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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE , 1996
REGISTRATION NO.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ADVANTA CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
DELAWARE 23-1462070
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
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FIVE HORSHAM BUSINESS CENTER
300 WELSH ROAD
HORSHAM, PENNSYLVANIA 19044-9808
(215) 657-4000
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICE)
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GENE S. SCHNEYER, ESQ.
ADVANTA CORP.
FIVE HORSHAM BUSINESS CENTER
300 WELSH ROAD
HORSHAM, PENNSYLVANIA 19044-9808
(215) 657-4000
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
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Approximate date of commencement of proposed sale to the public: From time
to time after the 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. / /
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CALCULATION OF REGISTRATION FEE
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Proposed
Maximum Proposed
Amount Offering Maximum Amount of
Title of Each Class of Being Price Offering Registration
Securities Being Registered Registered(1) Per Unit* Price*(1) Fee
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<S> <C> <C> <C> <C>
Debt Securities............................. $1,500,000,000 100% $1,500,000,000 $517,242
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THE PROSPECTUS CONSTITUTING PART OF THIS REGISTRATION STATEMENT ALSO
CONSTITUTES PART OF THE COMPANY'S REGISTRATION STATEMENT, FILE NO. 33-50883
(WHICH BECAME EFFECTIVE NOVEMBER 8, 1993 AND WHICH COVERS $114,919,500 OF UNSOLD
SECURITIES). $39,628 OF FILING FEES WERE PAID WITH RESPECT TO SUCH UNSOLD
SECURITIES.
* Estimated solely for the purpose of determining the registration fee.
(1) In U.S. Dollars or the equivalent thereof denominated in foreign currencies
or units of one or more foreign currencies or component currencies. Such
amount shall be increased, if any Debt Securities are issued at an original
issue discount, by an amount such that the net proceeds to be received by
the Registrant shall be equal to the above amount to be registered.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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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 , 1996
PROSPECTUS
[LOGO HERE]
DEBT SECURITIES
------------------------
Advanta Corp. (the "Company") may from time to time issue its debt
securities (the "Debt Securities") up to an aggregate initial public offering
price of $1,614,919,500 or the equivalent thereof denominated in foreign
currencies or units of two or more foreign currencies, such as European Currency
Units, at prices and on terms determined by market conditions at the time of
sale.
When a particular series of Debt Securities is offered, a supplement to
this Prospectus will be delivered (the "Prospectus Supplement") together with
this Prospectus setting forth the terms of such Debt Securities, including,
where applicable, the specific designation, aggregate principal amount, currency
or currencies in which the principal, premium, if any, and interest are payable,
denominations, maturity, rate (which may be fixed or variable) and time of
payment of interest, any terms for redemption, any terms for repayment at the
option of the holder, any terms for sinking fund payments, the initial public
offering price, whether such Debt Securities are issuable in individual
registered form without coupons, in the form of one or more global securities,
or in bearer form with or without coupons, and any listing of the Debt
Securities on a securities exchange. The Prospectus Supplement will also contain
information, where applicable, about certain U.S. federal income tax, accounting
and other considerations relating to the Debt Securities covered by it.
The Company may sell the Debt Securities to or through dealers or
underwriters, directly to other purchasers or through agents. If an agent of the
Company or a dealer or an underwriter is involved in the sale of the Debt
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 Debt Securities
may be deemed "underwriters" within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"). See "Plan of Distribution" for possible
indemnification arrangements for any agents, dealers or underwriters.
The Debt Securities will be unsecured obligations of the Company and will
not be savings accounts, deposits or other obligations of any bank or non-bank
subsidiary of the Company, and are not insured by the Federal Deposit Insurance
Corporation or any other federal or state agency.
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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 , 1996.
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the information 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.
The Company has filed with the Commission Registration Statement Nos.
33-50883 and 33- (herein, together with all amendments and exhibits
thereto, called the "Registration Statement") under the Securities Act with
respect to the Debt Securities offered hereby. This Prospectus does not contain
all of the information set forth in the Registration Statement. For further
information with respect to the Company and the Debt 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.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
As required by the Commission, the Company hereby incorporates by
reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995;
2. The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996; and
3. The Company's Current Reports on Form 8-K dated January 23, April 18,
and April 22, 1996.
All documents filed by the Company pursuant to Section 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 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.
The Company 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, Horsham, Pennsylvania 19044-2209, telephone (215)
784-5335.
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THE COMPANY
GENERAL
The Company serves consumers and small businesses through innovative
products and services primarily via direct, cost effective delivery systems. The
Company primarily originates and services credit cards and mortgages. Other
products include small-ticket equipment leasing, credit insurance and deposit
products. The Company utilizes customer information attributes including credit
assessments, usage patterns and other characteristics enhanced by proprietary
information to match customer profiles with appropriate products. At year end
1995 assets under management totaled $14 billion.
Approximately 73% of total revenues are derived from credit cards marketed
through carefully targeted direct mail campaigns. For the past several years,
the Company's strategy has been to market this product in the form of a no
annual fee, low variable-rate gold card. The Company has successfully grown to
one of the ten largest issuers of gold cards in the United States and ranks
among the top 15 bankcard issuers worldwide. Mortgage services contributes 9% of
total revenues with a managed loan portfolio of $1.8 billion. Mortgage loans are
originated directly with consumers, as well as through conduit relationships and
wholesale purchases from brokers and other financial institutions.
The Company was incorporated in Delaware in 1974 as Teachers Service
Organization, Inc., the successor to a business originally founded in 1951. In
January 1988, the Company's name was changed from TSO Financial Corp. to Advanta
Corp. The Company's principal executive office is located at Five Horsham
Business Center, 300 Welsh Road, Horsham, Pennsylvania 19044-9808. The Company's
telephone number at its principal executive office is (215) 657-4000.
ADVANTA PERSONAL PAYMENT SERVICES
During 1995, the Company's consumer credit card unit adopted the name
Advanta Personal Payment Services, which more appropriately captures the unit's
mission and its goal of expansion into new delivery systems as described below.
The Company, which has been in the credit card business since 1983, issues
gold (i.e., premium) and standard MasterCard(R)* and VISA(R)* credit cards
nationwide. The Company has built a substantial cardholder base which, as of
December 31, 1995, totaled 4.8 million accounts and $10.0 billion in managed
receivables. At March 31, 1996, the cardholder base had grown to 5.5 million
accounts and $11.7 billion in managed receivables. As of December 31, 1995, the
gold card strategy had produced a portfolio with 82% of its balances derived
from gold cards. This contrasts with the bankcard industry as a whole, which is
composed of 43% gold (versus standard) cards. Both gold and standard accounts
undergo the same credit analysis, but gold accounts have higher initial credit
limits because of the cardholders' better credit quality. In addition, gold
accounts generally offer a wider variety of services to cardholders. The primary
method of account acquisition is direct mail solicitation. The Company generally
uses credit scoring by independent third parties and a proprietary market
segmentation and targeting model to target its mailings to profitable segments
of the market.
In 1982, the Company acquired Advanta National Bank USA ("Advanta National
USA"), formerly known as Colonial National Bank USA. As a national bank, Advanta
National USA 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. In 1995, the
Company chartered Advanta National Bank ("ANB") to complement the credit card
activities of Advanta National USA. ANB is a type of limited purpose
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* MasterCard(R) is a federally registered servicemark of MasterCard
International, Inc. ("MasterCard"); VISA(R) is a federally registered
servicemark of VISA, U.S.A., Inc. ("VISA").
3
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national bank known as a "credit card bank" whose lending activities are limited
to consumer credit card lending. See "Government Regulation -- Advanta National
Bank USA and Advanta National Bank." Prior to the establishment of ANB,
substantially all of the Company's credit card receivables and bank deposits
were originated by Advanta National USA. However, at December 31, 1995, ANB
accounted for $1.7 billion of the Company's total of $10.0 billion of managed
credit card assets, and $684 million of the total $1.9 billion of bank deposits;
and at March 31, 1996, ANB had grown to represent $3.5 billion of the Company's
total of $11.7 billion of managed credit card assets, and $930 million of the
total of $2.0 billion of bank deposits.
Most of the Company's MasterCard(R) and VISA(R) credit cards carry no
annual fee, and those credit cards which do include an annual fee generally have
lower fees than those charged by many of the Company's competitors. The Company
believes that this characteristic of no or low annual fee credit cards has
appealed to consumers, and that the Company's credit cards have also appealed to
consumers because of their competitive interest rates, credit lines, quality
service and payment terms.
While the Company believes that its credit card offers will continue to
appeal to consumers for the reasons stated, the Company also notes that for
several years competition has been increasing in the credit card industry. At
the same time, the U.S. consumer has become a generally more sophisticated and
demanding user of credit. These forces are likely to produce significant changes
in the industry. The Company is devoting substantial resources to meeting the
challenges and taking advantage of the opportunities which management sees
emerging in the industry. In 1994 and 1995, this included significant focus on
balance transfer initiatives, in which the Company encouraged new and existing
customers to transfer account balances they were maintaining with other credit
card issuers to an Advanta National USA or ANB account with a lower interest
rate. Approximately 35% of the new credit card sales generated in 1995 resulted
from balance transfer business. In addition, as part of the strategy to broaden
and deepen its relationship with the consumer, the Company has launched some
proprietary branded credit card products. These products were crafted to meet an
identified long-term consumer need and are expected to establish relationships
with consumers that will be lasting. The Company intends to continue exploring
new approaches to the credit card market.
The interest rates on the majority of the Company's credit card receivables
are variable, tied either to the prime rate or the London interbank offered rate
("LIBOR"). This variable rate structure helps the Company maintain net interest
margins in both rising and declining interest rate environments.
The Company 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 and VISA, has been below industry averages for the past three years.
The Company's net credit losses on average managed credit card receivables
outstanding for the year ended December 31, 1995 and the quarter ended March 31,
1996 were 2.5% and 3.2%, respectively. The Company's percentage of managed
credit card receivables that were delinquent 30 or more days for the year ended
December 31, 1995 and the quarter ended March 31, 1996 was 2.6% and 2.7%,
respectively. With customers in all 50 states, the Company's credit card
portfolio is geographically diversified. At December 31, 1995, the states with
the highest aggregate managed loans outstanding were California, New York,
Texas, Florida and Illinois, with approximately 15.9%, 7.6%, 6.5%, 5.8% and
4.4%, respectively, of the Company's total managed credit card receivables.
Since 1988, Advanta National USA has been active in the credit card
securitization market, and since its inception in 1995 ANB has likewise become
active, together securitizing $3.4 billion of credit card receivables in 1995.
ADVANTA PERSONAL FINANCE SERVICES
Formerly known as Advanta Mortgage, Advanta Personal Finance Services
("APFS") has been renamed to reflect the growing diversification and product
array of this business unit, which expanded
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to include both Advanta Mortgage and Advanta Finance in 1995, and an automobile
financing business (Advanta Auto Finance) in 1996.
Advanta Mortgage Corp. USA originates, purchases, securitizes and services
non-conforming credit first and second mortgage loans directly, through its
subsidiaries, and for Advanta National USA's "Advanta Mortgage USA" Division
(collectively, "Advanta Mortgage"). Loan production is generated through
multiple distribution channels including two centralized direct to consumer
origination centers (each one dedicated to a specific product), a broker network
serviced by selected sales locations, correspondent relationships and purchases
from other financial institutions. In 1995, Advanta Mortgage developed and
tested a Home Equity Line of Credit product. Loan production volume relating to
this product was not material in 1995 but is expected to grow significantly in
1996.
Advanta Mortgage originates and purchases loans, generally funding those
loans through sales or securitizations which have been structured to qualify as
real estate mortgage investment conduits ("REMICs") under the Internal Revenue
Code.
Advanta Mortgage's managed portfolio of receivables includes owned loans
(generally held for sale) as well as loans it services in which it retains an
interest in the excess spread. At December 31, 1995, owned mortgage loan
receivables totaled $322 million while total managed receivables were $1,798
million. Loans serviced under contract for a fee are not included in the
Company's "managed portfolio" as the performance of such loans does not have a
material impact on the Company's credit risk profile. In contrast, the
performance of the managed portfolio, including loans sold by the Company, can
materially impact ongoing mortgage banking income. Total loans serviced at
December 31, 1995, including loans serviced for others for a fee, were $2,421
million.
Approximately 78% of the managed portfolio is secured by first mortgages
and the balance is secured by second mortgages. Approximately 81% of the managed
portfolio is comprised of fixed rate loans while the remainder represents
adjustable rate loans. At December 31, 1995, the states with the highest
aggregate managed loans outstanding were California, New York, New Jersey,
Maryland and Pennsylvania, with approximately 21.6%, 10.2%, 10.0%, 8.8% and
7.2%, respectively.
During 1995 a new business channel, "Advanta Finance," was launched,
offering loans directly to the consumer through a branch office system. Through
December 31, 1995, eighteen branches were opened offering first and second
mortgage loans similar to those offered by Advanta Mortgage. Production activity
for the year was not material but is expected to become significant in 1996. At
March 31, 1996, the number of Advanta Finance offices had grown to 34, and the
first quarter loan production was $21.5 million. The combined origination volume
for APFS for 1995 and the first quarter of 1996 was $773 million and $240
million, respectively. In the second quarter of 1996, Advanta Auto Finance began
purchasing installment sale contracts made with sub-prime customers secured by
automobiles through correspondent relationships.
ADVANTA BUSINESS SERVICES
In late 1994, the Company's subsidiary, Advanta Leasing Corp., changed its
name to Advanta Business Services Corp. ("ABS"), reflecting the Company's
intention to expand its offerings to small business customers. The name change
followed the Company's introduction, in July 1994, of a business-purpose
MasterCard(R) credit card as a supplement to its commercial equipment leasing
business. Both lines of business continue to expand.
The commercial equipment leasing business is generated primarily through
third party referrals from manufacturers or distributors of equipment as well as
independent brokers. Most contact with these referral sources is made from the
Company's ABS headquarters in Voorhees, New Jersey, using extensive direct
marketing operations.
Leasing originations volume, measured by the cost of the equipment included
in new lease contracts, continues to grow, from a total of $190 million in 1994
to $251 million in 1995. While much of this growth is due to increased
penetration of existing markets, such as office machinery, security
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systems and computers, some has been the result of expansion into additional
market segments. The most significant of those are leasing programs for certain
industrial and agricultural equipment and programs for leasing equipment to
agencies of state and local governments.
The business-purpose credit card operation also continues to grow, with
over 23,000 accounts as of December 31, 1995. Again, direct marketing
techniques, primarily direct mail to prospective customers, are the source of
new accounts. The "Advanta business card" is marketed by ABS and issued by its
affiliate, Advanta Financial Corp. ("AFC"), an FDIC-insured industrial loan
corporation organized under the laws of the State of Utah. See "Government
Regulation -- Advanta Financial Corp."
ADVANTA INSURANCE COMPANIES
The Company mainly offers specialty credit related insurance products and
services to its existing customer base. The focus of these products is on the
customers' ability to repay their debt in the event of certain circumstances.
Enrollment in these programs is achieved through the utilization of either
direct mail or telemarketing distribution channels.
Through unaffiliated insurance carriers, the Company generally offers a
combined credit life, disability and unemployment product to the Company's
lending customers. The Company's insurance subsidiaries reinsure 100% of these
risks from the insurance carriers on a coinsurance basis. In consideration for
assumption of these risks the insurance subsidiaries receive reinsurance
premiums equal to 100% of the net premiums collected by the insurance carriers,
less a ceding fee as defined by the reinsurance treaties, and all acquisition
expenses, premium taxes and loss payments made by the carriers on these risks.
Under the terms of certain reinsurance treaties the subsidiaries are either
obligated to maintain in trust for the benefit of an insurance carrier an amount
equal to 100% of the unearned premiums and all statutory reserves for future
incurred loss payments or have certain of these loss reserves, as defined,
withheld by an insurance carrier.
Approximately 90% of the Company's total insurance revenues are derived
from the offering of insurance products to credit card customers of Advanta
National USA and ANB.
ADVANTA PARTNERS
Advanta Partners LP is a private venture capital equity investment firm
formed in 1994. The firm focuses primarily on growth capital financing,
restructuring and management buyouts in the financial services and information
services industries. The investment objective of Advanta Partners is to earn
attractive returns by building the long-term values of the businesses in which
it invests. Advanta Partners combines transaction expertise, management skills
and a broad contact base with strong industry-specific knowledge which is
further enhanced by its relationship with the Company.
DEVELOPMENTAL INITIATIVES
The Company has initiated a number of new programs focused on creating new
products, entering new markets and expanding the Company's channels of delivery.
As part of the Company's expansion into new markets, in 1995 the Company formed
a joint venture with The Royal Bank of Scotland to market, issue and service
bankcards in the United Kingdom. While initial test mailings have generated
positive response, this effort was not material to the Company in 1995. The
Company believes that the results of the joint venture will not be material to
earnings in 1996. Additionally, the Company has developed and launched several
branded credit card products. The Company is continuing to explore new product
concepts and expects to introduce new products in 1996. Simultaneously, the
Company is exploring new technologies and delivery systems related to payment
services. The Company continues to engage in research and development activities
with respect to products and services outside the financial services sector.
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RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of
the Company and its subsidiaries for the periods indicated:
<TABLE>
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THREE
MONTHS
ENDED MARCH
31, YEAR ENDED DECEMBER 31,
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1996 1995 1995 1994 1993 1992 1991
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Ratio of Earnings to Fixed Charges(A)................ 2.10 2.26 2.26 2.71 2.52 1.81 1.36
</TABLE>
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(A) For purposes of computing these ratios, "earnings" represent income before
income taxes plus fixed charges, and "fixed charges" consist of interest
expense and one-third (the proportion deemed representative of the interest
factor) of rental expense on operating leases.
GOVERNMENT REGULATION
THE COMPANY
The Company is not required to register as a bank holding company under the
Bank Holding Company Act of 1956, as amended (the "BHCA"). The Company owns
Advanta National USA, which is a "bank" as defined under the BHCA as amended by
the Competitive Equality Banking Act of 1987 ("CEBA"). However, under certain
grandfathering provisions of CEBA, the Company is not required to register as a
bank holding company under the BHCA, because Advanta National USA, 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
Advanta National USA from cross-marketing products or services of an affiliate
that are not permissible for bank holding companies under the BHCA. In addition,
the Company 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, the Company 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 the Company or Advanta
National USA cease complying 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 the Company believes that it meets the
Federal Reserve Board's managerial standards and that its ownership of Advanta
National USA has improved the bank's competitiveness, should the Company 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 the Company and its
subsidiaries to inspection and regulation by the Federal Reserve Board. Although
the Company has no plans to register as a bank holding company at this time, the
Company 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 the Company's insurance subsidiaries would have to be
discontinued, the effects of which would not be material. However, the Company
is actively exploring additional lines of business, some of which the Company
might not be able to pursue as a registered bank holding company under the BHCA.
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Under CEBA, neither ANB nor AFC is considered a "bank" for purposes of the
BHCA, and so the Company's ownership of these institutions does not impact the
Company's exempt status under the BHCA. ANB is a "credit card bank" under CEBA,
and as such is subject to certain restrictions, including that it may only
engage in credit card operations, it may not offer checking or transaction
accounts and it may only accept time deposits in amounts of $100,000 or more.
However, unlike Advanta National USA, ANB's growth is not limited to 7% per
annum.
ADVANTA NATIONAL BANK USA AND ADVANTA NATIONAL BANK (THE "BANKS")
The Company acquired Advanta National USA (formerly known as Colonial
National Bank USA) in 1982 and organized ANB in 1995. Both of the Banks are
national banking associations organized under the laws of the United States of
America. Advanta National USA's headquarters (which is also its sole branch) and
ANB's only office, its headquarters, are located in Delaware. ANB was chartered
to complement the credit card activities of Advanta National USA. ANB is a
"credit card bank," a class of FDIC-insured depository institution created under
CEBA, which can only engage in credit card operations, can only accept deposits
in denominations of $100,000 or more, may not offer transaction (e.g., checking)
accounts, may only maintain one office for the collection of deposits, and may
not engage in commercial lending activities. The Company conducts all of its
consumer credit card lending business through the Banks, and conducts a large
portion of its mortgage lending business through Advanta National USA.
The Banks are subject primarily to regulation and periodic examination 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 national banks, the Banks are subject
to provisions of federal law which restrict their ability to extend credit to
their affiliates or pay dividends to its parent company. See "Dividends and
Transfers of Funds."
The Banks are 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, 1995, 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 also adopted a minimum leverage ratio (Tier 1 capital divided by
total average assets) of 3% for national banks that meet certain specified
criteria, including 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, 1995, Advanta National USA's Tier 1
capital ratio was 7.30%, its combined Tier 1 and Tier 2 capital ratio was 11.56%
and its leverage ratio was 6.79%. At December 31, 1995, ANB's Tier 1 capital
ratio was 8.04%, its combined Tier 1 and Tier 2 capital ratio was 12.28% and its
leverage ratio was 7.87%.
Recognizing that the risk-based capital standards address only credit risk
(and not interest rate, liquidity, operational or other risks), the Comptroller
has indicated that many national banks will be expected to maintain capital in
excess of the minimum standards. As indicated above, both of the Banks'
respective capital levels currently exceed the minimum standards. To date, the
Comptroller has not required either of the Banks to maintain capital in excess
of the minimum standards. However, there can be no assurance that such a
requirement will not be imposed in the future, or if it is, what higher standard
will be applicable.
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In addition, pursuant to certain provisions of the FDIC Improvement Act of
1991 ("FDICIA") and regulations promulgated thereunder, FDIC-insured
institutions such as the Banks may only accept brokered deposits without FDIC
permission 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, both of the
Banks are currently "well-capitalized," and the Company intends to maintain both
Banks as "well-capitalized" institutions.
Under Federal law, the Banks may "export" (i.e., charge their customers
resident in other states) the finance charges permissible under the law of their
state of domicile, Delaware, which state has no usury statute applicable to
banks. Consistent with prevailing industry practice, the Banks also export
credit card fees (including, for example, annual fees, late charges, returned
payment check fees and fees for exceeding credit limits) permitted under
Delaware law. Litigation regarding the issue of whether the exportation of such
credit card fees is permissible has been initiated against various credit card
issuers in various states, including one such lawsuit filed against Advanta
National USA in the Court of Common Pleas, Philadelphia County, Pennsylvania on
June 28, 1995. The courts that had ruled on this issue reached conflicting
opinions, and on January 19, 1996, the United States Supreme Court agreed to
review a California Supreme Court decision regarding exportation of credit card
late fees. On June 3, 1996, the United States Supreme Court ruled that the
exportation of fees that are allowed by the state in which a bank is located is
permissible under Federal law. As a result of this decision, the Company
anticipates that the lawsuit filed against Advanta National USA will be
dismissed.
ADVANTA FINANCIAL CORP.
In January 1992, 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, 1995, AFC had
deposits of $38 million and total assets of $78 million. Currently, AFC's
principal activities consist of small ticket equipment lease financing and
issuance of the "Advanta business card" credit card marketed by ABS. The Company
anticipates that AFC's managed receivables base of Advanta business card loans
will grow significantly in 1996.
LENDING AND LEASING ACTIVITIES
The Company'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 the Company'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 the Company's leasing activities. In
addition, Advanta Mortgage, Advanta Finance and their respective 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 Advanta National
USA, AFC or ANB can finance or otherwise supply funds through dividends, loans
or otherwise to the Company and its affiliates. The prior approval of the
Comptroller is required if the total of all dividends declared by either of the
Banks in any calendar year exceeds that institution's net profits (as defined)
for that year combined with its retained net profits for the preceding two
years, less any required transfers to
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surplus accounts. In addition, neither Advanta National USA nor ANB may 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.
Advanta National USA, 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 the depository institution to the Company 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 the
depository institution's transactions with its affiliates be on terms no less
favorable to the bank than comparable transactions with unrelated third parties.
These transfers by any one institution to the Company 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 the Company to maintain its grandfathered exemption under
CEBA, neither Advanta National USA nor ANB may make any loans to the Company or
any of its subsidiaries.
REGULATION OF INSURANCE
The insurance subsidiaries are subject to the laws and regulations of and
supervision by the states in which they are domiciled or have obtained authority
to transact insurance business. These states have adopted laws and regulations
which govern all marketing, administration and financial operations of an
insurance company, including dividend payments and financial solvency. In
addition, the insurance subsidiaries have registered as an Arizona Holding
Company which requires approval of transactions between all affiliated entities.
The maximum dividend that any of the insurance subsidiaries can distribute
to its parent in any twelve month period without prior approval of the State of
Arizona Department of Insurance is the lesser of 10% of the subsidiary's
statutory surplus or its net income for any given twelve month period (if a life
insurance company) or net investment income (if a property and casualty
insurance company).
The State of Arizona has adopted minimum risk-based capital standards as
developed by the National Association of Insurance Commissioners. Risk-based
capital is the quantification of an insurer's surplus requirements based on
financial balances and underwriting activity risks. The ratio of an insurer's
total adjusted capital and surplus, as defined, is compared to various levels of
risk-based capital to determine what intervention, if any, is required by either
the insurance company or an insurance department. All of the insurance companies
currently meet all risk-based capital standards and require no action by any
party.
The Company's insurance subsidiaries reinsure risks whose underwriting
insurance practices and rates are regulated in part or fully by state insurance
departments. These rates are continually being reviewed and modified by the
state insurance departments based on prior historical experience. Any
modifications may impact the future profitability of the Company's insurance
subsidiaries.
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 the Company's profitability or the manner in which the
Company conducts its activities, the Company cannot now predict the extent of
the impact of any such new laws or regulations.
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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, and proposals which would place 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. It is impossible to determine whether any of
these proposals will become law and, if so, what impact they will have on the
Company.
In 1994, Congress adopted the Interstate Banking and Branching Efficiency
Act, which statute permits nationwide interstate bank acquisitions beginning in
1995, and interstate bank branching in 1997 (or earlier at a state's option).
The Company does not currently believe that the changes in the country's banking
system wrought by this statute will materially impact the Company's business.
USE OF PROCEEDS
Unless otherwise provided in the Prospectus Supplement, the net proceeds
from the sale of the Debt Securities will be used: for general corporate
purposes, including the purchase of assets from, investments in and extensions
of credit to, subsidiaries and affiliates of the Company, which will use the
proceeds for general corporate purposes; and, possibly, for financing future
acquisitions by the Company, including without limitation, acquisitions of
credit card and home equity loan portfolios. At the date hereof, no specific
proposed acquisitions have been identified as probable. The precise amounts and
timing of the application of proceeds will depend upon funding requirements of
the Company and its subsidiaries and affiliates and the amount of Debt
Securities offered from time to time pursuant to this Prospectus. If the Company
elects at the time of issuance of Debt Securities to make different or more
specific use of proceeds other than as set forth herein, such use will be
described in the Prospectus Supplement.
In view of its anticipated requirements, the Company 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
The Debt Securities are to be issued under an Indenture (the "Indenture")
dated as of November 15, 1993 entered into between the Company and The Chase
Manhattan Bank (National Association), as Trustee (the "Trustee"), a copy of
which is filed as an exhibit to the Registration Statement. The following
summaries of certain provisions of the Indenture do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all
provisions of the Indenture, including the definitions therein of certain terms.
Wherever particular Sections or defined terms of the Indenture are referred to,
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 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.
The Company'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 the
Company may itself be a creditor with recognized claims against the subsidiary.
GENERAL
The Indenture does not limit the aggregate principal amount of Debt
Securities which may be issued thereunder and provides that Debt Securities may
be issued from time to time in one or more series. The Debt Securities will be
unsecured obligations of the Company. Neither the Indenture nor
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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
the Company or any of its subsidiaries. The Debt Securities will rank on a
parity with all other unsecured unsubordinated indebtedness of the Company.
Reference is made to the Prospectus Supplement relating to the particular
series of Debt Securities offered thereby for the following terms: (1) the title
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, or the method or methods, if any, by which such
date or dates shall be determined, on which such Debt Securities will mature;
(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 to any purchase
fund provisions, be redeemed by the Company, 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 the Company 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 of such bearer Debt Securities (including exchange for
registered Debt Securities of the same series); (12) information with respect to
book-entry procedures; (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 the Company 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) if other than the 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 the Company 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
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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 the Company 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 the Company 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 the
Company with respect to any of such Debt Securities; and (23) any other terms of
the series (which will not be inconsistent with the provisions of the
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 Indenture, but will be an
amount less than the amount payable at the maturity of the principal of such
Original Issue Discount Security. Special federal income tax and other
considerations applicable thereto will be described in the Prospectus Supplement
relating thereto.
The provisions of the Indenture 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 the Company.
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 Indenture, however, provides that the Company 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 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 or exchange of the Debt
Securities but the Company 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, and transfer of the Debt Securities will be
registrable, at the corporate trust office of The Chase Manhattan Bank (National
Association), as Paying Agent and Security Registrar under the Indenture, in The
City of New York, New York, provided that payments of interest may be made at
the option of the Company 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).
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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 the Company 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 the Company 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 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 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
The Indenture contains a covenant by the Company limiting its ability to
dispose of the Voting Stock of a Significant Subsidiary. A"Significant
Subsidiary" is defined to mean any Subsidiary of the Company the Consolidated
Assets of which constitute 20% or more of the Company's Consolidated Assets.
Such covenant provides that, subject to certain exceptions, so long as any of
the Debt Securities are outstanding, the Company: (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 the Company 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 the Company
will own, directly or indirectly, at least 80% of the issued and outstanding
Voting Stock of such Subsidiary after giving effect to such transaction; or (b)
will not permit a Significant Subsidiary to either (i) merge or consolidate with
or into any corporation (other than the Company), 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 the Company, or (ii)
lease, sell or transfer all or substantially all of its properties or assets to
any corporation or other person (other than the Company), 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 the Company
(Section 1005).
In addition, the Indenture contains a covenant prohibiting the Company 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).
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EVENTS OF DEFAULT
The following are Events of Default under the Indenture 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 the Company in the
Indenture (other than a covenant or warranty included in the Indenture solely
for the benefit of series of Debt Securities other than that series), continued
for 60 days after written notice as provided in the Indenture; (e) certain
events in bankruptcy, insolvency or reorganization involving the Company or any
Significant Subsidiary; (f) acceleration of indebtedness in a principal amount
in excess of $10,000,000 for money borrowed by the Company 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 Indenture; and (g) any other Event of Default
provided with respect to Debt Securities of that series (Section 501). If an
Event of Default with respect to Debt Securities of any series at the time
outstanding occurs and is continuing, either the 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 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 Indenture (Section 502).
ADDITIONAL PROVISIONS
The Indenture provides that, subject to the duty of the 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). 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).
No holder of any Debt Security of any series will have any right to
institute any proceeding with respect to the Indenture or for any remedy
thereunder, unless: (i) such holder shall have previously given to the 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 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). 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 institute suit for the enforcement of any
such payment (Section 508).
The Company is required to furnish to the Trustee annually a statement as
to performance by the Company of certain of its obligations under the Indenture
and as to any default in such performance. The Company is also required to
deliver to the 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 or Default (Section 1009).
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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 the Company or any obligor on such Debt
Security or any Affiliate of the Company or such other obligor, shall be deemed
not to be outstanding (Section 101).
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the 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 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; or (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 Indenture or for waiver of certain
defaults (Section 902).
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 the
Company with certain restrictive provisions of the Indenture (Section 1008). 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 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).
Modification and amendment of the Indenture may be made by the Company and
the Trustee without the consent of any holder for any of the following purposes:
(i) to evidence the succession of another corporation to the Company; (ii) to
add to the covenants of the Company 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
16
<PAGE> 18
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).
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company 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 the
Company's obligations on the Debt Securities and under the Indenture, 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).
CONCERNING THE TRUSTEE
The Company and certain of its subsidiaries maintain banking relationships
with the Trustee in the ordinary course of their businesses.
PLAN OF DISTRIBUTION
The Company may sell the Debt 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 distribution of the Debt 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 Debt Securities may be solicited directly by the Company
or by agents designated by the Company 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 Debt Securities in respect of which
this Prospectus is delivered will be named, and any commissions payable by the
Company to such agent will be set forth, in the 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, the Company
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 Debt Securities in respect of which this
Prospectus is delivered to the public.
If a dealer is utilized in the sale of the Debt Securities in respect of
which this Prospectus is delivered, the Company may sell such Debt Securities to
the dealer, as principal. The dealer may then resell such Debt 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,
the Company 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 the Company, to indemnification
against certain civil liabilities, including liabilities under the Securities
Act.
If so indicated in the Prospectus Supplement, the Company will authorize
agents and underwriters to solicit offers by certain institutions to purchase
Debt Securities from the Company 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. Each Contract will be for an amount not less than, and, unless the
Company otherwise agrees, the aggregate principal amount of Debt Securities sold
pursuant to Contracts shall be not less nor more
17
<PAGE> 19
than, the respective amounts stated in the Prospectus Supplement. Institutions
with whom Contracts, when authorized, may be made include commercial and savings
banks, insurance companies, pension funds, investment companies, educational and
charitable institutions and other institutions, but shall in all cases be
subject to the approval of the Company. Contracts will not be subject to any
conditions except that the purchase by an institution of the Debt Securities
covered by its Contract shall not at the time of delivery be prohibited under
the laws of any jurisdiction in the United States to which such institution is
subject. A commission indicated in the Prospectus Supplement will be paid to
underwriters and agents soliciting purchases of Debt Securities pursuant to
Contracts accepted by the Company.
LEGAL OPINIONS
Certain legal matters relating to the Debt Securities offered hereby will
be passed upon for the Company by Gene S. Schneyer, Esquire, Vice President,
Secretary and General Counsel of the Company and 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 the Company which is well below 1% of the outstanding common stock of the
Company.
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.
18
<PAGE> 20
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
<TABLE>
<S> <C>
Securities and Exchange Commission Registration fee...................... $ 517,242
Printing and engraving................................................... 50,000
Blue Sky fees and expenses............................................... 20,000
Trustee's fee and expenses............................................... 47,000
Accounting services...................................................... 150,000
Legal fees and expenses (including those of counsel to the agents under
the Distribution Agreement)............................................ 80,000
Rating agency fees....................................................... 437,500
Miscellaneous............................................................ 5,258
----------
Total.......................................................... $1,307,000
=========
</TABLE>
- ---------------
* All amounts shown are estimates, other than the registration fee.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides, inter alia,
that under specified circumstances a corporation shall have the power to
indemnify any person who is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding by reason of the
fact that such person is or was a director, officer, employee or agent of the
corporation, against expenses, attorneys' fees, judgments, fines and
settlements. The By-Laws of the Company provide that the Company shall indemnify
any director, officer, employee or agent of the Company to the fullest extent
now or hereafter permitted by law in connection with any such action, suit or
proceeding. The By-Laws further provide that the Board of Directors of the
Company may, by resolution, indemnify any person other than a director, officer,
employee or agent of the Company for liabilities incurred in connection with
services rendered for or at the request of the Company or its subsidiaries. In
addition, consistent with Section 102 of the Delaware General Corporation Law,
the Company's Certificate of Incorporation limits the personal liability of the
Company's directors to the Company or its stockholders for monetary damages for
certain breaches of fiduciary duty. The Company maintains director and officer
liability insurance which would provide coverage against certain securities law
liabilities.
Any underwriters, dealers or agents referred to in the agreements filed as
Exhibit 1.1 or 1.2 to this Registration Statement will agree to indemnify the
Company's directors, its officers who signed the Registration Statement and its
controlling persons against certain liabilities which might arise under the
Securities Act from information furnished to the Company by or on behalf of any
such indemnifying party.
ITEM 16. EXHIBITS.
<TABLE>
<S> <C>
1.1. Form of Underwriting Agreement -- Basic Provisions relating to the Debt Securities
(incorporated by reference to Exhibit 1.1. to the Company's Registration Statement on
Form S-3 (33-50883), filed November 2, 1993).
1.2. Form of Distribution Agreement relating to the Debt Securities.
4. Form of Indenture between the Company and The Chase Manhattan Bank (National
Association), Trustee (incorporated by reference to Exhibit 4 to the Company's
Registration Statement on Form S-3 (33-50883), filed November 2, 1993). The form or
forms of Debt Securities with respect to each particular series of Debt Securities
registered hereunder will be filed as an exhibit or exhibits to a Current Report on
Form 8-K of the Company and incorporated herein by reference.
</TABLE>
II-1
<PAGE> 21
<TABLE>
<S> <C>
5. Opinion of Gene S. Schneyer, Vice President, Secretary and General Counsel.
12. Computation of ratio of earnings to fixed charges.
23.1. Consent of Arthur Andersen LLP.
23.2. Consent of Gene S. Schneyer, Vice President, Secretary and General Counsel (included
in Exhibit 5).
24. Power of Attorney (set forth on signature page).
25. Statement of eligibility of Trustee on Form T-1.
</TABLE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
provided, however, that the undertakings set forth in clauses (i) and (ii) of
this paragraph shall not apply if the information required to be included in
such post-effective amendments is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the Debt Securities offered therein,
and the offering of such Debt Securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the Debt Securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the Debt
Securities offered therein and the offering of such Debt Securities at that time
shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-2
<PAGE> 22
(i) (1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new Registration Statement relating to the Debt Securities offered
therein, and the offering of such Securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Horsham Township, Montgomery County, Commonwealth of
Pennsylvania, on June 10, 1996.
Advanta Corp.
By: /s/ RICHARD A. GREENWALT
------------------------------------
RICHARD A. GREENAWALT, PRESIDENT,
CHIEF OPERATING OFFICER AND DIRECTOR
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned does hereby
constitute and appoint Dennis Alter, Richard Greenawalt, Alex W. Hart, John J.
Calamari, David D. Wesselink, William A. Rossoff and Gene S. Schneyer, or any of
them (with full power to each of them to act alone), his or her true and lawful
attorney-in-fact and agent, with full power of substitution, for him or her and
on his or her behalf to sign, execute and file this Registration Statement and
any or all amendments (including, without limitation, post-effective amendments
and any amendment or amendments increasing the amount of securities for which
registration is being sought) to this Registration Statement, with all exhibits
and any and all documents required to be filed with respect thereto, with the
Securities and Exchange Commission or any regulatory authority, granting unto
such attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises in order to effectuate the same as fully to all
intents and purposes as he or she might or could do if personally present,
hereby ratifying and confirming all that such attorneys-in-fact and agents, or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on behalf of the
Registrant and in the capacities indicated on the
day of June 10, 1996.
<TABLE>
<CAPTION>
NAME TITLE
---- -----
<S> <C>
/s/ DENNIS ALTER Chairman of the Board
- ---------------------------------------------
Dennis Alter
/s/ ALEX W. HART Chief Executive Officer and Director
- ---------------------------------------------
Alex W. Hart
/s/ RICHARD A. GREENAWALT President, Chief Operating Officer and
- --------------------------------------------- Director
Richard A. Greenawalt
/s/ WILLIAM A. ROSOFF Vice Chairman and Director
- ---------------------------------------------
William A. Rosoff
/s/ DAVID D. HESSELINK Senior Vice President and
- --------------------------------------------- Chief Financial Officer
David D. Wesselink
/s/ JOHN J. CALAMARI Vice President, Finance and
- --------------------------------------------- Chief Accounting Officer
John J. Calamari
/s/ ARTHUR P. BELLIS Director
- ---------------------------------------------
Arthur P. Bellis
</TABLE>
II-4
<PAGE> 24
<TABLE>
<CAPTION>
NAME TITLE
- --------------------------------------------- --------------------------------------------
<S> <C>
/s/ MAX BOTEL Director
- ---------------------------------------------
Max Botel
/s/ RICHARD J. BRAEMER Director
- ---------------------------------------------
Richard J. Braemer
/s/ ANTHONY P. BRENNER Director
- ---------------------------------------------
Anthony P. Brenner
/s/ WILLIAM C. DUNKELBERG Director
- ---------------------------------------------
William C. Dunkelberg
/s/ DANA BECKER DUNN Director
- ---------------------------------------------
Dana Becker Dunn
/s/ ROBERT C. HALL Director
- ---------------------------------------------
Robert C. Hall
/s/ WARREN KANTOR Director
- ---------------------------------------------
Warren Kantor
/s/ JAMES E. KSANSNAK Director
- ---------------------------------------------
James E. Ksansnak
/s/ RONALD J. NAPLES Director
- ---------------------------------------------
Ronald J. Naples
/s/ PHILLIP A. TURBERG Director
- ---------------------------------------------
Phillip A. Turberg
</TABLE>
II-5
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------- ------------
<S> <C> <C>
1.1. Form of Underwriting Agreement -- Basic Provisions relating to the Debt
Securities (incorporated by reference to Exhibit 1.1. to the Company's
Registration Statement on Form S-3 (33-50883), filed November 2, 1993)...
1.2. Form of Distribution Agreement relating to the Debt Securities...........
4. Form of Indenture between the Company and The Chase Manhattan Bank
(National Association), Trustee (incorporated by reference to Exhibit 4
to the Company's Registration Statement on Form S-3 (33-50883), filed
November 2, 1993). The form or forms of Debt Securities with respect to
each particular series of Debt Securities registered hereunder will be
filed as an exhibit or exhibits to a Current Report on Form 8-K of the
Company and incorporated herein by reference.............................
5. Opinion of Gene S. Schneyer, Vice President, Secretary and General
Counsel..................................................................
12. Computation of ratio of earnings to fixed charges........................
23.1. Consent of Arthur Andersen LLP. .........................................
23.2. Consent of Gene S. Schneyer, Vice President, Secretary and General
Counsel (included in Exhibit 5)..........................................
24. Power of Attorney (set forth on signature page)..........................
25. Statement of eligibility of Trustee on Form T-1..........................
</TABLE>
<PAGE> 1
EXHIBIT 1.2
ADVANTA CORP.
MEDIUM-TERM NOTES DUE
9 MONTHS TO 40 YEARS FROM DATE OF ISSUE
DISTRIBUTION AGREEMENT
____________, 1996
[Names/Addresses of Agents]
Dear Sirs:
Advanta Corp., a Delaware corporation (the "Company"), confirms its
agreement with ____________________________________ (each referred to as an
"Agent" and collectively referred to as the "Agents") with respect to the issue
and sale by the Company of its Medium-Term Notes described herein (the "Notes").
The Notes are to be issued pursuant to an indenture (the "Indenture") dated as
of November 15, 1993 between the Company and The Chase Manhattan Bank (National
Association), as trustee (the "Trustee"). As of the date hereof, the Company has
authorized the issuance and sale of up to U.S. _____________ aggregate principal
amount (or its equivalent, based upon the applicable exchange rate at the time
of issuance, in such foreign or composite currencies as the Company shall
designate at the time of issuance) of Notes designated as its "Medium-Term
Notes, Series ____" to or through the Agents pursuant to the terms of this
Agreement. It is understood, however, that the Company may from time to time
authorize the issuance of additional series of Notes and that such additional
Notes may be sold to or through the Agents pursuant to the terms of this
Agreement.
This Agreement provides both for the sale of Notes by the Company to an
Agent as principal for resale to investors and other purchasers and for the sale
of Notes by the Company directly to investors (as may from time to time be
agreed to by the Company and the applicable Agent), in which case the applicable
Agent will act as an agent of the Company in soliciting Note purchases.
The Company has filed with the Securities and Exchange Commission (the
"SEC") two registration statements on Form S-3 (Nos. 33-50883 and 33-________)
for the registration of debt securities, including the Notes, under the
Securities Act of 1933 (the "1933 Act") and the offering
1
<PAGE> 2
thereof from time to time in accordance with Rule 415 of the rules and
regulations of the SEC under the 1933 Act (the "1933 Act Regulations"). Such
registration statements have been declared effective by the SEC and the
Indenture has been qualified under the Trust Indenture Act of 1939 (the "1939
Act"). Registration statement No. 33-_______ and, to the extent applicable,
registration statement No. 33-50883 (and any further registration statements
which may be filed by the Company for the purpose of registering additional
Notes and in connection with which this Agreement is included or incorporated by
reference as an exhibit) and the prospectus constituting a part thereof, and any
prospectus supplements relating to the Notes, including all documents
incorporated therein by reference, as from time to time amended or supplemented
by the filing of documents pursuant to the Securities Exchange Act of 1934 (the
"1934 Act") or the 1933 Act or otherwise, are referred to herein as the
"Registration Statement" and the "Prospectus", respectively, except that if any
revised prospectus shall be provided to the Agents by the Company for use in
connection with the offering of the Notes, whether or not such revised
prospectus is required to be filed by the Company pursuant to Rule 424(b) of the
1933 Act Regulations, the term "Prospectus" shall refer to such revised
prospectus from and after the time it is first provided to each Agent for such
use.
SECTION 1. Appointment as Agents.
(a) Appointment. Subject to the terms and conditions stated herein and
subject to the reservation by the Company of the right to sell Notes directly on
its own behalf, the Company hereby agrees that Notes will be sold to or through
the Agents. Each Agent is authorized to engage the services of any other broker
or dealer in connection with the offer or sale of the Notes purchased by such
Agent as principal for resale to others but is not authorized to appoint
subagents. In connection with sales by an Agent of Notes purchased by such Agent
as principal to other brokers or dealers, such Agent may allow any portion of
the discount it has received in connection with such purchase from the Company
to such brokers or dealers. Each Agent is acting in connection with the Notes
individually and not collectively or jointly. The appointment of the Agents
hereunder is not exclusive and the Company may from time to time offer Notes for
sale otherwise than to or through an Agent; provided, however, that so long as
this Agreement is in effect the Company will not appoint any other agent for the
purpose of soliciting purchases of the Notes on a continuous basis. It is
understood, however, that if from time to time the Company is approached by a
prospective agent offering to solicit a specific purchase of Notes, the Company
may engage such agent with respect to such specific purchase, provided that (i)
such agent is engaged on terms substantially similar to the applicable terms of
this Agreement (including the same commission schedule as set forth hereto as
Schedule A) and (ii) the Agents are given notice of such purchase promptly, in
each case after the purchase is agreed to.
(b) Sale of Notes. The Company shall not sell or approve the
solicitation of purchases of Notes in excess of the amount which shall be
authorized by the Company from time to time or in excess of the principal amount
of Notes registered pursuant to the Registration Statement. The Agents will have
no responsibility for maintaining records with respect to the aggregate
principal
2
<PAGE> 3
amount of Notes sold, or of otherwise monitoring the availability of Notes for
sale, under the Registration Statement.
(c) Purchases as Principal. The Agents shall not have any obligation to
purchase Notes from the Company as principal, but each Agent may agree from time
to time to purchase Notes as principal. Any such purchase of Notes by an Agent
as principal shall be made in accordance with Section 3(a) hereof.
(d) Solicitations as Agent. If agreed upon by the Agents and the
Company, the Agents, acting solely as agents for the Company and not as
principal, will solicit purchases of the Notes. Each Agent will communicate to
the Company, orally, each offer to purchase Notes solicited by such Agent on an
agency basis, other than those offers rejected by such Agent. Each Agent shall
have the right, in its discretion reasonably exercised, to reject any proposed
purchase of Notes, as a whole or in part, and any such rejection shall not be
deemed a breach of such Agent's agreement contained herein. The Company may
accept or reject any proposed purchase of the Notes, in whole or in part. Each
Agent shall make reasonable efforts to assist the Company in obtaining
performance by each purchaser whose offer to purchase Notes has been solicited
by such Agent and accepted by the Company. The Agents shall not have any
liability to the Company in the event any such agency purchase is not
consummated for any reason. If the Company shall default on its obligation to
deliver Notes to a purchaser whose offer it has accepted, the Company shall (i)
hold the applicable Agent harmless against any loss, claim or damage arising
from or as a result of such default by the Company and (ii) notwithstanding such
default, pay to the applicable Agent any commission to which it would be
entitled in connection with such sale.
(e) Reliance. The Company and each Agent agree that any Notes purchased
by such Agent shall be purchased, and any Notes the placement of which such
Agent arranges shall be placed by such Agent, in reliance on the
representations, warranties, covenants and agreements of the Company contained
herein and on the terms and conditions and in the manner provided herein.
SECTION 2. Representations and Warranties.
(a) The Company represents and warrants to each Agent as of the date
hereof, as of the date of each acceptance by the Company of an offer for the
purchase of Notes (whether to an Agent as principal or through an Agent as
agent), as of the date of each delivery of Notes (whether to an Agent as
principal or through an Agent as agent) (the date of each such delivery to an
Agent as principal being hereafter referred to as a "Settlement Date"), and as
of any time that the Registration Statement or the Prospectus shall be amended
or supplemented or there is filed with the SEC any document incorporated by
reference into the Prospectus (each of the times referenced above being referred
to herein as a "Representation Date") as follows:
(i) Due Incorporation and Qualification. The Company has been
duly incorporated and is validly existing as a corporation in good
standing under the laws of the state of Delaware with corporate power
and authority to own, lease and operate its
3
<PAGE> 4
properties and to conduct its business as described in the Prospectus; and the
Company is duly qualified as a foreign corporation to transact business and is
in good standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure to so qualify and be in good standing would
not have a material adverse effect on the condition, financial or otherwise, or
the earnings or business affairs of the Company and its subsidiaries considered
as one enterprise.
(ii) Subsidiaries. Each subsidiary of the Company which is a
significant subsidiary (each, a "Significant Subsidiary") as defined in
Rule 405 of Regulation C of the 1933 Act Regulations has been duly
incorporated and is validly existing as a corporation (or, in the case
of Advanta National Bank USA ("AUS") and Advanta National Bank ("ANB",
and together with AUS referred to herein collectively as the "Banks"),
validly existing as a national banking association) in good standing
under the laws of the juris diction of its incorporation, has corporate
power and authority to own, lease and operate its properties and
conduct its business as described in the Prospectus and is duly
qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure to so qualify and be in
good standing would not have a material adverse effect on the
condition, financial or otherwise, or the earnings or business affairs
of the Company and its subsidiaries considered as one enter prise; and
all of the issued and outstanding capital stock of each Significant
Subsidiary has been duly authorized and validly issued, is fully paid
and non-assessable (subject, in the case of the shares issued by the
Banks, to the provisions of Section 55, Title 12, United States Code)
and, except for directors' qualifying shares, is owned by the Company,
directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity.
(iii) Registration Statement and Prospectus. At the time the
Registration Statement became effective, the Registration Statement
complied, and as of each applicable Representation Date will comply, in
all material respects with the requirements of the 1933 Act and the
1933 Act Regulations and the 1939 Act and the rules and regulations of
the SEC promulgated thereunder. The Registration Statement, at the time
it became effective, did not, and at each time thereafter at which any
amendment to the Registration Statement becomes effective or any Annual
Report on Form 10-K is filed by the Company with the SEC and as of each
Representation Date, will not, contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading. The
Prospectus, as of the date hereof does not, and as of each
Representation Date will not, include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that the representations
and warranties in this subsection shall not apply to statements in or
omissions from the Registration Statement or Prospectus made in
reliance upon and in
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<PAGE> 5
conformity with information furnished to the Company in writing by the Agents
expressly for use in the Registration Statement or Prospectus.
(iv) Incorporated Documents. The documents incorporated by
reference in the Prospectus, at the time they were or hereafter are
filed with the SEC, complied or when so filed will comply, as the case
may be, in all material respects with the requirements of the 1934 Act
and the rules and regulations promulgated thereunder (the "1934 Act
Regulations").
(v) Accountants. The accountants who certified the financial
statements included or incorporated by reference in the Prospectus are
independent public accountants within the meaning of the 1933 Act and
the 1933 Act Regulations.
(vi) Financial Statements. The financial statements and any
supporting schedules of the Company and its consolidated subsidiaries
included or incorporated by reference in the Registration Statement and
the Prospectus present fairly the consolidated financial position of
the Company and its consolidated subsidiaries as of the dates indicated
and the consolidated results of their operations for the periods
specified; and, except as stated therein, said financial statements
have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis; and the supporting schedules
included in the Registration Statement present fairly the information
required to be stated therein.
(vii) Authorization and Validity of this Agreement, the
Indenture and the Notes. This Agreement has been duly authorized,
executed and delivered by the Company and, upon execution and delivery
by the Agents, will be a valid and legally binding agreement of the
Company; the Indenture has been duly authorized, executed and delivered
by the Company and, upon execution and delivery by the Trustee, will be
a valid and legally binding obligation of the Company enforceable in
accordance with its terms, except as enforcement thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting enforcement of creditors' rights generally or
by general equity principles, and except further as enforcement thereof
may be limited by (i) requirements that a claim with respect to any
Notes denominated other than in U.S. dollars (or a foreign currency or
currency unit judgment in respect of such claim) be converted into U.S.
dollars at a rate of exchange prevailing on a date determined pursuant
to applicable law or (ii) governmental authority to limit, delay or
prohibit the making of payments outside the United States; the Notes
have been duly and validly authorized for issuance, offer and sale
pursuant to this Agreement and, when issued, authenticated and
delivered pursuant to the provisions of this Agreement and the
Indenture against payment of the consideration therefor specified in
the Prospectus or agreed upon pursuant to the provisions of this
Agreement, the Notes will constitute valid and legally binding
obligations of the Company enforceable in accordance with their terms,
except as enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting
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<PAGE> 6
enforcement of creditors' rights generally or by general equity prin
ciples, and except further as enforcement thereof may be limited by (i)
requirements that a claim with respect to any Notes denominated other
than in U.S. dollars (or a foreign currency or currency unit judgment
in respect of such claim) be converted into U.S. dollars at a rate or
exchange prevailing on a date determined pursuant to applicable law or
(ii) governmental authority to limit, delay or prohibit the making of
payments outside the United States; the Notes and the Indenture will be
substantially in the form heretofore delivered to the Agents and
conform in all material respects to all statements relating thereto
contained in the Prospectus; and each holder of Notes will be entitled
to the benefits of the Indenture.
(viii) Material Changes. Since the respective dates as of
which information is given in the Registration Statement and the
Prospectus, except as may otherwise be stated therein or contemplated
thereby there has been no material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its subsidiaries considered as
one enterprise, whether or not arising in the ordinary course of
business.
(ix) No Defaults; Regulatory Approvals. Neither the Company
nor any of its Significant Subsidiaries is in violation of its charter
or in default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other instrument to
which it is a party or by which it or any of them or their properties
may be bound, the violation or default of which would have a material
adverse effect on the Company and its subsidiaries considered as one
enterprise; the execution and delivery of this Agreement and the
Indenture and the consummation of the transactions contemplated herein
and therein have been duly authorized by all necessary corporate action
and will not conflict with or constitute a breach of, or default under,
or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which the Company or any
of its subsidiaries is a party or by which it or any of them may be
bound or to which any of the property or assets of the Company or any
such subsidiary is subject, nor will such action result in any
violation of the provisions of the charter or by-laws of the Company or
any law, administrative regulation or administrative or court order or
decree; and no consent, approval, authorization, order or decree of any
court or governmental agency or body is required for the consummation
by the Company of the transactions contemplated by this Agreement or in
connection with the sale of Notes hereunder, except such as have been
obtained or rendered, as the case may be, or as may be required under
the securities laws of any state or other jurisdiction of the United
States (the "Blue Sky" laws).
(x) Legal Proceedings; Contracts. No legal or governmental
proceedings are pending to which the Company or any of its subsidiaries
is a party or to which the property of the Company or any of its
subsidiaries is subject that would
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<PAGE> 7
reasonably be expected to materially and adversely affect the
consummation of this Agreement or the Indenture or any transaction
contemplated hereby or thereby or which are required to be described in
the Registration Statement or the Prospectus and are not described
therein, and to the knowledge of the Company no proceedings required to
be so described have been threatened against the Company or any of its
subsidiaries or with respect to any of their respective properties; and
no contract or other document is required to be described in the
Registration Statement or the Prospectus or to be filed as an exhibit
to the Registration Statement by the 1933 Act or by the 1933 Act
Regulations which has not been so described or filed as required.
(xi) Company and Bank Status. The Company is a company
described in Section 4(f)(1) of the Bank Holding Company Act of 1956,
as amended (the "BHCA"). The Banks are in compliance in all material
respects with all regulations of the Office of the Comptroller of the
Currency, the Board of Governors of the Federal Reserve System and the
Federal Deposit Insurance Corporation (the "FDIC") the failure to
comply with which would have a material adverse effect on the Company
and its subsidiaries considered as one enterprise. AUS is in compliance
with each of the limitations contained in Section 4(f)(3) of the BHCA.
(xii) The Company is in compliance with all of the provisions
of Section 517.075 of the Florida statutes, and all rules and
regulations promulgated thereunder relating to issuers doing business
in Cuba.
(b) Additional Certifications. Any certificate signed by any director
or officer of the Company and delivered to the Agents or to counsel for the
Agents in connection with an offering of Notes through an Agent as agent or the
sale of Notes to an Agent as principal shall be deemed a representation and
warranty by the Company to such Agent as to the matters covered thereby on the
date of such certificate and at each Representation Date subsequent thereto.
SECTION 3. Purchases as Principal; Solicitations as Agent.
(a) Purchases as Principal. Unless otherwise agreed by an Agent and the
Company, Notes shall be purchased by such Agent as principal. Such purchases
shall be made in accordance with terms agreed upon by such Agent and the Company
(which terms shall be agreed upon orally, with written confirmation prepared by
such Agent and delivered to the Company). Each Agent's commitment to purchase
Notes as principal shall be deemed to have been made on the basis of the
representations and warranties of the Company herein contained and shall be
subject to the terms and conditions herein set forth. Each purchase of Notes,
unless otherwise agreed, shall be at a discount from the principal amount of
each such Note equivalent to the applicable commission set forth in Schedule A
hereto. The Agents may engage the services of any other broker or dealer in
connection with the resale of the Notes purchased as principal and may allow any
portion of the discount received in connection with such purchases from the
Company to such brokers and dealers. At the time of each purchase of Notes by an
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<PAGE> 8
Agent as principal, such Agent shall specify the requirements for the stand-off
agreement, officer's certificate, opinion of counsel and comfort letter pursuant
to Sections 4(k), 7(b), 7(c) and 7(d) hereof.
(b) Solicitations as Agent. On the basis of the representations and
warranties herein contained, but subject to the terms and conditions herein set
forth, when agreed by the Company and an Agent, such Agent, as an agent of the
Company, will use its reasonable efforts to solicit offers to purchase the Notes
upon the terms and conditions set forth herein and in the Prospectus. All Notes
sold through an Agent as agent will be sold at 100% of their principal amount
unless otherwise agreed to by the Company and such Agent.
The Company reserves the right, in its sole discretion, to suspend
solicitation of purchases of the Notes through an Agent, as agent, commencing at
any time for any period of time or permanently. Upon receipt of instructions
from the Company, the Agents will forthwith suspend solicitation of purchases
from the Company until such time as the Company has advised the Agents that such
solicitation may be resumed.
The Company agrees to pay each Agent a commission, in the form of a
discount, equal to the applicable percentage of the principal amount of each
Note sold by the Company as a result of a solicitation made by such Agent as set
forth in Schedule A hereto.
(c) Administrative Procedures. The purchase price, interest rate or
formula, maturity date and other terms of the Notes (as applicable) specified in
Exhibit A hereto shall be agreed upon by the Company and the applicable Agent
and set forth in a pricing supplement to the Prospectus to be prepared in
connection with each sale of Notes. Except as may be otherwise provided in such
supplement to the Prospectus, the Notes will be issued in denominations of
[U.S.$100,000] or any larger amount that is an integral multiple of U.S. $1,000.
Administrative procedures with respect to the sale of Notes shall be agreed upon
from time to time by the Agents, the Company and the Trustee (the "Procedures").
The Agents and the Company agree to perform the respective duties and
obligations specifically provided to be performed by them in the Procedures.
SECTION 4. Covenants of the Company.
The Company covenants with each Agent as follows:
(a) Notice of Certain Events. The Company will notify the Agents
immediately (i) of the effectiveness of any amendment to the Registration
Statement, (ii) of the transmittal to the SEC for filing of any supplement to
the Prospectus relating to the sale of Notes through such Agent or any document
to be filed pursuant to the 1934 Act which will be incorporated by reference in
the Prospectus, (iii) of the receipt of any comments from the SEC with respect
to the Registration Statement or the Prospectus, (iv) of any request by the SEC
for any amendment to the Registration Statement or any amendment or supplement
to the Prospectus or for additional
8
<PAGE> 9
information, and (v) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose. The Company will make every reasonable effort to prevent the
issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment.
(b) Notice of Certain Proposed Filings. The Company will give the
Agents advance notice of its intention to file or prepare any additional
registration statement with respect to the registration of additional Notes, any
amendment to the Registration Statement or any amendment or supplement to the
Prospectus (other than an amendment or supplement providing solely for a change
in the interest rates of Notes or any amendment or supplement which relates
exclusively to an offering of debt securities other than the Notes), whether by
the filing of documents pursuant to the 1934 Act, the 1933 Act or otherwise, and
will furnish the Agents with copies of any such amendment or supplement or other
documents proposed to be filed or prepared a reasonable time in advance of such
proposed filing or preparation, as the case may be, and will not file any such
amendment or supplement or other documents in a form to which the Agents or
counsel for the Agents shall reasonably object.
(c) Copies of the Registration Statement and the Prospectus. The
Company will deliver to the Agents one signed and as many conformed copies of
the Registration Statement (as originally filed) and of each amendment thereto
(including exhibits filed therewith or incorporated by reference therein and
documents incorporated by reference in the Prospectus) as the Agents may
reasonably request. The Company will furnish to the Agents as many copies of the
Prospectus (as amended or supplemented) as the Agents shall reasonably request
so long as the Agents are required to deliver a Prospectus in connection with
sales or solicitations of offers to purchase the Notes.
(d) Preparation of Pricing Supplements. The Company will prepare, with
respect to any Notes to be sold through or to the Agents pursuant to this
Agreement, a Pricing Supplement with respect to such Notes in a form previously
approved by the Agents and will file such Pricing Supplement pursuant to Rule
424(b)(3) under the 1933 Act not later than the close of business of the SEC on
the fifth business day after the date on which such Pricing Supplement is first
used.
(e) Revisions of Prospectus -- Material Changes. Except as otherwise
provided in subsection (l) of this Section, if at any time during the term of
this Agreement any event shall occur or condition exist as a result of which it
is necessary, in the reasonable opinion of counsel for the Agents or counsel for
the Company, to further amend or supplement the Prospectus in order that the
Prospectus will not include an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time the Prospectus
is delivered to a purchaser, or if it shall be necessary, in the reasonable
opinion of either such counsel, to amend or supplement the Regis tration
Statement or the Prospectus in order to comply with the requirements of the 1933
Act or the 1933 Act Regulations, immediate notice shall be given, and confirmed
in writing, to the Agents to cease the solicitation of offers to purchase the
Notes in the Agents' capacity as agent
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<PAGE> 10
and to cease sales of any Notes the Agents may then own as principal, and the
Company will promptly amend the Registration Statement and the Prospectus,
whether by filing documents pursuant to the 1934 Act, the 1933 Act or otherwise,
as may be necessary to correct such untrue statement or omission or to make the
Registration Statement and Prospectus comply with such requirements.
(f) Prospectus Revisions -- Periodic Financial Information. Except as
otherwise provided in subsection (1) of this Section, on or prior to the date on
which there shall be released to the general public interim financial statement
information related to the Company with respect to each of the first three
quarters of any fiscal year or preliminary financial statement information with
respect to any fiscal year, the Company shall cause the Prospectus to be amended
or supplemented to include or incorporate by reference financial information
with respect thereto and corresponding information for the comparable period of
the preceding fiscal year, as well as such other information and explanations as
shall be necessary for an understanding thereof or as shall be required by the
1933 Act or the 1933 Act Regulations and shall provide copies of such amendment
or supplement to the Agents upon the filing thereof.
(g) Prospectus Revisions -- Audited Financial Information. Except as
otherwise provided in subsection (1) of this Section, on or prior to the date on
which there shall be released to the general public financial information
included in or derived from the audited financial statements of the Company for
the preceding fiscal year, the Company shall cause the Registration Statement
and the Prospectus to be amended, whether by the filing of documents pursuant to
the 1934 Act, the 1933 Act or otherwise, to include or incorporate by reference
such audited financial statements and the report or reports, and consent or
consents to such inclusion or incorporation by reference, of the independent
accountants with respect thereto, as well as such other information and explana
tions as shall be necessary for an understanding of such financial statements or
as shall be required by the 1933 Act or the 1933 Act Regulations.
(h) Earnings Statements. The Company will make generally available to
its security holders as soon as practicable after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 under the 1933 Act) covering each twelve month period beginning, in
each case, not later than the first day of the Company's fiscal quarter next
following the "effective date" (as defined in such Rule 158) of the Registration
Statement with respect to each sale of Notes.
(i) Blue Sky Qualifications. The Company will endeavor, in cooperation
with the Agents, to qualify the Notes for offering and sale under the applicable
Blue Sky laws of such states and other jurisdictions of the United States as the
Agents may designate, and will maintain such qualifications in effect for as
long as may be required for the distribution of the Notes; provided, however,
that the Company shall not be obligated to file any general consent to service
of process or to qualify as a foreign corporation in any jurisdiction in which
it is not so qualified. The Company will file such statements and reports as may
be required by the laws of each jurisdiction in which the Notes have been
qualified as above provided. The Company will promptly advise the
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<PAGE> 11
Agents of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Notes for sale in any such state or
jurisdiction or the initiating or threatening of any proceeding for such
purpose.
(j) 1934 Act Filings. The Company, during the period when the
Prospectus is required to be delivered under the 1933 Act, will file promptly
all documents required to be filed with the SEC pursuant to Sections 13(a),
13(c), 14 or 15(d) of the 1934 Act.
(k) Stand-Off Agreement. If specified by an Agent in connection with a
purchase by it of Notes as principal, between the date of the agreement to
purchase such Notes and the Settlement Date with respect to such purchase, the
Company will not, without such Agent's prior written consent, offer or sell, or
enter into any agreement to sell, any debt securities of the Company (other than
the Notes that are to be sold pursuant to such agreement, commercial paper in
the ordinary course of business, debt securities sold by the Company or its
selling agents pursuant to the Company's existing retail note program and [debt
securities sold pursuant to the Company's insitutional medium-term note
program/debt securities sold pursuant to the Company's retail medium-term note
program]).
(l) Suspension of Certain Obligations. The Company shall not be
required to comply with the provisions of subsections (e), (f) or (g) of this
Section during any period from the time (i) the Agents shall have suspended
solicitation of purchases of the Notes in its capacity as agent pursuant to a
request from the Company and (ii) the Agents shall not then hold any Notes
purchased as principal pursuant hereto, until the time the Company shall
determine that solicitation of purchases of the Notes should be resumed or the
Agent shall subsequently purchase Notes from the Company as principal.
SECTION 5. Conditions of Obligations.
The obligations of each Agent to purchase Notes as principal and to
solicit offers to purchase the Notes as agent of the Company, and the
obligations of any purchasers of the Notes sold through each Agent as agent,
will be subject to the accuracy of the representations and warranties on the
part of the Company herein and to the accuracy of the statements of the
Company's officers made in any certificate furnished pursuant to the provisions
hereof, to the performance and observance by the Company of all its covenants
and agreements herein contained and to the following additional condi tions
precedent:
(a) Legal Opinions. On the date hereof, the Agents shall have received
the following legal opinions, dated as of the date hereof and in form and
substance satisfactory to the Agents:
(1) Opinion of Company Counsel. The opinion of Gene S. Schneyer,
Vice President, Secretary and General Counsel to the Company, to the effect
that:
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<PAGE> 12
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the
laws of the State of Delaware.
(ii) The Company has corporate power and authority to own,
lease and operate its properties and to conduct its
business as described in the Prospectus.
(iii) To the best of such counsel's knowledge, the Company
is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction
in which such qualification is required, whether by
reason of the ownership or leasing of property or the
conduct of business, except where the failure to so
qualify and be in good standing would not have a
material adverse effect on the condition, financial or
otherwise, or the earnings or business affairs of the
Company and its subsidiaries considered as one
enterprise.
(iv) Each Significant Subsidiary of the Company has been
duly incorporated and is validly existing as a
corporation (or, in the case of the Banks, validly
existing as a national banking association) in good
standing under the laws of the jurisdiction of its
incorporation, has corporate power and authority to
own, lease and operate its properties and conduct its
business as described in the Prospectus, and, to the
best of such counsel's knowledge, is duly qualified as
a foreign corporation to transact business and is in
good standing in each jurisdiction in which such
qualification is required, whether by reason of the
ownership or leasing of property or the conduct of
business, except where the failure to so qualify and
be in good standing would not have a material adverse
effect on the condition, financial or otherwise, or
the earnings or business affairs of the Company and
its subsidiaries considered as one enterprise; all of
the issued and outstanding capital stock of each such
Significant Subsidiary has been duly authorized and
validly issued, is fully paid and non-assessable
(subject, in the case of the Banks, to the provisions
of Section 55, Title 12, United States Code), and,
except for directors' qualifying shares, is owned by
the Company directly or indirectly through one of its
wholly-owned subsidiaries, free and clear of any
mortgage, pledge, lien, encumbrance, claim or equity.
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(v) This Agreement has been duly and validly authorized,
executed and delivered by the Company.
(vi) The Indenture has been duly and validly authorized,
executed and delivered by the Company and (assuming
the Indenture has been duly authorized, executed and
delivered by the Trustee) constitutes a legal, valid
and binding agreement of the Company, enforceable in
accordance with its terms, except as enforcement
thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to
or affecting enforcement of creditors' rights
generally, or by general equity principles, and except
further as enforcement thereof may be limited by (A)
requirements that a claim with respect to any Notes
denominated other than in U.S. dollars (or a foreign
currency or foreign currency unit judgment in respect
of such claim) be converted into United States dollars
at a rate of exchange prevailing on a date determined
pursuant to applicable law or (B) governmental
authority to limit, delay or prohibit the making of
payments in foreign currency or currency units or
payments outside the United States.
(vii) The Notes, are in the form contemplated by the
Indenture, have been duly authorized for issuance,
offer and sale pursuant to this Agreement and, when
issued, authenticated and delivered pursuant to the
provisions of this Agreement and the Indenture against
payment of the consideration therefor, will constitute
valid and legally binding obligations of the Company,
enforceable in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws
relating to or affecting enforcement of creditors'
rights generally or by general equity principles, and
except further as enforcement thereof may be limited
by (A) requirements that a claim with respect to any
Notes denominated other than in U.S. dollars (or a
foreign currency or foreign currency unit judgment in
respect of such claim) be converted into United States
dollars at a rate of exchange prevailing on a date
determined pursuant to applicable law or (B)
governmental authority to limit, delay or prohibit the
making of payments in foreign currency or currency
units or payments outside the United States, and each
holder of Notes will be entitled to the benefits of
the Indenture.
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(viii) The statements in the Prospectus under the captions
"Description of Notes" and "Description of Debt
Securities" insofar as they purport to summarize
certain provisions of documents specifically referred
to therein, are accurate summaries of such provisions.
(ix) The Indenture is qualified under the 1939 Act.
(x) The Registration Statement is effective under the 1933
Act and, to the best of such counsel's knowledge, no
stop order suspending the effectiveness of the
Registration Statement has been issued under the 1933
Act or proceedings therefor initiated or threatened by
the SEC.
(xi) At the time the Registration Statement became
effective, the Registration Statement (other than the
financial statements included therein, as to which no
opinion need be rendered) complied as to form in all
material respects with the require ments of the 1933
Act, the 1939 Act and the regulations under each of
those Acts.
(xii) To the best of such counsel's knowledge, there are no
legal or governmental proceedings pending or
threatened which are required to be disclosed in the
Prospectus, other than those disclosed therein, and
all pending legal or governmental proceedings to which
the Company or any subsidiary of the Company is a
party or of which any of their property is the subject
which are not described in the Registration Statement,
including ordinary routine litigation incidental to
the business of the Company or any such subsidiary,
are, considered in the aggregate, not material.
(xiii) To the best of such counsel's knowledge, neither the
Company nor any of its Significant Subsidiaries is in
violation of its charter or in default in the
performance or observance of any material obligation,
agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note or
lease to which it is a party or by which it or any of
them or their properties may be bound, the violation
or default of which would have a material adverse
effect on the Company and its subsidiaries considered
as one enterprise. The execution and delivery of this
Agreement or of the Indenture, or the consummation by
the Company of the transactions con-
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<PAGE> 15
templated herein and therein have been duly authorized
by all necessary corporate action and will not
conflict with or constitute a breach of, or default
under, or result in the creation or imposition of any
lien, charge or encumbrance upon any property or
assets of the Company or any of its Significant
Subsidiaries pursuant to, any contract, indenture,
mortgage, loan agreement, note, lease or other
instrument known to such counsel and to which the
Company or any such subsidiary is a party or by which
it or any of them may be bound or to which any of the
property or assets of the Company or any such
subsidiary is subject, or any law, administrative
regulation or administrative or court decree known to
such counsel to be applicable to the Company of any
court or governmental agency, authority or body or any
arbitrator having jurisdiction over the Company; nor
will such action result in any violation of the
provisions of the charter or by-laws of the Company.
(xiv) To the best of such counsel's knowledge, there are no
contracts, indentures, mortgages, loan agreements,
notes, leases or other instruments or documents
required to be described or referred to in the
Registration Statement or to be filed as exhibits
thereto other than those described or referred to
therein or filed or incorporated by reference as
exhibits thereto, the descriptions thereof or
references thereto are correct, and no default exists
in the due performance or observance of any material
obligation, agreement, covenant or condition contained
in any contract, indenture, mortgage, loan agreement,
note, lease or other instrument so described, referred
to, filed or incorporated by reference which would
have a material adverse effect on the Company and its
subsidiaries considered as one enterprise.
(xv) No consent, approval, authorization, order or decree
of any court or governmental agency or body (including
the SEC) is required for the consummation by the
Company of the transactions contemplated by this
Agreement or in connection with the sale of Notes
hereunder, except such as have been obtained or
rendered, as the case may be, or as may be required
under Blue Sky laws.
(xvi) Each document filed pursuant to the 1934 Act and
incorporated by reference in the Prospectus complied
when filed as to form
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in all material respects with the 1934 Act and the
1934 Act Regulations thereunder.
(xvii) The information contained in the Prospectus under the
caption "Government Regulation" and under the caption
"Government Regulation" in the Company's Annual Report
on Form 10-K, to the extent that it constitutes
matters of law or legal conclusions, has been reviewed
by such counsel and is correct.
(xviii) The Company is a company described in Section 4(f)(1)
of the BHCA. The Banks are in compliance in all
material respects with all regulations of the Office
of the Comptroller of the Currency, the Board of
Governors of the Federal Reserve System and the FDIC
the failure to comply with which would have a material
adverse effect on the Company and its subsidiaries
considered as one enterprise. AUS is in compliance
with each of the limitations contained in Section
4(f)(3) of the BHCA.
In rendering such opinion, Mr. Schneyer may rely on the opinion of
counsel for the Agents as to matters of New York law.
(2) Opinion of Counsel to the Agents. The opinion of Brown & Wood,
counsel to the Agents, covering the matters referred to in subparagraph (1)
under the subheadings (i) and (v) to (xi), inclusive, above.
(3) In giving their opinions required by subsection (a)(1) and (a)(2)
of this Section, Gene S. Schneyer, Esq. and Brown & Wood shall each additionally
state that nothing has come to their attention that would lead them to believe
that the Registration Statement, at the time it became effective or, if an
amendment to the Registration Statement or an Annual Report on Form 10-K has
been filed by the Company with the SEC subsequent to the effectiveness of the
Registration Statement, then at the time such amendment became effective or at
the time of the most recent such filing, as the case may be, contained an untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading or that the Prospectus, as amended or supplemented at the
date hereof, or (if such opinion is being delivered in connection with the
purchase of Notes by an Agent as principal pursuant to Section 7(c) hereof) at
the date of any agreement by such Agent to purchase Notes as principal and at
the Settlement Date with respect thereto, as the case may be, included or
includes an untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
16
<PAGE> 17
(b) Officers' Certificate. At the date hereof, the Agents shall have
received a certificate of the President or any Vice President and the chief
financial or chief accounting officer of the Company, dated as of the date
hereof, to the effect that (i) since the respective dates as of which
information is given in the Registration Statement and the Prospectus or since
the date of any agreement by an Agent to purchase Notes as principal, there has
not been any material adverse change in the condition, financial or otherwise,
or in the earnings, business affairs or business prospects of the Company and
its subsidiaries considered as one enterprise, whether or not arising in the
ordinary course of business, (ii) the other representations and warranties of
the Company contained in Section 2 hereof are true and correct with the same
force and effect as though expressly made at and as of the date of such
certificate, (iii) the Company has performed or complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or prior to
the date of such certificate, and (iv) that no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceedings
for that purpose have been initiated or threatened by the SEC.
(c) Comfort Letter. On the date hereof, the Agents shall have received
a letter from Arthur Andersen LLP, dated as of the date hereof in the form
heretofore agreed to by the Agents.
(d) Other Documents. On the date hereof and on each Settlement Date,
counsel to the Agents shall have been furnished with such documents and opinions
as such counsel may reasonably require for the purpose of enabling such counsel
to pass upon the issuance and sale of Notes as herein contemplated and related
proceedings, or in order to evidence the accuracy and completeness of any of the
representations and warranties, or the fulfillment of any of the conditions,
herein contained; and all proceedings taken by the Company in connection with
the issuance and sale of Notes as herein contemplated shall be satisfactory in
form and substance to the Agents and to counsel to the Agents.
If any condition specified in this Section 5 shall not have been
fulfilled when and as required to be fulfilled, this Agreement (or, at the
option of the applicable Agent, any applicable agreement by such Agent to
purchase Notes as principal) may be terminated by the Agents by notice to the
Company at any time and any such termination shall be without liability of any
party to any other party, except that the covenant regarding provision of an
earnings statement set forth in Section 4(h) hereof, the provi sions concerning
payment of expenses under Section 10 hereof, the indemnity and contribution
agreement set forth in Sections 8 and 9 hereof, the provisions concerning the
representations, warranties and agreements to survive delivery of Section 11
hereof, the provisions relating to governing law set forth in Section 14 and the
provisions set forth under "Parties" of Section 15 hereof shall remain in
effect.
SECTION 6. Delivery of and Payment for Notes Sold through the Agents.
Delivery of Notes sold through an Agent as agent shall be made by the
Company to such Agent for the account of any purchaser only against payment
therefor in immediately available funds. In the event that a purchaser shall
fail either to accept delivery of or to make payment for a
17
<PAGE> 18
Note on the date fixed for settlement, the applicable Agent shall promptly
notify the Company and deliver the Note to the Company, and, if such Agent has
theretofore paid the Company for such Note, the Company will promptly return
such funds to such Agent. If such failure occurred for any reason other than
default by an Agent in the performance of its obligations hereunder, the Company
will reimburse such Agent on an equitable basis for its loss of the use of the
funds for the period such funds were credited to the Company's account.
SECTION 7. Additional Covenants of the Company.
The Company covenants and agrees with each Agent that:
(a) Reaffirmation of Representations and Warranties. Each acceptance by
it of an offer for the purchase of Notes (whether to an Agent as principal or
through an Agent as agent), and each delivery of Notes to an Agent (whether to
an Agent as principal or through an Agent as agent), shall be deemed to be an
affirmation that the representations and warranties of the Company contained in
this Agreement and in any certificate theretofore delivered to such Agents
pursuant hereto are true and correct at the time of such acceptance or sale, as
the case may be, and an undertaking that such representations and warranties
will be true and correct at the time of delivery to the purchaser or its agent,
or to such Agent, of the Note or Notes relating to such acceptance or sale, as
the case may be, as though made at and as of each such time (and it is
understood that such representations and warranties shall relate to the
Registration Statement and Prospectus as amended and supplemented to each such
time).
(b) Subsequent Delivery of Certificates. Each time that (i) the
Registration Statement or the Prospectus shall be amended or supplemented (other
than by an amendment or supplement providing solely for a change in the interest
rates of Notes or similar changes, and other than by an amendment or supplement
which relates exclusively to an offering of debt securities other than the
Notes), (ii) there is filed with the SEC any document incorporated by reference
into the Prospectus (other than any Current Report on Form 8-K unless the Agents
shall otherwise specify), (iii) (if required in connection with the purchase of
Notes by an Agent as principal) the Company sells Notes to an Agent as principal
or (iv) the Company issues and sells Notes in a form not previously certified to
the Agents by the Company, the Company shall furnish or cause to be furnished to
the Agents forthwith a certificate dated the date of filing with the SEC of such
supplement or document, the date of effectiveness of such amendment, or the date
of such sale, as the case may be, in form satisfactory to the Agents or, in lieu
of such certificate, a certificate of the same tenor as the certificate referred
to in said Section 5(b), modified as necessary to relate to the Registration
Statement and the Prospectus as amended and supplemented to the time of delivery
of such certificate; provided that the certificate delivered with respect to
(iv) above may be limited to the due authorization, execution, delivery and
enforceability of such Notes.
(c) Subsequent Delivery of Legal Opinions. Each time that (i) the
Registration Statement or the Prospectus shall be amended or supplemented (other
than by an amendment or supplement providing solely for a change in the interest
rates of the Notes or similar changes or
18
<PAGE> 19
solely for the inclusion of additional financial information, and, other than by
an amendment or supplement which relates exclusively to an offering of debt
securities other than the Notes), (ii) there is filed with the SEC any document
incorporated by reference into the Prospectus (other than any Current Report on
Form 8-K, unless the Agents shall otherwise specify), (iii) (if required in
connection with the purchase of Notes by an Agent as principal) the Company
sells Notes to an Agent as principal or (iv) if the Company issues and sells
Notes in a form not previously certified to the Agents by the Company, the
Company shall furnish or cause to be furnished forthwith to the Agents and to
counsel to the Agents a written opinion of Gene S. Schneyer, Esq., General
Counsel to the Company, or other counsel satisfactory to the Agents dated the
date of filing with the SEC of such supplement or document, the date of
effectiveness of such amendment, or the date of such sale, as the case may be,
in form and substance satisfactory to the Agents, or, in lieu of such opinion,
counsel last furnishing such opinion to the Agents shall furnish the Agents with
a letter to the effect that the Agents may rely on such last opinion to the same
extent as though it was dated the date of such letter authorizing reliance
(except that statements in such last opinion shall be deemed to relate to the
Registration Statement and the Prospectus as amended and supplemented to the
time of delivery of such letter authorizing reliance); provided that the opinion
delivered with respect to (iv) above may be limited to the due authorization,
execution, delivery and enforceability of such Notes.
(d) Subsequent Delivery of Comfort Letters. Each time that (i) the
Registration Statement or the Prospectus shall be amended or supplemented to
include additional financial information or there is filed with the SEC (other
than any Current Report on Form 8-K, unless the Agents shall otherwise
reasonably specify) any document incorporated by reference into the Prospectus
which contains additional financial information, or (ii) (if required in
connection with the purchase of Notes by an Agent as principal) the Company
sells Notes to an Agent as principal, the Company shall cause Arthur Andersen
LLP forthwith to furnish such Agent a letter, dated the date of effectiveness of
such amendment, supplement or document with the SEC, or the date of such sale,
as the case may be, in form satisfactory to such Agent, of the same tenor as the
letter referred to in Section 5(c) hereof but modified to relate to the
Registration Statement and Prospectus, as amended and supplemented to the date
of such letter, and with such changes as may be necessary to reflect changes in
the financial statements and other information derived from the accounting
records of the Company; provided, however, that if the Registration Statement or
the Prospectus is amended or supplemented solely to include financial
information as of and for a fiscal quarter, Arthur Andersen LLP may limit the
scope of such letter to the unaudited financial statements included in such
amendment or supplement unless any other information included therein of an
accounting, financial or statistical nature is of such a nature that, in the
reasonable judgment of such Agent, such letter should cover such other
information.
19
<PAGE> 20
SECTION 8. Indemnification.
(a) Indemnification of the Agents. The Company agrees to indemnify and
hold harmless each Agent and each person, if any, who controls each Agent within
the meaning of Section 15 of the 1933 Act as follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any
untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement
(or any amendment thereto), or the omission or alleged
omission therefrom of a material fact necessary to make
the statements therein not misleading or arising out of
any untrue statement or alleged untrue statement of a
material fact included in the Prospectus (or any
amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary
to make the statements therein, in the light of the
circumstances under which they were made, not
misleading, unless such untrue statement or omission or
such alleged untrue statement or omission was made in
reliance upon and in conformity with written information
furnished to the Company by the Agents expressly for use
in the Registration Statement or the Prospectus;
(ii) against any and all loss, liability, claim, damage
and expense whatso ever, as incurred, to the extent of
the aggregate amount paid in settlement of any
litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or
of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue
statement or omission, if such settlement is effected
with the written consent of the Company; and
(iii) against any and all expense whatsoever, as
incurred, (including the fees and disbursements of
counsel chosen by the Agents) reasonably incurred in
investigating, preparing or defending against any
litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or
any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue
statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above.
(b) Indemnification of Company. Each Agent severally agrees to
indemnify and hold harmless the Company, its directors, each of its officers who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in subsection (a) of this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendment thereto) or the Prospectus (or any
amendment or supplement thereto) in reliance
20
<PAGE> 21
upon and in conformity with written information furnished to the Company by the
Agents expressly for use in the Registration Statement (or any amendment
thereto) or the Prospectus (or any amendment or supplement thereto).
(c) General. Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability which it may
have otherwise than on account of this indemnity agreement. An indemnifying
party may participate at its own expense in the defense of such action. In no
event shall the indemnifying parties be liable for the fees and expenses of more
than one counsel (in addition to any local counsel) for all indemnified parties
in connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances.
SECTION 9. Contribution.
In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in Section 8 hereof
is for any reason held to be unavailable to or insufficient to hold harmless the
indemnified parties although applicable in accordance with its terms, the
Company and the Agents shall contribute to the aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by said indemnity
agreement incurred by the Company and the Agents, as incurred, in such
proportions that each Agent is responsible for that portion represented by the
percentage that the total commissions and underwriting discounts received by
such Agent to the date of such liability bears to the total sales price from the
sale of Notes sold to or through such Agent to the date of such liability, and
the Company is responsible for the balance; provided, however, that no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section, each
person, if any, who controls each Agent within the meaning of Section 15 of the
1933 Act shall have the same rights to contribution as such Agent, and each
director of the Company, each officer of the Company who signed the Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act shall have the same rights to contribution as the
Company.
SECTION 10. Payment of Expenses.
The Company will pay all expenses incident to the performance of its
obligations under this Agreement, including:
(a) The preparation and filing of the Registration Statement and all
amendments thereto and the Prospectus and any amendments or supplements thereto;
(b) The preparation, filing and reproduction of this Agreement;
21
<PAGE> 22
(c) The preparation, printing, issuance and delivery of the Notes,
including any fees and expenses relating to the use of book-entry notes;
(d) The fees and disbursements of the Company's accountants and
counsel, of the Trustee and its counsel, and of any Calculation Agent or
Exchange Rate Agent;
(e) The reasonable fees and disbursements of counsel to the Agents
incurred in connection with the establishment of the program relating to the
Notes and incurred from time to time in connection with the transactions
contemplated hereby;
(f) The qualification of the Notes under the Blue Sky laws in
accordance with the provisions of Section 4(i) hereof, including filing fees and
the reasonable fees and disbursements of counsel for the Agents in connection
therewith and in connection with the preparation of any Blue Sky Survey;
(g) The printing and delivery to the Agents in quantities as
hereinabove stated of copies of the Registration Statement and any amendments
thereto, and of the Prospectus and any amendments or supplements thereto, and
the delivery by the Agents of the Prospectus and any amendments or supplements
thereto in connection with solicitations or confirmations of sales of the Notes;
(h) The preparation, printing, reproducing and delivery to the Agents
of copies of the Indenture and all supplements and amendments thereto;
(i) Any fees charged by rating agencies for the rating of the Notes;
(j) The fees and expenses incurred in connection with the listing of
the Notes on any securities exchange;
(k) The fees and expenses, if any, incurred with respect to any filing
with the National Association of Securities Dealers, Inc.;
(l) Any advertising and other out-of-pocket expenses of the Agents
incurred with the approval of the Company;
(m) The cost of providing any CUSIP or other identification numbers for
the Notes; and
(n) The fees and expenses of any Depositary (as defined in the
Indenture) and any nominees thereof in connection with the Notes.
22
<PAGE> 23
SECTION 11. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company submitted pursuant
hereto or thereto, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of the Agents or any
controlling person of the Agents, or by or on behalf of the Company, and shall
survive each delivery of and payment for any of the Notes.
SECTION 12. Termination.
(a) Termination of this Agreement. This Agreement (excluding any
agreement hereunder by an Agent to purchase Notes as principal) may be
terminated for any reason, at any time by either the Company or an Agent (as to
such Agent) upon the giving of written notice of such termination to the other
party hereto.
(b) Termination of Agreement to Purchase Notes as Principal. Each Agent
may termi nate any agreement hereunder by such Agent to purchase Notes as
principal, immediately upon notice to the Company, at any time prior to the
Settlement Date relating thereto (i) if there has been, since the date of such
agreement or since the respective dates as of which information is given in the
Registration Statement, any material adverse change in the condition, financial
or otherwise, or in the earnings, business affairs or business prospects of the
Company and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there shall have occurred
any material adverse change in the financial markets in the United States or any
outbreak or escalation of hostilities or other national or international
calamity or crisis the effect of which is such as to make it, in the judgment of
such Agent, impracticable to market the Notes or enforce contracts for the sale
of the Notes, or (iii) if trading in any securities of the Company has been
suspended by the SEC or a national securities exchange, or if trading generally
on either the American Stock Exchange or the New York Stock Exchange shall have
been suspended, or minimum or maximum prices for trading have been fixed, or
maximum ranges for prices for securities have been required, by either of said
exchanges or by order of the SEC or any other governmental authority, or if a
banking moratorium shall have been declared by either Federal, New York or
Pennsylvania authorities or if a banking moratorium shall have been declared by
the relevant authorities in the country or countries of origin of any foreign
currency or currencies in which the Notes are denominated or payable, or (iv) if
the rating assigned by any nationally recognized securities rating agency to any
debt securities of the Company as of the date of any applicable principal
purchase shall have been lowered since that date or if any such rating agency
shall have publicly announced that it has under surveillance or review, with
possible negative implications, its rating of any debt securities of the
Company, or (v) if there shall have come to such Agent's attention any facts
that would cause such Agent to believe that the Prospectus, at the time it was
required to be delivered to a purchaser of Notes, included an untrue statement
of a material fact or omitted to state a material fact necessary in order to
make the statements therein, in light of the circumstances existing at the time
of such delivery, not misleading.
23
<PAGE> 24
(c) General. In the event of any such termination, neither party will
have any liability to the other party hereto, except that (i) the applicable
Agent shall be entitled to any commission earned in accordance with the third
paragraph of Section 3(b) hereof, (ii) if at the time of termination (a) the
applicable Agent shall own any Notes purchased by it as principal with the
intention of reselling them or (b) an offer to purchase any of the Notes has
been accepted by the Company but the time of delivery to the purchaser or his
agent of the Note or Notes relating thereto has not occurred, the covenants set
forth in Sections 4 and 7 hereof shall remain in effect until such Notes are so
resold or delivered, as the case may be, and (iii) the covenant set forth in
Section 4(h) hereof, the provisions of Section 10 hereof, the indemnity and
contribution agreements set forth in Sections 8 and 9 hereof, and the provisions
of Sections 11, 14 and 15 hereof shall remain in effect.
SECTION 13. Notices.
Unless otherwise provided herein, all notices required under the terms
and provisions hereof shall be in writing, either delivered by hand, by mail or
by telex, telecopier or telegram, and any such notice shall be effective when
received at the address specified below.
If to the Company:
Advanta Corp.
Five Horsham Business Center
300 Welsh Road
Horsham, Pennsylvania 19044
Attention: Gene S. Schneyer, General Counsel
If to ____________:
If to ________________________
If to________________________
or at such other address as such party may designate from time to time by notice
duly given in accordance with the terms of this Section 13.
24
<PAGE> 25
SECTION 14. Governing Law; Forum.
This Agreement and all the rights and obligations of the parties shall
be governed by and construed in accordance with the laws of the State of New
York applicable to agreements made and to be performed in such State. Any suit,
action or proceeding brought by the Company against the Agents in connection
with or arising under this Agreement shall be brought solely in the state or
federal court of appropriate jurisdiction located in the Borough of Manhattan,
The City of New York.
SECTION 15. Parties.
This Agreement shall inure to the benefit of and be binding upon the
Agents and the Company and their respective successors. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person, firm or corporation, other than the parties hereto and their respective
successors and the controlling persons and officers and directors referred to in
Sections 8 and 9 and their heirs and legal representatives, any legal or
equitable right, remedy or claim under or in respect of this Agreement or any
provision herein contained. This Agreement and all conditions and provisions
hereof are intended to be for the sole and exclusive benefit of the parties
hereto and respective successors and said controlling persons and officers and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of Notes shall be deemed to be a
successor by reason merely of such purchase.
25
<PAGE> 26
If the foregoing is in accordance with the Agents' understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument along with all counterparts will become a binding agreement
between the Agents and the Company in accordance with its terms.
Very truly yours,
Advanta Corp.
By:
Name:
Title:
Accepted:
By:
Name:
Title:
By:
Name:
Title:
By:
Name:
Title:
26
<PAGE> 27
The following terms, if applicable, shall be agreed to by the
applicable Agent and the Company in connection with each sale of Notes:
Principal Amount: $_______
(or principal amount of foreign currency)
Interest Rate:
If Fixed Rate Note, Interest Rate:
If Floating Rate Note:
Interest Rate Basis:
Initial Interest Rate:
Spread or Spread Multiplier, if any:
Interest Reset Date(s):
Interest Payment Date(s):
Index Maturity:
Maximum Interest Rate, if any:
Minimum Interest Rate, if any:
Interest Reset Period:
Interest Payment Period:
Calculation Agent:
If Redeemable:
Initial Redemption Date:
Initial Redemption Percentage:
Annual Redemption Percentage Reduction:
If Repayable:
Optional Repayment Date(s):
Date of Maturity:
Purchase Price: ___%
Settlement Date and Time:
Currency of Denomination:
Denominations (if currency is other than U.S. dollar):
Currency of Payment:
Additional Terms:
Also, in connection with the purchase of Notes by an Agent as principal,
agreement as to whether the following will be required:
Officer's Certificate pursuant to Section 7(b) of the Distribution
Agreement. Legal Opinion pursuant to Section 7(c)of the Distribution
Agreement. Comfort Letter pursuant to Section 7(d) of the Distribution
Agreement. Stand-off Agreement pursuant to Section 4(k) of the
Distribution Agreement.
<PAGE> 28
SCHEDULE A
As compensation for the services of the Agents hereunder, the Company
shall pay to the applicable Agent, on a discount basis, a commission for the
sale of each Note equal to the principal amount of such Note multiplied by the
appropriate percentage set forth below:
PERCENT OF
MATURITY RANGES PRINCIPAL AMOUNT
<PAGE> 1
EXHIBIT 5
June 10, 1996
Advanta Corp.
Five Horsham Business Center
300 Welsh Road
Horsham, PA 19044
Ladies and Gentlemen:
I am Vice President, Secretary and General Counsel of Advanta Corp. (the
"Company"), and have acted as counsel for the Company in connection with the
Registration Statement on Form S-3 (the "Registration Statement") which the
Company expects to file on or about June 11, 1996 with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the "Act"),
relating to not more than $1,614,919,500 aggregate principal amount of its debt
securities (the "Debt Securities"), to be issued in one or more series under the
Indenture, dated as of November 15, 1993, between the Company and The Chase
Manhattan Bank (National Association), Trustee (the "Indenture"). I am familiar
with the requirements of the Act and the rules and regulations promulgated
pursuant thereto. I have examined the Company's Restated Certificate of
Incorporation, the Company's By-Laws and such other corporate records and
documents of the Company as I have deemed necessary or advisable in connection
with rendering this opinion.
Based on the foregoing, it is my opinion that:
1. The Company is a validly organized and existing corporation under the
laws of the State of Delaware.
2. The issuance of the Debt Securities has been duly authorized by
appropriate corporate action.
3. The Indenture is a valid and binding agreement, enforceable in the
accordance with its terms.
4. The Debt Securities described in the Prospectus included in the
Registration Statement, namely a total of $1,614,919,500 of principal amount of
Debt Securities (including $114,919,500 of unsold Debt Securities from
Registration Statement No. 33-50883 which became effective November 8, 1993),
when duly executed, authenticated, and delivered in accordance with the terms of
the Indenture, will be entitled to the benefits of the Indenture and will be
valid and binding obligations of the Company enforceable in accordance with
their terms, except as such enforceability may be limited by bankruptcy,
insolvency, moratorium, or similar laws affecting creditors' rights generally or
by equitable principles.
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 12
ADVANTA CORP. AND SUBSIDIARIES
STATEMENTS SETTING FORTH DETAILS OF COMPUTATION OF RATIO OF EARNINGS TO FIXED
CHARGES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
MARCH 31, FOR THE YEARS ENDED DECEMBER 31,
------------------ ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
-------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net earnings........................ $ 41,030 $30,784 $136,677 $106,063 $ 77,920 $ 48,037 $ 25,165
Federal and state income taxes...... 21,133 17,670 75,226 59,144 45,335 29,063 14,154
-------- ------- -------- -------- -------- -------- --------
Earnings before income taxes........ 62,163 48,454 211,903 165,207 123,255 77,100 39,319
-------- ------- -------- -------- -------- -------- --------
Fixed charges:
Interest.......................... 55,935 38,110 166,032 94,758 79,303 93,545 109,139
One-Third of all rentals.......... 461 365 1,641 1,809 1,591 1,252 1,103
-------- ------- -------- -------- -------- -------- --------
56,396 38,475 167,673 96,567 80,894 94,797 110,242
-------- ------- -------- -------- -------- -------- --------
Earnings before income taxes and
fixed charges..................... $118,559 $86,929 $379,576 $261,774 $204,149 $171,897 $149,561
-------- ------- -------- -------- -------- -------- --------
Ratio of earnings to fixed
charges(A)........................ 2.10x 2.26x 2.26x 2.71x 2.52x 1.81x 1.36x
</TABLE>
- ---------------
(A) For purposes of computing these ratios, "earnings" represent income before
income taxes plus fixed charges, and "fixed charges" consist of interest
expense and one-third (the proportion deemed representative of the interest
factor) of rental expense on operating leases.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Form S-3 Registration Statement of our reports dated
January 22, 1996 on the Advanta Corp. consolidated financial statements included
in the Advanta Corp. Form 10-K for the year ended December 31, 1995, and to all
references to our Firm included in this Form S-3 Registration Statement.
Arthur Andersen LLP
Philadelphia, PA
June 10, 1996
<PAGE> 1
EXHIBIT 25
Securities Act of 1933 File No. _________
(If application to determine eligibility of trustee
for delayed offering pursuant to Section 305 (b) (2))
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(b)(2)_________________
------------------
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
(Exact name of trustee as specified in its charter)
13-2633612
(I.R.S. Employer Identification Number)
1 CHASE MANHATTAN PLAZA, NEW YORK, NEW YORK
(Address of principal executive offices)
10081
(Zip Code)
---------------
ADVANTA CORP.
(Exact name of obligor as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation or organization)
23-1462070
(I.R.S. Employer Identification No.)
FIVE HORSHAM BUSINESS CENTER
300 WELSH ROAD
HORSHAM, PA
(Address principal executive offices)
19044
(Zip Code)
---------------------------------
DEBT SECURITIES
(Title of the indenture securities)
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<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Comptroller of the Currency, Washington, D.C.
Board of Governors of The Federal Reserve System, Washington,
D. C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
such affiliation.
The Trustee is not the obligor, nor is the Trustee directly or
indirectly controlling, controlled by, or under common control
with the obligor.
(See Note on Page 2.)
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as a part of this statement of
eligibility.
*1. -- A copy of the articles of association of the trustee as now in
effect . (See Exhibit T-1 (Item 12), Registration No. 33-55626.)
*2. -- Copies of the respective authorizations of The Chase Manhattan
Bank (National Association) and The Chase Bank of New York
(National Association) to commence business and a copy of
approval of merger of said corporations, all of which documents
are still in effect. (See Exhibit T-1 (Item 12), Registration No.
2-67437.)
*3. -- Copies of authorizations of The Chase Manhattan Bank (National
Association) to exercise corporate trust powers, both of which
documents are still in effect. (See Exhibit T-1 (Item 12),
Registration No. 2-67437.)
*4. -- A copy of the existing by-laws of the trustee. (See Exhibit
T-1 (Item 12(a)), Registration No. 22-26320.)
*5. -- A copy of each indenture referred to in Item 4, if the obligor
is in default. (Not applicable.)
*6. -- The consents of United States institutional trustees required
by Section 321(b) of the Act. (See Exhibit T-1, (Item 12),
Registration No. 22-19019.)
7. -- A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its supervising
or examining authority.
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*The Exhibits thus designated are incorporated herein by reference.
Following the description of such Exhibits is a reference to the copy of the
Exhibit heretofore filed with the Securities and Exchange Commission, to which
there have been no amendments or changes.
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<PAGE> 3
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base a responsive answer to Item 2 the answer
to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, The Chase Manhattan Bank (National Association), a corporation
organized and existing under the laws of the United States of America, has duly
caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of New York, and the
State of New York, on the 10th day of June, 1996.
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
/s/ Sheik Wiltshire
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By: Sheik Wiltshire Second,Vice President
2.
<PAGE> 4
EXHIBIT 7
REPORT OF CONDITION
Consolidating domestic and foreign subsidiaries of the THE CHASE MANHATTAN BANK,
N.A. of New York in the State of New York, at the close of business on March 31,
1996, published in response to call made by Comptroller of the Currency, under
title 12, United States Code, Section 161.
<TABLE>
<CAPTION>
CHARTER NUMBER 2370 COMPTROLLER OF THE CURRENCY NORTHEASTERN DISTRICT
STATEMENT OF RESOURCES AND LIABILITIES
ASSETS THOUSANDS
OF DOLLARS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ............................. $ 5,026,000
Interest-bearing balances ...................................................... 4,135,000
Held to maturity securities ........................................................ 0
Available-for-sale securities ...................................................... 5,632,000
Federal funds sold and securities purchased under agreements to resell in domestic
offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs:
Federal funds sold ............................................................. 1,254,000
Securities purchased under agreements to resell ................................ 880,000
Loans and lease financing receivable:
Loans and leases, net of unearned income .................. $ 60,869,000
LESS: Allowance for loan and lease losses ................. 1,113,000
LESS: Allocated transfer risk reserve .................... 0
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Loans and leases, net of unearned income, allowance, and reserve ............... 59,756,000
Assets held in trading accounts .................................................... 13,203,000
Premises and fixed assets (including capitalized leases) ........................... 1,690,000
Other real estate owned ............................................................ 268,000
Investments in unconsolidated subsidiaries and associated companies ................ 29,000
Customers' liability to this bank on acceptances outstanding ....................... 1,170,000
Intangible assets .................................................................. 1,330,000
Other assets ....................................................................... 9,398,000
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TOTAL ASSETS .............................................................. $103,771,000
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LIABILITIES
Deposits:
In domestic offices ............................................................ $ 30,681,000
Noninterest-bearing .................................... $ 11,913,000
Interest-bearing ....................................... 18,768,000
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In foreign offices, Edge and Agreement subsidiaries, and IBFs .................. 38,923,000
Noninterest-bearing .................................... $ 3,696,000
Interest-bearing ....................................... 35,227,000
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Federal funds purchased and securities sold under agreements to
repurchase in domestic offices of the bank and of its Edge and
Agreement subsidiaries, and in IBFs:
Federal funds purchased ........................................................ 3,143,000
Securities sold under agreements to repurchase ................................. 100,000
Demand notes issued to the U.S. Treasury ........................................... 25,000
Trading liabilities ................................................................ 8,453,000
Other borrowed money:
With original maturity of one year or less ..................................... 3,064,000
With original maturity of more than one year ................................... 365,000
Mortgage indebtedness and obligations under capitalized leases ..................... 39,000
Bank's liability on acceptances executed and outstanding ........................... 1,173,000
Subordinated notes and debentures .................................................. 1,960,000
Other liabilities .................................................................. 8,482,000
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TOTAL LIABILITIES .................................................................. 96,408,000
Limited-life preferred stock and related surplus ................................... 0
EQUITY CAPITAL
Perpetual preferred stock and related surplus ...................................... 0
Common stock ....................................................................... 921,000
Surplus ............................................................................ 5,354,000
Undivided profits and capital reserves ............................................. 1,092,000
Net unrealized holding gains (losses) on available-for-sale securities ............. 15,000
Cumulative foreign currency translation adjustments ................................ 11,000
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TOTAL EQUITY CAPITAL ............................................................... 7,363,000
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TOTAL LIABILITIES, LIMITED-LIFE PREFERRED STOCK,
AND EQUITY CAPITAL ............................................................. $ 103,771,000
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</TABLE>
I, Lester J. Stephens, Jr., Senior Vice President and Controller of the above
named bank do hereby declare that this Report of Condition is true and correct
to the best of my knowledge and belief. (Signed) Lester J. Stephens, Jr.
We the undersigned directors, attest to the correctness of this statement of
resources and liabilities. We declare that it has been examined by us, and to
the best of our knowledge and belief has been prepared in conformance with the
instructions and is true and correct.
(Signed) Thomas G. Labrecque
(Signed) Donald Trautlein Directors
(Signed) Richard J. Boyle
