<PAGE> 1
As Filed With the Securities and Exchange Commission via the EDGAR system on
August 6, 1997
Registration No. 333-28291
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ADVANTA CORP.
(EXACT NAME OF ISSUER AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 23-1462070
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
WELSH & MCKEAN ROADS, SPRING HOUSE, PENNSYLVANIA 19477
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
ELIZABETH H. MAI, ESQUIRE
ADVANTA CORP.
WELSH & MCKEAN ROADS
P.O. BOX 844
SPRING HOUSE, PA 19477
(215) 657-4000
(NAME, ADDRESS AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective. If any of the
securities being registered on this form are to be offered on a delayed or a
continuous basis pursuant to Rule 415 of the Securities Act of 1933, check the
following box: [X]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================================
TITLE OF EACH CLASS PROPOSED MAXIMUM
OF SECURITIES AMOUNT TO BE OFFERING PRICE PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RediReserve
Certificates, Notes... $200,000,000 100% $200,000,000 $60,607
================================================================================================
</TABLE>
------------------------
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.
================================================================================
<PAGE> 2
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, DATED , 1997
$200,000,000 PRINCIPAL AMOUNT
[ADVANTA LOGO]
REDIRESERVE VARIABLE RATE CERTIFICATES ($1,000 MIN.)
91 DAY NOTES
SIX, EIGHTEEN AND THIRTY MONTH NOTES
ONE, TWO, THREE, FOUR, FIVE, SEVEN AND TEN YEAR NOTES
------------------------
The Securities offered hereby are debt securities of Advanta Corp. (the
"Company") consisting of RediReserve Variable Rate Certificates (the
"RediReserve Certificates") and Notes (the "Notes," and together with the
RediReserve Certificates, the "Securities"). The RediReserve Certificates are
redeemable at the demand of the holder. The Notes are subject to automatic
extension at maturity unless the Company requests redemption at least seven days
prior to maturity or the holder elects redemption, in writing, within seven days
after maturity. For information on the terms of such extensions, including the
interest rate to be paid during any extended term, see "Description of
Securities -- Provisions Relating to Notes." The Securities will be
uncertificated and evidenced by book-entry and a statement issued to each
purchaser.
The interest rates on the Notes and RediReserve Certificates will be
established by the Company from time to time and will be set forth in
supplements hereto. Interest rates are subject to change by the Company, but no
such change will affect any Security theretofore issued or as to which an offer
to purchase has been accepted by the Company.
A tabular summary of the terms of the Securities offered hereby appears at
page 8.
The Company is not subject to state or federal regulations applicable to
banks and savings and loan associations, including, among other things,
regulations regarding the maintenance of reserves and the quality or condition
of its assets. THE SECURITIES OFFERED HEREBY REPRESENT UNSECURED OBLIGATIONS OF
THE COMPANY AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION ("FDIC") OR ANY OTHER GOVERNMENTAL OR PRIVATE ENTITY. SEE "RISK
FACTORS" BEGINNING ON PAGE 4.
The Securities are being offered by the Company directly without an
underwriter or selling agent. The Securities are being offered on a continuous
basis without an expected termination date. See "Plan of Distribution." The
terms of the offering or the Securities may be modified prospectively at any
time. Certain terms of outstanding RediReserve Certificates may be modified. See
"Description of Securities." There is no assurance that all or any portion of
the offered Securities will be sold. It is not expected that there will be a
trading market for any of the Securities. The Company reserves the right to
reject any subscription in whole or in part.
The Securities being offered will not be listed on a securities exchange
and the Company does not expect that any active trading market in the Securities
will develop or be sustained.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS, ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=================================================================================================
UNDERWRITING
COMMISSIONS AND PROCEEDS
PUBLIC(1) DISCOUNTS TO THE COMPANY(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Security...................... 100% None 100%
- -------------------------------------------------------------------------------------------------
Total............................. $200,000,000 None $200,000,000
=================================================================================================
</TABLE>
(1) RediReserve Certificates will be issued in payment of interest due on
RediReserve Certificates.
(2) Before deducting expenses estimated at $102,000.
The date of this Prospectus is _________, 1997.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
Available Information................................................................. 2
Incorporation of Certain Information by Reference..................................... 3
Risk Factors.......................................................................... 4
The Company........................................................................... 6
Recent Developments................................................................... 6
Summary of the Offering............................................................... 7
Highlights of Terms of Securities Offered............................................. 8
Ratio of Earnings to Fixed Charges.................................................... 9
Use of Proceeds....................................................................... 9
Description of Securities............................................................. 9
General............................................................................. 9
Provisions Relating to RediReserve Certificates..................................... 10
Provisions Relating to Notes........................................................ 11
Provisions Relating to All Securities............................................... 12
Retail Value Note Program............................................................. 14
Certain United States Federal Income Tax Consequences................................. 14
Plan of Distribution.................................................................. 16
Legal Opinions........................................................................ 16
Experts............................................................................... 17
</TABLE>
No Company employee or other person has been authorized to give any oral
information or to make any oral representation other than those contained in
this Prospectus and, if given or made, such information or representation must
not be relied upon as having been authorized by the Company. This Prospectus
does not constitute an offer of any securities other than those to which it
relates or to any person in any jurisdiction where such offer would be unlawful.
The delivery of this Prospectus at any time does not imply that the information
herein is true as of any time subsequent to its date.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information can be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024, 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 Northwestern Atrium Center, 500 West Madison Street 14th Floor, 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 the
address of the Commission set forth above. Such information may also be accessed
electronically by means of the Commission's home page on the Internet
(http://www.sec.gov).
The Company has filed with the Commission registration statements (herein,
together with all amendments and exhibits thereto, collectively called the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act") with respect to the Securities offered hereby. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission, and reference is hereby made to the Registration Statement
and to the exhibits relating thereto for further information with respect to the
Company and the Securities. Statements contained herein concerning the
provisions of 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 or otherwise filed with the Commission. 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.
2
<PAGE> 4
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, 1996;
2. The Company's Current Reports on Form 8-K dated January 22, March
17, April 16, July 14, July 16, and July 28, 1997;
3. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997;
4. The Company's Employee Saving Plan's Annual Report on Form 11-K for
the fiscal year ended December 31, 1996; and
5. The Company's definitive proxy statement filed pursuant to Section
14 of the Exchange Act in connection with the 1997 annual meeting of its
shareholders.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 and 15(d) of the Exchange Act prior to the filing of a Post-Effective
Amendment which indicates that all Securities offered have been sold or which
deregisters all Securities then remaining unsold, 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 this
Prospectus or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus or any supplement thereto to the extent that a statement
contained herein or in any subsequently filed document which is deemed to be
incorporated by reference herein or therein (or in any subsequently filed
document that also is or is deemed to be incorporated by reference herein or
therein) 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 of this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein do not purport to be complete, and
where reference is made to the particular provisions of such contract or other
document, such provisions are qualified in all respects by reference to all of
the provisions of such contract or other document. 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., Welsh & McKean Roads, Spring
House, Pennsylvania 19477, telephone (215) 444-5335.
3
<PAGE> 5
RISK FACTORS
Investors in the Securities offered hereby should consider the following
factors:
Absence of Insurance and Guarantees. The Securities are not deposits or
other obligations of a bank and, accordingly, are not insured by any
governmental or other entity such as the FDIC, as are bank, savings and loan or
credit union accounts, and the Securities are not guaranteed by any public or
private entity. In these respects, the Company is similar to most other
commercial enterprises (including bank holding companies) which sell debt
securities to public investors, but is dissimilar to most banking or savings
institutions.
Recent Operating Loss. On March 17, 1997, the Company announced that it
expects to report 1997 results well below previous expectations. On April 16,
1997, the Company reported a loss of $19.8 million, or $0.43 cents per share,
for the first quarter. See "Recent Developments." There can be no assurance that
the Company will not incur operating losses in future periods.
Reduced Availability of Financing. Beginning March 1997, in connection
with the March 17, 1997 announcement described above under "-Recent Operating
Loss," the various rating agencies lowered their ratings of the Company's debt
securities. As of May 12, 1997, senior debt of the Company was rated two levels
below investment grade by Standard & Poor's and by Moody's Investors Service.
The lowering of the credit ratings reduced the availability of financing. As a
result of this and other factors, there can be no assurance that the Company
will be able to obtain adequate financing for its business needs in the future.
See "Recent Developments."
Limited Availability of Bank and Insurance Company Assets; Impact on
Liquidity. Because the Company's subsidiaries include banks and insurance
companies that are subject to significant state and federal regulation, the
Company's ability to receive dividends and loans from its subsidiaries is
restricted. Banking regulations limit the amount of dividends that a bank may
pay. In addition, Arizona insurance regulations restrict the amount of dividends
which any of the Company's insurance subsidiaries can distribute to its parent
in any twelve month period without the prior consent of the State of Arizona
Department of Insurance. Further, Advanta National Bank and Advanta Financial
Corp., which are subsidiaries of the Company, are 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 depository institution 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, Advanta National Bank does not intend to
make loans to the Company. The limited availability to the Company of dividends
and loans from its banking and insurance subsidiaries impacts the Company's
liquidity.
Risks Associated with Maintaining Portfolios of Credit Card Receivables and
Mortgage Loans. There are certain risks associated with maintaining portfolios
of credit card receivables and mortgage loans. The primary risks involve
potential increases in credit losses, and potential deterioration in managed net
interest margin. These risks are inherent to every lender. The Company believes
its credit loss experience is comparable to that of the industry as a whole
although its managed net interest margin is currently significantly below that
of other leading domestic credit card issuers. See "Recent Developments."
Regulation. The banking and finance businesses in general, and the
Company's banking and insurance subsidiaries in particular, are the subject of
extensive regulation at both the state and federal levels. In addition, numerous
legislative and regulatory proposals are advanced each year which, if adopted,
could adversely affect the Company's profitability or the manner in which the
Company conducts its activities.
Competition. As a marketer of credit products, the Company faces intense
competition from numerous providers of financial services. Although the Company
believes it is generally competitive in most of the
4
<PAGE> 6
geographic areas in which it offers its services, there can be no assurance that
its ability to market its services successfully or to obtain adequate yields on
its loans will not be impacted by the nature of the competition that now exists
or may develop.
Limited Events of Default; Absence of Provisions Relating to Highly
Leveraged Transactions or a Change in Control. The Indenture contains only
limited events of default other than default in the timely payment of principal
or interest. See "Description of Securities -- Provisions Relating to All
Securities -- Events of Default." The Indenture contains no covenants or other
provisions (other than standard provisions requiring any successor entity to
assume the Company's obligations under the Securities) to afford protection to
holders of Securities in the event of a highly leveraged transaction or a change
in the control of the Company.
Structural Subordination. The Company's operations are largely conducted
by its subsidiaries. Because the Company's subsidiaries include banks and
insurance companies that are subject to significant state and federal
regulation, the Company's ability to receive dividends and loans from its
subsidiaries is restricted. Further, the right of the Company to participate in
any distribution of assets of any subsidiary upon such subsidiary's liquidation
or reorganization or otherwise (and thus the ability of holders of the
Securities to benefit indirectly from such distribution) is subject to the prior
claims of creditors of that subsidiary, except to the extent that the Company
may itself be recognized as a creditor of that subsidiary. Accordingly, the
Securities will be effectively subordinated to all existing and future
liabilities of the Company's subsidiaries. At March 31, 1997, the subsidiaries
of the Company had total liabilities (excluding liabilities owed to the Company)
of approximately $3.9 billion. The Indenture does not place any limitation on
the amount of secured or unsecured debt that may be incurred by the Company or
any of its subsidiaries. See "Description of Securities -- Provisions Relating
to All Securities -- Aggregate Indebtedness."
------------------------
This Prospectus contains forward-looking statements, including but not
limited to projections of future earnings, that are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
projected. Significant risks and uncertainties include: the Company's managed
net interest margin, which in turn is affected by the Company's success in
originating new credit card accounts, the receivables volume and initial pricing
of new accounts, the impact of repricing existing accounts and account
attrition, the mix of account types and interest rate fluctuations; the level of
delinquencies, customer bankruptcies, and charge-offs; and the amount and rate
of growth in the Company's expenses. The Company's earnings also may be
significantly affected by factors that affect consumer debt, competitive
pressures from other providers of financial services, the effects of
governmental regulation, the amount and cost of financing available to the
Company and its subsidiaries, the difficulty or inability to securitize the
Company's receivables and the impact of the ratings on debt of the Company and
its subsidiaries. Additional risks that may affect the Company's future
performance are set forth elsewhere in this Prospectus and in the Company's
other filings with the Securities and Exchange Commission.
5
<PAGE> 7
THE COMPANY
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 mortgage loans. Other
products include commercial small-ticket equipment leasing, business credit
cards, automobile loans, insurance and deposit products. The Company utilizes
consumer information attributes, including credit assessments, usage patterns
and other characteristics, enhanced by proprietary information, to match
prospect profiles with appropriate products. At March 31, 1997, assets under
management totaled $20 billion.
Approximately 61% of total revenues at March 31, 1997 were derived from
credit cards marketed through 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. Personal finance
loans, which include mortgage, home equity and automobile loans, contribute
approximately 20% of total revenues with a managed loan portfolio of $3.3
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 Welsh & McKean
Roads, Spring House, Pennsylvania, 19477. The Company's telephone number at its
principal executive office is (215) 657-4000.
RECENT DEVELOPMENTS
On March 17, 1997, the Company announced that it expects to report a net
profit for full-year 1997 of approximately $1.50 per share, which is well below
previous expectations. For the first quarter of 1997, the Company reported a
loss of $19.8 million, or $0.43 cents per share. On July 16, 1997, the Company
announced its return to profitability and reported net income of $5.4 million,
or earnings per share of $0.12 cents, for the second quarter. This interruption
in the Company's historical pattern of strong financial results reflects a
number of factors, including continuing increases in consumer bankruptcies and
charge-offs and lower receivables balances than originally anticipated in its
credit card business. The Company is pursuing a number of steps designed to
return the Company to its historical level of financial performance by
increasing revenues and stemming credit card losses. These steps include
repricing certain segments of the credit card portfolio, improving the Company's
collection process, tightening underwriting standards and developing new
marketing programs. The Company's mortgage financing, leasing and insurance
businesses continue to perform well.
Notwithstanding the lowering of the Company's credit ratings referred to
above under "Risk Factors -- Reduced Availability of Financing," the Company
believes that its current cash position and the availability of financing will
provide adequate financing for the Company's current needs.
On March 17, 1997, the Company also announced that it has retained BT
Wolfensohn, a division of BT Securities Corporation, to explore all strategic
alternatives that build upon the historic strength and success of the Company as
a whole and of its business units with the aim of maximizing the Company's
value. The strategic alternatives that might be considered by the Company
include, but are not limited to, a strategic alliance with another company, an
alliance or initial public offering involving one or more of the Company's
operating units, or a merger or sale involving the Company as a whole. There is
no assurance that any such event will occur.
6
<PAGE> 8
SUMMARY OF THE OFFERING
The following information is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus.
SECURITIES OFFERED
This offering relates to $200,000,000 in principal amount of the following
Securities of the Company: RediReserve Money Market Certificates ("RediReserve
Certificates") and Notes ("Notes"). The RediReserve Certificates are payable on
the demand of the holder. The Notes have maturities of 91 days, six months, one
year, 18 months, two years, 30 months, and three, four, five, seven and ten
years after the date of issue. The Securities are not insured, guaranteed or
secured by any lien on assets of the Company and there are no sinking fund
provisions.
In lieu of paying interest by check, additional RediReserve Certificates
will be issued in payment of interest due on RediReserve Certificates. Interest
on RediReserve Certificates will only be paid in such manner, except that, upon
redemption by a holder of all RediReserve Certificates held by such holder, any
accrued interest will be paid by check. Further, subject to the limitations
described under "Redemption at Holder's Election" and "Redemption by Draft,"
holders may access by draft all funds held in the form of RediReserve
Certificates.
No interest will be paid on RediReserve Certificates for any day during
which the principal balance in an account is below $1,000.
A tabular summary of the terms of the Securities appears on the following
page.
MODIFICATION, TERMINATION OR EXTENSION OF OFFERING
The Company reserves the right to modify at any time the terms of the
offering or the Securities as set forth on the cover page of this Prospectus.
Any such modification will apply only to Securities offered after the date of
such modification, except as described under "Description of
Securities -- General." From time to time, the aggregate amount of Securities
offered for sale by the Company may be increased.
7
<PAGE> 9
HIGHLIGHTS OF TERMS OF SECURITIES OFFERED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
REDIRESERVE VARIABLE RATE CERTIFICATES
- ------------------------------------------------------------------------------------
<S> <C>
Denomination of Minimum initial purchase: $1,000 or any amount in excess
Initial Purchase and thereof; additional purchases in any amount.
Additional Purchases
-----------------------------------------------------------------------------------
Annual Interest Interest rate on all outstanding Certificates may vary from
week to week. The rate will be set each week by the
Company, to be at least the average rate on Thirteen Week
U.S. Treasury Bills over the preceding eight weeks, less
one percent. No interest will be paid for any day on which
the principal balance in an account is below the minimum
balance (currently $1,000).
- ------------------------------------------------------------------------------------
Payment of Interest Quarterly, on each March 31, June 30, September 30 and
December 31, accrued interest is added to the principal in
each account in the form of additional RediReserve
Certificates. Except as otherwise provided herein, no
checks will be issued in payment of interest.
- ------------------------------------------------------------------------------------
Redemption by Holder Redeemable by holder upon oral or written demand, or by
draft. Redemption must be least $250 except for redemption
to close an account.
- ------------------------------------------------------------------------------------
Redemption by Company Redeemable on 30 days' notice.
- ------------------------------------------------------------------------------------
Form Book-entry and non-negotiable.
(A statement will be issued, not a promissory note).
- ------------------------------------------------------------------------------------
Automatic Extension Not applicable (no fixed maturity).
- ------------------------------------------------------------------------------------
<CAPTION>
91 DAY, SIX, EIGHTEEN AND THIRTY MONTH,
AND ONE, TWO, THREE, FOUR, FIVE, SEVEN AND TEN YEAR NOTES
- ------------------------------------------------------------------------------------
<S> <C>
Denomination of Minimum purchase: $5,000 or other amount as specified by
Initial Purchase and the Company.
Additional Purchases
-----------------------------------------------------------------------------------
Annual Interest Fixed by the Company based on market conditions and the
Company's financial requirements. Once determined, the rate
on each Note remains fixed until its maturity, but may
change if the Note is extended, and will be set forth in a
supplement hereto.
- ------------------------------------------------------------------------------------
Payment of Interest On Notes with maturities of 91 days or six months interest
is compounded daily and paid at maturity. On all other
Notes, at the election of the holder, interest is
compounded daily and paid at maturity or may be paid
monthly, quarterly, semi-annually or annually.
- ------------------------------------------------------------------------------------
Redemption by Holder May be redeemed by the original holder after total
permanent disability or by his estate after death, at the
principal amount plus accrued interest. Otherwise, there is
no right of the holder to cause redemption prior to
maturity.
- ------------------------------------------------------------------------------------
Redemption by Company Not redeemable until maturity.
- ------------------------------------------------------------------------------------
Form Book-entry and non-negotiable.
(A statement will be issued, not a promissory note).
- ------------------------------------------------------------------------------------
Automatic Extension If the Company does not request redemption at least seven
days prior to maturity or if not redeemed by holder within
seven Business Days after its maturity date, then a Note
with a principal amount of $2,500 or more will be extended
automatically for a period equal to the original term. A
Note with a principal amount that is less than $2,500 at
maturity will automatically be redeemed. Notes are extended
at the rate being offered on newly-issued Notes of like
tenor, term and denomination at their respective maturity
dates. If similar Notes are not then being offered, absent
instructions from the Noteholder selecting a Note with a
term currently being offered, the maturing Note will be
redeemed.
- ------------------------------------------------------------------------------------
</TABLE>
The Securities are unsecured obligations of the Company. The Company is not
subject to state or federal regulation applicable to banks and savings and loan
associations with regard to insurance, the maintenance of reserves, or the
quality or condition of its assets or other matters. It is not expected that
there will be a trading market for the Notes, see "Description of
Securities -- Provisions Relating to the Notes -- Liquidity."
THE SECURITIES ARE NOT INSURED OR GUARANTEED BY ANY BANK SUBSIDIARY OF THE
COMPANY OR ANY OTHER PUBLIC OR PRIVATE ENTITY.
8
<PAGE> 10
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of
the Company for the periods indicated:
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------- --------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ------ ------ ------ ------ ------ ------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges(A)........ (B) 2.10x 1.97x 2.26x 2.71x 2.52x 1.81x
</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 expenses on operating leases.
(B) For the three months ended March 31, 1997, earnings were inadequate to cover
fixed charges. The deficiency was approximately $26.7 million.
USE OF PROCEEDS
The net proceeds to the Company from the sale of 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, mortgage and equipment lease
portfolios. At the date hereof, no specific proposed acquisitions have been
identified as probable. Proceeds may also be used to invest in income-producing
securities and other assets. The amount of Securities offered from time to time
and the precise amounts and timing of the applications of such proceeds will
depend upon funding requirements of the Company and its subsidiaries and
affiliates.
In view of its anticipated requirements, the Company expects to engage on a
recurring basis in additional private or public financing of a character and
amount to be determined as the need arises.
DESCRIPTION OF SECURITIES
GENERAL
This offering relates to the RediReserve Certificates and the Notes. The
Notes have maturities of 91 days, six months, one year, eighteen months, two
years, thirty months, or three, four, five, seven or ten years after their
respective dates of issue. The Securities are to be issued under an Indenture
dated October 23, 1995 (the "Indenture") between the Company and The Chase
Manhattan Bank, a corporation organized and existing under the laws of the State
of New York, as successor trustee (the "Trustee"). A copy of the Indenture is
filed as an exhibit to the Registration Statement of which this Prospectus is a
part. The following statements are brief summaries of certain provisions of the
Indenture, and are subject to the detailed provisions of the Indenture, to which
reference is hereby made for a complete statement of such provisions. Whenever
particular provisions of the Indenture or terms defined therein are referred to
herein, such provisions or definitions are incorporated by reference as part of
the statements made herein and the statements are qualified in their entirety by
such reference. Parenthetical Section and Article references appearing below are
to the Indenture.
The Indenture may be modified as set forth below. Additionally, the Company
has reserved the right to terminate this offering, or modify the terms of the
offering or the Securities, at any time, by an appropriate amendment to this
Prospectus, but no such modification will affect the rights of the holders of
then outstanding Securities, except that, at the Company's election: (i) the
principal amount required to be maintained in an existing RediReserve
Certificate account may be increased (after 30 days' notice) or decreased; (ii)
the minimum amount of any withdrawal from a RediReserve Certificate account may
be increased (after 30 days' notice) or decreased; and (iii) certain service
charges may be imposed or modified as described under "Description of
Securities -- Provisions Relating to all Securities."
The Securities are not secured by any collateral or lien. There are no
provisions for a sinking fund.
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PROVISIONS RELATING TO REDIRESERVE CERTIFICATES
Form; Non-negotiability and Statements: RediReserve Certificates are not
negotiable and are not evidenced by any promissory note issued to the holder. A
statement evidencing ownership of a RediReserve Certificate will be issued to
each purchaser of a RediReserve Certificate, but such statement is not a
negotiable instrument, and no rights of ownership in a RediReserve Certificate
can be transferred by mere endorsement and delivery of such a statement to a
purchaser. Each holder of a RediReserve Certificate will receive, at the end of
the month after each investment, withdrawal and interest payment, a statement
indicating any transactions in such holder's RediReserve Certificate account.
The Company maintains a register to record the owner of each outstanding
RediReserve Certificate, and may treat the person whose name is so recorded as
the owner of such RediReserve Certificate for all purposes. Ownership of a
RediReserve Certificate may be transferred on the register only by written
notice to the Company signed by the holder or his duly authorized representative
on a form to be supplied by the Company. (Article Three)
Denomination and Minimum Purchase: As of the date of this Prospectus, the
minimum initial purchase of a RediReserve Certificate is $1,000 and additional
purchases may be in any amount. From time to time, the Company may set other
minimum purchase amounts and minimum balance requirements (as described below)
for RediReserve Certificates.
Interest on RediReserve Certificate Accounts: The interest rate on all
outstanding RediReserve Certificates will be set by the Company each Tuesday (or
such other day as the Company may determine from time to time by Company Order)
and the interest rate paid on each outstanding RediReserve Certificate may vary
from week to week. As long as a holder maintains the applicable minimum balance
in his RediReserve Certificate account, the weekly rate, at a minimum, will be
1% below the average rate on Thirteen Week U.S. Treasury Bills for the preceding
eight weekly auctions. While the foregoing is the minimum at which the weekly
rate will be fixed, the actual rate may be above the minimum. Investors may
inquire concerning the rate then being paid on outstanding RediReserve
Certificates by writing or telephoning the Company.
Interest on each RediReserve Certificate account with a balance above the
minimum required (currently $1,000) accrues daily and is compounded quarterly on
March 31, June 30, September 30 and December 31 of each year. Interest accrued
during each quarterly period will not be paid by check, but rather will be added
to the principal balance of each holder's RediReserve Certificate account in the
form of additional RediReserve Certificates. Interest accrues on the principal
balance of each RediReserve Certificate through the date of redemption. If a
holder redeems in full all RediReserve Certificates held by him, the Company
will pay all accrued interest by check as soon as practicable after redemption.
Minimum Balance Requirement for RediReserve Certificate Accounts: No
interest shall be paid on any day the principal amount in a holder's RediReserve
Certificate account is less than the amount which may be designated from time to
time by the Company ($1,000 at the date of this Prospectus). The Company has the
right to increase or decrease the minimum principal amount which must be
maintained in a RediReserve Certificate account and such an increase or decrease
may be applied, at the Company's election, to RediReserve Certificates
outstanding as of the date of the increase or decrease as well as RediReserve
Certificates issued after such increase or decrease. The Company must give
holders of RediReserve Certificates at least 30 days advance written notice if
the Company elects to increase the minimum principal amount which must be
maintained in their RediReserve Certificate accounts.
Redemption at the Holder's Election: RediReserve Certificates may be
redeemed at any time in minimum amounts of $250 (or any amount if closing an
account) with respect to RediReserve Certificates, and will be paid in full upon
demand by the holder, which demand is received by the Company at its principal
place of business or such other places as may be designated by it for such
purpose. The Company may delay redemption of a newly purchased RediReserve
Certificate for such time as may be necessary to assure that it has received the
full purchase price of such RediReserve Certificate -- for example, until a
check given to it in payment for the RediReserve Certificate is collected.
The minimum amount for redemptions may be increased (after 30 days' notice)
or decreased by the Company from time to time.
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Redemption by Draft: A holder may elect to make redemptions by draft
payable to the order of any payee in any amount of $250 or more. At the request
of a holder, the Company will provide drafts drawn on it that will be payable
through one of its subsidiary banks, or a successor bank. All authorized signers
on a RediReserve Certificate account must submit specimen signatures on a
signature card provided by the Company and must agree to abide by the Company's
rules and regulations pertaining to such accounts. As with regular bank checks,
certain banks may not provide cash at the time of deposit, but will wait until
they have received payment from the subsidiary bank. When a draft is presented
to the subsidiary bank for payment, the subsidiary bank, as agent of the holder,
will cause the Company to redeem a sufficient amount from the holder's
RediReserve Certificate account to cover the amount of the draft. Interest
continues to accrue on a RediReserve Certificate account until a draft is
presented to the subsidiary bank for payment. The subsidiary bank will return a
draft if the amount of collected funds in the holder's RediReserve Certificate
account is insufficient to cover the draft or if the signature(s) on the draft
is (are) not, in the judgment of the Company, the same as the specimen
signature(s) previously submitted to the Company. The Company reserves the right
to charge a fee for the dishonor of a draft or for a stop payment order.
Neither the Company nor the subsidiary bank will return canceled drafts to
the holders of RediReserve Certificate accounts, although the Company will, upon
request, provide a holder with copies of drafts designated by the holder upon
payment of a service charge. Holders of RediReserve Certificate accounts will
receive statements as described under "Form; Non-negotiability and Statements"
above, which will reflect draft transactions.
Redemption at the Company's Election: The Company may, at its election,
redeem RediReserve Certificates either as a whole or from time to time in part,
upon not less than 30 days' written notice to the holder, at the principal
amount thereof without premium, plus interest accrued to the date of redemption.
Accrued interest on RediReserve Certificates so redeemed will be paid as soon as
practicable.
PROVISIONS RELATING TO NOTES
Form and Denominations: The Notes shall be uncertificated and evidenced by
book entry and a statement issued to each purchaser.
Statements issued by the Company are not negotiable instruments, and no
rights of ownership can be transferred by mere endorsement and delivery of a
statement. Ownership of a Note may be transferred on the Company register only
by written notice to the Company signed by the owner(s) or such owner's duly
authorized representative on a form to be supplied by the Company. The Notes may
not be pledged, assigned or hypothecated (as collateral for a loan or
otherwise). The Notes may be purchased in minimum denominations ($5,000 at the
date of this Prospectus) to be determined, from time to time, by the Company.
Separate purchases may not be accumulated to satisfy the minimum denomination
requirements.
Interest: The interest rates payable on the Notes will be fixed by the
Company from time to time based on market conditions and the Company's financial
requirements. Once determined, the rate of interest payable on a Note will
remain fixed on such Note until it matures or is redeemed by the Noteholder.
Interest on 91 Day and Six Month Notes compounds daily and is paid only at
maturity. While interest on Eighteen Month, Two Year, 30 Month, and Three, Four,
Five, Seven and Ten Year Notes compounds daily, holders may elect to have
interest paid monthly, quarterly, semiannually, annually, or paid at maturity.
This election may be changed one time by the holder during the term of the Note.
Interest on One Year Notes compounds daily and holders may elect to have
interest paid monthly, quarterly, semiannually or at maturity. This election may
not be changed during the term of a One Year Note.
Automatic Extension: If the Company does not request redemption of a Note
at least seven Business Days prior to maturity, or if a Note is not redeemed or
converted to another term by the Noteholder within seven Business Days after
maturity, a Note with a principal amount of $2,500 or more will be extended
automatically for a period equal to the original term. As used herein, "Business
Day" means any day that is not a Saturday, a Sunday or a day on which banking
institutions or trust companies in the State of Delaware or the Commonwealth of
Pennsylvania are not authorized or obligated to be open. If a Note is renewed as
described above, such Note will continue in all its provisions, including
provisions relating to payment, except that the interest rate payable during any
renewed term shall be the interest rate which is being offered by the Company on
similar Notes as of the renewal date. If similar Notes are not then being
offered, the Note will
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not renew, and, absent instructions from the Noteholder selecting a Note with a
term that is currently being offered, the maturing Note will be redeemed. The
Company will give each Noteholder notice at least seven days prior to maturity
reminding him of the maturity. If the Company gives notice to a Noteholder of
the Company's desire to redeem a Note at maturity, no interest will accrue after
the date of maturity. Likewise, if a Noteholder submits a written request for
redemption within seven days after its maturity date, no interest will accrue
after the date of maturity. A Note with a principal amount that is less than
$2,500 at maturity will be redeemed automatically.
No Redemption by the Company: The Company has no right to redeem a Note
and the holder has no right to require the Company to redeem any such Note prior
to its maturity date as originally stated or as it may be extended, except as
indicated below.
Redemption by the Holder on Death or Disability: A Note may be redeemed at
the election of the original owner (if he is still the holder) following his
total permanent disability, or at the election of his estate following his
death, as established to the satisfaction of the Company. The redemption price,
in the event of such a death or disability, is the principal amount of the Note,
plus interest accrued and not previously paid, to the date of redemption. If two
or more persons are joint record owners of a Note, the election to redeem will
not apply until both record owners are either deceased or disabled, except that,
if the joint owners are husband and wife, the election may be made after the
death or total permanent disability of either spouse.
The Company may modify the foregoing policy on redemption after death or
disability. However, no such modification will affect the right of redemption
applicable to any Note which was purchased at a time when the then current
prospectus of the Company stated the Company's policy to redeem as indicated in
the preceding paragraph.
Liquidity: It is not expected that there will be a trading market for the
Notes. Although Noteholders have no contractual right to redeem a Note prior to
maturity, the Company, in its sole discretion, may honor a written request for
early redemption. Should the Company elect to do so, the Company will impose a
penalty that is the higher of (a) 91 days' compound interest at the actual rate
of interest borne by the Note, plus an amount equal to the difference, if any,
between the interest earned on the Note, at the rate and on the terms stated
therein, and the interest that would have been earned on the Note at a rate of
5%, if 5% is lower than the rate borne by the Note; or (b) the rate currently
being offered by the Company (as of the redemption date) on a Note of the same
term as the Note being redeemed, less the actual interest rate borne by the Note
being redeemed, multiplied by the remaining term of the Note being redeemed on a
365 day basis. Under either calculation method, early redemption may result in a
loss of principal.
PROVISIONS RELATING TO ALL SECURITIES
Interest Accrual Date: Interest on the Securities accrues from the date of
purchase which is deemed to be the date the Company receives funds which are
received prior to 3:00 p.m. on a business day or the next business day if the
Company receives such funds on a non-business day or after 3:00 p.m. on a
business day. For this purpose, the Company's business days will be deemed to be
Monday through Friday, except for Pennsylvania legal holidays.
Interest Withholding: With respect to those investors who do not provide
the Company with a fully executed Form W-9 or satisfactory equivalent, the
Company will withhold 31% of any interest paid.
Additional Interest: In addition to the interest rates payable as set
forth above, the Company may make such additional payments of interest, premiums
or other benefits ("Additional Interest") on such of the Securities, in such
amounts, in such form, on such terms and at such times as shall be determined
from time to time by the Company. Such Additional Interest payments may be
modified or discontinued at any time. For example, such Additional Interest
payments may be limited to new investors, or to current investors increasing or
renewing their investments in the Securities. Also, such Additional Interest
payments may be limited to current or new investors residing in one or more
states or localities where the Company is authorized to sell the Securities.
Aggregate Indebtedness: The amount of indebtedness which may be
outstanding under the Indenture at any one time is unlimited. There also is no
limitation on the respective amounts of each class of Securities which may be
outstanding at any one time.
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Modification of Indenture: The Indenture may be modified by the Company
and the Trustee at any time or times with the consent of the holders of not less
than a majority in principal amount of the Securities then outstanding, but no
modification of the Indenture may be made which will affect the terms of payment
or the principal of any Security, without consent of the holder thereof, or
reduce the percentage of holders of Securities whose consent to modification is
required. The Company and the Trustee may enter into supplemental indentures
adding covenants or agreements of the Company for the protection of the holders
of Securities, or clarifying any ambiguity or correcting any defect in the
Indenture, consistent with its terms, or modifying provisions of the Indenture
provided that such modifications do not have a material adverse effect on the
interest of the holders of outstanding Securities, without action by the holders
of Securities. (Article Nine)
Place and Method of Payment: Principal and interest upon the Securities
will be payable at the office of the Company, as it may be established from time
to time, or at such other place as the Company may designate for that purpose;
provided, however, that payments may be made at the option of the Company by
check or draft mailed to the person entitled thereto at his address appearing in
the register which the Company maintains for that purpose. (Sections 307 and
1002)
Events of Default: An Event of Default is defined in the Indenture as
being any of the following: (i) default in payment of principal on any of the
Securities under the Indenture which has not been cured; (ii) a default for 30
days in payment of any installment of interest on a Security; or (iii) certain
events of bankruptcy, insolvency or reorganization or default in the performance
or breach of any covenant or warranty of the Company in the Indenture and
continuance of such default in performance or breach for a period of 60 days
after notice of such default has been received by the Company from the Trustee
or from the holders of 25% in principal amount of the outstanding Securities.
The Company is required to file annually with the Trustee an officer's
certificate as to the absence of certain defaults under the terms of the
Indenture. The Indenture provides that the holders of a majority in aggregate
principal amount of the applicable Securities at the time outstanding may, on
behalf of all holders, waive any past default or Event of Default except in
payment of principal or interest on the Securities and certain other specified
covenants or provisions. (Article Five)
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
is under no obligation to exercise any of its rights or powers under the
Indenture at the request, order or direction of any of the holders of
Securities, unless such holders of Securities shall have offered to the Trustee
reasonable indemnity. (Section 601) Subject to such provisions for the
indemnification of the Trustee, the holders of a majority in principal amount of
the Securities at the time outstanding have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any power conferred on the Trustee. The Indenture contains certain
limitations on the right of individual holders of Securities to institute legal
proceedings in the event of the Company's default. (Sections 507 and 512)
Certain Covenants: The Company has entered into certain covenants
including that it will not consolidate or merge with or into any other
corporation, unless the other corporation expressly assumes the obligations of
the Company under the Indenture. (Article Eight) The Indenture contains no
covenants or other provisions to afford protection to holders of Securities in
the event of a highly leveraged transaction for a change in the control of the
Company.
Exchanges: The Company, in its discretion, may offer and/or accept
outstanding Securities in exchange for other Securities issued under the
Indenture. (Section 305)
Concerning the Trustee: The Trustee may resign at any time, may be removed
by the holders of a majority of the principal amount of outstanding Securities,
or upon the occurrence of certain contingencies (relating generally to the
insolvency of the Trustee or the Trustee's ineligibility to serve as such under
the Trust Indenture Act of 1939, as amended), may be removed by the Company or
by a court of competent jurisdiction upon petition of a holder of Securities,
but no such resignation or removal of the Trustee may become effective until a
successor Trustee has accepted the appointment as provided in the Indenture.
(Sections 607 and 608) The Company and its subsidiaries reserve the right to
enter into banking relationships with the Trustee and its subsidiaries.
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Satisfaction and Discharge of Indenture: The Indenture may be discharged
upon the payment of all RediReserve Certificates and Notes outstanding
thereunder or upon deposit in trust of funds sufficient therefor, plus
compliance with certain formal procedures. (Article Four)
Reports: The Company publishes annual reports containing audited financial
statements and quarterly reports containing unaudited financial information for
the first three quarters of each fiscal year. Copies of such reports will be
sent to any holder of Securities upon oral or written request.
Service Charges: The Company reserves the right to assess service charges
for services such as changing the registration of any Security when such change
is occasioned by a change in name of the holder, or a transfer (whether by
operation of law or otherwise) of the Security by the holder to another person.
The Company also reserves the right, upon 30 days' written notice to the
holder, to increase service charges currently imposed in connection with
redemptions by draft from RediReserve Certificate accounts and assess service
charges for: (i) a holder making more than a specified number of redemptions in
a specified period from a RediReserve Certificate account; and (ii) for certain
other services provided with respect to RediReserve Certificate accounts.
Additional Securities: The Company may offer from time to time, pursuant
to the Indenture, additional classes of securities with terms and conditions
different from the Securities offered hereby, except that no such security
issued under the Indenture may be senior to the Securities offered hereby. The
Company will supplement this Prospectus if and when it decides to offer to the
public any additional class of Security pursuant to the Indenture.
Variations in Terms and Conditions: The Company reserves the right from
time to time to offer different Securities and to vary the terms and conditions
of the offer (including, but not limited to, minimum balance requirements for
RediReserve Certificates and minimum denominations, additional interest payments
and service charges for all Securities) depending upon the state or locality
where the purchaser resides, the purchaser's tenure as an investor with the
Company or whether an investor is increasing or renewing his/her investment in
the Company's securities. In addition, the Company may vary certain terms and
conditions of the RediReserve Certificate account and/or Notes for its employees
and the employees of its subsidiaries.
Compliance with Rule 14e-1: Any purchase of Securities by the Company will
be accomplished in compliance with Section 14(e) of the Exchange Act and Rule
14e-1 promulgated thereunder, if applicable.
RETAIL VALUE NOTE PROGRAM
The Company intends to establish a separate retail note program pursuant to
which notes (the "Value Notes") similar to the Notes described in this
Prospectus will be offered on a continuous basis for sale by the Company through
one or more agents, each of which would agree to use its reasonable efforts to
solicit offers to purchase the Notes. While the Value Notes are expected to be
comparable in certain respects to the Notes described in this Prospectus, rates
on the Value Notes for comparable maturities, and certain other terms and
conditions of the Value Notes, may be different from those for the Notes
described in this Prospectus. The Value Notes are expected to be DTC eligible
book-entry notes and, unlike the Notes (for which there is no secondary market),
the agents may, from time to time, purchase and sell the Value Notes in the
secondary market, although they would not obligated to do so. The information
provided in this paragraph shall not constitute an offer to sell or the
solicitation of an offer to buy the Value Notes. The Value Notes may only be
issued pursuant to a current prospectus relating thereto.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary of the material United States Federal income tax
consequences of the purchase, ownership and disposition of the Securities
represents the opinion of Wolf, Block, Schorr and Solis-Cohen. It is based upon
laws, regulations, rulings and decisions now in effect, all of which are subject
to change or possible differing interpretations, which could apply
retroactively, so as to result in United States Federal income tax consequences
different from those discussed below. This summary deals only with Securities
held as capital assets and does not purport to deal with persons in special tax
situations, such as financial institutions, insurance companies, regulated
investment companies, dealers in securities or currencies, persons holding
Securities as a hedge against currency risks or as a position in a "straddle"
for tax purposes, or persons whose functional currency is not the United States
dollar. It also does not deal with holders other than original purchasers
(except where otherwise specifically noted). Persons considering the purchase of
the Securities
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should consult their own tax advisors concerning the application of United
States Federal income tax laws to their particular situations as well as any
consequences of the purchase, ownership and disposition of the Securities
arising under the laws of any other taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of the
Securities that is for United States Federal income tax purposes (i) a citizen
or resident of the United States, (ii) a corporation, partnership or other
entity created or organized in or under the laws of the United States or of any
political subdivision thereof, (iii) an estate the income of which is subject to
United States Federal income taxation regardless of its source, (iv) a trust if
a court within the United States is able to exercise primary supervision over
the administration of the trust and one or more United States fiduciaries having
authority to control all decisions of the trust; or (v) any other person whose
income or gain in respect of the Securities is effectively connected with the
conduct of a United States trade or business.
U.S. HOLDERS
Payments of Interest
Payments of interest on the Securities generally will be taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or are
received, actually or constructively (in accordance with the U.S. Holder's
regular method of tax accounting). If a holder of an eighteen month, two year,
30 month, three, four, five, seven or ten year Note elects to have interest paid
only at maturity, such Note will be treated as issued with original issue
discount and the holder should consult with a tax advisor with respect to the
specific tax consequences of such election. Generally, the holder will be
required to include such original issue discount in income as ordinary interest
as it accrues under a constant yield method in advance of the receipt of the
cash payments attributable to such income, regardless of the holder's regular
method of tax accounting.
Short-Term Notes
Notes that have a fixed maturity of one year or less ("Short-Term Notes")
will be treated as having been issued with original issue discount. In general,
a cash method U.S. Holder is not required to accrue such original issue discount
unless the U.S. Holder elects to do so. If such an election is not made, any
gain recognized by the U.S. Holder on the sale, exchange or redemption of the
Short-Term Note will be ordinary income to the extent of the original issue
discount accrued on a straight-line basis, or upon election under the constant
yield method (based on daily compounding), through the date of sale or maturity,
and a portion of the deductions otherwise allowable to the U.S. Holder for
interest on borrowings allocable to the Short-Term Note will be deferred until a
corresponding amount of income is realized. Accrual method U.S. Holders and
certain other holders including banks and dealers in securities, are required to
accrue original issue discount on a Short-Term Note on a straight-line basis
unless an election is made to accrue the original issue discount under a
constant yield method (based on daily compounding).
Disposition of Securities
Upon the sale, exchange or retirement of a Security, a U.S. Holder
generally will recognize taxable gain or loss equal to the difference between
the amount realized on the sale, exchange or retirement (other than amounts
representing accrued and unpaid interest) and such U.S. Holder's adjusted tax
basis in the Security. A U.S. Holder's adjusted tax basis in a Security
generally will equal such U.S. Holder's initial investment in the Security
increased by any original issue discount included in income (and accrued market
discount, if any, if the U.S. Holder has included such market discount in
income) and decreased by the amount of any principal payments, and in the case
of a Security issued with original issue discount, any payments, other than
qualified stated interest payments, received and amortizable bond premium taken
with respect to such Security. The Taxpayer Relief Act of 1997 generally reduced
the maximum capital gains rates for individuals with respect to gain recognized
upon the disposition of capital assets held for more than 18 months to 20% and
retained the maximum capital gains rate of 28% with respect to capital assets
held for more than one year but less than 18 months. Thus, gain recognized by a
Holder upon the disposition of a Security may be subject to the more favorable
capital gains rates depending in part upon the Holder's holding period for the
Security. Holders should consult their own tax advisors with respect to the tax
consequences to them of the disposition of the Securities. The distinction
between capital gain or loss is also relevant for purposes of, among other
things, limitations on the deductibility of capital losses.
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If a U.S. Holder disposes of only a portion of a Security pursuant to a
redemption or repayment , such disposition will be treated as a pro rata
prepayment in retirement of a portion of a debt instrument. Generally, the
resulting gain or loss would be calculated by assuming that the original
Security being tendered consists of two instruments, one that is retired (or
repaid), and one that remains outstanding. The adjusted issue price, U.S.
Holder's adjusted basis and the accrued but unpaid original issue discount of
the Security, determined immediately before the disposition, would be allocated
between these two instruments based on the portion of the instrument that is
treated as retired by the pro rata prepayment.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Backup withholding and information reporting requirements may apply to
certain payments of principal, premium and interest (including original issue
discount) on the Securities, and to payments of proceeds of the sale or
redemption of the Securities, to certain non-corporate U.S. Holders. The
Company, its agent, a broker, the relevant Trustee or any paying agent, as the
case may be, will be required to withhold from any payment a tax equal to 31
percent of such payment if the U.S. Holder fails to furnish or certify his
correct taxpayer identification number (social security number or employer
identification number) to the payor in the manner required, fails to certify
that such U.S. Holder is not subject to backup withholding, or otherwise fails
to comply with the applicable requirements of the backup withholding rules. Any
amounts withheld under the backup withholding rules from a payment to a Holder
may be credited against such Holder's United States Federal income tax and may
entitle such Holder to a refund, provided that the required information is
furnished to the United States Internal Revenue Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT
TO THE TAX CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION OF THE
SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER
TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
PLAN OF DISTRIBUTION
The Securities will be sold by the Company directly without an underwriter
or selling agent. The Securities will be sold by employees of the Company who,
pursuant to Rule 3a4-1(a) promulgated under the Exchange Act, are deemed not to
be brokers. In accordance with certain provisions of Rule 3a4-1(a), such
employees are not compensated by commission, are not associated with any broker
or dealer and limit their activities so that, among other things, they do not
engage in oral solicitations of, and comply with certain specified limitations
when responding to inquiries from, potential purchasers.
The Company may vary the terms and conditions of the offer by state,
locality or as otherwise described under "Description of
Securities -- Provisions Relating to All Securities -- Additional Interest" and
"-- Variations in Terms and Conditions" in this Prospectus. Further, the Company
may offer different Securities at different times depending on such factors as
the Company's liquidity requirements, the interest rate environment and other
economic conditions.
LEGAL OPINIONS
Certain legal matters relating to the Securities offered hereby will be
passed upon for the Company by Elizabeth H. Mai, Esquire, Senior Vice President,
Secretary and General Counsel of the Company. Ms. Mai has a right to acquire a
number of shares of Class B Common Stock of the Company which is well below 1%
of the outstanding common stock of the Company. Wolf, Block, Schorr and
Solis-Cohen will pass upon certain matters relating to United States federal
income tax considerations.
16
<PAGE> 18
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 accounts, and are incorporated herein in
reliance upon the authority of said firm as experts in giving said reports.
17
<PAGE> 19
[Advanta Logo]
PROSPECTUS
The date of this Prospectus is
_______, 1997
<PAGE> 20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16. EXHIBITS
<TABLE>
<S> <C>
4.1 Trust Indenture dated October 23, 1995 between Registrant and The Chase Manhattan
Bank, as Successor Trustee (incorporated by reference to Exhibit 4.1 to the
Registrant's Registration Statement on Form S-3 (File No. 33-62601), filed September
13, 1995).
5. Opinion and Consent of Elizabeth H. Mai, Senior Vice President, Secretary and General
Counsel (filed June 2, 1997).
8. Opinion and Consent of Wolf, Block, Schorr and Solis-Cohen (filed herewith).
12. Computation of Ratio of Earnings to Fixed Charges (filed June 2, 1997).
23. Consent of independent public accountants (filed herewith).
24. Powers of Attorney (included on Signature Pages filed June 2, 1997).
25. Form T-1, Statement of Eligibility and Qualification Under the Trust Indenture Act of
1933 of a Corporation Designated to Act as Trustee (filed August 1, 1997).
</TABLE>
II-1
<PAGE> 21
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 Amendment No. 3 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Lower Gwynned Township, Montgomery County, Commonwealth of
Pennsylvania, on August 6, 1997.
Advanta Corp.
By: /s/ ELIZABETH MAI
------------------------------------
Elizabeth Mai, Senior Vice
President,
Secretary and General Counsel
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to Registration Statement has been signed by the following persons on
behalf of the Registrant and in the capacities indicated on the 6th day of
August, 1997.
<TABLE>
<CAPTION>
NAME TITLE
- --------------------------------------------- ------------------------------------------
<S> <C>
* Chairman and Director
- ---------------------------------------------
Dennis Alter
* Chief Executive Officer and Director
- ---------------------------------------------
Alex W. Hart
* Vice Chairman and Director
- ---------------------------------------------
William A. Rosoff
* Senior Vice President and
- --------------------------------------------- Chief Financial Officer
David D. Wesselink
* Vice President, Finance and
- --------------------------------------------- Chief Accounting Officer
John J. Calamari
* Director
- ---------------------------------------------
Arthur P. Bellis
* Director
- ---------------------------------------------
Max Botel
* Director
- ---------------------------------------------
Richard J. Braemer
</TABLE>
II-2
<PAGE> 22
<TABLE>
<CAPTION>
NAME TITLE
- --------------------------------------------- ------------------------------------------
<S> <C>
* Director
- ---------------------------------------------
William C. Dunkelberg
* Director
- ---------------------------------------------
Dana Becker Dunn
* Director
- ---------------------------------------------
Robert C. Hall
* Director
- ---------------------------------------------
James E. Ksansnak
* Director
- ---------------------------------------------
Ronald J. Naples
* Director
- ---------------------------------------------
Phillip A. Turberg
* Director
- ---------------------------------------------
Ronald Lubner
*By: /s/ ELIZABETH MAI
- ---------------------------------------------
Elizabeth Mai, Attorney-in-Fact
Pursuant to Powers of Attorney
previously filed as part of
this Registration Statement
</TABLE>
II-3
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
ITEM
- -----
<C> <S>
4.1 Trust Indenture dated October 23, 1995 between Registrant and The Chase Manhattan
Bank, as Successor Trustee (incorporated by reference to Exhibit 4.1 to the
Registrant's Registration Statement on Form S-3 (File No. 33-62601), filed September
13, 1995).
5. Opinion and Consent of Elizabeth H. Mai, Senior Vice President, Secretary and General
Counsel (filed June 2, 1997).
8. Opinion and Consent of Wolf, Block, Schorr and Solis-Cohen (filed herewith).
12. Computation of Ratio of Earnings to Fixed Charges (filed June 2, 1997).
23. Consent of independent public accountants (filed herewith).
24. Powers of Attorney (included on Signature Pages filed June 2, 1997).
25. Form T-1, Statement of Eligibility and Qualification Under the Trust Indenture Act of
1933 of a Corporation Designated to Act as Trustee (filed August 1, 1997).
</TABLE>
<PAGE> 1
EXHIBIT 8
OPINION AND CONSENT OF WOLF BLOCK
[WOLF, BLOCK, SCHORR AND SOLIS-COHEN LETTERHEAD]
August 6, 1997
Advanta Corp.
Welsh & McKean Roads
P.O. Box 844
Spring House, Pennsylvania 19477
RE: Advanta Corp. -- Registration Statement on Form S-3, File No. 333-28291
(the "Registration Statement")
Dear Ladies and Gentlemen:
We have acted as special tax counsel for Advanta Corp. in connection
with the offer of Securities (as defined in the Registration Statement).
In our opinion, the discussion in the prospectus (the "Prospectus")
that is part of the Registration Statement, under the caption "Certain United
States Federal Income Tax Consequences," sets forth the material United States
federal income tax consequences of the purchase, ownership and disposition of
the Securities under current law, subject to the caveats and limitations stated
therein.
We hereby consent to the use of our name under the caption "Legal
Opinions" in the Prospectus. The issuance of such a consent does not concede
that we are an "Expert" for the purposes of the Securities Act of 1933.
Very truly yours,
Wolf, Block, Schorr And Solis-Cohen
<PAGE> 1
EXHIBIT 23
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
21, 1997 on the Advanta Corp. consolidated financial statements included in the
Advanta Corp. Form 10-K for the year ended December 31, 1996 and to all
references to our Firm included in this Form S-3 Registration Statement.
Arthur Andersen LLP
Philadelphia, PA
August 6, 1997
