<PAGE> 1
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JULY 8, 1996)
$250,000,000
ADVANTA LOGO
VALUE NOTES(SM), SERIES A
DUE FROM 9 MONTHS TO 15 YEARS FROM DATE OF ISSUE
Advanta Corp. (the "Company") may offer from time to time up to
$250,000,000 aggregate initial offering price of its Value Notes(SM), Series A,
Due from 9 Months to 15 Years from Date of Issue (the "Notes"). Unless otherwise
described herein, the original (continued on next page)
------------------------
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 NOTES OFFERED HEREBY ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF
A BANK AND ARE NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION ("FDIC") OR ANY OTHER GOVERNMENTAL OR PRIVATE ENTITY. SEE "RISK
FACTORS" ON PAGE S-3.
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 SUPPLEMENT, THE PROSPECTUS OR ANY
SUPPLEMENT HERETO. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===============================================================================================
Underwriting
Price to Commissions and Proceeds
Public(1) Discounts(1) to the Company(1)(2)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note............... 100% .20% to 2.50% 99.80% to 97.50%
- -----------------------------------------------------------------------------------------------
Total.................. $250,000,000 $500,000 to $6,250,000 $249,500,000 to $243,750,000
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) If agreed to by the Company and an Agent, such Agent may utilize its
reasonable efforts on an agency basis to solicit offers to purchase the
Notes at 100% of the principal amount thereof, unless otherwise specified in
an applicable Pricing Supplement. The Company will pay a commission to each
Agent ranging from .20% to 2.50% of the principal amount of the Note,
depending upon its stated maturity, sold through such Agent. An Agent also
may purchase the Notes, as principal, from the Company, for resale to
investors and other purchasers at varying prices relating to prevailing
market prices at the time of resale as determined by such Agent or, if so
specified in an applicable Pricing Supplement, at a fixed public offering
price. Unless otherwise specified in an applicable Pricing Supplement, any
Note sold to an Agent as principal will be purchased by such Agent at a
price equal to 100% of the principal amount thereof less a percentage of the
principal amount equal to the commission applicable to an agency sale (as
described above). The Company has agreed to indemnify the Agents against,
and to provide contribution with respect to, certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Securities
Act"). See "Plan of Distribution."
(2) Before deducting expenses payable by the Company estimated at $85,000.
------------------------
PAINEWEBBER INCORPORATED
LEGG MASON WOOD WALKER, INCORPORATED
SAGE RUTTY & CO.
------------------------
The date of this Prospectus Supplement is August 7, 1997.
<PAGE> 2
(continued from cover page)
issue price, interest rate, Issue Date (as defined herein), Interest Payment
Dates (as defined herein), Stated Maturity Date (as defined herein), whether the
Notes are subject to redemption at the option of the Company prior to the Stated
Maturity Date and certain other terms with respect to each Note will be
established at the time of issuance and set forth in the applicable Pricing
Supplement. Unless otherwise specified in the applicable Pricing Supplement,
Notes will be issued only in denominations of $1,000 or any amount in excess
thereof which is an integral multiple of $1,000. The Notes will be unsecured and
unsubordinated obligations of the Company and will rank equal to and ratably
with all other unsecured and unsubordinated indebtedness of the Company.
The Notes may be issued in whole or in part in the form of one or more
global Notes to be deposited with or on behalf of The Depository Trust Company
("DTC") or other depositary (DTC or such other depositary specified in the
applicable Pricing Supplement is herein referred to as the "Depositary") and
registered in the name of the Depositary's nominee. Beneficial interests in the
Notes will be shown on, and transfers thereof will be effected only through,
records maintained by the Depositary and, with respect to the beneficial owners'
interests, by the Depositary's participants. Notes will not be issuable as
certificated Notes except under the limited circumstances described herein. See
"Description of Notes -- Delivery and Form."
Each Note will bear interest from and including the Issue Date at a fixed
rate established by the Company and set forth on the face of such Note and in
the applicable Pricing Supplement. The Interest Payment Dates for a Note that
provides for monthly interest payments, unless otherwise provided in the
applicable Pricing Supplement, shall be the fifteenth day of the calendar month
next succeeding the month in which the Note is issued and the fifteenth day of
each succeeding calendar month thereafter until the Maturity Date. In the case
of a Note that provides for quarterly interest payments, unless otherwise
provided in the applicable Pricing Supplement, the Interest Payment Dates shall
be the fifteenth day of the third calendar month next succeeding the month in
which the Note is issued and the fifteenth day of each third succeeding calendar
month thereafter until the Maturity Date. In the case of a Note that provides
for semi-annual interest payments, unless otherwise provided in the applicable
Pricing Supplement, the Interest Payment Dates shall be the fifteenth day of the
sixth calendar month next succeeding the month in which the Note is issued and
the fifteenth day of each sixth succeeding calendar month thereafter until the
Maturity Date. In the case of a Note that provides for annual interest payments,
unless otherwise provided in the applicable Pricing Supplement, the Interest
Payment Dates shall be the fifteenth day of the twelfth calendar month next
succeeding the month in which the Note is issued and the fifteenth day of each
twelfth succeeding calendar month thereafter until the Maturity Date. The
Regular Record Date with respect to any Interest Payment Date, unless otherwise
provided in the applicable Pricing Supplement, shall be the close of business on
the first day of the calendar month in which such Interest Payment Date occurs;
provided, however, that interest payable on the Maturity Date will be payable to
the person to whom principal shall be payable.
The Notes are being offered on a continuous basis for sale by the Company
through one or more of the Agents and each of the Agents has agreed to use its
reasonable efforts to solicit offers to purchase the Notes. Unless otherwise
specified in an applicable Pricing Supplement, the Notes will not be listed on
any securities exchange, and there can be no assurance that the Notes offered
hereby will be sold, or that there will be a secondary market for the Notes or
liquidity in such market if one develops. The Company or an Agent, if it
solicits the offer on an agency basis, may reject any offer to purchase Notes in
whole or in part. See "Plan of Distribution." No termination date for the
offering of the Notes has been established. The Company reserves the right to
withdraw, cancel or modify the offer made hereby without notice.
------------------------------
IN CONNECTION WITH AN OFFERING OF NOTES PURCHASED BY ONE OR MORE AGENTS AS
PRINCIPAL ON A FIXED PRICE BASIS, SUCH AGENT(S) MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SUCH
TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF NOTES TO COVER SHORT
POSITIONS OF SUCH AGENT(S). FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF
DISTRIBUTION."
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<PAGE> 3
RISK FACTORS
Purchasers of the Notes offered hereby should consider the following
factors:
Absence of Insurance and Guarantees. The Notes 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 Notes 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 the date of this Prospectus Supplement, 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 geographic areas in which it
offers its services, there can be no assurance that its ability to market its
services
S-3
<PAGE> 4
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.
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
Notes 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 Notes -- General."
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 Debt Securities -- Events of Default" in the
accompanying Prospectus. The Indenture contains no covenants or other provisions
(other than standard provisions requiring any successor entity to assume the
Company's obligations under the Notes) to afford protection to holders of the
Notes in the event of a highly leveraged transaction or a change in the control
of the Company. See "Description of Debt Securities -- Restrictive Covenants" in
the accompanying Prospectus.
Absence of Trading Market. The Notes will not have an established trading
market when issued, and there can be no assurance of a secondary market for the
Notes or the liquidity of the secondary market if one develops. See "Plan of
Distribution."
------------------------------
This Prospectus Supplement 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 Supplement and in the
Company's other filings with the Securities and Exchange Commission.
S-4
<PAGE> 5
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 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.
S-5
<PAGE> 6
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 YEAR ENDED DECEMBER 31,
MARCH 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 and preferred stock dividends
of subsidiary trust.
(B) For the three months ended March 31, 1997, earnings were inadequate to cover
fixed charges. The deficiency was approximately $26.7 million.
DESCRIPTION OF NOTES
The Notes will be issued under an Indenture, dated as of November 15, 1993
(the "Indenture"), between the Company and The Chase Manhattan Bank (successor
by merger to The Chase Manhattan Bank (National Association)), as Trustee. The
following summary of certain provisions of the Notes and of the Indenture does
not purport to be complete and is qualified in its entirety by reference to the
Indenture, a copy of which has been filed as an exhibit to the registration
statement of which this Prospectus Supplement and the accompanying Prospectus
are a part (the "Registration Statement"). Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture or the
Notes, as the case may be. The term "Debt Securities," as used in this
Prospectus Supplement, refers to all securities issued and issuable from time to
time under the Indenture and includes the Notes. The following description of
the Notes, including the terms and conditions set forth herein, will apply to
each Note unless otherwise specified in an applicable Pricing Supplement and in
such Note.
GENERAL
All Debt Securities, including the Notes, issued and to be issued under the
Indenture will be unsecured general obligations of the Company and will rank
pari passu with all other unsecured and unsubordinated indebtedness of the
Company from time to time outstanding. The Indenture does not limit the
aggregate principal amount of Debt Securities which may be issued thereunder and
Debt Securities may be issued thereunder from time to time in one or more series
up to the aggregate principal amount from time to time authorized by the Company
for each series.
The Notes are currently limited to $250,000,000 aggregate initial offering
price. The foregoing limit, however, may be increased by the Company, if, in the
future, it determines that it may wish to sell additional Notes. The Notes will
be offered on a continuing basis and will mature on any day nine months to 15
years from the date of issue (the "Issue Date"), as selected by the purchaser
and agreed to by the Company and as specified in an applicable Pricing
Supplement. Each Note will bear interest from the Issue Date at a fixed rate.
Interest rates and other variable terms of the Notes are subject to change by
the Company from time to time, but no such change will affect any Note already
issued or as to which an offer to purchase has been accepted by the Company.
Each Note will be issued in fully registered form without coupons (a
"Book-Entry Note"). Except as set forth herein, Notes will be issuable only in
global form and will be represented by a global Note (each, a "Global Note" and,
collectively, the "Global Notes") registered in the name of a nominee of the
Depositary. See "Description of Notes -- Delivery and Form." All Notes issued on
the same day and having the same terms (including, but not limited to, the same
designation, the same Interest Payment Dates, interest rate,
S-6
<PAGE> 7
Stated Maturity Date and redemption provisions) may be represented by a single
Global Note. A beneficial interest in a Note will be shown on, and transfers
thereof will be effected only through, records maintained by the Depositary and,
with respect to beneficial owners' interests, by the Depositary's participants.
Payments of the principal of, and premium, if any, and interest on, the Notes
will be made by the Company through the Trustee to the Depositary or its
nominee. Unless otherwise specified in the applicable Pricing Supplement, DTC
will be the Depositary. See "Description of Notes -- Delivery and Form."
Unless otherwise specified in the applicable Pricing Supplement, the
authorized denominations of the Notes will be $1,000 and any amount in excess
thereof that is an integral multiple of $1,000.
The principal amount of the Notes will be payable on the Maturity Date at
the Corporate Trust Office of The Chase Manhattan Bank, Corporate Trust
Services, 450 West 33rd Street, 15th Floor, New York, New York 10001, or at such
other place as the Company may designate.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
may not be redeemed by the Company prior to their Stated Maturity Date. The
Notes may not be repaid at the option of the holder prior to their Stated
Maturity Date, except pursuant to the Survivor's Option described herein. See
"Description of Notes -- Repayment Upon Death." Unless otherwise specified in
the applicable Pricing Supplement, the Notes will not be subject to any sinking
fund. See "Description of Notes -- Redemption."
The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may be held or
resold or, at the discretion of the Company, may be surrendered to the Trustee.
If applicable, any purchase of Notes by the Company will be accomplished in
compliance with Section 14(e) of the Exchange Act and Rule 14e-1 promulgated
thereunder.
Unless otherwise specified herein, the Pricing Supplement relating to each
Note or Notes will describe the following terms, as applicable: (1) the price
(which may be expressed as a percentage of the aggregate initial public offering
price thereof) at which such Note will be issued to the public (the "Issue
Price"); (2) the Issue Date; (3) the Stated Maturity Date of such Note; (4) the
rate per annum at which such Note will bear interest (the "Interest Rate"); (5)
the Interest Payment Dates; (6) whether such Note may be redeemed at the option
of the Company prior to its Stated Maturity Date, and if so, the provisions
relating to such redemption; (7) certain special United States Federal income
tax consequences of the purchase, ownership and disposition of certain Notes, if
any; and (8) any other terms of such Note not inconsistent with the provisions
of the Indenture.
GLOSSARY
Reference is made to the Indenture and the forms of Notes filed by
incorporation by reference as exhibits to the Registration Statement for the
full definition of certain of the terms used in this Prospectus Supplement, as
well as any capitalized terms used herein for which no definition is provided.
Set forth below are definitions of certain terms used in this Prospectus
Supplement with respect to the Notes.
"Business Day" with respect to any Note means, unless otherwise specified
in the applicable Pricing Supplement, any day other than a Saturday, Sunday, or
other day on which banking institutions are authorized or required by law,
regulation or executive order to be closed in The City of New York.
"Interest Payment Date" with respect to any Note means a date on which,
under the terms of such Note, regularly scheduled interest shall be payable.
"Maturity Date" with respect to any Note means the date on which the
principal of a Note or an installment of principal becomes due and payable in
accordance with its terms and the terms of the Indenture, whether at its Stated
Maturity Date or by declaration of acceleration, call for redemption at the
option of the Company, repayment pursuant to exercise of the Survivor's Option,
or otherwise.
S-7
<PAGE> 8
DELIVERY AND FORM
THE COMPANY HAS ESTABLISHED A DEPOSITARY ARRANGEMENT WITH THE DEPOSITARY
WITH RESPECT TO THE BOOK-ENTRY NOTES, THE TERMS OF WHICH ARE SUMMARIZED BELOW.
ANY ADDITIONAL OR DIFFERING TERMS OF THE DEPOSITARY ARRANGEMENT WITH RESPECT TO
THE BOOK-ENTRY NOTES WILL BE DESCRIBED IN THE APPLICABLE PRICING SUPPLEMENT.
Upon issuance, all Notes having the same Issue Date, Interest Rate,
Interest Payment Dates, redemption provisions, if any, Stated Maturity Date and
other terms, if any, will be represented by a single Global Note; provided,
however, that no single Global Note shall exceed $200,000,000. Each Global Note
representing Notes will be deposited with, or on behalf of, the Depositary and
will be registered in the name of the Depositary or a nominee of the Depositary.
No Global Note may be transferred except as a whole by a nominee of the
Depositary to the Depositary or to another nominee of the Depositary, or by the
Depositary or such nominee to a successor of the Depositary or a nominee of such
successor.
So long as the Depositary or its nominee is the registered owner of a
Global Note, the Depositary or its nominee, as the case may be, will be the sole
holder of the Book-Entry Notes represented thereby for all purposes under the
Indenture. Except as otherwise provided below, the beneficial owners of the
Global Note or Notes representing Book-Entry Notes will not be entitled to
receive physical delivery of certificated Notes and will not be considered the
holders thereof for any purpose under the Indenture, and no Global Note
representing Book-Entry Notes shall be exchangeable or transferable.
Accordingly, each beneficial owner must rely on the procedures of the Depositary
and, if such beneficial owner is not a DTC participant (a "Participant"), on the
procedures of the Participant through which such beneficial owner owns its
interest in order to exercise any rights of a holder under such Global Note or
the Indenture. The laws of some jurisdictions require that certain purchasers of
securities take physical delivery of such securities in certificated form. Such
limits and laws may impair the ability to transfer beneficial interests in a
Global Note representing Book-Entry Notes.
Unless otherwise specified in the applicable Pricing Supplement, each
Global Note representing Book-Entry Notes will be exchangeable for certificated
Notes of like tenor and terms and of differing authorized denominations in a
like aggregate principal amount, only if (i) the Depositary notifies the Company
that the Depositary is unwilling to continue in such capacity or has ceased to
be a clearing agency registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and, in any such case, the Company shall not have
appointed a successor to the Depositary within 60 days thereafter, (ii) the
Company, in its sole discretion, determines that the Global Notes shall be
exchangeable for certificated Notes or (iii) an Event of Default shall have
occurred and be continuing with respect to the Notes under the Indenture. Upon
any such exchange, the certificated Notes shall be registered in the names of
the beneficial owners of the Global Note or Notes representing Book-Entry Notes,
which names shall be provided by the Depositary's relevant Participants (as
identified by the Depositary) to the Trustee.
The following is based on information furnished by the Depositary:
The Depositary will act as securities depository for the Book-Entry
Notes. The Book-Entry Notes will be issued as fully registered securities
registered in the name of Cede & Co. (the Depositary's nominee). One fully
registered Global Note will be issued for each issue of Book-Entry Notes,
each in the aggregate principal amount of such issue, and will be deposited
with the Depositary. If, however, the aggregate principal amount of any
issue exceeds $200,000,000, one Global Note will be issued with respect to
each $200,000,000 of principal amount and an additional Global Note will be
issued with respect to any remaining principal amount of such issue.
The Depositary is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the
New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. The Depositary holds securities that its
Participants deposit with the Depositary. The Depositary also facilitates
the settlement among Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts,
S-8
<PAGE> 9
thereby eliminating the need for physical movement of securities
certificates. Direct Participants of the Depositary ("Direct Participants")
include securities brokers and dealers (including the Agents), banks, trust
companies, clearing corporations and certain other organizations. The
Depositary is owned by a number of its Direct Participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the Depositary's
system is also available to others such as securities brokers and dealers,
banks, trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to the Depositary and its
Participants are on file with the Securities and Exchange Commission.
Purchases of Book-Entry Notes under the Depositary's system must be
made by or through Direct Participants, which will receive a credit for
such Book-Entry Notes on the Depositary's records. The ownership interest
of each actual purchaser of each Book-Entry Note represented by a Global
Note ("Beneficial Owner") is in turn to be recorded on the records of
Direct Participants and Indirect Participants. Beneficial Owners will not
receive written confirmation from the Depositary of their purchase, but
Beneficial Owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their
holdings, from the Direct Participants or Indirect Participants through
which such Beneficial Owner entered into the transaction. Transfers of
ownership interests in a Global Note representing Book-Entry Notes are to
be accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners of a Global Note
representing Book-Entry Notes will not receive certificated Notes
representing their ownership interests therein, except in the event that
use of the book-entry system for such Book-Entry Notes is discontinued.
To facilitate subsequent transfers, all Global Notes representing
Book-Entry Notes which are deposited with, or on behalf of, the Depositary
are registered in the name of the Depositary's nominee, Cede & Co. The
deposit of Global Notes with, or on behalf of, the Depositary and their
registration in the name of Cede & Co. effect no change in the beneficial
ownership. The Depositary has no knowledge of the actual Beneficial Owners
of the Global Notes representing the Book-Entry Notes; the Depositary's
records reflect only the identity of the Direct Participants to whose
accounts such Book-Entry Notes are credited, which may or may not be the
Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and
by Direct Participants and Indirect Participants to Beneficial Owners will
be governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with
respect to the Global Notes representing the Book-Entry Notes. Under its
usual procedures, the Depositary mails an Omnibus Proxy to the Company as
soon as possible after the applicable record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Book-Entry Notes are credited on the
applicable record date (identified in a listing attached to the Omnibus
Proxy).
Principal, premium, if any, and interest, if any, payments in respect
of the Global Notes representing the Book-Entry Notes will be made in
immediately available funds to the Depositary. The Depositary's practice is
to credit Direct Participants' accounts on the applicable payment date in
accordance with their respective holdings shown on the Depositary's records
unless the Depositary has reason to believe that it will not receive
payment on such date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such
Participant and not of the Depositary, the Trustee or the Company, subject
to any statutory or regulatory requirements as may be in effect from time
to time. Payment of principal, premium, if any, and interest, if any, to
the Depositary is the responsibility of the Company and the Trustee,
disbursement of such payments to Direct Participants shall be the
responsibility of the Depositary, and disbursement of such
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payments to the Beneficial Owners shall be the responsibility of Direct
Participants and Indirect Participants.
If applicable, redemption notices shall be sent to Cede & Co. If less
than all of the Book-Entry Notes of like tenor and terms are being
redeemed, the Depositary's practice is to determine by lot the amount of
the interest of each Direct Participant in such issue to be redeemed.
A Beneficial Owner shall give notice of any option to elect to have
its Book-Entry Notes repaid by the Company, through its Participant, to the
Trustee, and shall effect delivery of such Book-Entry Notes by causing the
Direct Participant to transfer the participant's interest in the Global
Note or Notes representing such Book-Entry Notes, on the Depositary's
records, to the Trustee. The requirement for physical delivery of
Book-Entry Notes in connection with a demand for repayment will be deemed
satisfied when the ownership rights in the Global Note or Notes
representing such Book-Entry Notes are transferred by Direct Participants
on the Depositary's records.
The Depositary may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving
reasonable notice to the Company or the Trustee. Under such circumstances,
in the event that a successor securities depository is not obtained,
certificated Notes are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor securities depository). In
that event, certificated Notes will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that the Company and the
Agents believe to be reliable, but neither the Company nor any of the Agents
takes any responsibility for the accuracy thereof.
INTEREST AND PRINCIPAL PAYMENTS
Owners of beneficial interests in a Note will be paid in accordance with
the Depositary's and the Participant's procedures in effect from time to time as
described under "Description of Notes -- Delivery and Form." Unless otherwise
specified in the applicable Pricing Supplement, payments of principal of, and
premium, if any, and interest on, the Maturity Date of a Note will be made in
immediately available funds upon surrender of such Note at the office of the
Trustee, provided that the Note is presented to the Trustee in time for the
Trustee to make such payments in such funds in accordance with its normal
procedures. Unless otherwise specified in the applicable Pricing Supplement,
principal, premium, if any, and interest payable on the Maturity Date of a Note
will be paid by the Trustee to an account specified by the Depositary. The
Company will pay any administrative costs imposed by banks in connection with
making payments in immediately available funds, but any tax, assessment or
governmental charge imposed upon payments, including, without limitation, any
withholding tax, will be borne by the holders of the Notes in respect of which
such payments are made.
Certain Notes may be considered to be issued with original issue discount
which must be included in income for United States Federal income tax purposes
at a constant rate, prior to the receipt of the cash attributable to that
income. See "Certain United States Federal Income Tax Consequences -- U.S.
Holders -- Original Issue Discount."
Each Note will bear interest from and including its Issue Date at the rate
per annum set forth thereon and in the applicable Pricing Supplement until the
principal amount thereof is paid (or made available for payment) in full. Each
payment of interest on a Note shall include interest accrued from and including
the Issue Date or from and including the last Interest Payment Date in respect
of which interest has been paid (or made available for payment), as the case may
be, to but excluding the Interest Payment Date or the Maturity Date, as the case
may be. Unless otherwise specified in the applicable Pricing Supplement,
interest on the Notes will be computed on the basis of a 360-day year of twelve
30-day months.
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Unless otherwise specified in the applicable Pricing Supplement, interest
on each Note will be payable either monthly, quarterly, semi-annually or
annually on each Interest Payment Date and on the Maturity Date. Any payment of
principal, premium, if any, or interest required to be made on a Note on a day
which is not a Business Day need not be made on such day, but may be made on the
next succeeding Business Day with the same force and effect as if made on such
day, and no additional interest shall accrue as a result of such delayed
payment. Interest will be payable to the person in whose name a Note is
registered at the close of business on the Regular Record Date next preceding
each Interest Payment Date; provided, however, that interest payable on the
Maturity Date will be payable to the person to whom principal shall be payable.
Each applicable Pricing Supplement will specify whether the Interest
Payment Dates for a Note will be monthly, quarterly, semiannually or annually.
Unless otherwise specified in the applicable Pricing Supplement, the "Interest
Payment Dates" will be, in the case of a Note that provides for: (i) monthly
interest payments, the fifteenth day of the calendar month next succeeding the
month in which the Note is issued and the fifteenth day of each succeeding
calendar month thereafter until the Maturity Date; (ii) quarterly interest
payments, the fifteenth day of the third calendar month next succeeding the
month in which the Note is issued and the fifteenth day of each third succeeding
calendar month thereafter until the Maturity Date; (iii) semiannual interest
payments, the fifteenth day of the sixth calendar month next succeeding the
month in which the Note is issued and the fifteenth day of each sixth succeeding
calendar month thereafter until the Maturity Date; and (iv) annual interest
payments, the fifteenth day of the twelfth calendar month next succeeding the
month in which the Note is issued and the fifteenth day of each twelfth
succeeding calendar month thereafter until the Maturity Date. The "Regular
Record Date" with respect to any Interest Payment Date, unless otherwise
provided in the applicable Pricing Supplement, shall be the close of business on
the first day of the calendar month in which such Interest Payment Date occurs;
provided, however, that interest payable on the Maturity Date will be payable to
the person to whom principal shall be payable.
REDEMPTION
Unless otherwise provided in the applicable Pricing Supplement, the Notes
will not be redeemable prior to the Stated Maturity Date at the option of the
Company. Unless otherwise specified in the applicable Pricing Supplement, the
Notes will not be subject to any sinking fund. The Notes will not be repayable
prior to the Stated Maturity Date at the option of the holder other than
pursuant to the Survivor's Option. See "Repayment Upon Death."
If applicable, the Pricing Supplement relating to each Note will indicate
that the Note will be redeemable at the option of the Company on the date(s) or
period(s) specified prior to the Stated Maturity Date and, unless otherwise
specified in such Pricing Supplement, at a price equal to 100% of the principal
amount thereof, together with accrued interest to but not including the date of
redemption.
The Company may redeem any Notes that are subject to redemption at the
option of the Company, either in whole or from time to time in part, upon not
less than 30 or more than 60 days' prior written notice. Unless otherwise
specified in the applicable Pricing Supplement, if less than all of the Notes
with like tenor and terms are to be redeemed, the Notes to be redeemed shall be
selected by the Trustee by such method as the Trustee shall deem fair and
appropriate.
If applicable, the Company will comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws or regulations in
connection with any such repurchase.
The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may, at the
discretion of the Company, be held or resold or surrendered to the Trustee for
cancellation.
REPAYMENT UPON DEATH
The holder of a Note will have the right to require the Company to repay
such Note prior to its Stated Maturity Date upon the death of the beneficial
owner of an interest in such Note, as described below (the "Survivor's Option").
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Pursuant to exercise of the Survivor's Option, the Company will repay any
Note (or portion thereof) upon appropriate written demand for repayment by or on
behalf of the person (the "Representative") that has authority to act on behalf
of the deceased owner of the beneficial interest in such Note under the laws of
the appropriate jurisdiction (including, without limitation, the personal
representative, executor, surviving joint tenant or surviving tenant by the
entirety of such deceased beneficial owner) at a price equal to 100% of the
principal amount of the beneficial interest of the deceased owner in such Note
plus accrued interest to the date of such repayment. The Company will not make
principal repayments pursuant to exercise of the Survivor's Option in amounts
that are less than $1,000. Demand for repayment of any Note (or portion thereof)
pursuant to exercise of the Survivor's Option may be withdrawn by a written
request by the Representative of the deceased owner received by the Trustee
prior to its repayment.
Each Note (or portion thereof) the repayment of which is appropriately
demanded pursuant to valid exercise of the Survivor's Option will be accepted
promptly in the order all such demands are tendered. Any Note (or portion
thereof) accepted for repayment pursuant to exercise of the Survivor's Option
will be repaid no later than the first Interest Payment Date that occurs 20 or
more calendar days after the date of such acceptance. In the event that the
demand for repayment of the Note (or any portion thereof) is not accepted, the
Trustee will deliver a notice by first-class mail to the registered holder
thereof at its last known address as indicated in the Note Register, that states
the reason such demand for repayment of such Note (or portion thereof) has not
been accepted for payment.
Subject to the foregoing, in order for a Survivor's Option to be validly
exercised with respect to any Note (or portion thereof), the Trustee must
receive from the Representative of the deceased owner: (i) a written request for
repayment signed by the Representative, and such signature must be guaranteed by
a member firm of a registered national securities exchange or of the National
Association of Securities Dealers, Inc. (the "NASD") or a commercial bank or
trust company having an office or correspondent in the United States; (ii)
identification of the Note (or portion thereof) to be repaid; (iii) appropriate
evidence satisfactory to the Trustee that (A) the Representative has authority
to act on behalf of the deceased beneficial owner, (B) the death of such
beneficial owner has occurred and (C) the deceased was the owner of a beneficial
interest in such Note at the time of death; and (iv) if the beneficial interest
in such Note is held by a nominee of the deceased beneficial owner, a
certificate satisfactory to the Trustee from such nominee attesting to the
deceased's ownership of a beneficial interest in such Note. All questions as to
the eligibility or validity of any exercise of the Survivor's Option will be
determined by the Trustee, in its sole discretion, which determination will be
final and binding on all parties.
The death of a person owning a Note in joint tenancy or tenancy by the
entirety with another or others will be deemed the death of the holder of the
Note, and the entire principal amount of the Note so held will be subject to
repayment, together with interest accrued thereon to the repayment date. The
death of a person owning a Note by tenancy in common will be deemed the death of
a holder of a Note only with respect to the deceased holder's interest in the
Note so held by tenancy in common; except that in the event a Note is held by
husband and wife as tenants in common, the death of either will be deemed the
death of the holder of the Note, and the entire principal amount of the Note so
held will be subject to repayment. The death of a person who, during his or her
lifetime, was entitled to substantially all of the beneficial ownership interest
in a Note will be deemed the death of the holder thereof for purposes of this
provision, regardless of the registered holder, if such beneficial interest can
be established to the satisfaction of the Trustee. Such beneficial interest will
be deemed to exist in typical cases of nominee ownership, ownership under the
Uniform Gifts to Minors Act, community property or other joint ownership
arrangements between a husband and wife and trust arrangements where one person
has substantially all of the beneficial ownership interest in the Note during
his or her lifetime.
For Notes represented by a Global Note, the Depositary or its nominee will
be the holder of such Note and therefore will be the only entity that can
exercise the Survivor's Option for such Note. To obtain repayment pursuant to
exercise of the Survivor's Option with respect to such Note, the Representative
must provide to the broker or other entity through which the beneficial interest
in such Note is held by the deceased owner: (i) the documents described in
clauses (i) and (iii) of the second preceding paragraph; and (ii) instructions
to such broker or other entity to notify the Depositary of such Representative's
desire to
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obtain repayment pursuant to exercise of the Survivor's Option. Such broker or
other entity will provide to the Trustee (a) the documents received from the
Representative referred to in clause (i) of the preceding sentence and (b) a
certificate satisfactory to the Trustee from such broker or other entity stating
that it represents the beneficial owner. Such broker or entity will be
responsible for disbursing any payments it receives pursuant to exercise of the
Survivor's Option to the appropriate Representative. See "Description of
Notes -- Delivery and Form."
A REPRESENTATIVE MAY OBTAIN THE FORMS USED TO EXERCISE THE SURVIVOR'S
OPTION FROM THE CHASE MANHATTAN BANK, THE TRUSTEE, AT 450 WEST 33RD STREET, 15TH
FLOOR, NEW YORK, NEW YORK 10001, DURING NORMAL BUSINESS HOURS.
RETAIL DIRECT ISSUANCE PROGRAM
The Company maintains a separate retail note program pursuant to which
similar notes ("the Direct Issue Notes") are sold by the Company directly
(without any underwriter or selling agent) through employees of the Company who,
pursuant to Rule 3a4-(1)(a) promulgated under the Exchange Act, are deemed not
to be brokers. While the Notes described in this Prospectus Supplement are
comparable to the Direct Issue Notes in certain respects, rates on the Direct
Issue Notes for comparable maturities, and certain other terms and conditions of
the Direct Issue Notes, may be different from those for the Notes described in
this Prospectus Supplement. Also, the Direct Issue Notes are not DTC eligible
and there is no secondary market for them. In the case of the Notes, the Agents
may from time to time, purchase and sell Notes in the secondary market, although
they are not obligated to do so, and there can be no assurance that there will
be a secondary market for the Notes. The information provided in this paragraph
shall not constitute an offer to sell or the solicitation of an offer to buy the
Direct Issue Notes. The Direct Issue Notes may only be issued pursuant to a
current prospectus relating thereto.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes 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 Notes 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 Notes
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 Notes
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 Notes arising
under the laws of any other taxing jurisdiction. Special United States Federal
income tax considerations, not otherwise discussed herein, which are applicable
to a particular issue of Notes will be discussed in the applicable Pricing
Supplement.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
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 a Note is effectively connected with the conduct of
a United States trade or business.
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U.S. HOLDERS
Payments of Interest
Payments of interest on a Note generally will be taxable to a U.S. Holder
as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting).
Original Issue Discount
The following summary is a general discussion of the United States Federal
income tax consequences to U.S. Holders of the purchase, ownership and
disposition of Notes issued with original issue discount ("Original Issue
Discount Notes") based upon Treasury regulations (the "OID Regulations"), under
the original issue discount provisions of the Internal Revenue Code of 1986, as
amended (the "Code").
Under the OID regulations, a Note that is issued for an amount less than
its stated redemption price at maturity will generally be considered to have
been issued with original issue discount. Original issue discount is the excess,
if any, of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of 1%
of the Note's stated redemption price at maturity multiplied by (i) the number
of complete years to maturity or (ii) the weighted average maturity, in the case
of a Note providing for the payment of any amount other than "qualified stated
interest" (as hereinafter defined) prior to maturity. The issue price of a Note
is equal to the first price at which a substantial amount of Notes in the same
issue of Notes has been sold to the public (ignoring sales to bond houses,
brokers, or similar persons or organizations acting in the capacity of
underwriters, placement agents, or wholesalers). The stated redemption price at
maturity of a Note is the sum of all payments provided by the Note other than
"qualified stated interest" payments. The term "qualified stated interest"
generally means stated interest that is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually at a
single fixed rate.
Payments of qualified stated interest on a Note are taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of an Original Issue Discount Note must include
original issue discount in income as ordinary interest as it accrues under a
constant yield method in advance of receipt of the cash payments attributable to
such income, regardless of such U.S. Holder's regular method of tax accounting.
In general, the amount of original issue discount included in income is the sum
of the daily portions of the original issue discount for each day during the
taxable year (or portion of the taxable year) on which the U.S. Holder held the
Original Issue Discount Note. The "daily portion" of original issue discount is
determined by allocating to each day in any accrual period a ratable portion of
the original issue discount allocable to that accrual period. An "accrual
period" may be of any length and may vary in length over the term of the
Original Issue Discount Note, provided that each accrual period is no longer
than one year and each scheduled payment of principal or interest occurs either
on the final day of an accrual period or on the first day of an accrual period.
The amount of original issue discount allocable to each accrual period is
generally equal to the difference between (i) the product of the Original Issue
Discount Note's adjusted issue price at the beginning of such accrual period and
its yield to maturity and (ii) the amount of any qualified stated interest
payments allocable to such accrual period. The "adjusted issue price" of an
Original Issue Discount Note at the beginning of any accrual period is the sum
of the issue price of the Original Issue Discount Note plus the amount of
original issue discount allocable to all prior accrual periods minus the amount
of any prior payments on the Original Issue Discount Note that were not
qualified stated interest payments. Under these rules, U.S. Holders of Original
Discount Notes generally will have to include in income increasingly greater
amounts of original issue discount in successive accrual periods.
A U.S. Holder who purchases an Original Issue Discount Note for an amount
that is greater than its adjusted issue price as of the purchase date and less
than or equal to the sum of all amounts payable on the Original Issue Discount
Note after the purchase date other than payments of qualified stated interest,
will be considered to have purchased the Original Issue Discount Note at an
"acquisition premium." Under the acquisition premium rules, the amount of
original issue discount which such U.S. Holder must include in its
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gross income for any taxable year (or portion thereof in which the U.S. Holder
holds the Original Issue Discount Note) will be reduced (but not below zero) by
the portion of the acquisition premium properly allocable to the period.
Certain of the Notes (i) may be redeemable at the option of the Company
prior to their stated maturity (a "call option") and/or (ii) may be repayable at
the option of the holder prior to their stated maturity (a "put option"). Notes
containing such features may be subject to rules that differ from the general
rules discussed above. Investors intending to purchase Notes with such features
should consult their own tax advisors, since the original issue discount
consequences will depend, in part, on the particular terms and features of the
purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
that accrues on a Note, i.e., the excess of all remaining payments to be
received on the Note over the amount paid for the Note by such Holder, by using
the constant yield method applicable to original issue discount, subject to
certain limitations and exceptions.
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).
Market Discount
If a U.S. Holder purchases a Note for an amount that is less than its issue
price (or, in the case of a subsequent purchaser, its stated redemption price at
maturity) or, in the case of an Original Issue Discount Note, for an amount that
is less than its adjusted issue price as of the purchase date, such U.S. Holder
will be treated as having purchased such Note at a "market discount," unless
such market discount is less than a specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat
any partial principal payment (or, in the case of an Original Issue Discount
Note, any payment that does not constitute qualified stated interest) on, or any
gain realized on the sale, exchange, retirement, or other disposition of, a Note
as ordinary income to the extent of the lesser of (i) the amount of such payment
or realized gain or (ii) the market discount which has not previously been
included in income and is treated as having accrued on such Note at the time of
such payment or disposition. Market discount will be considered to accrue
ratably during the period from the date of acquisition to the maturity date of
the Note, unless the U.S. Holder elects to accrue market discount under a
constant yield method on the basis of semi-annual compounding.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
certain earlier dispositions, because a current deduction is only allowed to the
extent the interest expense exceeds an allocable portion of market discount. A
U.S. Holder may elect to include market discount in income currently as it
accrues (on either a ratable or semi-annual compounding basis), in which case
the rules described above regarding the recognition of ordinary income and the
deferral of interest deductions will not apply. Generally, such currently
included market discount is treated as ordinary interest. Such an election will
apply to all debt instruments acquired by the U.S. Holder on or after the first
day of the first taxable year
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to which such election applies and may be revoked only with the consent of the
Internal Revenue Service (the "IRS").
Premium
If a U.S. Holder purchases a Note for an amount that is greater than the
sum of all amounts payable on the Note after the purchase date other than
payments of qualified stated interest, such U.S. Holder will be considered to
have purchased the Note with "amortizable bond premium" equal in amount to such
excess. A U.S. Holder may elect to amortize such premium using a constant yield
method over the remaining term of the Note and may offset interest otherwise
required to be included in respect of the Note during any taxable year by the
amortized premium for the taxable year. However, if the Note may be optionally
redeemed after the U.S. Holder acquires it at a price in excess of its stated
redemption price at maturity, special rules apply which could result in a
deferral of the amortization of some bond premium until later in the term of the
Note. Any election to amortize bond premium applies to all taxable debt
instruments then owned and thereafter acquired by the U.S. Holder on or after
the first day of the first taxable year to which such election applies and may
be revoked only with the consent of the IRS.
Disposition of a Note
Except as discussed above, upon the sale, exchange or retirement of a Note,
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 Note. A U.S. Holder's adjusted tax basis in a
Note generally will equal such U.S. Holder's initial investment in the Note
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 an Original Issue Discount Note, any payments, other than qualified stated
interest payments, received and amortizable bond premium taken with respect to
such Note. 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 U.S. Holder upon the
disposition of a Note may be subject to the more favorable capital gains rates
depending in part upon the U.S. Holder's holding period for the Note. U.S.
Holders should consult their own tax advisors with respect to the tax
consequences to them of the disposition of the Notes. The distinction between
capital gain or loss is also relevant for purposes of, among other things,
limitations on the deductibility of capital losses.
If a U.S. Holder disposes of only a portion of a Note pursuant to a
redemption or repayment (including the Survivor's Option, if applicable), 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 Note 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 Note, 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 a Note, and to payments of proceeds of the sale or redemption of a
Note, 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.
S-16
<PAGE> 17
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 NOTES,
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
Under the terms of the Distribution Agreement dated as of August 7, 1997,
the Notes are offered on a continuing basis by the Company through PaineWebber
Incorporated, Legg Mason Wood Walker, Incorporated and Sage Rutty & Co. (the
"Agents") who have agreed to use their reasonable efforts to solicit purchases
of the Notes at 100% of the principal amount thereof, unless otherwise specified
in an applicable Pricing Supplement. The Company may appoint additional Agents
to solicit sales of the Notes; provided, however, that any such solicitation and
sale of the Notes shall be on the same terms and conditions to which the Agents
have agreed. The Company will pay a commission to each Agent, ranging from 0.20%
to 2.50% of the principal amount of each Note, depending upon its stated
maturity, sold through the Agent.
Following the solicitation of orders, the Agents, severally and not
jointly, may purchase Notes from the Company as principal for their own
accounts. Unless otherwise set forth in the applicable Pricing Supplement, such
Notes will be purchased by the Agent at a price equal to 100% of the principal
amount thereof and will be resold to one or more investors and other purchasers
at varying prices relating to prevailing market prices at the time of resale as
determined by such Agent or, if so specified in the applicable Pricing
Supplement, at a fixed public offering price. The Agents may sell Notes they
have purchased from the Company as principal to other dealers for resale to
investors and other purchasers, and may allow all or any portion of the discount
received in connection with such purchase from the Company to such dealers.
After the initial public offering of Notes, the public offering price (in the
case of Notes to be resold at a fixed public offering price), the concession and
the discount may be changed.
The Company reserves the right to withdraw, cancel or modify the offer made
hereby without notice and may reject orders in whole or in part (whether placed
directly with the Company or through the Agents). The Agents will have the
right, in their discretion reasonably exercised, to reject in whole or in part
any offer to purchase Notes received by them on an agency basis.
Unless otherwise specified in an applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in The City of New York on the date of settlement.
No Note will have an established trading market when issued. Unless
otherwise specified in an applicable Pricing Supplement, the Notes will not be
listed on any securities exchange. The Agents may from time to time purchase and
sell Notes in the secondary market, but the Agents are not obligated to do so,
and there can be no assurance that there will be a secondary market for the
Notes or liquidity in the secondary market if one develops. From time to time,
the Agents may make a market in the Notes, but the Agents are not obligated to
do so and may discontinue any market-making activity at any time.
In connection with the offering of Notes purchased by one or more Agents as
principal on a fixed price basis, such Agent(s) will be permitted to engage in
certain transactions that stabilize the price of such Notes. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the Notes. If the Agent creates or the Agents create, as the case
may be, a short position in such Notes, i.e., if it sells or they sell, as the
case may be, Notes in an aggregate principal amount exceeding that set forth in
the applicable Pricing Supplement, such Agent(s) may reduce that short position
by purchasing Notes in the open market. In general, purchases of Notes for the
purpose of stabilization or to reduce a short position could cause the price of
the Notes to be higher than it might be in the absence of such purchases.
S-17
<PAGE> 18
Neither the Company nor any of the Agents makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Notes. In addition, neither the
Company nor any of the Agents makes any representations that the Agents will
engage in any such transactions or that such transactions, once commenced, will
not be discontinued without notice.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act. The Company has agreed to indemnify the Agents against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Agents may be required to make in respect thereof. The Company has
agreed to reimburse the Agents for certain other expenses.
Concurrently with the offering of Notes through the Agents as described
herein, the Company may from time to time sell Notes directly to purchasers and
may issue other Debt Securities described in the accompanying Prospectus
pursuant to the Indenture referred to herein.
LEGAL MATTERS
Certain legal matters relating to the Notes offered hereby will be passed
upon for the Company by Elizabeth H. Mai, Esquire, Senior Vice President,
Secretary and General Counsel of the Company and for the agents and underwriters
by Brown & Wood LLP, New York, New York. Ms. Mai owns or has the 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.
TRADEMARKS
Advanta is a federally registered trademark of the Company. The Advanta
logo and Value Notes(SM) are trademarks of the Company.
S-18
<PAGE> 19
PROSPECTUS
LOGO
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 $1,604,919,500 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.
------------------------
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 July 8, 1996.
<PAGE> 20
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 Commission maintains a Web site at
http://www.sec.gov containing reports, proxy and information statements and
other information regarding registrants, including the Company, that file
electronically with the Commission.
The Company has filed with the Commission Registration Statement Nos.
33-50883 and 333-05701 (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.
2
<PAGE> 21
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 national
bank known as a "credit card bank" whose lending activities are limited to
consumer credit card lending.
- ---------------
* 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
<PAGE> 22
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 to include both Advanta Mortgage and
Advanta Finance in 1995, and an automobile financing business (Advanta Auto
Finance) in 1996.
4
<PAGE> 23
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 systems and
computers, some has been the result of expansion into additional market
segments. The
5
<PAGE> 24
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.
6
<PAGE> 25
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>
<CAPTION>
THREE
MONTHS
ENDED MARCH
31, YEAR ENDED DECEMBER 31,
----------- --------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges(A)............. 2.10 2.26 2.26 2.71 2.52 1.81 1.36
</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.
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.
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
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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.
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
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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 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
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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, pursuant to Arizona laws and regulations, each of the insurance
subsidiaries is required to register as part of an Arizona holding company
structure which, among other things, 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.
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.
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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 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
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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 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
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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).
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
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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).
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
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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).
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).
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<PAGE> 34
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 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).
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<PAGE> 35
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 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.
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<PAGE> 36
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 l% 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> 37
======================================================
NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT OR
THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT,
THE APPLICABLE PRICING SUPPLEMENT AND THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY ANY AGENT. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE
MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF. THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING
SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE NOTES OFFERED HEREBY BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUPPLEMENT
Risk Factors......................... S-3
The Company.......................... S-5
Recent Developments.................. S-5
Ratio of Earnings to Fixed Charges... S-6
Description of Notes................. S-6
Retail Direct Issuance Program....... S-13
Certain United States Federal Income
Tax Consequences................... S-13
Plan of Distribution................. S-17
Legal Matters........................ S-18
Trademarks........................... S-18
PROSPECTUS
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 2
The Company.......................... 3
Ratio of Earnings To Fixed Charges... 7
Government Regulation................ 7
Use of Proceeds...................... 11
Description of Debt Securities....... 11
Plan of Distribution................. 17
Legal Opinions....................... 18
Experts.............................. 18
</TABLE>
======================================================
======================================================
$250,000,000
ADVANTA LOGO
VALUE NOTES(SM), SERIES A
DUE FROM 9 MONTHS TO 15 YEARS
FROM DATE OF ISSUE
PAINEWEBBER INCORPORATED
LEGG MASON WOOD WALKER,
INCORPORATED
SAGE RUTTY & CO.
PROSPECTUS SUPPLEMENT
AUGUST 7, 1997
======================================================
K
