may also be used as all or part of the
consideration to be paid by Advanta for property or assets.
The distribution of the Securities may be effected from time to time in one
or more transactions: (i) at a fixed price or prices, which may be changed; (ii)
at market prices prevailing at the time of sale; (iii) at prices related to such
prevailing market prices; or (iv) at negotiated prices.
Offers to purchase Securities may be solicited directly by Advanta or by
agents designated by Advanta and/or Advanta Capital from time to time. Any such
agent, which may be deemed to be an underwriter as that term is defined in the
Securities Act, involved in the offer or sale of the Securities in respect of
which this Prospectus is delivered will be named, and any commissions payable by
Advanta and/or Advanta Capital, as the case may be, to such agent will be set
forth, in the applicable Prospectus Supplement. Unless otherwise indicated in
the Prospectus Supplement, any such agent will be acting on a reasonable efforts
basis.
If an underwriter or underwriters are utilized in the sale of Securities in
respect of which this Prospectus and the accompanying Prospectus Supplement are
delivered, Advanta and/or Advanta Capital will execute an underwriting agreement
with such underwriters at the time of sale to them and the names of the
underwriters and the terms of the transaction will be set forth in the
Prospectus Supplement, which will be used by the underwriters to make resales of
the Securities in respect of which this Prospectus is delivered to the public.
If a dealer is utilized in the sale of the Securities in respect of which
this Prospectus is delivered, Advanta and/or Advanta Capital will sell such
Securities to the dealer, as principal. The dealer may then resell such
Securities to the public at varying prices to be determined by such dealer at
the time of resale.
Certain of the underwriters, dealers or agents may be customers of,
including borrowers from, engage in transactions with, and perform services for,
Advanta or one or more of its affiliates in the ordinary course of business.
Underwriters, dealers, agents and other persons may be entitled, under
agreements which may be entered into with Advanta and/or Advanta Capital, as the
case may be, to indemnification against certain civil liabilities, including
liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, Advanta or Advanta
Capital will authorize agents and underwriters to solicit offers by certain
institutions to purchase Securities from Advanta or Advanta Capital at the
public offering price set forth in the Prospectus Supplement pursuant to delayed
delivery contracts ("Contracts") providing for payment and delivery on the date
stated in the Prospectus Supplement. A commission indicated in the Prospectus
Supplement will be paid to underwriters and agents soliciting purchases of
Securities pursuant to Contracts accepted by Advanta or Advanta Capital.
25
<PAGE> 29
LEGAL OPINIONS
Certain legal matters relating to certain of the Securities offered hereby
will be passed upon for Advanta by Gene S. Schneyer, Esquire, Vice President,
Secretary and General Counsel of Advanta. Certain legal matters relating to the
Class B Preferred Stock, the Class B Common Stock, the Depositary Shares, the
Securities Warrants, the Guarantees, the Capital Securities, the Stock Purchase
Contracts, Stock Purchase Units and the Preferred Shares will be passed upon for
Advanta and/or Advanta Capital by Wolf, Block, Schorr and Solis-Cohen. Wolf,
Block, Schorr and Solis-Cohen will also pass upon United States federal income
tax matters, as described in a Prospectus Supplement relating to the Securities
to be offered. Certain legal matters relating to the Securities offered hereby
will be passed upon for the agents and underwriters, if any, by Brown & Wood,
New York, New York. Mr. Schneyer owns or has the right to acquire a number of
shares of Class A and Class B Common Stock of Advanta which is well below l% of
the outstanding common stock of Advanta.
EXPERTS
The consolidated financial statements and schedules incorporated by
reference in this Prospectus and elsewhere in the Registration Statement to the
extent and for the periods indicated in their reports have been audited by
Arthur Andersen LLP, independent public accountants, and are incorporated herein
in reliance upon the authority of said firm as experts in giving said reports.
26
<PAGE> 30
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
ITEM DESCRIPTION
- -------- -----------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement -- Basic Provision relating to Debt Securities of
Advanta (incorporated by reference to Exhibit 1.1 to Advanta's Registration
Statement on Form S-3 (33-50883), filed November 2, 1993).
**1.2 Form of Distribution Agreement relating to Debt Securities.
**1.3 Form of Preferred Stock Purchase Agreement of Advanta.
**1.4 Form of Common Stock Purchase Agreement of Advanta.
**1.5 Form of Preferred Share Purchase Agreement of Advanta Capital.
+3.1 Certificate of Formation of Advanta Capital.
**3.2 Form of Limited Liability Company Agreement of Advanta Capital.
3.3 Restated Certificate of Incorporation of Advanta (incorporated by reference to
Exhibit 4.1 to Pre-Effective Amendment No. 1 to Advanta's Registration Statement
Form S-3 (File No. 33-53475), filed June 10, 1994).
3.4 By-Laws of Advanta, as amended (incorporated by reference to Exhibit 3.11 to
Advanta's Current Report on Form 8-K dated December 22, 1994, filed on the same
date).
**3.5 Form of Payment and Guarantee Agreement with respect to Preferred Shares of Advanta
Capital.
4.1 Specimen of Class A Common Stock Certificate and specimen of Class B Common Stock
Certificate (incorporated by reference to Exhibit 1 of Advanta's Amendment No. 1 to
Form 8 and Exhibit 1 to Advanta's Form 8-A, respectively, both dated April 22,
1992).
**4.2 Specimen of Class B Preferred Stock Certificate.
**4.3 Form of Certificate of Amendment to Advanta's Certificate of Incorporation relating
to the Class B Preferred Stock.
+4.4 Form of Senior Trust Indenture dated as of , 1995 between Advanta and
, as Trustee.
+4.5 Form of Subordinated Trust Indenture dated as of , 1995 between Advanta
and , as trustee.
**4.6 Form or forms of Debt Securities.
**4.7 Form of Debt Warrant Agreement.
**4.8 Form of Preferred Stock Warrant Agreement.
**4.9 Form of Common Stock Warrant Agreement.
**4.10 Form of Deposit Agreement (including form of Depositary Share).
**4.11 Form of Stock Purchase Contract of Advanta.
**4.12 Form of Preferred Share Certificate of Advanta Capital.
*5.1 Opinion of Gene S. Schneyer, Vice President, Secretary and General Counsel of
Advanta, as to the legality of certain of the Securities being offered.
*5.2 Opinion of Wolf, Block, Schorr and Solis-Cohen as to the legality of the Class B
Common Stock, Class B Preferred Stock, Preferred Shares and certain of the other
Securities being offered.
**8.1 Opinion of Wolf, Block, Schorr and Solis-Cohen as to certain tax matters.
+12.1 Statement regarding computation of ratios of earnings to fixed charges and
preferred stock dividends.
+23.1 Consent of Arthur Andersen LLP.
*23.2 Consent of Gene S. Schneyer, Vice President, Secretary and General Counsel of
Advanta (included in his opinion filed as Exhibit 5.1 hereto).
*23.3 Consent of Wolf, Block, Schorr and Solis-Cohen (included in its opinion filed as
Exhibit 5.2 hereto).
**23.4 Consent of Wolf, Block, Schorr and Solis-Cohen (to be included in its opinion filed
as Exhibit 8.1 hereto).
+24.1 Power of Attorney (set forth on signature page).
</TABLE>
II-1
<PAGE> 31
<TABLE>
<CAPTION>
ITEM DESCRIPTION
- -------- -----------------------------------------------------------------------------------
<S> <C>
**25.1 Statement of Eligibility of as the trustee under the Senior
Trust Indenture (separately bound and filed).
**25.2 Statement of Eligibility of as the trustee under the Subordinated
Trust Indenture (separately bound and filed).
</TABLE>
- ---------------
+ Previously filed.
* Filed herewith.
** To be filed by amendment. Advanta will file as an Exhibit to a Current Report
on Form 8-K any related forms utilized in the future and not previously filed
by means of an amendment.
II-2
<PAGE> 32
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this
Pre-Effective Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Horsham Township,
Montgomery County, Commonwealth of Pennsylvania, on July 12, 1995.
ADVANTA CORP.
By: /s/ DAVID D. WESSELINK
---------------------------------------------
David D. Wesselink, Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this
Pre-Effective Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Horsham Township,
Montgomery County, Commonwealth of Pennsylvania, on July 12, 1995.
ADVANTA CAPITAL L.L.C.
By: Advanta Corp., as
Managing Member
By: /s/ DAVID D. WESSELINK
---------------------------------------------
David D. Wesselink, Senior Vice President and
Chief Financial Officer
II-3
<PAGE> 33
Pursuant to the requirements of the Securities Act of 1933, this
Pre-Effective Amendment No. 1 to the Registration Statement has been signed by
the following persons in the capacities with Advanta Corp. and the Managing
Member and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE DATE
- --------------------------------------------- -------------
<S> <C>
* July 11, 1995
- ---------------------------------------------
Dennis Alter
Chairman of the Board, Chief Executive
Officer and Director (Principal Executive
Officer)
* July 11, 1995
- ---------------------------------------------
Alex W. Hart
Executive Vice Chairman and Director
* July 11, 1995
- ---------------------------------------------
Richard A. Greenawalt
President, Chief Operating Officer and
Director
/s/ DAVID D. WESSELINK July 11, 1995
- ---------------------------------------------
David D. Wesselink
Senior Vice President and Chief Financial
Officer (Principal Financial Officer)
* July 11, 1995
- ---------------------------------------------
John J. Calamari
Vice President, Finance, and Chief Accounting
Officer (Principal Accounting Officer)
* July 11, 1995
- ---------------------------------------------
Arthur P. Bellis, Director
* July 11, 1995
- ---------------------------------------------
Max Botel, Director
* July 11, 1995
- ---------------------------------------------
Richard J. Braemer, Director
* July 11, 1995
- ---------------------------------------------
Anthony P. Brenner, Director
* July 11, 1995
- ---------------------------------------------
William C. Dunkelberg, Director
* July 11, 1995
- ---------------------------------------------
Robert C. Hall, Director
* July 11, 1995
- ---------------------------------------------
Warren Kantor, Director
</TABLE>
II-4
<PAGE> 34
<TABLE>
<CAPTION>
SIGNATURE DATE
- --------------------------------------------- -------------
<S> <C>
* July 11, 1995
- ---------------------------------------------
Ronald J. Naples, Director
* July 11, 1995
- ---------------------------------------------
Phillip A. Turberg, Director
*By: /s/ DAVID D. WESSELINK
----------------------------------------
David D. Wesselink, Attorney-in-Fact
Pursuant to powers of attorney
previously filed as part of this
Registration Statement.
</TABLE>
II-5
<PAGE> 35
EXHIBIT INDEX
<TABLE>
<CAPTION>
ITEM DESCRIPTION PAGE
- -------- ---------------------------------------------------------------------------- ----
<C> <S> <C>
1.1 Form of Underwriting Agreement -- Basic Provision relating to Debt
Securities of Advanta (incorporated by reference to Exhibit 1.1 to Advanta's
Registration Statement on Form S-3 (33-50883), filed November 2, 1993).
**1.2 Form of Distribution Agreement relating to Debt Securities.
**1.3 Form of Preferred Stock Purchase Agreement of Advanta.
**1.4 Form of Common Stock Purchase Agreement of Advanta.
**1.5 Form of Preferred Share Purchase Agreement of Advanta Capital.
+3.1 Certificate of Formation of Advanta Capital.
**3.2 Form of Limited Liability Company Agreement of Advanta Capital.
3.3 Restated Certificate of Incorporation of Advanta (incorporated by reference
to Exhibit 4.1 to Pre-Effective Amendment No. 1 to Advanta's Registration
Statement Form S-3 (File No. 33-53475), filed June 10, 1994).
3.4 By-Laws of Advanta, as amended (incorporated by reference to Exhibit 3.11 to
Advanta's Current Report on Form 8-K dated December 22, 1994, filed on the
same date).
**3.5 Form of Payment and Guarantee Agreement with respect to Preferred Shares of
Advanta Capital.
4.1 Specimen of Class A Common Stock Certificate and specimen of Class B Common
Stock Certificate (incorporated by reference to Exhibit 1 of Advanta's
Amendment No. 1 to Form 8 and Exhibit 1 to Advanta's Form 8-A, respectively,
both dated April 22, 1992).
**4.2 Specimen of Class B Preferred Stock Certificate.
**4.3 Form of Certificate of Amendment to Advanta's Certificate of Incorporation
relating to the Class B Preferred Stock.
+4.4 Form of Senior Trust Indenture dated as of , 1995 between
Advanta and, as Trustee.
+4.5 Form of Subordinated Trust Indenture dated as of , 1995 between
Advanta and , as trustee.
**4.6 Form or forms of Debt Securities.
**4.7 Form of Debt Warrant Agreement.
**4.8 Form of Preferred Stock Warrant Agreement.
**4.9 Form of Common Stock Warrant Agreement.
**4.10 Form of Deposit Agreement (including form of Depositary Share).
**4.11 Form of Stock Purchase Contract of Advanta.
**4.12 Form of Preferred Share Certificate of Advanta Capital.
*5.1 Opinion of Gene S. Schneyer, Vice President, Secretary and General Counsel
of Advanta, as to the legality of certain of the Securities being offered.
*5.2 Opinion of Wolf, Block, Schorr and Solis-Cohen as to the legality of the
Class B Common Stock, Class B Preferred Stock, Preferred Shares and certain
of the other Securities being offered.
**8.1 Opinion of Wolf, Block, Schorr and Solis-Cohen as to certain tax matters.
+12.1 Statement regarding computation of ratios of earnings to fixed charges and
preferred stock dividends.
</TABLE>
<PAGE> 36
<TABLE>
<CAPTION>
ITEM DESCRIPTION PAGE
- -------- ---------------------------------------------------------------------------- ----
<C> <S> <C>
+23.1 Consent of Arthur Andersen LLP.
*23.2 Consent of Gene S. Schneyer, Vice President, Secretary and General Counsel
of Advanta (included in his opinion filed as Exhibit 5.1 hereto).
*23.3 Consent of Wolf, Block, Schorr and Solis-Cohen (included in its opinion
filed as Exhibit 5.2 hereto).
**23.4 Consent of Wolf, Block, Schorr and Solis-Cohen (to be included in its
opinion filed as Exhibit 8.1 hereto).
+24.1 Power of Attorney (set forth on signature page).
**25.1 Statement of Eligibility of as the trustee under the Senior Trust
Indenture (separately bound and filed).
**25.2 Statement of Eligibility of as the trustee under the
Subordinated Trust Indenture (separately bound and filed).
</TABLE>
- ---------------
+ Previously filed.
* Filed herewith.
** To be filed by amendment. Advanta will file as an Exhibit to a Current Report
on Form 8-K any related forms utilized in the future and not previously filed
by means of an amendment.
<PAGE> 1
Exhibit 5.1
June 20, 1995
Advanta Corp.
650 Naamans Road
Claymont, Delaware 19703
Ladies and Gentlemen:
Referring to the Registration Statement (Form S-3) which Advanta Corp.
("Advanta") and Advanta Capital L.L.C. expect to file on or about June 20,
1995 with the Securities and Exchange Commission under the Securities Act of
1933, as amended, relating to not more than $500 million aggregate principal
amount of their securities (the "Securities"), a portion of which Securities
may be issued in one or more series of debt securities (the "Debt Securities")
under either a senior convertible or a subordinated convertible indenture to be
entered into, in each case, between Advanta and a trustee to be named (each
individually, an "Indenture"), I am of the opinion:
1. That Advanta is a validly organized and existing corporation
under the laws of the State of Delaware.
2. That the execution and delivery of each Indenture by Advanta,
when completed as set forth in Paragraph 3 below, has been duly authorized by
appropriate corporate action.
3. That (a) each Indenture, in the form filed as Exhibit 4.4 or
4.5, as the case may be, to the Registration Statement, with such modifications
as the executing officer shall approve, when duly qualified under the Trust
Indenture Act of 1939, as amended, and duly executed and delivered, will be a
valid and binding agreement in accordance with its terms; and (b) the Debt
Securities, when the issuance of such Debt Securities has been approved by all
necessary corporate action of the Board of Directors of Advanta, or a committee
designated thereby, and when duly executed, authenticated, and delivered in
accordance with the terms of the applicable Indenture and in accordance with
the provisions of the applicable definitive purchase, underwriting or similar
agreement and upon payment of the consideration therefor provided for therein,
will be validly issued and binding obligations of Advanta in accordance with
their terms and will be entitled to the benefits of such Indenture.
4. That the Class B Common Stock or other capital securities into
which the Debt Securities are convertible, when the issuance of such Class B
Common Stock or other capital securities has been approved by all necessary
corporate action of the Board of Directors of Advanta or a committee designated
thereby, and when duly executed, countersigned and delivered upon conversion
of the Debt Securities in accordance with the terms of such Debt Securities and
the applicable Indenture providing for such
<PAGE> 2
June 20, 1995
Page Two
conversion, and upon payment of the consideration therefor approved by the
Board (but not less than the par value thereof), will be duly authorized,
validly issued, and fully paid and nonassessable.
I am licensed to practice law only in the Commonwealth of Pennsylvania and I
express no opinion as to the laws of any other jurisdictions except (I) the
laws of the United States of America and (II) the general corporate laws of
the State of Delaware to the extent that matters of Delaware corporate law are
involved in the opinions set forth above; provided however, that my opinions
expressed in paragraph 3 above are made on the assumption that the laws of the
State of New York and the laws of the Commonwealth of Pennsylvania are
substantially identical as they relate to matters relevant to such opinion.
I hereby consent to the filing of this opinion with the Securities and Exchange
Commission in connection with the Registration Statement referred to above and
to being named under the heading "Legal Opinions" in the Prospectus included in
the Registration Statement.
Very truly yours,
/s/ GENE S. SCHNEYER
- ---------------------------------
Gene S. Schneyer
Vice President, Secretary and
General Counsel
<PAGE> 1
EXHIBIT 5.2
June 8, 1995
Advanta Corp.
Brandywine Corporate Center
650 Naamans Road
Claymont, DE 19703
Advanta Capital L.L.C.
501 Carr Road
Wilmington, DE 19809
Re: Shelf Registration Statement on Form S-3
Gentlemen:
As counsel for Advanta Corp., a Delaware corporation (the "Company")
and Advanta Capital L.L.C., a Delaware limited liability company (the "LLC"),
we have reviewed a Registration Statement on Form S-3 (the "Registration
Statement") prepared by the Company and the LLC in connection with the proposed
offering from time to time of: (i) Debt Securities, Class B Preferred Stock,
Depositary Shares, Debt Warrants, Preferred Stock Warrants, Class B Common
Stock, Common Stock Warrants, Stock Purchase Contracts, Stock Purchase Units,
Capital Securities and Guarantees (each as defined in the Registration
Statement) to be offered from time to time by the Company; and (ii) Preferred
Shares (as defined in the Registration Statement) to be offered in one or more
series from time to time by the LLC; all such securities of the Company and the
LLC having an aggregate initial offering price of up to U.S. $500,000,000 (or
the equivalent thereof). The Debt Warrants, Preferred Stock Warrants and the
Common Stock Warrants of the Company are referred to collectively herein as the
"Warrants". The Class B Preferred Stock, Depositary Shares, Warrants, Class B
Common Stock, Capital Securities, Guarantees, Stock Purchase Contracts and
Stock Purchase Units of the Company and the Preferred Shares of the LLC are
collectively referred to herein as the "Securities".
<PAGE> 2
Advanta Corp.
Advanta Capital L.L.C.
June 8, 1995
Page 2
In connection therewith, we have examined the originals or copies,
certified or otherwise identified to our satisfaction, of such records,
instruments, documents and matters of law as we have deemed necessary or
appropriate for the purpose of rendering this opinion.
In our examination of documents, instruments and other papers, we have
assumed the genuineness of all signatures on original and certified documents
and the conformity to original and certified documents of all copies submitted
to us as conformed, photostatic or other copies. As to matters of fact which
have not been independently established, we have relied upon representations of
officers of the Company and the LLC.
In rendering this opinion, we have assumed that there will be no
changes in applicable law between the date of this opinion and any date of
issuance or delivery of the Securities, including without limitation, any
Securities that may be issued upon conversion or exchange of any of the
Securities.
Based upon the foregoing, it is our opinion that:
1. When and if (a) the definitive terms of any offering of Class
B Common Stock have been duly established, in accordance with resolutions of
the Board of Directors of the Company authorizing the issuance and sale of the
Class B Common Stock, so as not to violate any applicable law or result in a
default under or breach of any agreement or instrument then binding upon the
Company, and (b) such shares so offered have been duly issued or delivered in
the manner and for the consideration contemplated by the Registration
Statement, the prospectus contained therein and the applicable prospectus
supplement, such shares of Class B Common Stock will be legally issued, fully
paid and non-assessable.
2. When and if (a) the definitive terms of any particular series
of Class B Preferred Stock have been duly established, in accordance with
resolutions of the Board of Directors of the Company authorizing the issuance
and sale of Class B Preferred Stock, so as not to violate any applicable law or
result in a default under or breach of any agreement or instrument then binding
upon the Company, (b) a statement of designation conforming to the Delaware
General Corporation Law regarding the Class B Preferred Stock has been filed
with the Secretary of State of the State of Delaware, and (c) such shares
<PAGE> 3
Advanta Corp.
Advanta Capital L.L.C.
June 8, 1995
Page 3
of Class B Preferred Stock have been duly issued or delivered in the manner and
for the consideration contemplated by the Registration Statement, the
prospectus contained therein and the applicable prospectus supplement, and in
accordance with the terms of the particular series as established by the
Company's Board of Directors, the Class B Preferred Stock will be legally
issued, fully paid and non-assessable.
3. When and if (a) an appropriate form of limited liability
company agreement of the LLC ("LLC Agreement") is duly authorized, executed and
delivered by the Company, as member of the LLC, which LLC Agreement provides
for the issuance of a class of limited liability company interests represented
by preferred shares in the LLC to persons and entities (other than the Company,
as member of the LLC) who have taken a legally sufficient act resulting in
their becoming duly admitted to the LLC as members of the LLC in accordance
with the LLC Agreement, (b) the LLC at all times has at least two members
within the meaning of the Delaware Limited Liability Company Act, (c) the
definitive terms of any Preferred Shares and of the offering of such Preferred
Shares have been duly established in accordance with the LLC Agreement so as
not to violate any applicable law or result in a default under or breach of any
agreement or instrument then binding on the LLC, and (d) the Preferred Shares
so offered have been duly issued or delivered in accordance with the LLC
Agreement, in the manner and for the consideration contemplated by the
Registration Statement, the prospectus contained therein and the applicable
prospectus supplement, such Preferred Shares will represent legally issued,
fully paid and non-assessable interests in the LLC.
4. When and if (a) the deposit agreement relating to the
Depositary Shares has been duly executed and delivered by the Company and the
depositary in accordance with resolutions of the Board of Directors of the
Company, (b) the terms of the Depositary Shares and of their issuance and sale
have been duly established in conformity with the deposit agreement relating to
such Depositary Shares so as not to violate any applicable law or result in a
default under or breach of any agreement or instrument then binding upon the
Company, (c) the Class B Preferred Stock which is represented by Depositary
Shares is validly issued and delivered (as contemplated above) to the
depositary, (d) the depositary receipts evidencing the Depositary Shares are
duly issued against the deposit of the Class B Preferred Stock in accordance
with the deposit agreement, and (e)
<PAGE> 4
Advanta Corp.
Advanta Capital L.L.C.
June 8, 1995
Page 4
the Depositary Shares are issued in the manner and for the consideration
contemplated by the Registration Statement, the prospectus contained therein
and the applicable prospectus supplement, the Depositary Shares will be legally
issued.
5. When and if (a) the Warrants have been duly executed and
delivered, and issued and sold in the form and in the manner contemplated in
the Registration Statement, the prospectus and the applicable prospectus
supplement, (b) the terms of the Warrants as executed and delivered are as
described in the Registration Statement, the prospectus contained therein and
the applicable prospectus supplement, (c) the Warrants, as executed and
delivered, do not violate any applicable law or result in a default under or
breach of any agreement or instrument binding upon the Company, and (d) the
Warrants are then issued and sold as contemplated in the Registration
Statement, the prospectus contained therein and any related prospectus
supplement, the Warrants will constitute valid and legally binding obligations
of the Company.
6. When and if (a) the terms of the Guarantees relating to the
LLC Preferred Shares have been duly established in accordance with applicable
law, (b) the instruments relating to the Guarantees have been duly authorized,
executed and delivered, (c) the LLC Preferred Shares to which the Guarantees
relate have been duly issued and sold and the purchase price therefor has been
received by the LLC, and (d) the consideration, if any, separately payable for
the Guarantees has been received, the Guarantees will constitute valid and
legally binding obligations of the Company.
7. When and if (a) the terms of the Stock Purchase Contracts and
Stock Purchase Units have been duly established in accordance with applicable
law, (b) all documents relating to the purchase of such Stock Purchase
Contracts, and any other arrangements relating to securities constituting part
of such Stock Purchase Units, have been duly authorized by resolutions of the
Board of Directors of the Company and have been duly executed and delivered,
(c) such documents as executed and delivered do not violate any applicable law
or result in a default under or breach of any agreement or instrument then
binding upon the Company, (d) the Registration Statement and any required
post-effective amendment thereto have become effective under the Securities Act
and all applicable federal and state securities laws have been complied with,
and (e) the Stock Purchase
<PAGE> 5
Advanta Corp.
Advanta Capital L.L.C.
June 8, 1995
Page 5
Contracts and Stock Purchase Units are entered into or issued, as the case may
be, as contemplated in the Registration Statement, the prospectus contained
therein and any related prospectus supplement, the Stock Purchase Contracts
will constitute valid and legally binding obligations of the Company and the
Stock Purchase Units will be legally issued.
8. When and if (a) the Capital Securities issuable upon
conversion or exchange of any legally issued convertible or exchangeable
Securities (which have been surrendered to the Company in accordance with their
respective terms), or upon the sale date specified in the Stock Purchase
Contracts, are duly issued from shares or other units of such Securities
reserved therefor in accordance with the resolutions of the Board of Directors
of the Company, (b) the Board of Directors has duly authorized the issuance of
such Capital Securities and (c) such Capital Securities are duly issued or
delivered in the manner and for the consideration contemplated by the
Registration Statement, the prospectus contained therein and the applicable
prospectus supplement, the Capital Securities will be legally issued, fully
paid and non-assessable.
In connection with our opinions above, we have assumed that, at the
time of delivery of the Securities, all contemplated additional actions shall
have been taken, the authorization of the Securities will not have been
modified or rescinded, and there will not have occurred any change in law
affecting the validity or enforceability of such Securities. We have also
assumed that none of the terms of any Securities to be established subsequent
to the date hereof, nor the issuance and delivery of such Securities, nor the
compliance by the Company or the LLC with the terms of such Securities, will
violate any applicable law or result in a violation of any provision of any
instrument or agreement then binding upon the Company or the LLC, or any
restriction imposed by any court or governmental body having jurisdiction over
the Company or the LLC.
Each of the opinions expressed above is subject to the effect of
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and is subject to general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
<PAGE> 6
Advanta Corp.
Advanta Capital L.L.C.
June 8, 1995
Page 6
We hereby consent to the reference to our firm in the Registration
Statement under the Prospectus caption "Legal Matters" and to the inclusion of
this opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ WOLF, BLOCK, SCHORR AND SOLIS-COHEN
---------------------------------------
WOLF, BLOCK, SCHORR AND SOLIS-COHEN
