<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 4, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
<TABLE>
<S> <C>
ADVANTA CORP. ADVANTA CAPITAL TRUST I
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS
CHARTER) (EXACT NAME OF REGISTRANT AS SPECIFIED
IN ITS TRUST AGREEMENT)
DELAWARE DELAWARE
(STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) INCORPORATION OR ORGANIZATION)
6719 6719
(PRIMARY STANDARD INDUSTRIAL (PRIMARY STANDARD INDUSTRIAL
CLASSIFICATION CODE NUMBER) CLASSIFICATION CODE NUMBER)
23-1462070 23-2869132
(I.R.S. EMPLOYER (I.R.S. EMPLOYER
IDENTIFICATION NO.) IDENTIFICATION NO.)
</TABLE>
------------------------
<TABLE>
<S> <C>
WELSH & MCKEAN ROADS C/O ADVANTA CORP.
P.O. BOX 844 501 CARR ROAD
SPRING HOUSE, PENNSYLVANIA 19477 WILMINGTON, DELAWARE 19809
(215) 657-4000 (302) 791-4400
</TABLE>
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
------------------------
GENE S. SCHNEYER, ESQ.
ADVANTA CORP.
WELSH & MCKEAN ROADS
P.O. BOX 844
SPRING HOUSE, PENNSYLVANIA 19477
(215) 657-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENTS FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
JASON M. SHARGEL, ESQ. EDWARD F. PETROSKY, ESQ.
WOLF, BLOCK, SCHORR AND SOLIS-COHEN BROWN & WOOD LLP
TWELFTH FLOOR PACKARD BUILDING ONE WORLD TRADE CENTER
S.E. CORNER 15TH AND CHESTNUT STREETS NEW YORK, NEW YORK 10048
PHILADELPHIA, PENNSYLVANIA 19102-2678
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
==========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED TO BE REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Series B Capital Securities of Advanta Capital
Trust I......................................... $100,000,000 100% $100,000,000 $30,303
- --------------------------------------------------------------------------------------------------------------------------
Series B Junior Subordinated Deferrable Interest
Debentures of Advanta Corp.(2)..................
- --------------------------------------------------------------------------------------------------------------------------
Advanta Corp. Series B Guarantee with respect to
Series B Capital Securities(3)..................
- --------------------------------------------------------------------------------------------------------------------------
Total.................................... $100,000,000(4) 100% $100,000,000(5) $30,303
==========================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee.
(2) No separate consideration will be received for the Series B Junior
Subordinated Deferrable Interest Debentures of Advanta Corp. (the "New
Junior Subordinated Debentures") distributed upon any liquidation of Advanta
Capital Trust I.
(3) No separate consideration will be received for the Advanta Corp. Series B
Guarantee.
(4) This Registration Statement is deemed to cover rights of holders of the New
Junior Subordinated Debentures under the Indenture, the rights of holders of
Series B Capital Securities of Advanta Capital Trust I under the Amended and
Restated Declaration of Trust, the rights of holders of such Capital
Securities under the Advanta Corp. Series B Guarantee and certain backup
undertakings as described herein.
(5) Such amount represents the liquidation amount of the Advanta Capital Trust I
Series B Capital Securities to be exchanged hereunder and the principal
amount of New Junior Subordinated Debentures that may be distributed to
holders of such Capital Securities upon any liquidation of Advanta Capital
Trust I.
------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED APRIL 4, 1997
ADVANTA CAPITAL TRUST I
OFFER TO EXCHANGE ITS
8.99% SERIES B CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
FOR ANY AND ALL OF ITS OUTSTANDING
8.99% SERIES A CAPITAL SECURITIES
(LIQUIDATION AMOUNT $1,000 PER CAPITAL SECURITY)
UNCONDITIONALLY GUARANTEED, TO THE EXTENT SET FORTH HEREIN, BY
ADVANTA LOGO
Corp.
------------------------
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED.
------------------------
Advanta Capital Trust I, a trust formed under the laws of the State of
Delaware (the "Trust"), hereby offers, upon the terms and subject to the
conditions set forth in this Prospectus (as the same may be amended or
supplemented from time to time, the "Prospectus") and in the accompanying Letter
of Transmittal (which together constitute the "Exchange Offer"), to exchange up
to $100,000,000 aggregate Liquidation Amount of its 8.99% Series B Capital
Securities (the "New Capital Securities") which have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement (as defined herein) of which this Prospectus constitutes
a part, for a like Liquidation Amount of its outstanding 8.99% Series A Capital
Securities (the "Old Capital Securities"), of which $100,000,000 aggregate
Liquidation Amount is outstanding. Pursuant to the Exchange Offer, Advanta
Corp., a Delaware corporation ("Advanta" or the "Corporation"), is also offering
to exchange (i) its guarantee of payments of cash distributions and payments on
liquidation of the Trust or redemption of the Old Capital Securities (the "Old
Guarantee") for a like guarantee in respect of the New Capital Securities (the
"New Guarantee") and (ii) all of its 8.99% Series A Junior Subordinated
Deferrable Interest Debentures due December 17, 2026 (the "Old Junior
Subordinated Debentures") for a like aggregate principal amount of its 8.99%
Series B Junior Subordinated Deferrable Interest Debentures due December 17,
2026 (the "New Junior Subordinated Debentures"), which New Guarantee and New
Junior Subordinated Debentures also have been registered under the Securities
Act. The Old Capital Securities, the Old Guarantee and the Old Junior
Subordinated Debentures are collectively referred to herein as the "Old
Securities" and the New Capital Securities, the New Guarantee and the New Junior
Subordinated Debentures are collectively referred to herein as the "New
Securities."
The New Securities are substantially identical to the Old Securities except
that (i) the New Securities have been registered under the Securities Act and
therefore will not be subject to certain restrictions on transfer applicable to
the Old Securities, (ii) the New Capital Securities will not contain the
$100,000 minimum Liquidation Amount transfer restriction, (iii) the New Capital
Securities will not provide for any increase in the Distribution Rate (as
defined herein) thereon, (iv) the New Junior Subordinated Debentures will not
contain the $100,000 minimum principal amount transfer restriction and (v) the
New Junior Subordinated Debentures will not provide for any increase in the
interest rate thereon. See "Description of New Securities" and "Description of
Old Securities." The New Capital Securities are being offered for exchange in
order to satisfy certain obligations of the Corporation and the Trust under the
Registration Rights Agreement dated as of December 11, 1996 (the "Registration
Rights Agreement") among the Corporation, the Trust and the Initial Purchasers
(as defined in the Registration Rights Agreement). In the event that the
Exchange Offer is consummated, any Old Capital Securities
(Continued on the following page)
This Prospectus and the Letter of Transmittal are first being mailed to all
holders of Old Capital Securities on , 1997.
SEE "RISK FACTORS" COMMENCING ON PAGE 15 FOR CERTAIN INFORMATION THAT
SHOULD BE CONSIDERED BY HOLDERS IN DECIDING WHETHER TO TENDER OLD CAPITAL
SECURITIES IN THE EXCHANGE OFFER.
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 , 1997.
<PAGE> 3
(continued from the previous page)
which remain outstanding after consummation of the Exchange Offer and the New
Capital Securities issued in the Exchange Offer will vote together as a single
class for purposes of determining whether holders of the requisite percentage in
outstanding Liquidation Amount thereof have taken certain actions or exercised
certain rights under the Declaration (as defined herein).
The New Capital Securities and the Old Capital Securities (collectively,
the "Capital Securities") represent beneficial interests in the assets of the
Trust. The Corporation is the owner of all of the beneficial interests
represented by common securities of the Trust (the "Common Securities," and
together with the Capital Securities, the "Trust Securities"). The Chase
Manhattan Bank is the Property Trustee of the Trust. The Trust exists for the
sole purpose of issuing the Trust Securities and investing the proceeds thereof
in the Junior Subordinated Debentures (as defined herein). The Junior
Subordinated Debentures will mature on December 17, 2026 (the "Stated Maturity
Date"). The Capital Securities will have a preference over the Common Securities
under certain circumstances with respect to cash distributions and amounts
payable on liquidation, redemption or otherwise. See "Description of New
Securities -- Description of New Capital Securities -- Subordination of Common
Securities."
As used herein, (i) the "Indenture" means the Indenture, dated as of
December 17, 1996, as amended and supplemented from time to time, between the
Corporation and The Chase Manhattan Bank, as Debenture Trustee (the "Debenture
Trustee"), (ii) the "Declaration" means the Amended and Restated Declaration of
Trust relating to the Trust among the Corporation, as Sponsor, The Chase
Manhattan Bank, as Property Trustee (the "Property Trustee"), Chase Manhattan
Bank Delaware, as Delaware Trustee, (the "Delaware Trustee"), and the
Administrative Trustees named therein (collectively, with the Property Trustee
and Delaware Trustee, the "Issuer Trustees"). In addition, as the context may
require, unless otherwise expressly stated, (i) the term "Junior Subordinated
Debentures" includes the Old Junior Subordinated Debentures and the New Junior
Subordinated Debentures and (ii) the term "Guarantee" includes the Old Guarantee
and the New Guarantee.
Holders of the New Capital Securities will be entitled to receive
preferential cumulative cash distributions arising from the payment of interest
on the Junior Subordinated Debentures, accruing from December 17, 1996, and
payable semi-annually in arrears on June 17 and December 17 of each year,
commencing June 17, 1997, at the annual rate of 8.99% of the Liquidation Amount
of $1,000 per New Capital Security ("Distributions"). The Corporation will have
the right to defer payments of interest on the Junior Subordinated Debentures at
any time and from time to time for a period not exceeding 10 consecutive semi-
annual periods with respect to each deferral period (each, an "Extension
Period"), provided that no Extension Period may extend beyond the Stated
Maturity Date. Upon the termination of any such Extension Period and the payment
of all amounts then due, the Corporation may elect to begin a new Extension
Period, subject to the requirements set forth in the Indenture. If and for so
long as interest payments on the Junior Subordinated Debentures are so deferred,
Distributions on the Trust Securities will also be deferred and the Corporation
will not be permitted, subject to certain exceptions described herein, to
declare or pay any cash distributions with respect to the Corporation's capital
stock (which includes common and preferred stock) or to make any payment with
respect to debt securities of the Corporation that rank pari passu with or
junior to the Junior Subordinated Debentures. During an Extension Period,
interest on the Junior Subordinated Debentures will continue to accrue (and the
amount of Distributions to which holders of the Trust Securities are entitled
will accumulate) at the rate of 8.99% per annum, compounded semiannually, and
holders of Trust Securities will be required to accrue interest income for
United States federal income tax purposes. See "Description of New
Securities -- Description of New Junior Subordinated Debentures -- Option to
Extend Interest Payment Date" and "Certain Federal Income Tax
Consequences -- Interest Income and Original Issue Discount."
Through the Guarantee, the guarantee agreement of the Corporation relating
to the Common Securities (the "Common Guarantee"), the Declaration, the Junior
Subordinated Debentures and the Indenture, taken together, the Corporation has
guaranteed or will guarantee, as the case may be, fully, irrevocably and
unconditionally, all of the Trust's obligations under the Trust Securities. See
"Relationship Among the New Capital Securities, the New Junior Subordinated
Debentures and the New Guarantee -- Full and Uncondi-
2
<PAGE> 4
tional Guarantee." The Old Guarantee and the Common Guarantee collectively
guarantee, and the New Guarantee and the Common Guarantee collectively will
guarantee, payments of Distributions and payments on liquidation of the Trust or
redemption of the Trust Securities, but in each case only to the extent that the
Trust holds funds on hand legally available therefor and has failed to make such
payments, as described herein. See "Description of New Securities -- Description
of New Guarantee." If the Corporation fails to make a required payment on the
Junior Subordinated Debentures, the Trust will not have sufficient funds to make
the related payments, including Distributions, on the Trust Securities. The
Guarantee and the Common Guarantee will not cover any such payment when the
Trust does not have sufficient funds on hand legally available therefor. In such
event, a holder of Capital Securities may institute a legal proceeding directly
against the Corporation to enforce its rights in respect of such payment. See
"Description of New Securities -- Description of New Junior Subordinated
Debentures -- Enforcement of Certain Rights By Holders of New Capital
Securities." The obligations of the Corporation under the Guarantee, the Common
Guarantee and the Junior Subordinated Debentures will be subordinate and junior
in right of payment to all Senior Indebtedness of the Corporation (as defined in
"Description of New Securities -- Description of New Junior Subordinated
Debentures -- Subordination") the outstanding principal amount of which was
approximately $1.1 billion at December 31, 1996.
The Trust Securities will be subject to mandatory redemption in a Like
Amount (as defined herein), (i) in whole but not in part, on the Stated Maturity
Date upon repayment of the Junior Subordinated Debentures at a redemption price
equal to the principal amount of, plus accrued interest on, the Junior
Subordinated Debentures (the "Maturity Redemption Price"), (ii) in whole but not
in part, contemporaneously with the optional prepayment of the Junior
Subordinated Debentures, upon the occurrence and continuation of a Special Event
(as defined herein) prior to December 17, 2006 (the "Initial Optional Prepayment
Date") at a redemption price equal to the Special Event Prepayment Price (as
defined below) (the "Special Event Redemption Price"), and (iii) in whole or in
part, on or after the Initial Optional Prepayment Date, contemporaneously with
the optional prepayment by the Corporation of the Junior Subordinated
Debentures, at a redemption price equal to the Optional Prepayment Price (as
defined below) (the "Optional Redemption Price"). Any of the Maturity Redemption
Price, the Special Event Redemption Price and the Optional Redemption Price may
be referred to herein as the "Redemption Price." See "Description of New
Securities -- Description of New Capital Securities -- Redemption." The Junior
Subordinated Debentures will be prepayable prior to the Stated Maturity Date at
the option of the Corporation (i) on or after the Initial Optional Prepayment
Date, in whole or in part, at a prepayment price (the "Optional Prepayment
Price") equal to 104.4950% of the principal amount thereof on the Initial
Optional Prepayment Date, declining ratably on each December 17 thereafter to
100% on or after December 17, 2016, plus accrued interest thereon to the date of
prepayment, or (ii) prior to the Initial Optional Prepayment Date, in whole but
not in part, upon the occurrence and continuation of a Special Event, at a
prepayment price (the "Special Event Prepayment Price") equal to the greater of
(a) 100% of the principal amount thereof or (b) the sum, as determined by a
Quotation Agent (as defined herein), of the present values of the principal
amount and premium payable with respect to an optional redemption of Junior
Subordinated Debentures on the Initial Optional Prepayment Date, together with
scheduled payments of interest on the Junior Subordinated Debentures from the
prepayment date to and including the Initial Optional Prepayment Date,
discounted to the prepayment date on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Adjusted Treasury Rate (as
defined herein) plus, in either case, accrued interest thereon to the date of
prepayment. Either of the Optional Prepayment Price or the Special Event
Prepayment Price may be referred to herein as the "Prepayment Price." See
"Description of New Securities -- Description of New Junior Subordinated
Debentures -- Optional Prepayment" and "-- Special Event Prepayment."
The Corporation will have the right at any time to terminate the Trust and
cause a Like Amount of the Junior Subordinated Debentures to be distributed to
the holders of the Trust Securities in liquidation of the Trust, subject to the
Corporation having received an opinion of counsel to the effect that such
distribution will not be a taxable event to holders of Capital Securities.
Unless the Junior Subordinated Debentures are distributed to the holders of the
Trust Securities, in the event of a liquidation of the Trust as described
herein, after satisfaction of liabilities to creditors of the Trust as required
by applicable law, the holders of the Capital
3
<PAGE> 5
Securities generally will be entitled to receive a Liquidation Amount of $1,000
per Capital Security plus accumulated and unpaid Distributions thereon to the
date of payment. See "Description of New Securities -- Description of New
Capital Securities -- Liquidation of the Trust and Distribution of Junior
Subordinated Debentures."
------------------------
The Trust is making the Exchange Offer of the New Capital Securities in
reliance on the position of the staff of the Division of Corporation Finance of
the Securities and Exchange Commission (the "Commission") as set forth in
certain interpretive letters addressed to third parties in other transactions.
However, neither the Corporation nor the Trust has sought its own interpretive
letter and there can be no assurance that the staff of the Division of
Corporation Finance of the Commission would make a similar determination with
respect to the Exchange Offer as it has in such interpretive letters to third
parties. Based on these interpretations by the staff of the Division of
Corporation Finance of the Commission, and subject to the two immediately
following sentences, the Corporation and the Trust believe that New Capital
Securities issued pursuant to this Exchange Offer in exchange for Old Capital
Securities may be offered for resale, resold and otherwise transferred by a
holder thereof (other than a holder who is a broker-dealer) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such New Capital Securities are acquired in the
ordinary course of such holder's business and that such holder is not
participating, and has no arrangement or understanding with any person to
participate, in a distribution (within the meaning of the Securities Act) of
such New Capital Securities. However, any holder of Old Capital Securities who
is an "affiliate", as such term is defined in Rule 405 under the Securities Act
(an "Affiliate"), of the Corporation or the Trust or who intends to participate
in the Exchange Offer for the purpose of distributing New Capital Securities, or
any broker-dealer who purchased Old Capital Securities from the Trust for resale
pursuant to Rule 144A under the Securities Act ("Rule 144A") or any other
available exemption under the Securities Act, (a) will not be able to rely on
the interpretations of the staff of the Division of Corporation Finance of the
Commission set forth in the above-mentioned interpretive letters, (b) will not
be permitted or entitled to tender such Old Capital Securities in the Exchange
Offer and (c) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or other transfer
of such Old Capital Securities unless such sale is made pursuant to an exemption
from such requirements. In addition, as described below, if any broker-dealer
holds Old Capital Securities acquired for its own account as a result of
market-making or other trading activities and exchanges such Old Capital
Securities for New Capital Securities, then such broker-dealer must deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resales of such New Capital Securities.
Each holder of Old Capital Securities who wishes to exchange Old Capital
Securities for New Capital Securities in the Exchange Offer will be required to
represent that (i) it is not an Affiliate of the Corporation or the Trust, (ii)
any New Capital Securities to be received by it are being acquired in the
ordinary course of its business, (iii) it has no arrangement or understanding
with any person to participate in a distribution (within the meaning of the
Securities Act) of such New Capital Securities, and (iv) if such holder is not a
broker-dealer, such holder is not engaged in, and does not intend to engage in,
a distribution (within the meaning of the Securities Act) of such New Capital
Securities. In addition, the Corporation and the Trust may require such holder,
as a condition to such holder's eligibility to participate in the Exchange
Offer, to furnish to the Corporation and the Trust (or an agent thereof) in
writing information as to the number of "beneficial owners" (within the meaning
of Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) on behalf of whom such holder holds the Capital Securities to
be exchanged in the Exchange Offer. Each broker-dealer that receives New Capital
Securities for its own account pursuant to the Exchange Offer must acknowledge
that it acquired the Old Capital Securities for its own account as the result of
market-making activities or other trading activities and must agree that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such New Capital Securities. The Letter of
Transmittal states that, by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. Based on the position taken by the staff of the
Division of Corporation Finance of the Commission in the interpretive letters
referred to above, the Corporation and the Trust believe that broker-dealers who
acquired Old Capital Securities for their own accounts, as a result of
market-making activities or other trading activities
4
<PAGE> 6
("Participating Broker-Dealers"), may fulfill their prospectus delivery
requirements with respect to the New Capital Securities received upon exchange
of such Old Capital Securities (other than Old Capital Securities which
represent an unsold allotment from the original sale of the Old Capital
Securities) with a prospectus meeting the requirements of the Securities Act,
which may be the prospectus prepared for an exchange offer so long as it
contains a description of the plan of distribution with respect to the resale of
such New Capital Securities. Accordingly, this Prospectus, as it may be amended
or supplemented from time to time, may be used by a Participating Broker-Dealer
during the period referred to below in connection with resales of New Capital
Securities received in exchange for Old Capital Securities where such Old
Capital Securities were acquired by such Participating Broker-Dealer for its own
account as a result of market-making or other trading activities. Subject to
certain provisions set forth in the Registration Rights Agreement, the
Corporation and the Trust have agreed that this Prospectus, as it may be amended
or supplemented from time to time, may be used by a Participating Broker-Dealer
in connection with resales of such New Capital Securities for a period ending
90-days after the Expiration Date (as defined herein) (subject to extension
under certain limited circumstances described below) or, if earlier, when all
such New Capital Securities have been disposed of by such Participating
Broker-Dealer. See "Plan of Distribution." However, a Participating
Broker-Dealer who intends to use this Prospectus in connection with the resale
of New Capital Securities received in exchange for Old Capital Securities
pursuant to the Exchange Offer must notify the Corporation or the Trust, or
cause the Corporation or the Trust to be notified, on or prior to the Expiration
Date, that it is a Participating Broker-Dealer. Such notice may be given in the
space provided for that purpose in the Letter of Transmittal or may be delivered
to the Exchange Agent at one of the addresses set forth herein under "The
Exchange Offer -- Exchange Agent." Any Participating Broker-Dealer who is an
Affiliate of the Corporation or the Trust may not rely on such interpretive
letters and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
See "The Exchange Offer -- Resales of New Capital Securities."
In that regard, each Participating Broker-Dealer who surrenders Old Capital
Securities pursuant to the Exchange Offer will be deemed to have agreed, by
execution of the Letter of Transmittal, that, upon receipt of notice from the
Corporation or the Trust of the occurrence of any event or the discovery of any
fact which makes any statement contained or incorporated by reference in this
Prospectus untrue in any material respect or which causes this Prospectus to
omit to state a material fact necessary in order to make the statements
contained or incorporated by reference herein, in light of the circumstances
under which they were made, not misleading or of the occurrence of certain other
events specified in the Registration Rights Agreement, such Participating
Broker-Dealer will suspend the sale of New Capital Securities (or the New
Guarantee or the New Junior Subordinated Debentures, as applicable) pursuant to
this Prospectus until the Corporation or the Trust has amended or supplemented
this Prospectus to correct such misstatement or omission and has furnished
copies of the amended or supplemented Prospectus to such Participating
Broker-Dealer or the Corporation or the Trust has given notice that the sale of
the New Capital Securities (or the New Guarantee or the New Junior Subordinated
Debentures, as applicable) may be resumed, as the case may be. If the
Corporation or the Trust gives such notice to suspend the sale of the New
Capital Securities (or the New Guarantee or the New Junior Subordinated
Debentures, as applicable), it shall extend the 90-day period referred to above
during which Participating Broker-Dealers are entitled to use this Prospectus in
connection with the resale of New Capital Securities by the number of days
during the period from and including the date of the giving of such notice to
and including the date when Participating Broker-Dealers shall have received
copies of the amended or supplemented Prospectus necessary to permit resales of
the New Capital Securities or to and including the date on which the Corporation
or the Trust has given notice that the sale of New Capital Securities (or the
New Guarantee or the New Junior Subordinated Debentures, as applicable) may be
resumed, as the case may be.
Prior to the Exchange Offer, there has been only a limited secondary market
and no public market for the Old Capital Securities. The New Capital Securities
will be a new issue of securities for which there currently is no market.
Although the Initial Purchasers have informed the Corporation and the Trust that
they each currently intend to make a market in the New Capital Securities, they
are not obligated to do so, and any such market making may be discontinued at
any time without notice. Accordingly, there can be no assurance as to the
development or liquidity of any market for the New Capital Securities. The
Corporation and the Trust
5
<PAGE> 7
currently do not intend to apply for listing of the New Capital Securities on
any securities exchange or for inclusion in the Nasdaq Stock Market, the
electronic securities market operated by the National Association of Securities
Dealers, Inc. ("Nasdaq").
Any Old Capital Securities not tendered and accepted in the Exchange Offer
will remain outstanding and will be entitled to all the same rights and will be
subject to the same limitations applicable thereto under the Declaration (except
for those rights which terminate upon consummation of the Exchange Offer).
Following consummation of the Exchange Offer, the holders of Old Capital
Securities will continue to be subject to all of the existing restrictions upon
transfer thereof and neither the Corporation nor the Trust will have any further
obligation to such holders (other than under certain limited circumstances) to
provide for registration under the Securities Act of the Old Capital Securities
held by them. To the extent that Old Capital Securities are tendered and
accepted in the Exchange Offer, a holder's ability to sell untendered Old
Capital Securities could be adversely affected. See "Risk
Factors -- Consequences of a Failure to Exchange Old Capital Securities."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD CAPITAL SECURITIES ARE URGED TO READ THIS PROSPECTUS
AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO
TENDER THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER.
Old Capital Securities may be tendered for exchange on or prior to 5:00
p.m., New York City time, on , 1997 (such time on such date being
hereinafter called the "Expiration Date"), unless the Exchange Offer is extended
by the Corporation or the Trust (in which case the term "Expiration Date" shall
mean the latest date and time to which the Exchange Offer is extended). Tenders
of Old Capital Securities may be withdrawn at any time on or prior to the
Expiration Date. The Exchange Offer is not conditioned upon any minimum
Liquidation Amount of Old Capital Securities being tendered for exchange.
However, the Exchange Offer is subject to certain events and conditions which
may be waived by the Corporation or the Trust and to the terms and provisions of
the Registration Rights Agreement. Old Capital Securities may be tendered in
whole or in part having an aggregate Liquidation Amount of not less than
$100,000 (100 Capital Securities) or any integral multiple of $1,000 Liquidation
Amount (one Capital Security) in excess thereof. The Corporation has agreed to
pay all expenses of the Exchange Offer. See "The Exchange Offer -- Fees and
Expenses." Holders of the Old Capital Securities whose Old Capital Securities
are accepted for exchange will not receive Distributions on such Old Capital
Securities and will be deemed to have waived the right to receive any
Distributions on such Old Capital Securities accumulated from and including
December 17, 1996. Accordingly, holders of New Capital Securities as of the
record date for the payment of Distributions on the Capital Securities on June
17, 1997 will be entitled to receive Distributions accumulated from and
including December 17, 1996. See "The Exchange Offer -- Distributions on New
Capital Securities."
Neither the Corporation nor the Trust will receive any cash proceeds from
the issuance of the New Capital Securities offered hereby. No dealer-manager is
being used in connection with this Exchange Offer. See "Use of Proceeds" and
"Plan of Distribution."
------------------------
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON REQUEST FROM
ADVANTA CORP., INVESTOR RELATIONS DEPARTMENT, WELSH & MCKEAN ROADS, P.O. BOX
844, SPRING HOUSE, PA 19477-0844; TELEPHONE: (215) 444-5335. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY ,
1997.
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<PAGE> 8
AVAILABLE INFORMATION
The Corporation is subject to the informational requirements of the
Exchange Act, and in accordance therewith, files reports, proxy statements and
other information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities of
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the regional offices of the Commission located at 7 World Trade Center, 13th
Floor, Suite 1300, New York, New York 10048 and Suite 1400, Citicorp Center,
14th Floor, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material can also be obtained at prescribed rates by writing to the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. Such information may also be accessed electronically by means of the
Commission's home page on the Internet (http://www.sec.gov).
No separate financial statements of the Trust have been included herein.
The Corporation and the Trust do not consider that such financial statements
would be material to holders of the New Capital Securities because the Trust is
a newly formed special purpose entity, has no operating history or independent
operations and is not engaged in and does not propose to engage in any activity
other than holding as trust assets the Junior Subordinated Debentures and
issuing the Trust Securities. See "Advanta Capital Trust I" and "Description of
New Securities." In addition, the Corporation does not expect that the Trust
will file reports under the Exchange Act with the Commission.
This Prospectus constitutes a part of a registration statement on Form S-4
(the "Registration Statement") filed by the Corporation and the Trust with the
Commission under the Securities Act. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission, and
reference is hereby made to the Registration Statement and to the exhibits
relating thereto for further information with respect to the Corporation, the
Trust and the New Securities. Any statements contained herein concerning the
provisions of any document are not necessarily complete, and, in each instance,
reference is made to the copy of such document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
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<PAGE> 9
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Corporation
pursuant to Section 13 of the Exchange Act are incorporated by reference in this
Prospectus:
(a) Annual Report on Form 10-K for the fiscal year ended December 31,
1996; and
(b) Current Reports on Form 8-K dated January 22, 1997 and March 17,
1997.
All documents filed by the Corporation pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the later of the termination of the Exchange Offer and the expiration
of the period permitted for resales by Participating Broker-Dealers (as
described in "Plan of Distribution") shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained in this Prospectus or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus or any supplement
thereto to the extent that a statement contained herein or therein (or in any
subsequently filed document that also is or is deemed to be incorporated by
reference herein or therein) modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
As used herein, the terms "Prospectus" and "herein" mean this Prospectus,
including the documents incorporated or deemed to be incorporated herein by
reference, as the same may be amended, supplemented or otherwise modified from
time to time. Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein do not purport to be complete, and
where reference is made to the particular provisions of such contract or other
document, such provisions are qualified in all respects by reference to all of
the provisions of such contract or other document. The Corporation will provide
without charge to each person to whom a copy of this Prospectus has been
delivered, upon the written or oral request of such person, a copy of any or all
of the documents referred to above which have been or may be incorporated by
reference herein (other than exhibits to such documents unless such exhibits are
specifically incorporated by reference in such documents). Requests for such
copies should be directed to: Investor Relations, Advanta Corp., Welsh and
McKean Roads, P.O. Box 844, Spring House, Pennsylvania 19477-0844; telephone:
(215) 444-5335.
8
<PAGE> 10
SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus.
ADVANTA CORP.
The Corporation serves consumers and small businesses through innovative
products and services primarily via direct, cost-effective delivery systems. The
Corporation 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 Corporation
utilizes consumer information attributes, including credit assessments, usage
patterns and other characteristics, enhanced by proprietary information to match
prospect profiles with appropriate products. At December 31, 1996, assets under
management totaled $19 billion.
Approximately 72% of total revenues for the year ended December 31, 1996
were derived from credit cards marketed through targeted direct mail campaigns.
For the past several years, the Corporation's strategy has been to market this
product in the form of a no annual fee, low variable-rate gold card. The
Corporation 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 13% of total revenues with a managed loan portfolio
of $2.8 billion. Mortgage loans are originated directly with consumers, as well
as through conduit relationships and wholesale purchases from brokers and other
financial institutions.
ADVANTA CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) a declaration of trust executed by the Corporation, as Sponsor, and Chase
Manhattan Bank Delaware, as Delaware Trustee, and the three individual trustees
named therein (the "Initial Individual Trustees"), and (ii) the filing of a
certificate of trust with the Delaware Secretary of State on December 5, 1996.
The Trust's business and affairs are conducted pursuant to the Declaration (as
defined herein) by the Issuer Trustees: The Chase Manhattan Bank, as Property
Trustee; Chase Manhattan Bank Delaware, as Delaware Trustee; and the three
individual Administrative Trustees who are employees or officers of or
affiliated with the Corporation. The Trust exists for the exclusive purposes of
(i) issuing and selling the Trust Securities, (ii) using the proceeds from the
sale of the Trust Securities to acquire the Junior Subordinated Debentures
issued by the Corporation and (iii) engaging in only those other activities
necessary, advisable or incidental thereto (such as registering the transfer of
the Trust Securities). Accordingly, the Junior Subordinated Debentures are and
will be the sole assets of the Trust, and payments under the Junior Subordinated
Debentures will be the sole revenue of the Trust. All of the Common Securities
are owned by the Corporation.
THE EXCHANGE OFFER
The Exchange Offer......... Up to $100,000,000 aggregate Liquidation Amount of
New Capital Securities are being offered in
exchange for a like aggregate Liquidation Amount of
Old Capital Securities. Old Capital Securities may
be tendered for exchange in whole or in part in a
Liquidation Amount of $100,000 (100 Capital
Securities) or any integral multiple of $1,000 (one
Capital Security) in excess thereof. The
Corporation and the Trust
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<PAGE> 11
are making the Exchange Offer in order to satisfy
their obligations under the Registration Rights
Agreement relating to the Old Capital Securities.
For a description of the procedures for tendering
Old Capital Securities, see "The Exchange
Offer -- Procedures for Tendering Old Capital
Securities."
Expiration Date............ 5:00 p.m., New York City time, on ,
1997, unless the Exchange Offer is extended by the
Corporation or the Trust (in which case the
Expiration Date will be the latest date and time to
which the Exchange Offer is extended). See "The
Exchange Offer -- Terms of the Exchange Offer."
Conditions to the
Exchange Offer........... The Exchange Offer is subject to certain
conditions, which may be waived by the Corporation
and the Trust in their sole discretion. The
Exchange Offer is not conditioned upon any minimum
Liquidation Amount of Old Capital Securities being
tendered. See "The Exchange Offer -- Conditions to
the Exchange Offer."
Offer...................... The Corporation and the Trust reserve the right in
their sole and absolute discretion, subject to
applicable law, at any time and from time to time,
to (i) delay the acceptance of the Old Capital
Securities for exchange, (ii) terminate the
Exchange Offer if certain specified conditions have
not been satisfied, (iii) extend the Expiration
Date of the Exchange Offer and retain all Old
Capital Securities tendered pursuant to the
Exchange Offer, subject, however, to the right of
holders of Old Capital Securities to withdraw their
tendered Old Capital Securities, or (iv) waive any
condition or otherwise amend the terms of the
Exchange Offer in any respect. See "The Exchange
Offer -- Terms of the Exchange Offer."
Withdrawal Rights.......... Tenders of Old Capital Securities may be withdrawn
at any time on or prior to the Expiration Date by
delivering a written notice of such withdrawal to
the Exchange Agent in conformity with certain
procedures set forth below under "The Exchange
Offer -- Withdrawal Rights."
Procedures for Tendering
Old Capital Securities..... Tendering holders of Old Capital Securities must
complete and sign a Letter of Transmittal in
accordance with the instructions contained therein
and forward the same by mail, facsimile or hand
delivery, together with any other required
documents, to the Exchange Agent, either with the
Old Capital Securities to be tendered or in
compliance with the specified procedures for
guaranteed delivery of Old Capital Securities.
Certain brokers, dealers, commercial banks, trust
companies and other nominees may also effect
tenders by book-entry transfer. Holders of Old
Capital Securities registered in the name of a
broker, dealer, commercial bank, trust company or
other nominee are urged to contact such person
promptly if they wish to tender Old Capital
Securities pursuant to the Exchange Offer. See "The
Exchange Offer -- Procedures for Tendering Old
Capital Securities."
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<PAGE> 12
Letters of Transmittal and certificates
representing Old Capital Securities should not be
sent to the Corporation or the Trust. Such
documents should only be sent to the Exchange
Agent.
Resales of New Capital
Securities............... The Corporation and the Trust are making the
Exchange Offer in reliance on the position of the
staff of the Division of Corporation Finance of the
Commission as set forth in certain interpretive
letters addressed to third parties in other
transactions. However, neither the Corporation nor
the Trust has sought its own interpretive letter
and there can be no assurance that the staff of the
Division of Corporation Finance of the Commission
would make a similar determination with respect to
the Exchange Offer as it has in such interpretive
letters to third parties. Based on these
interpretations by the staff of the Division of
Corporation Finance of the Commission, and subject
to the two immediately following sentences, the
Corporation and the Trust believe that New Capital
Securities issued pursuant to this Exchange Offer
in exchange for Old Capital Securities may be
offered for resale, resold and otherwise
transferred by a holder thereof (other than a
holder who is a broker-dealer) without further
compliance with the registration and prospectus
delivery requirements of the Securities Act,
provided that such New Capital Securities are
acquired in the ordinary course of such holder's
business and that such holder is not participating,
and has no arrangement or understanding with any
person to participate, in a distribution (within
the meaning of the Securities Act) of such New
Capital Securities. However, any holder of Old
Capital Securities who is an Affiliate of the
Corporation or the Trust or who intends to
participate in the Exchange Offer for the purpose
of distributing the New Capital Securities, or any
broker-dealer who purchased the Old Capital
Securities from the Trust for resale pursuant to
Rule 144A or any other available exemption under
the Securities Act, (a) will not be able to rely on
the interpretations of the staff of the Division of
Corporation Finance of the Commission set forth in
the above-mentioned interpretive letters, (b) will
not be permitted or entitled to tender such Old
Capital Securities in the Exchange Offer and (c)
must comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any sale or other transfer of such
Old Capital Securities unless such sale is made
pursuant to an exemption from such requirements. In
addition, as described below, if any broker-dealer
holds Old Capital Securities acquired for its own
account as a result of market-making or other
trading activities and exchanges such Old Capital
Securities for New Capital Securities, then such
broker-dealer must deliver a prospectus meeting the
requirements of the Securities Act in connection
with any resales of such New Capital Securities.
Each holder of Old Capital Securities who wishes to
exchange Old Capital Securities for New Capital
Securities in the Exchange Offer will be required
to represent that (i) it is not an Affiliate of the
Corporation or the Trust, (ii) any New Capital
Securities to be received by it are
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<PAGE> 13
being acquired in the ordinary course of its
business, (iii) it has no arrangement or
understanding with any person to participate in a
distribution (within the meaning of the Securities
Act) of such New Capital Securities, and (iv) if
such holder is not a broker-dealer, such holder is
not engaged in, and does not intend to engage in, a
distribution (within the meaning of the Securities
Act) of such New Capital Securities. Each
broker-dealer that receives New Capital Securities
for its own account pursuant to the Exchange Offer
must acknowledge that it acquired the Old Capital
Securities for its own account as the result of
market-making activities or other trading
activities and must agree that it will deliver a
prospectus meeting the requirements of the
Securities Act in connection with any resale of
such New Capital Securities. The Letter of
Transmittal states that, by so acknowledging and by
delivering a prospectus, a broker-dealer will not
be deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. Based on
the position taken by the staff of the Division of
Corporation Finance of the Commission in the
interpretive letters referred to above, the
Corporation and the Trust believe that
Participating Broker-Dealers who acquired Old
Capital Securities for their own accounts as a
result of market-making activities or other trading
activities may fulfill their prospectus delivery
requirements with respect to the New Capital
Securities received upon exchange of such Old
Capital Securities (other than Old Capital
Securities which represent an unsold allotment from
the original sale of the Old Capital Securities)
with a prospectus meeting the requirements of the
Securities Act, which may be the prospectus
prepared for an exchange offer so long as it
contains a description of the plan of distribution
with respect to the resale of such New Capital
Securities. Accordingly, this Prospectus, as it may
be amended or supplemented from time to time, may
be used by a Participating Broker-Dealer in
connection with resales of New Capital Securities
received in exchange for Old Capital Securities
where such Old Capital Securities were acquired by
such Participating Broker-Dealer for its own
account as a result of market-making or other
trading activities. Subject to certain provisions
set forth in the Registration Rights Agreement and
to the limitations described below under "The
Exchange Offer -- Resales of New Capital
Securities," the Corporation and the Trust have
agreed that this Prospectus, as it may be amended
or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with
resales of such New Capital Securities for a period
ending 90-days after the Expiration Date (subject
to extension under certain limited circumstances)
or, if earlier, when all such New Capital
Securities have been disposed of by such
Participating Broker-Dealer. See "Plan of
Distribution." Any Participating Broker-Dealer who
is an Affiliate of the Corporation or the Trust may
not rely on such interpretive letters and must
comply with the registration and prospectus
delivery requirements of the Securities Act in
connection with any resale transaction. See "The
Exchange Offer -- Resales of New Capital
Securities."
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<PAGE> 14
Exchange Agent............. The exchange agent with respect to the Exchange
Offer is The Chase Manhattan Bank (the "Exchange
Agent"). The applicable addresses, and telephone
and facsimile numbers, of the Exchange Agent are
set forth in "The Exchange Offer -- Exchange Agent"
and in the Letter of Transmittal.
Use of Proceeds............ Neither the Corporation nor the Trust will receive
any cash proceeds from the issuance of the New
Capital Securities offered hereby. See "Use of
Proceeds."
Certain Federal Income Tax
Consequences; ERISA
Considerations........... Holders of Old Capital Securities should review the
information set forth under "Certain Federal Income
Tax Consequences" and "ERISA Considerations" prior
to tendering Old Capital Securities in the Exchange
Offer.
THE NEW CAPITAL SECURITIES
Securities Offered......... Up to $100,000,000 aggregate Liquidation Amount of
the New Capital Securities which have been
registered under the Securities Act (Liquidation
amount of $1,000 per New Capital Security). The New
Capital Securities will be issued, and the Old
Capital Securities were issued, under the
Declaration. The New Capital Securities and any Old
Capital Securities which remain outstanding after
consummation of the Exchange Offer will vote
together as a single class for purposes of
determining whether holders of the requisite
percentage in outstanding Liquidation Amount
thereof have taken certain actions or exercised
certain rights under the Declaration. See
"Description of New Securities -- Description of
New Capital Securities -- Voting Rights; Amendment
of the Declaration." The terms of the New Capital
Securities are identical in all material respects
to the terms of the Old Capital Securities, except
that the New Capital Securities have been
registered under the Securities Act and will not be
subject to the $100,000 minimum Liquidation Amount
transfer restriction and certain other transfer
restrictions applicable to the Old Capital
Securities and will not provide for any increase in
the Distribution Rate thereon. See "The Exchange
Offer -- Purpose of the Exchange Offer,"
"Description of New Securities" and "Description of
Old Securities."
Distribution Dates......... June 17 and December 17 of each year, commencing
June 17, 1997.
Extension Periods.......... Distributions on the Capital Securities will be
deferred for the duration of any Extension Period
elected by the Corporation with respect to the
payment of interest on the Junior Subordinated
Debentures. No Extension Period will exceed 10
consecutive semi-annual periods or extend beyond
the Stated Maturity Date. See "Description of New
Securities -- Description of New Junior
Subordinated Debentures -- Option to Extend
Interest Payment Date" and "Certain Federal Income
Tax Consequences -- Interest Income and Original
Issue Discount."
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<PAGE> 15
Ranking.................... The New Capital Securities will rank pari passu,
and payments thereon will be made pro rata, with
the Old Capital Securities and the Common
Securities except with respect to the Common
Securities, in certain circumstances described
under "Description of New Securities -- Description
of New Capital Securities -- Subordination of
Common Securities." The New Junior Subordinated
Debentures will rank pari passu with the Old Junior
Subordinated Debentures and all other junior
subordinated debentures to be issued by the
Corporation ("Other Debentures"), which will be
issued and sold (if at all) to other trusts to be
established by the Corporation (if any), in each
case similar to the Trust ("Other Trusts"), and
will be unsecured and subordinate and rank junior
in right of payment to all Senior Indebtedness (as
defined herein) to the extent and in the manner set
forth in the Indenture. See "Description of New
Securities -- Description of New Junior
Subordinated Debentures." The New Guarantee will
rank pari passu with the Old Guarantee and all
other guarantees (if any) to be issued by the
Corporation with respect to capital securities (if
any) issued by Other Trusts ("Other Guarantees")
and will constitute an unsecured obligation of the
Corporation and will be subordinate and rank junior
in right of payment to all Senior Indebtedness to
the extent and in the manner set forth in the
Guarantee Agreement. See "Description of New
Securities -- Description of the New Guarantee."
Redemption................. The Trust Securities will be subject to mandatory
redemption in a Like Amount, (i) in whole but not
in part, on the Stated Maturity Date upon repayment
of the Junior Subordinated Debentures, (ii) in
whole but not in part, contemporaneously with the
optional prepayment of the Junior Subordinated
Debentures by the Corporation upon the occurrence
and continuation of a Special Event prior to the
Initial Optional Prepayment Date and (iii) in whole
or in part, on or after the Initial Optional
Prepayment Date contemporaneously with the optional
prepayment by the Corporation of the Junior
Subordinated Debentures, in each case at the
applicable Redemption Price. See "Description of
New Securities -- Description of New Capital
Securities -- Redemption."
Absence of Market for the
New Capital Securities... The New Capital Securities will be a new issue of
securities for which there currently is no market.
Although the Initial Purchasers have informed the
Trust and the Corporation that they each currently
intend to make a market in the New Capital
Securities, the Initial Purchasers are not
obligated to do so, and any such market making may
be discontinued at any time without notice.
Accordingly, there can be no assurance as to the
development or liquidity of any market for the New
Capital Securities. The Trust and the Corporation
do not intend to apply for listing of the New
Capital Securities on any securities exchange or
for inclusion in Nasdaq. See "Plan of
Distribution."
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<PAGE> 16
RISK FACTORS
Prospective investors should carefully review the information contained
elsewhere in this Prospectus and should particularly consider the following
matters in connection with the Exchange Offer and the New Capital Securities
offered hereby.
RANKING OF SUBORDINATE OBLIGATIONS UNDER THE GUARANTEE AND JUNIOR SUBORDINATED
DEBENTURES
The obligations of the Corporation under the Guarantee issued by it for the
benefit of holders of Capital Securities, as well as under the Junior
Subordinated Debentures, will be unsecured, will rank subordinate and junior in
right of payment to all present and future Senior Indebtedness of the
Corporation and will rank pari passu with obligations to or rights of the
Corporation's other general unsecured creditors, except that, in the case of a
bankruptcy or insolvency proceeding, the Corporation's obligations under the
Guarantee will rank subordinate and junior in right of payment to all
liabilities (other than Other Guarantees) of the Corporation. At December 31,
1996, the aggregate principal amount of outstanding Senior Indebtedness of the
Corporation was approximately $1.1 billion. The Corporation's operations are
largely conducted by its subsidiaries. Because the Corporation's subsidiaries
include banks and insurance companies that are subject to significant state and
federal regulation, the Corporation's ability to receive dividends and loans
from its subsidiaries is restricted. Further, the right of the Corporation 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 Capital Securities to benefit indirectly from such distribution)
is subject to the prior claims of creditors of that subsidiary, except to the
extent that the Corporation may itself be recognized as a creditor of that
subsidiary. Accordingly, the Junior Subordinated Debentures will be effectively
subordinated to all existing and future liabilities of the Corporation's
subsidiaries. At December 31, 1996, the subsidiaries of the Corporation had
total liabilities (excluding liabilities owed to the Corporation) of
approximately $3.5 billion. None of the Indenture, the Guarantee, the Common
Guarantee or the Declaration places any limitation on the amount of secured or
unsecured debt, including Senior Indebtedness, that may be incurred by the
Corporation or any of its subsidiaries. See "Description of New
Securities -- Description of the New Guarantee -- Status of the New Guarantee"
and "Description of New Securities -- Description of New Junior Subordinated
Debentures -- Subordination."
The ability of the Trust to pay amounts due on the Capital Securities is
dependent upon the Corporation making payments on the Junior Subordinated
Debentures as and when required. For a description of certain recent
developments that have adversely affected the Company's results of operations,
see "Recent Developments."
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSIDERATIONS
So long as no Debenture Event of Default shall have occurred and be
continuing, the Corporation will have the right under the Indenture to defer
payments of interest on the Junior Subordinated Debentures at any time or from
time to time for a period not exceeding 10 consecutive semi-annual periods with
respect to each Extension Period, provided that no Extension Period may extend
beyond the Stated Maturity Date. Upon any such deferral, semi-annual
Distributions on the Capital Securities by the Trust will be deferred (and the
amount of Distributions to which holders of the Capital Securities are entitled
will accumulate additional Distributions thereon at the rate of 8.99% per annum,
compounded semi-annually, but not exceeding the interest rate then accruing on
the Junior Subordinated Debentures) from the relevant payment date for such
Distributions during any such Extension Period.
The Corporation may extend any existing Extension Period, provided that
such extension does not cause such Extension Period to exceed 10 consecutive
semi-annual periods or to extend beyond the Stated Maturity Date. Upon the
termination of any Extension Period and the payment of all interest then accrued
and unpaid on the Junior Subordinated Debentures (together with interest thereon
at the annual rate of 8.99%, compounded semi-annually, to the extent permitted
by applicable law), the Corporation may elect to begin a new Extension Period,
subject to the above requirements. There is no limitation on the number of times
that the Corporation may elect to begin an Extension Period. See "Description of
New Securities -- Description of New Capital Securities -- Distributions" and
"Description of New Securities -- Description of New Junior Subordinated
Debentures -- Option to Extend Interest Payment Date."
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<PAGE> 17
Should the Corporation exercise its right to defer payments of interest on
the Junior Subordinated Debentures, each holder of Capital Securities will be
required to accrue income (as original issue discount ("OID")) in respect of the
deferred stated interest allocable to its Capital Securities for United States
federal income tax purposes, which will be allocated but not distributed to
holders of Capital Securities. As a result, during an Extension Period, each
holder of Capital Securities will recognize income for United States federal
income tax purposes in advance of the receipt of cash and will not receive the
cash related to such income from the Trust if the holder disposes of the Capital
Securities prior to the record date for the payment of Distributions thereafter.
See "Certain Federal Income Tax Consequences -- Interest Income and Original
Issue Discount" and "-- Sales of Capital Securities."
Should the Corporation elect to exercise its right to defer payments of
interest on the Junior Subordinated Debentures, the market price of the Capital
Securities is likely to be affected. A holder that disposes of its Capital
Securities during an Extension Period, therefore, might not receive the same
return on its investment as a holder that continues to hold its Capital
Securities. In addition, the mere existence of the Corporation's right to defer
payments of interest on the Junior Subordinated Debentures may cause the market
price of the Capital Securities to be more volatile than the market prices of
other securities on which OID accrues that are not subject to such deferrals.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION; POSSIBLE TAX LAW CHANGES AFFECTING THE
CAPITAL SECURITIES
Upon the occurrence and continuation of a Special Event (as defined under
"Description of New Securities -- Description of New Junior Subordinated
Debentures -- Special Event Prepayment") prior to the Initial Optional
Prepayment Date, the Corporation will have the right to prepay the Junior
Subordinated Debentures in whole (but not in part) at the Special Event
Prepayment Price within 90 days following the occurrence of such Special Event
and therefore cause a mandatory redemption of the Capital Securities at the
Special Event Redemption Price. The Corporation also will have the right at any
time to terminate the Trust and, after satisfaction of claims of creditors as
provided by applicable law, to cause the Junior Subordinated Debentures to be
distributed to the holders of the Trust Securities. See "Description of New
Securities -- Description of New Capital Securities -- Redemption" and
"Description of New Securities -- Description of New Capital
Securities -- Liquidation of the Trust and Distribution of New Junior
Subordinated Debentures."
On February 6, 1997, as part of President Clinton's Fiscal 1998 Budget
Proposal, the Treasury Department proposed legislation (the "Proposed
Legislation") which would, among other things, generally deny corporate issuers
a deduction for interest in respect of certain debt obligations, such as the
Junior Subordinated Debentures, issued on or after the "date of first committee
action" if such debt obligations have a maximum term in excess of 15 years and
are not shown as indebtedness on the issuer's applicable consolidated balance
sheet. Neither of the tax-writing committees of Congress has considered or acted
upon the Proposed Legislation and the New Junior Subordinated Debentures should
be considered as having been issued on December 17, 1996. If the Proposed
Legislation were enacted with the effective date proposed by the Treasury
Department, such legislation would not apply to the Junior Subordinated
Debentures. There can be no assurance, however, that such effective date will be
incorporated into the Proposed Legislation, if enacted, or that other
legislation enacted after the date hereof will not otherwise adversely affect
the ability of the Corporation to deduct the interest payable on the Junior
Subordinated Debentures. Such a change could give rise to a Special Event, which
may permit the Corporation to cause a redemption of the Trust Securities at the
Special Event Redemption Price by electing to prepay the Junior Subordinated
Debentures at the Special Event Prepayment Price. See "Description of New
Securities -- Description of New Capital Securities -- Redemption," "Description
of New Securities -- Description of New Junior Subordinated
Debentures -- Special Event Prepayment" and "Certain Federal Income Tax
Consequences -- Proposed Tax Legislation."
POSSIBLE ADVERSE EFFECT ON MARKET PRICES
There can be no assurance as to the market prices for New Capital
Securities or New Junior Subordinated Debentures distributed to the holders of
New Capital Securities if a termination of the Trust
16
<PAGE> 18
were to occur. Accordingly, the New Capital Securities or the New Junior
Subordinated Debentures may trade at a discount from the price that the investor
paid to purchase the New Capital Securities. Because holders of Capital
Securities may receive Junior Subordinated Debentures in liquidation of the
Trust and because Distributions are otherwise limited to payments on the Junior
Subordinated Debentures, prospective purchasers of New Capital Securities are
also making an investment decision with regard to the New Junior Subordinated
Debentures and should carefully review all the information regarding the New
Junior Subordinated Debentures contained herein. See "Description of New
Securities -- Description of New Junior Subordinated Debentures."
RIGHTS UNDER THE GUARANTEE
The Chase Manhattan Bank will act as Guarantee Trustee and will hold the
Guarantee for the benefit of the holders of the Capital Securities. The Chase
Manhattan Bank will also act as Property Trustee and as Debenture Trustee under
the Indenture. Chase Manhattan Bank Delaware will act as Delaware Trustee under
the Declaration. The Old Guarantee guarantees and the New Guarantee will
guarantee, as the case may be, to the holders of the Capital Securities the
following payments, to the extent not paid by the Trust: (i) any accumulated and
unpaid Distributions required to be paid on the Capital Securities, to the
extent that the Trust has funds on hand legally available therefor; (ii) the
applicable Redemption Price with respect to any Capital Securities called for
redemption, to the extent that the Trust has funds on hand legally available
therefor; and (iii) upon a voluntary or involuntary termination and liquidation
of the Trust (unless the Junior Subordinated Debentures are distributed to
holders of the Capital Securities), the lesser of (a) the aggregate of the
Liquidation Amount and all accumulated and unpaid Distributions to the date of
payment, to the extent that the Trust has funds on hand legally available
therefor on such date and (b) the amount of assets of the Trust remaining
available for distribution to holders of the Capital Securities on such date.
The holders of a majority in Liquidation Amount of the Capital Securities will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Guarantee Trustee in respect of the Guarantee or
to direct the exercise of any trust power conferred upon the Guarantee Trustee.
Any holder of the Capital Securities may institute a legal proceeding directly
against the Corporation to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Trust, the Guarantee Trustee or any
other person or entity. If the Corporation defaults on its obligation to pay
amounts payable under the Junior Subordinated Debentures, the Trust will not
have sufficient funds for the payment of Distributions or amounts payable on
redemption of the Capital Securities or otherwise, and, in such event, holders
of the Capital Securities will not be able to rely upon the Guarantee for
payment of such amounts. Instead, in the event a Debenture Event of Default
shall have occurred and be continuing and such event is attributable to the
failure of the Corporation to pay principal of or premium, if any, or interest
on the Junior Subordinated Debentures on the payment date on which such payment
is due and payable, then a holder of Capital Securities may institute a legal
proceeding directly against the Corporation for enforcement of payment to such
holder of the principal of or premium, if any, or interest on such Junior
Subordinated Debentures having a principal amount equal to the Liquidation
Amount of the Capital Securities of such holder (a "Direct Action").
Notwithstanding any payments made to a holder of Capital Securities by the
Corporation in connection with a Direct Action, the Corporation shall remain
obligated to pay the principal of and premium, if any, and interest on the
Junior Subordinated Debentures, and the Corporation shall be subrogated to the
rights of the holder of such Capital Securities with respect to payments on the
Capital Securities to the extent of any payments made by the Corporation to such
holder in any Direct Action. Except as described herein, holders of Capital
Securities will not be able to exercise directly any other remedy available to
the holders of the Junior Subordinated Debentures or to assert directly any
other rights in respect of the Junior Subordinated Debentures. See "Description
of New Securities -- Description of New Junior Subordinated Debentures --
Enforcement of Certain Rights by Holders of Capital Securities" and "Description
of New Securities -- Description of New Junior Subordinated
Debentures -- Debenture Events of Default" and "Description of New
Securities -- Description of the New Guarantee." The Declaration will provide
that each holder of Capital Securities by acceptance thereof agrees to the
provisions of the Indenture.
17
<PAGE> 19
LIMITED VOTING RIGHTS
Holders of Capital Securities generally will have voting rights relating
only to the modification of the terms of the Capital Securities, the termination
or liquidation of the Trust, and the exercise of the Trust's rights as holder of
the Junior Subordinated Debentures. Holders of Capital Securities will not be
entitled to vote to appoint, remove or replace, or to increase or decrease the
number of, the Issuer Trustees, which voting rights are vested exclusively in
the holder of the Common Securities, except as described under "Description of
New Securities -- Description of New Capital Securities -- Removal of Issuer
Trustees." The Property Trustee, the Administrative Trustees and the Corporation
may amend the Declaration without the consent of holders of Capital Securities
to ensure that the Trust will be classified for United States federal income tax
purposes as a grantor trust even if such action adversely affects the interests
of such holders. See "Description of New Securities -- Description of New
Capital Securities -- Voting Rights; Amendment of the Declaration."
CONSEQUENCES OF A FAILURE TO EXCHANGE OLD CAPITAL SECURITIES
The Old Capital Securities have not been registered under the Securities
Act or any state securities laws and therefore may not be offered, sold or
otherwise transferred except in compliance with the registration requirements of
the Securities Act and any other applicable securities laws, or pursuant to an
exemption therefrom or in a transaction not subject thereto, and in each case in
compliance with certain other conditions and restrictions. Old Capital
Securities which remain outstanding after consummation of the Exchange Offer
will continue to bear a legend reflecting such restrictions on transfer. In
addition, upon consummation of the Exchange Offer, holders of Old Capital
Securities which remain outstanding will not be entitled to any rights to have
such Old Capital Securities registered under the Securities Act or to any
similar rights under the Registration Rights Agreement (subject to certain
limited exceptions). The Corporation and the Trust do not intend to register
under the Securities Act any Old Capital Securities which remain outstanding
after consummation of the Exchange Offer (subject to such limited exceptions, if
applicable). To the extent that Old Capital Securities are tendered and accepted
in the Exchange Offer, a holder's ability to sell untendered Old Capital
Securities could be adversely affected.
The New Capital Securities and any Old Capital Securities which remain
outstanding after consummation of the Exchange Offer will vote together as a
single class for purposes of determining whether holders of the requisite
percentage in outstanding Liquidation Amount thereof have taken certain actions
or exercised certain rights under the Declaration. See "Description of New
Securities -- Description of New Capital Securities -- Voting Rights; Amendment
of the Declaration."
The Old Capital Securities provide, among other things, that, if a
registration statement relating to the Exchange Offer has not been filed within
150 days after December 17, 1996 and declared effective on or prior to the 30th
day after such required filing date, the rate of Distributions (the
"Distribution Rate") borne by the Old Capital Securities, currently 8.99% per
annum, commencing on the 31st day after such required filing date will increase
by 0.25% per annum until the Exchange Offer is consummated. Upon consummation of
the Exchange Offer, holders of Old Capital Securities will not be entitled to
any increase in the Distribution Rate thereon or any further registration rights
under the Registration Rights Agreement, except under limited circumstances. See
"Description of Old Capital Securities."
ABSENCE OF PUBLIC MARKET
The Old Capital Securities were issued to, and the Corporation believes the
Old Capital Securities are currently owned by, a relatively small number of
beneficial owners. The Old Capital Securities have not been registered under the
Securities Act and will be subject to restrictions on transferability if they
are not exchanged for the New Capital Securities. Although the New Capital
Securities generally may be resold or otherwise transferred by the holders (who
are not Affiliates of the Corporation or the Trust) without compliance with the
registration requirements under the Securities Act, they will constitute a new
issue of securities with no established trading market. Old Capital Securities
may be transferred by the holders thereof only in blocks having a Liquidation
Amount of not less than $100,000 (100 Old Capital Securities). New
18
<PAGE> 20
Capital Securities may be transferred by the holders thereof in blocks having a
Liquidation Amount of $1,000 (one New Capital Security) or integral multiples
thereof. The Corporation and the Trust have been advised by the Initial
Purchasers that the Initial Purchasers presently intend to make a market in the
New Capital Securities. However, the Initial Purchasers are not obligated to do
so and any market-making activity with respect to the New Capital Securities may
be discontinued at any time without notice. In addition, such market-making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act and may be limited during the Exchange Offer. Accordingly, no
assurance can be given that an active public or other market will develop for
the New Capital Securities or the Old Capital Securities or as to the liquidity
of or the trading market for the New Capital Securities or the Old Capital
Securities. If an active public market does not develop, the market price and
liquidity of the New Capital Securities may be adversely affected.
If a public trading market develops for the New Capital Securities, future
trading prices will depend on many factors, including, among other things,
prevailing interest rates, the Corporation's results and the market for similar
securities. Depending on prevailing interest rates, the market for similar
securities and other factors, including the financial condition of the
Corporation, the New Capital Securities may trade at a discount.
Notwithstanding the registration of the New Capital Securities in the
Exchange Offer, holders who are Affiliates of the Corporation or the Trust may
publicly offer for sale or resell the New Capital Securities only in compliance
with the provisions of Rule 144 under the Securities Act.
Each broker-dealer that receives New Capital Securities for its own account
in exchange for Old Capital Securities, where such Old Capital Securities were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such New Capital Securities. See "Plan of
Distribution."
EXCHANGE OFFER PROCEDURES
Issuance of the New Capital Securities in exchange for Old Capital
Securities pursuant to the Exchange Offer will be made only after a timely
receipt by the Trust of such Old Capital Securities, a properly completed and
duly executed Letter of Transmittal and all other required documents. Therefore,
holders of the Old Capital Securities desiring to tender such Old Capital
Securities in exchange for New Capital Securities should allow sufficient time
to ensure timely delivery. Neither the Corporation nor the Trust is under any
duty to give notification of defects or irregularities with respect to the
tenders of Old Capital Securities for exchange.
19
<PAGE> 21
ADVANTA CORP.
The Corporation serves consumers and small businesses through innovative
products and services primarily via direct, cost-effective delivery systems. The
Corporation 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 Corporation
utilizes consumer information attributes, including credit assessments, usage
patterns and other characteristics, enhanced by proprietary information to match
prospect profiles with appropriate products. At December 31, 1996, assets under
management totaled $19 billion.
Approximately 72% of total revenues for the year ended December 31, 1996
were derived from credit cards marketed through targeted direct mail campaigns.
For the past several years, the Corporation's strategy has been to market this
product in the form of a no annual fee, low variable-rate gold card. The
Corporation 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 13% of total revenues with a managed loan portfolio
of $2.8 billion. Mortgage loans are originated directly with consumers, as well
as through conduit relationships and wholesale purchases from brokers and other
financial institutions.
The Corporation was incorporated in Delaware in 1974 as Teachers Service
Organization, Inc., the successor to a business originally founded in 1951. In
January 1988, the Corporation's name was changed from TSO Financial Corp. to
Advanta Corp. The Corporation's principal executive office is located at Welsh &
McKean Roads, P.O. Box 844, Spring House, Pennsylvania 19477-0844. The
Corporation's telephone number at its principal executive office is (215)
657-4000.
USE OF PROCEEDS
Neither the Corporation nor the Trust will receive any cash proceeds from
the issuance of the New Capital Securities. In consideration for issuing the New
Capital Securities in exchange for the Old Capital Securities as described in
this Prospectus, the Trust will receive Old Capital Securities in like
Liquidation Amount. The Old Capital Securities surrendered in exchange for the
New Capital Securities will be retired and canceled.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratios of earnings to fixed charges of
the Corporation for the respective periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges(1)................... 1.97x 2.26x 2.71x 2.52x 1.81x
</TABLE>
- ---------------
(1) 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.
20
<PAGE> 22
CAPITALIZATION
The following table sets forth the actual audited capitalization of the
Corporation and its consolidated subsidiaries at December 31, 1996. The table
should be read in conjunction with the Consolidated Financial Statements of the
Corporation and the related Notes thereto included in the documents incorporated
by reference herein. See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
(IN THOUSANDS)
<S> <C>
Long-Term Debt............................................................... $ 1,393,095
----------
Corporation-obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trust Holding Solely Subordinated Debentures of the
Corporation................................................................ 100,000
----------
Stockholders' Equity:
Class A Preferred Stock, $1,000 par value; 1,010 shares authorized,
issued and outstanding................................................. 1,010
Class B Preferred Stock, $.01 par value; authorized 1,000,000 shares;
issued and outstanding 25,000 shares................................... 0
Class A Common Stock, $.01 par value; authorized 200,000,000 shares;
issued and outstanding 17,945,471 shares............................... 179
Class B Common Stock, $.01 par value; authorized 200,000,000 shares;
issued and outstanding 25,592,764 shares............................... 256
Additional paid in capital, net......................................... 309,250
Retained earnings, net.................................................. 541,383
Less: Treasury Stock at cost, 1,231 shares of Class B Common Stock...... (42)
----------
Total stockholders' equity......................................... 852,036
----------
Total Capitalization......................................................... $ 2,345,131
==========
</TABLE>
21
<PAGE> 23
SUMMARY FINANCIAL DATA
The following table contains selected consolidated financial data for the
Corporation and its subsidiaries for the five years ended December 31, 1996. The
financial data for each of the years ended December 31, 1992 through 1996 have
been derived from audited financial statements. The summary below should be read
in conjunction with the Consolidated Financial Statements of the Corporation and
the related Notes thereto and Management's Discussion and Analysis of Financial
Condition and Results of Operations which are contained in each of the
Corporation's Annual Reports on Form 10-K for the years ended December 31, 1992
through 1996. See "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net interest income........................................ $ 78,265 $ 72,900 $ 70,381 $ 78,644 $ 73,176
Noninterest income......................................... 806,532 543,014 395,808 255,580 193,144
Net operating revenues(1).................................. 850,977 615,914 447,837 334,224 266,320
Provision for credit losses................................ 96,862 53,326 34,198 29,802 47,138
Operating expenses......................................... 523,174 350,685 266,784 181,167 142,082
Income before income taxes and extraordinary item.......... 264,761 211,903 165,207 123,255 77,100
Income before extraordinary item........................... 175,657 136,677 106,063 77,920 48,037
Net income................................................. 175,657 136,677 106,063 76,647 48,037
PER COMMON SHARE DATA
Income before extraordinary item........................... $ 3.89 $ 3.20 $ 2.58 $ 1.95 $ 1.38
Net income................................................. 3.89 3.20 2.58 1.92 1.38
FINANCIAL CONDITION -- PERIOD END
Investments and money market instruments................... $ 1,671,309 $ 1,090,047 $ 671,661 $ 542,222 $ 521,567
Gross receivables
Owned.................................................... 2,656,641 2,762,927 1,964,444 1,277,305 998,244
Securitized.............................................. 13,632,552 9,452,428 6,190,793 3,968,856 2,721,726
Managed.................................................. 16,289,193 12,215,355 8,155,237 5,246,161 3,719,970
Total assets
Owned.................................................... 5,583,959 4,524,259 3,113,048 2,140,195 1,775,067
Managed.................................................. 19,216,511 13,976,687 9,303,841 6,109,051 4,496,793
Deposits................................................... 1,860,058 1,906,601 1,159,358 1,254,881 1,204,486
Long-term debt............................................. 1,393,095 587,877 666,033 368,372 173,668
Capital Securities......................................... 100,000 0 0 0 0
Stockholders' equity....................................... 852,036 672,964 441,690 342,741 174,870
Stockholders' equity, Capital Securities and long-term
debt..................................................... 2,345,131 1,260,841 1,107,723 711,113 348,538
</TABLE>
22
<PAGE> 24
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1996 1995 1994 1993 1992
----- ----- ----- ----- -----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SELECTED FINANCIAL RATIOS
Return on average assets.............................................. 3.16% 4.06% 4.47% 3.91% 2.82%
Return on average common equity....................................... 25.31 26.15 26.97 27.50 33.32
Return on average total equity........................................ 22.07 24.75 26.97 27.50 33.32
Equity/Owned assets(4)................................................ 17.05 14.87 14.19 16.01 9.85
Dividend payout....................................................... 10.75 9.97 9.24 9.56 7.69
Managed net interest margin(2)........................................ 6.32 5.87 6.72 7.77 8.05
Allowance for credit losses at period end as a percentage of gross
owned receivables................................................... 3.4 1.9 2.1 2.4 4.0
Impaired assets at period end as a percentage of gross managed
receivables......................................................... 2.6 1.4 1.3 1.8 2.5
Managed net charge-offs as a percentage of average gross
receivables......................................................... 3.2(3) 2.2 2.3 2.9 3.4
Risk-based capital ratios
Advanta National Bank USA
Tier I............................................................ 10.15 7.30 7.95 7.19 9.84
Tier I and II..................................................... 15.84 11.56 12.04 12.06 11.12
Leverage ratio.................................................... 7.35 6.79 8.15 6.03 7.57
Advanta National Bank
Tier I............................................................ 11.13 8.04 -- -- --
Tier I and II..................................................... 17.20 12.28 -- -- --
Leverage ratio.................................................... 7.15 7.87 -- -- --
</TABLE>
- ---------------
(1) Excludes gains on sales of credit card relationships in 1994 and 1996.
(2) Combination of owned interest earning assets/interest-bearing liabilities
and securitized credit card assets/liabilities.
(3) In the third quarter of 1996, the Company adopted a new charge-off
methodology related to bankrupt credit card accounts, providing for up to a
90-day (rather than up to a 30-day) investigative period following
notification of the bankruptcy petition, prior to charge-off. Under the
prior methodology, the charge-off rate was 3.5%
(4) In 1996, equity/owned assets includes capital securities as equity. The
ratio without capital securities was 15.26%.
RECENT DEVELOPMENTS
On March 17, 1997, the Corporation announced that it expects to report 1997
results well below previous expectations. The Corporation stated it expects to
report a loss in the area of $20 million, or approximately $0.44 cents per
share, for the first quarter, and to report net profit for full-year 1997 of
approximately $1.50 per share. This interruption in the Corporation's historical
pattern of strong financial results reflects a number of factors, including
continuing increases in consumer bankruptcies and charge-offs and lower
receivable balances than originally anticipated in its credit card business. The
Corporation's mortgage financing, leasing and insurance businesses continue to
perform well. In addition to considering other strategic alternatives with its
financial and other advisors, the Corporation is pursuing a number of steps to
return the Corporation to its historical level of financial performance by
increasing revenues and stemming credit card losses. As a result of the
announcement, the ratings of the Old Capital Securities were changed from "ba2"
to "b1", "BB" to "BB-", "BBB-" to "BB", "BBB" to "BB+" and "BBB-" to "BB+" by
Moody's Investors Service, Inc., Standard & Poor's Ratings Services, Duff &
Phelps Credit Rating Co., Fitch Investors Service, L.P. and Thompson Bankwatch,
Inc., respectively.
This Prospectus and the documents incorporated by reference herein contain
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. The most significant
among these risks and uncertainties are: (1) the Corporation's managed net
interest margin, which in turn is affected by the Corporation's success in
originating new credit card accounts, the receivables volume and the initial
pricing of new accounts, the impact of repricing existing accounts and account
attrition, the mix of account types and interest rate fluctuations; (2) the
level of delinquencies and charge-offs; and (3) the level of expenses. Earnings
also may be affected by factors that affect consumer debt, competitive pressures
and the ratings on debt of the Corporation and its subsidiaries. Additional
risks that may affect the Corporation's future performance are detailed
elsewhere in this Prospectus and in the Corporation's filings with the
Commission that are incorporated by reference herein. See "Incorporation of
Certain Documents by Reference."
23
<PAGE> 25
ADVANTA CAPITAL TRUST I
The Trust is a statutory business trust formed under Delaware law pursuant
to (i) a declaration of trust, dated as of December 5, 1996, executed by the
Corporation, as Sponsor, the Delaware Trustee and the Initial Individual
Trustees named therein (the "Initial Declaration"), and (ii) the filing of a
certificate of trust with the Secretary of State of the State of Delaware on
December 5, 1996. The Initial Declaration was replaced by an amended and
restated declaration of trust dated as of December 17, 1996 (the "Declaration")
executed by the Corporation, as Sponsor, the Initial Individual Trustees, who
contemporaneously withdrew as trustees, and the Issuer Trustees (as defined
herein). The Trust exists for the exclusive purposes of (i) issuing and selling
the Trust Securities, which represent undivided beneficial interests in the
assets of the Trust, (ii) using the proceeds of the sale of the Trust Securities
to acquire the Junior Subordinated Debentures and (iii) engaging in only those
other activities necessary, advisable or incidental thereto. Accordingly, the
Junior Subordinated Debentures will be the sole assets of the Trust and payments
under the Junior Subordinated Debentures will be the sole revenues of the Trust.
All of the Common Securities are owned directly or indirectly by the
Corporation. The Common Securities will rank pari passu, and payments will be
made thereon pro rata, with the Capital Securities, except that upon the
occurrence and during the continuance of an Event of Default under the
Declaration resulting from a Debenture Event of Default, the rights of the
Corporation as holder of the Common Securities to payments in respect of
Distributions and payments upon liquidation, redemption or otherwise will be
subordinated and rank junior to the rights of the holders of the Capital
Securities. See "Description of New Capital Securities -- Subordination of
Common Securities." The Corporation has acquired Common Securities in a
Liquidation Amount equal to 3% of the total capital of the Trust. The Trust has
a term of 31 years but may terminate earlier as provided in the Declaration. The
Trust's business and affairs are conducted by its trustees, each appointed by
the Corporation as holder of the Common Securities. The trustees of the Trust
are The Chase Manhattan Bank, as Property Trustee, Chase Manhattan Bank
Delaware, as Delaware Trustee, and three individual trustees (the
"Administrative Trustees") who are employees or officers of or affiliated with
the Corporation (collectively, the "Issuer Trustees"). The Chase Manhattan Bank,
as Property Trustee, will act as sole indenture trustee under the Declaration.
The Chase Manhattan Bank will also act as indenture trustee under the Guarantee
and the Indenture. See "Description of New Securities -- Description of the New
Guarantee" and "-- Description of New Junior Subordinated Debentures." The
holder of the Common Securities of the Trust or, if an Event of Default under
the Declaration has occurred and is continuing, the holders of a majority in
Liquidation Amount of the Capital Securities, will be entitled to appoint,
remove or replace the Property Trustee and/or the Delaware Trustee. In no event
will the holders of the Capital Securities have the right to vote to appoint,
remove or replace the Administrative Trustees; such voting rights will be vested
exclusively in the holder of the Common Securities. The duties and obligations
of each Issuer Trustee are governed by the Declaration. The Corporation will
pay, directly or indirectly, all fees, expenses, debts and obligations (other
than the Trust Securities) related to the Trust and the offering of the Capital
Securities, including all ongoing costs, expenses and liabilities of the Trust.
The principal executive office of the Trust is c/o Advanta Corp., 501 Carr Road,
Wilmington, Delaware 19809.
24
<PAGE> 26
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Old Capital Securities, the Corporation
and the Trust entered into the Registration Rights Agreement with the Initial
Purchasers, pursuant to which the Corporation and the Trust agreed to file and
to use their best efforts to cause to become effective with the Commission a
registration statement with respect to the exchange of the Old Capital
Securities for the New Capital Securities. A copy of the Registration Rights
Agreement has been filed as an Exhibit to the Registration Statement of which
this Prospectus is a part.
The Exchange Offer is being made to satisfy the contractual obligations of
the Corporation and the Trust under the Registration Rights Agreement. The form
and terms of the New Capital Securities are the same as the form and terms of
the Old Capital Securities except that the New Capital Securities have been
registered under the Securities Act and will not be subject to the $100,000
minimum Liquidation Amount transfer restriction and certain other transfer
restrictions applicable to the Old Capital Securities and will not provide for
any increase in the Distribution Rate thereon. In that regard, the Old Capital
Securities provide, among other things, that, if a registration statement
relating to the Exchange Offer has not been filed within 150 days after December
17, 1996 and declared effective on or prior to the 30th day after such required
filing date, the Distribution Rate borne by the Old Capital Securities,
currently 8.99% per annum, commencing on the 31st day after such required filing
date will increase by 0.25% per annum until the Exchange Offer is consummated.
Upon consummation of the Exchange Offer, holders of Old Capital Securities will
not be entitled to any increase in the Distribution Rate thereon or any further
registration rights under the Registration Rights Agreement, except under
limited circumstances. See "Risk Factors -- Consequences of a Failure to
Exchange Old Capital Securities" and "Description of Old Capital Securities."
The Exchange Offer is not being made to, nor will the Trust accept tenders
for exchange from, holders of Old Capital Securities in any jurisdiction in
which the Exchange Offer or the acceptance thereof would not be in compliance
with the securities or blue sky laws of such jurisdiction.
Unless the context requires otherwise, the term "holder" with respect to
the Exchange Offer means any person in whose name the Old Capital Securities are
registered on the books of the Trust or any other person who has obtained a
properly completed bond power from such holder, or any person whose Old Capital
Securities are held of record by The Depository Trust Company ("DTC") who
desires to deliver such Old Capital Securities by book-entry transfer at DTC.
Pursuant to the Exchange Offer, the Corporation will exchange promptly
after the Expiration Date (as defined herein) the Old Guarantee for the New
Guarantee and the Old Junior Subordinated Debentures, in an amount corresponding
to the Old Capital Securities accepted for exchange, for a like aggregate
principal amount of the New Junior Subordinated Debentures. The New Guarantee
and New Junior Subordinated Debentures have been registered under the Securities
Act.
TERMS OF THE EXCHANGE OFFER
The Trust hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal, to
exchange up to $100,000,000 aggregate Liquidation Amount of New Capital
Securities for a like aggregate Liquidation Amount of Old Capital Securities
properly tendered on or prior to the Expiration Date and not properly withdrawn
in accordance with the procedures described below. The Trust will issue,
promptly after the Expiration Date, an aggregate Liquidation Amount of up to
$100,000,000 of New Capital Securities in exchange for a like principal amount
of outstanding Old Capital Securities tendered and accepted in connection with
the Exchange Offer. Holders may tender their Old Capital Securities in whole or
in part in a Liquidation Amount of not less than $100,000 (100 Capital
Securities) or any integral multiple of $1,000 Liquidation Amount (one Capital
Security) in excess thereof.
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The Exchange Offer is not conditioned upon any minimum Liquidation Amount
of Old Capital Securities being tendered. As of the date of this Prospectus,
$100,000,000 aggregate Liquidation Amount of Old Capital Securities is
outstanding.
Holders of Old Capital Securities do not have any appraisal or dissenters'
rights in connection with the Exchange Offer. Old Capital Securities which are
not tendered for or are tendered but not accepted in connection with the
Exchange Offer will remain outstanding and be entitled to the benefits of the
Declaration, but will not be entitled to any further registration rights under
the Registration Rights Agreement, except under limited circumstances. See "Risk
Factors -- Consequences of a Failure to Exchange Old Capital Securities" and
"Description of Old Securities."
If any tendered Old Capital Securities are not accepted for exchange
because of an invalid tender, the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Old Capital Securities
will be returned, without expense, to the tendering holder thereof promptly
after the Expiration Date.
Holders who tender Old Capital Securities in connection with the Exchange
Offer will not be required to pay brokerage commissions or fees or, subject to
the instructions in the Letter of Transmittal, transfer taxes with respect to
the exchange of Old Capital Securities in connection with the Exchange Offer.
The Corporation will pay all charges and expenses, other than certain applicable
taxes described below, in connection with the Exchange Offer. See "-- Fees and
Expenses."
NEITHER THE CORPORATION, THE BOARD OF DIRECTORS OF THE CORPORATION NOR ANY
ISSUER TRUSTEE OF THE TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF OLD CAPITAL
SECURITIES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION
OF THEIR OLD CAPITAL SECURITIES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO
ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD CAPITAL
SECURITIES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE
EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OLD CAPITAL SECURITIES TO
TENDER BASED ON SUCH HOLDERS OWN FINANCIAL POSITION AND REQUIREMENTS.
The term "Expiration Date" means 5:00 p.m., New York City time, on
, 1997 unless the Exchange Offer is extended by the Corporation or
the Trust (in which case the term "Expiration Date" shall mean the latest date
and time to which the Exchange Offer is extended).
The Corporation and the Trust expressly reserve the right in their sole and
absolute discretion, subject to applicable law, at any time and from time to
time, to (i) delay the acceptance of the Old Capital Securities for exchange,
(ii) terminate the Exchange Offer (whether or not any Old Capital Securities
have theretofore been accepted for exchange) if the Trust determines, in its
sole and absolute discretion, that any of the events or conditions referred to
under "-- Conditions to the Exchange Offer" have occurred or exist or have not
been satisfied, (iii) extend the Expiration Date of the Exchange Offer and
retain all Old Capital Securities tendered pursuant to the Exchange Offer,
subject, however, to the right of holders of Old Capital Securities to withdraw
their tendered Old Capital Securities as described under "-- Withdrawal Rights,"
and (iv) waive any condition or otherwise amend the terms of the Exchange Offer
in any respect. If the Exchange Offer is amended in a manner determined by the
Corporation and the Trust to constitute a material change, or if the Corporation
and the Trust waive a material condition of the Exchange Offer, the Corporation
and the Trust will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the holders of the Old Capital
Securities, and the Corporation and the Trust will extend the Exchange Offer to
the extent required by Rule 14e-1 under the Exchange Act.
Any such delay in acceptance, extension, termination or amendment will be
followed promptly by oral or written notice thereof to the Exchange Agent and by
making a public announcement thereof, and such announcement in the case of an
extension will be made no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Without limiting
the manner in which the Corporation and the Trust may choose to make any public
announcement and subject to applicable law, the
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Corporation and the Trust shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a
release to an appropriate news agency.
ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF NEW CAPITAL SECURITIES
Upon the terms and subject to the conditions of the Exchange Offer, the
Trust will exchange, and will issue to the Exchange Agent, New Capital
Securities for Old Capital Securities validly tendered and not withdrawn,
promptly after the Expiration Date.
In all cases, delivery of New Capital Securities in exchange for Old
Capital Securities tendered and accepted for exchange pursuant to the Exchange
Offer will be made only after timely receipt by the Exchange Agent of (i) Old
Capital Securities or a book-entry confirmation of a book-entry transfer of Old
Capital Securities into the Exchange Agent's account at DTC, (ii) the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees, and (iii) any other documents required by the
Letter of Transmittal.
The term "book-entry confirmation" means a timely confirmation of a
book-entry transfer of Old Capital Securities into the Exchange Agent's account
at DTC.
Subject to the terms and conditions of the Exchange Offer, the Trust will
be deemed to have accepted for exchange, and thereby exchanged, Old Capital
Securities validly tendered and not withdrawn as, if and when the Trust gives
oral or written notice to the Exchange Agent of the Trust's acceptance of such
Old Capital Securities for exchange pursuant to the Exchange Offer. The Exchange
Agent will act as agent for the Trust for the purpose of receiving tenders of
Old Capital Securities, Letters of Transmittal and related documents, and as
agent for tendering holders for the purpose of receiving Old Capital Securities,
Letters of Transmittal and related documents and transmitting New Capital
Securities to validly tendering holders. Such exchange will be made promptly
after the Expiration Date. If for any reason whatsoever, acceptance for exchange
or the exchange of any Old Capital Securities tendered pursuant to the Exchange
Offer is delayed (whether before or after the Trust's acceptance for exchange of
Old Capital Securities) or the Trust extends the Exchange Offer or is unable to
accept for exchange or exchange Old Capital Securities tendered pursuant to the
Exchange Offer, then, without prejudice to the Trust's rights set forth herein,
the Exchange Agent may, nevertheless, on behalf of the Trust and subject to Rule
14e-1(c) under the Exchange Act, retain tendered Old Capital Securities and such
Old Capital Securities may not be withdrawn except to the extent tendering
holders are entitled to withdrawal rights as described under "-- Withdrawal
Rights."
Pursuant to the Letter of Transmittal, a holder of Old Capital Securities
will warrant and agree in the Letter of Transmittal that it has full power and
authority to tender, exchange, sell, assign and transfer Old Capital Securities,
that the Trust will acquire good, marketable and unencumbered title to the
tendered Old Capital Securities, free and clear of all liens, restrictions,
charges and encumbrances, and the Old Capital Securities tendered for exchange
are not subject to any adverse claims or proxies. The holder also will warrant
and agree that it will, upon request, execute and deliver any additional
documents deemed by the Trust or the Exchange Agent to be necessary or desirable
to complete the exchange, sale, assignment, and transfer of the Old Capital
Securities tendered pursuant to the Exchange Offer.
PROCEDURES FOR TENDERING OLD CAPITAL SECURITIES
Valid Tender. Except as set forth below, in order for Old Capital
Securities to be validly tendered pursuant to the Exchange Offer, a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees and any other required documents, must be
received by the Exchange Agent at one of its addresses set forth under
"-- Exchange Agent," and either (i) tendered Old Capital Securities must be
received by the Exchange Agent, or (ii) such Old Capital Securities must be
tendered pursuant to the procedures for book-entry transfer set forth below and
a book-entry confirmation must be received by the Exchange Agent, in each case
on or prior to the Expiration Date, or (iii) the guaranteed delivery procedures
set forth below must be complied with.
If less than all of the Old Capital Securities are tendered, a tendering
holder should fill in the amount of Old Capital Securities being tendered in the
appropriate box on the Letter of Transmittal. The entire amount
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<PAGE> 29
of Old Capital Securities delivered to the Exchange Agent will be deemed to have
been tendered unless otherwise indicated.
THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER,
AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE
AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT REQUESTED,
PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Book-Entry Transfer. The Exchange Agent will establish an account with
respect to the Old Capital Securities at DTC for purposes of the Exchange Offer
within two business days after the date of this Prospectus. Any financial
institution that is a participant in DTC's book-entry transfer facility system
may make a book-entry delivery of the Old Capital Securities by causing DTC to
transfer such Old Capital Securities into the Exchange Agent's account at DTC in
accordance with DTC's procedures for transfers. However, although delivery of
Old Capital Securities may be effected through book-entry transfer into the
Exchange Agent's account at DTC, the Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees and any other required documents, must in any case be delivered to
and received by the Exchange Agent at its address set forth under "-- Exchange
Agent" on or prior to the Expiration Date, or the guaranteed delivery procedure
set forth below must be complied with.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
Signature Guarantees. Certificates for the Old Capital Securities need not
be endorsed and signature guarantees on the Letter of Transmittal are
unnecessary unless (a) a certificate for the Old Capital Securities is
registered in a name other than that of the person surrendering the certificate
or (b) such holder completes the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" in the Letter of Transmittal. In the case of (a)
or (b) above, such certificates for Old Capital Securities must be duly endorsed
or accompanied by a properly executed bond power, with the endorsement or
signature on the bond power and on the Letter of Transmittal guaranteed by a
firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an
"eligible guarantor institution," including (as such terms are defined therein):
(i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or
government securities broker or dealer; (iii) a credit union; (iv) a national
securities exchange, registered securities association or clearing agency; or
(v) a savings association that is a participant in a Securities Transfer
Association (each of the foregoing, an "Eligible Institution"), unless
surrendered on behalf of such Eligible Institution. See Instruction 1 to the
Letter of Transmittal.
Guaranteed Delivery. If a holder desires to tender Old Capital Securities
pursuant to the Exchange Offer and the certificates for such Old Capital
Securities are not immediately available or time will not permit all required
documents to reach the Exchange Agent on or prior to the Expiration Date, or the
procedure for book-entry transfer cannot be completed on a timely basis, such
Old Capital Securities may nevertheless be tendered, provided that all of the
following guaranteed delivery procedures are complied with:
(a) such tenders are made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form accompanying the Letter of Transmittal,
is received by the Exchange Agent, as provided below, on or prior to the
Expiration Date; and
(c) the certificates (or a book-entry confirmation) representing all
tendered Old Capital Securities, in proper form for transfer, together with
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees and any other documents
required by the Letter of Transmittal, are received by the Exchange Agent
within three New York Stock Exchange trading days after the date of
execution of such Notice of Guaranteed Delivery.
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The Notice of Guaranteed Delivery may be delivered by hand, or transmitted
by facsimile or mail to the Exchange Agent and must include a guarantee by an
Eligible Institution in the form set forth in such notice.
Notwithstanding any other provision hereof, the delivery of New Capital
Securities in exchange for Old Capital Securities tendered and accepted for
exchange pursuant to the Exchange Offer will in all cases be made only after
timely receipt by the Exchange Agent of Old Capital Securities, or of a
book-entry confirmation with respect to such Old Capital Securities, and a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), together with any required signature guarantees and any other
documents required by the Letter of Transmittal. Accordingly, the delivery of
New Capital Securities might not be made to all tendering holders at the same
time, and will depend upon when Old Capital Securities, book-entry confirmations
with respect to Old Capital Securities and other required documents are received
by the Exchange Agent.
The Trust's acceptance for exchange of Old Capital Securities tendered
pursuant to any of the procedures described above will constitute a binding
agreement between the tendering holder and the Trust upon the terms and subject
to the conditions of the Exchange Offer.
Determination of Validity. All questions as to the form of documents,
validity, eligibility (including time of receipt) and acceptance for exchange of
any tendered Old Capital Securities will be determined by the Corporation and
the Trust, in their sole discretion, whose determination shall be final and
binding on all parties. The Corporation and the Trust reserve the absolute
right, in their sole and absolute discretion, to reject any and all tenders
determined by them not to be in proper form or the acceptance of which, or
exchange for, may, in the opinion of counsel to the Corporation and the Trust,
be unlawful. The Corporation and the Trust also reserve the absolute right,
subject to applicable law, to waive any of the conditions of the Exchange Offer
as set forth under "-- Conditions to the Exchange Offer" or any condition or
irregularity in any tender of Old Capital Securities of any particular holder
whether or not similar conditions or irregularities are waived in the case of
other holders.
The interpretation by the Corporation and the Trust of the terms and
conditions of the Exchange Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding. No tender of Old Capital
Securities will be deemed to have been validly made until all irregularities
with respect to such tender have been cured or waived. Neither the Corporation,
the Trust, any affiliates or assigns of the Corporation or the Trust, the
Exchange Agent nor any other person shall be under any duty to give any
notification of any irregularities in tenders or incur any liability for failure
to give any such notification.
If any Letter of Transmittal, endorsement, bond power, power of attorney,
or any other document required by the Letter of Transmittal is signed by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and unless waived by the
Corporation and the Trust, proper evidence satisfactory to the Corporation and
the Trust, in their sole discretion, of such person's authority to so act must
be submitted.
A beneficial owner of Old Capital Securities that are held by or registered
in the name of a broker, dealer, commercial bank, trust company or other nominee
or custodian is urged to contact such entity promptly if such beneficial holder
wishes to participate in the Exchange Offer.
RESALES OF NEW CAPITAL SECURITIES
The Trust is making the Exchange Offer for the New Capital Securities in
reliance on the position of the staff of the Division of Corporation Finance of
the Commission as set forth in certain interpretive letters addressed to third
parties in other transactions. However, neither the Corporation nor the Trust
sought its own interpretive letter and there can be no assurance that the staff
of the Division of Corporation Finance of the Commission would make a similar
determination with respect to the Exchange Offer as it has in such interpretive
letters to third parties. Based on these interpretations by the staff of the
Division of Corporation Finance of the Commission, and subject to the two
immediately following sentences, the Corporation and the Trust believe that New
Capital Securities issued pursuant to this Exchange Offer in exchange for Old
Capital Securities may be offered for resale, resold and otherwise transferred
by a holder thereof (other than a holder
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who is a broker-dealer) without further compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such New
Capital Securities are acquired in the ordinary course of such holder's business
and that such holder is not participating, and has no arrangement or
understanding with any person to participate, in a distribution (within the
meaning of the Securities Act) of such New Capital Securities. However, any
holder of Old Capital Securities who is an Affiliate of the Corporation or the
Trust or who intends to participate in the Exchange Offer for the purpose of
distributing New Capital Securities, or any broker-dealer who purchased Old
Capital Securities from the Trust for resale pursuant to Rule 144A or any other
available exemption under the Securities Act, (a) will not be able to rely on
the interpretations of the staff of the Division of Corporation Finance of the
Commission set forth in the above-mentioned interpretive letters, (b) will not
be permitted or entitled to tender such Old Capital Securities in the Exchange
Offer and (c) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any sale or other transfer
of such Old Capital Securities unless such sale is made pursuant to an exemption
from such requirements. In addition, as described below, if any broker-dealer
holds Old Capital Securities acquired for its own account as a result of
market-making or other trading activities and exchanges such Old Capital
Securities for New Capital Securities, then such broker-dealer must deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resales of such New Capital Securities.
Each holder of Old Capital Securities who wishes to exchange Old Capital
Securities for New Capital Securities in the Exchange Offer will be required to
represent that (i) it is not an Affiliate of the Corporation or the Trust, (ii)
any New Capital Securities to be received by it are being acquired in the
ordinary course of its business, (iii) it has no arrangement or understanding
with any person to participate in a distribution (within the meaning of the
Securities Act) of such New Capital Securities, and (iv) if such holder is not a
broker-dealer, such holder is not engaged in, and does not intend to engage in,
a distribution (within the meaning of the Securities Act) of such New Capital
Securities. In addition, the Corporation and the Trust may require such holder,
as a condition to such holder's eligibility to participate in the Exchange
Offer, to furnish to the Corporation and the Trust (or an agent thereof) in
writing information as to the number of "beneficial owners" (within the meaning
of Rule 13d-3 under the Exchange Act) on behalf of whom such holder holds the
Capital Securities to be exchanged in the Exchange Offer. Each broker-dealer
that receives New Capital Securities for its own account pursuant to the
Exchange Offer must acknowledge that it acquired the Old Capital Securities for
its own account as the result of market-making activities or other trading
activities and must agree that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of such New
Capital Securities. The Letter of Transmittal states that, by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. Based on the
position taken by the staff of the Division of Corporation Finance of the
Commission in the interpretive letters referred to above, the Corporation and
the Trust believe that Participating Broker-Dealers may fulfill their prospectus
delivery requirements with respect to the New Capital Securities received upon
exchange of such Old Capital Securities (other than Old Capital Securities which
represent an unsold allotment from the original sale of the Old Capital
Securities) with a prospectus meeting the requirements of the Securities Act,
which may be the prospectus prepared for an exchange offer so long as it
contains a description of the plan of distribution with respect to the resale of
such New Capital Securities. Accordingly, this Prospectus, as it may be amended
or supplemented from time to time, may be used by a Participating Broker-Dealer
during the period referred to below in connection with resales of New Capital
Securities received in exchange for Old Capital Securities where such Old
Capital Securities were acquired by such Participating Broker-Dealer for its own
account as a result of market-making or other trading activities. Subject to
certain provisions set forth in the Registration Rights Agreement, the
Corporation and the Trust have agreed that this Prospectus, as it may be amended
or supplemented from time to time, may be used by a Participating Broker-Dealer
in connection with resales of such New Capital Securities for a period ending
90-days after the Expiration Date (subject to extension under certain limited
circumstances described below) or, if earlier, when all such New Capital
Securities have been disposed of by such Participating Broker-Dealer. See "Plan
of Distribution." However, a Participating Broker-Dealer who intends to use this
Prospectus in connection with the resale of New Capital Securities received in
exchange for Old Capital Securities pursuant to the Exchange Offer must notify
the Corporation or the Trust, or cause the Corporation or the Trust to be
notified, on or prior to the Expiration Date, that it is a Participating
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Broker-Dealer. Such notice may be given in the space provided for that purpose
in the Letter of Transmittal or may be delivered to the Exchange Agent at one of
the addresses set forth herein under "-- Exchange Agent." Any Participating
Broker-Dealer who is an Affiliate of the Corporation or the Trust may not rely
on such interpretive letters and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction.
In that regard, each Participating Broker-Dealer who surrenders Old Capital
Securities pursuant to the Exchange Offer will be deemed to have agreed, by
execution of the Letter of Transmittal, that, upon receipt of notice from the
Corporation or the Trust of the occurrence of any event or the discovery of any
fact which makes any statement contained or incorporated by reference in this
Prospectus untrue in any material respect or which causes this Prospectus to
omit to state a material fact necessary in order to make the statements
contained or incorporated by reference herein, in light of the circumstances
under which they were made, not misleading or of the occurrence of certain other
events specified in the Registration Rights Agreement, such Participating
Broker-Dealer will suspend the sale of New Capital Securities (or the New
Guarantee or the New Junior Subordinated Debentures, as applicable) pursuant to
this Prospectus until the Corporation or the Trust has amended or supplemented
this Prospectus to correct such misstatement or omission and has furnished
copies of the amended or supplemented Prospectus to such Participating
Broker-Dealer or the Corporation or the Trust has given notice that the sale of
the New Capital Securities (or the New Guarantee or the New Junior Subordinated
Debentures, as applicable) may be resumed, as the case may be. If the
Corporation or the Trust gives such notice to suspend the sale of the New
Capital Securities (or the New Guarantee or the New Junior Subordinated
Debentures, as applicable), it shall extend the 90-day period referred to above
during which Participating Broker-Dealers are entitled to use this Prospectus in
connection with the resale of New Capital Securities by the number of days
during the period from and including the date of the giving of such notice to
and including the date when Participating Broker-Dealers shall have received
copies of the amended or supplemented Prospectus necessary to permit resales of
the New Capital Securities or to and including the date on which the Corporation
or the Trust has given notice that the sale of New Capital Securities (or the
New Guarantee or the New Junior Subordinated Debentures, as applicable) may be
resumed, as the case may be.
WITHDRAWAL RIGHTS
Except as otherwise provided herein, tenders of Old Capital Securities may
be withdrawn at any time on or prior to the Expiration Date.
In order for a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at its address set forth under "-- Exchange Agent" on or
prior to the Expiration Date. Any such notice of withdrawal must specify the
name of the person who tendered the Old Capital Securities to be withdrawn, the
aggregate principal amount of Old Capital Securities to be withdrawn, and (if
certificates for such Old Capital Securities have been tendered) the name of the
registered holder of the Old Capital Securities as set forth on the Old Capital
Securities, if different from that of the person who tendered such Old Capital
Securities. If Old Capital Securities have been delivered or otherwise
identified to the Exchange Agent, then prior to the physical release of such Old
Capital Securities, the tendering holder must submit the serial numbers shown on
the particular Old Capital Securities to be withdrawn and the signature on the
notice of withdrawal must be guaranteed by an Eligible Institution, except in
the case of Old Capital Securities tendered for the account of an Eligible
Institution. If Old Capital Securities have been tendered pursuant to the
procedures for book-entry transfer set forth in "-- Procedures for Tendering Old
Capital Securities," the notice of withdrawal must specify the name and number
of the account at DTC to be credited with the withdrawal of Old Capital
Securities, in which case a notice of withdrawal will be effective if delivered
to the Exchange Agent by written, telegraphic, telex or facsimile transmission.
Withdrawals of tenders of Old Capital Securities may not be rescinded. Old
Capital Securities properly withdrawn will not be deemed validly tendered for
purposes of the Exchange Offer, but may be retendered at any subsequent time on
or prior to the Expiration Date by following any of the procedures described
above under "-- Procedures for Tendering Old Capital Securities."
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All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Trust, in its sole
discretion, whose determination shall be final and binding on all parties.
Neither the Corporation, the Trust, any affiliates or assigns of the Corporation
or the Trust, the Exchange Agent nor any other person shall be under any duty to
give any notification of any irregularities in any notice of withdrawal or incur
any liability for failure to give any such notification. Any Old Capital
Securities which have been tendered but which are withdrawn will be returned to
the holder thereof promptly after withdrawal.
DISTRIBUTIONS ON NEW CAPITAL SECURITIES
Holders of Old Capital Securities whose Old Capital Securities are accepted
for exchange will not receive Distributions on such Old Capital Securities and
will be deemed to have waived the right to receive any Distributions on such Old
Capital Securities accumulated from and including December 17, 1996.
Accordingly, holders of New Capital Securities as of the record date for the
payment of Distributions on June 17, 1997 will be entitled to receive
Distributions accumulated on the New Capital Securities from and including
December 17, 1996.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, or any
extension of the Exchange Offer, the Corporation and the Trust will not be
required to accept for exchange, or to exchange, any Old Capital Securities for
any New Capital Securities, and, as described below, may terminate the Exchange
Offer (whether or not any Old Capital Securities have theretofore been accepted
for exchange) or may waive any conditions to or amend the Exchange Offer, if any
of the following conditions have occurred or exists or have not been satisfied:
(a) there shall occur a change in the current interpretation by the
staff of the Commission which permits the New Capital Securities issued
pursuant to the Exchange Offer in exchange for Old Capital Securities to be
offered for resale, resold and otherwise transferred by holders thereof
(other than broker-dealers and any such holder which is an Affiliate of the
Corporation or the Trust) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such New
Capital Securities are acquired in the ordinary course of such holders'
business and such holders have no arrangement or understanding with any
person to participate in the distribution of such New Capital Securities;
(b) any law, statute, rule or regulation shall have been adopted or
enacted which, in the judgment of the Corporation or the Trust, would
reasonably be expected to impair its ability to proceed with the Exchange
Offer;
(c) the Corporation has determined in good faith that there is a
reasonable likelihood that, or a material uncertainty exists as to whether,
consummation of the Exchange Offer would result in a material adverse tax
consequence to the Corporation; or
(d) a stop order shall have been issued by the Commission or any state
securities authority suspending the effectiveness of the Registration
Statement or proceedings shall have been initiated or, to the knowledge of
the Corporation or the Trust, threatened for that purpose any governmental
approval has not been obtained, which approval the Corporation or the Trust
shall, in its sole discretion, deem necessary for the consummation of the
Exchange Offer as contemplated hereby.
If the Corporation or the Trust determines in its sole and absolute
discretion that any of the foregoing events or conditions has occurred or exists
or has not been satisfied, it may, subject to applicable law, terminate the
Exchange Offer (whether or not any Old Capital Securities have theretofore been
accepted for exchange) or may waive any such condition or otherwise amend the
terms of the Exchange Offer in any respect. If such waiver or amendment
constitutes a material change to the Exchange Offer, the Corporation or the
Trust will promptly disclose such waiver or amendment by means of a prospectus
supplement that will be
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distributed to the registered holders of the Old Capital Securities and will
extend the Exchange Offer to the extent required by Rule 14e-1 under the
Exchange Act.
EXCHANGE AGENT
The Chase Manhattan Bank has been appointed as Exchange Agent for the
Exchange Offer. Delivery of the Letters of Transmittal and any other required
documents, questions, requests for assistance, and requests for additional
copies of this Prospectus or of the Letter of Transmittal should be directed to
the Exchange Agent as follows:
By Registered or Certified Mail or By Hand or Overnight Delivery:
The Chase Manhattan Bank
450 West 33rd Street
15th Floor
New York, NY 10001
Attention: Sheik Wiltshire, Second Vice President
Global Trust Services
Confirm By Telephone:
(212) 946-3082
Facsimile Transmissions:
(ELIGIBLE INSTITUTIONS ONLY)
(212) 946-8161
Delivery to other than the above addresses or facsimile number will not
constitute a valid delivery.
FEES AND EXPENSES
The Corporation has agreed to pay the Exchange Agent reasonable and
customary fees for its services and will reimburse it for its reasonable
out-of-pocket expenses in connection therewith. The Corporation will also pay
brokerage houses and other custodians, nominees and fiduciaries the reasonable
out-of-pocket expenses incurred by them in forwarding copies of this Prospectus
and related documents to the beneficial owners of Old Capital Securities, and in
handling or tendering for their customers.
Holders who tender their Old Capital Securities for exchange will not be
obligated to pay any transfer taxes in connection therewith. If, however, New
Capital Securities are to be delivered to, or are to be issued in the name of,
any person other than the registered holder of the Old Capital Securities
tendered, or if a transfer tax is imposed for any reason other than the exchange
of Old Capital Securities in connection with the Exchange Offer, then the amount
of any such transfer taxes (whether imposed on the registered holder or any
other persons) will be payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted with the Letter
of Transmittal, the amount of such transfer taxes will be billed directly to
such tendering holder.
Neither the Corporation nor the Trust will make any payment to brokers,
dealers or other nominees soliciting acceptances of the Exchange Offer.
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DESCRIPTION OF NEW SECURITIES
DESCRIPTION OF NEW CAPITAL SECURITIES
Pursuant to the terms of the Declaration, the Trust has issued the Old
Capital Securities and the Common Securities and will issue the New Capital
Securities pursuant to the Exchange Offer. The New Capital Securities will
represent preferred beneficial interests in the Trust and the holders thereof
will be entitled to a preference over the Common Securities in certain
circumstances with respect to Distributions and amounts payable on redemption of
the Trust Securities or liquidation of the Trust. See "-- Subordination of
Common Securities." Upon effectiveness of the Registration Statement, the
Declaration will be qualified under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"). See "Exchange Offer; Registration Rights." The
following description does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Declaration and the Trust
Indenture Act. Certain capitalized terms used herein are defined in the
Declaration.
General. The Capital Securities (including the Old Capital Securities and
the New Capital Securities) are limited to $100,000,000 aggregate Liquidation
Amount at any one time outstanding. The New Capital Securities will rank pari
passu, and payments will be made thereon pro rata, with the Old Capital
Securities and the Common Securities except with respect to the Common
Securities, in certain circumstances described under "-- Subordination of Common
Securities" below. Legal title to the New Junior Subordinated Debentures will be
held by the Property Trustee in trust for the benefit of the holders of the New
Capital Securities. The New Guarantee will not guarantee payment of
Distributions or amounts payable on redemption of the New Capital Securities or
liquidation of the Trust when the Trust does not have funds on hand legally
available for such payments. See "-- Description of the New Guarantee."
Distributions. Distributions on the New Capital Securities will be
cumulative, will accumulate from December 17, 1996 and will be payable
semi-annually in arrears on June 17 and December 17 of each year, commencing
June 17, 1997, at the annual rate of 8.99% of the Liquidation Amount to the
holders of the New Capital Securities on the relevant record dates. The record
dates will be the first day of the month in which the relevant Distribution Date
(as defined herein) falls. The amount of Distributions payable for any period
will be computed on the basis of a 360-day year of twelve 30-day months. In the
event that any date on which Distributions are payable on the New Capital
Securities is not a Business Day (as defined herein), payment of the
Distributions payable on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other payment in respect to any
such delay), in each case with the same force and effect as if made on such date
(each date on which Distributions are payable in accordance with the foregoing,
a "Distribution Date"). A "Business Day" shall mean any day other than a
Saturday or a Sunday, or a day on which banking institutions in New York, New
York or Wilmington, Delaware are authorized or required by law or executive
order to remain closed.
So long as no Debenture Event of Default shall have occurred and be
continuing, the Corporation will have the right under the Indenture to elect to
defer the payment of interest on the Junior Subordinated Debentures at any time
or from time to time for a period not exceeding 10 consecutive semi-annual
periods with respect to each Extension Period, provided that no Extension Period
may extend beyond the Stated Maturity Date. Upon any such election, semi-annual
Distributions on the Capital Securities will be deferred by the Trust during
such Extension Period. Distributions to which holders of the Capital Securities
are entitled during any such Extension Period will accumulate additional
Distributions thereon at the rate per annum of 8.99% thereof, compounded
semi-annually from the relevant Distribution Date, but not exceeding the
interest rate then accruing on the Junior Subordinated Debentures. The term
"Distributions," as used herein, shall include any such additional
Distributions.
During any Extension Period, the Corporation may extend such Extension
Period, provided that such extension does not cause such Extension Period to
exceed 10 consecutive semi-annual periods or to extend beyond the Stated
Maturity Date. Upon the termination of any such Extension Period and the payment
of all amounts then due, and subject to the foregoing limitations, the
Corporation may elect to begin a new Extension Period. The Corporation must give
the Property Trustee, the Administrative Trustees and the
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Debenture Trustee notice of its election of any Extension Period or any
extension thereof at least five Business Days prior to the earlier of (i) the
date the Distributions on the Capital Securities would have been payable except
for the election to begin or extend such Extension Period and (ii) the date the
Trust is required to give notice to any securities exchange or to holders of the
Capital Securities of the record date or the date such Distributions are
payable, but in any event not less than five Business Days prior to such record
date. There is no limitation on the number of times that the Corporation may
elect to begin an Extension Period. See "-- Description of New Junior
Subordinated Debentures -- Option to Extend Interest Payment Date" and "Certain
Federal Income Tax Consequences -- Interest Income and Original Issue Discount."
During any Extension Period, the Corporation may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Corporation's capital stock
(which includes common and preferred stock) or (ii) make any payment of
principal of or premium, if any, or interest on or repay, repurchase or redeem
any debt securities of the Corporation (including Other Debentures) that rank
pari passu with or junior in right of payment to the Junior Subordinated
Debentures or (iii) make any guarantee payments with respect to any guarantee by
the Corporation of the debt securities of any subsidiary of the Corporation
(including Other Guarantees) if such guarantee ranks pari passu with or junior
in right of payment to the Junior Subordinated Debentures (other than (a)
dividends or distributions in shares of, or options, warrants or rights to
subscribe for or purchase shares of, common stock of the Corporation, (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Guarantee, (d) as a result of a reclassification of the
Corporation's capital stock or the exchange or conversion of one class, or
series of the Corporation's capital stock for another class or series of the
Corporation's capital stock, (e) the purchase of fractional interests in shares
of the Corporation's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
and (f) purchases of common stock related to the issuance of common stock or
rights under any of the Corporation's benefit plans for its directors, officers
or employees or any of the Corporation's dividend reinvestment plans).
Although the Corporation may in the future exercise its option to defer
payments of interest on the Junior Subordinated Debentures, the Corporation has
no such current intention.
The revenue of the Trust available for distribution to holders of the New
Capital Securities will be limited to payments under the New Junior Subordinated
Debentures. See "-- Description of New Junior Subordinated
Debentures -- General." If the Corporation does not make interest payments on
the New Junior Subordinated Debentures, the Property Trustee will not have funds
available to pay Distributions on the New Capital Securities. The payment of
Distributions (if and to the extent the Trust has funds on hand legally
available for the payment of such Distributions) will be guaranteed by the
Corporation on a limited basis as set forth herein under "-- Description of the
New Guarantee."
Redemption. Upon the repayment on the Stated Maturity Date or prepayment
prior to the Stated Maturity Date of the Junior Subordinated Debentures, the
proceeds from such repayment or prepayment shall be applied by the Property
Trustee to redeem a Like Amount (as defined below) of the Trust Securities, upon
not less than 30 nor more than 60 days' notice of a date of redemption (the
"Redemption Date") at the applicable Redemption Price, which shall be equal to
(i) in the case of the repayment of the Junior Subordinated Debentures on the
Stated Maturity Date, the Maturity Redemption Price (equal to the principal of
and accrued interest on the Junior Subordinated Debentures), (ii) in the case of
the optional prepayment of the Junior Subordinated Debentures upon the
occurrence and continuation of a Special Event prior to the Initial Optional
Prepayment Date, the Special Event Redemption Price (equal to the Special Event
Prepayment Price in respect of the Junior Subordinated Debentures) and (iii) in
the case of the optional prepayment of the Junior Subordinated Debentures on or
after the Initial Optional Prepayment Date, the Optional Redemption Price (equal
to the Optional Prepayment Price in respect of the Junior Subordinated
Debentures). See "-- Description of New Junior Subordinated
Debentures -- Optional Prepayment" and "-- Special Event Prepayment."
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"Like Amount" means (i) with respect to a redemption of the Trust
Securities, Trust Securities having a Liquidation Amount equal to the principal
amount of Junior Subordinated Debentures to be paid in accordance with their
terms and (ii) with respect to a distribution of Junior Subordinated Debentures
upon the liquidation of the Trust, Junior Subordinated Debentures having a
principal amount equal to the Liquidation Amount of the Trust Securities of the
holder to whom such Junior Subordinated Debentures are distributed.
The Corporation will have the option to prepay the Junior Subordinated
Debentures, (i) in whole or in part, on or after the Initial Optional Prepayment
Date, at the applicable Optional Prepayment Price and (ii) in whole but not in
part, at any time, upon the occurrence of a Special Event prior to the Initial
Optional Prepayment Date, at the Special Event Prepayment Price.
Liquidation of the Trust and Distribution of Junior Subordinated
Debentures. The Corporation will have the right at any time to terminate the
Trust and cause the Junior Subordinated Debentures to be distributed to the
holders of the Trust Securities in liquidation of the Trust. Such right is
subject to the Corporation having received an opinion of counsel to the effect
that such distribution will not be a taxable event to holders of Capital
Securities.
The Trust shall automatically terminate upon the first to occur of: (i)
certain events of bankruptcy, dissolution or liquidation of the Corporation;
(ii) the distribution of a Like Amount of the Junior Subordinated Debentures to
the holders of the Trust Securities, if the Corporation, as Sponsor, has given
written direction to the Property Trustee to terminate the Trust (which
direction is optional and, except as described above, wholly within the
discretion of the Corporation, as Sponsor); (iii) redemption of all of the Trust
Securities as described under "-- Redemption" above; (iv) expiration of the term
of the Trust; and (v) the entry of an order for the dissolution of the Trust by
a court of competent jurisdiction.
If a termination occurs as described in clause (i), (ii), (iv), or (v) of
the preceding paragraph, the Trust shall be liquidated by the Issuer Trustees as
expeditiously as the Issuer Trustees determine to be possible by distributing,
after satisfaction of liabilities to creditors of the Trust as provided by
applicable law, to the holders of the Trust Securities a Like Amount of the
Junior Subordinated Debentures, unless such distribution is determined by the
Property Trustee not to be practicable, in which event such holders will be
entitled to receive out of the assets of the Trust legally available for
distribution to holders, after satisfaction of liabilities to creditors of the
Trust as provided by applicable law, an amount equal to the aggregate of the
Liquidation Amount plus accumulated and unpaid Distributions thereon to the date
of payment (such amount being the "Liquidation Distribution"). If the
Liquidation Distribution can be paid only in part because the Trust has
insufficient assets on hand legally available to pay in full the aggregate
Liquidation Distribution, then the amounts payable directly by the Trust on the
Capital Securities and the Common Securities shall be paid on a pro rata basis,
except that if a Debenture Event of Default has occurred and is continuing, the
Capital Securities shall have a priority over the Common Securities. See
"-- Subordination of Common Securities." If an early termination occurs, the
Junior Subordinated Debentures will be subject to optional prepayment, in whole
or in part, on or after the Initial Optional Prepayment Date, except in the case
of an early termination described in clause (v) above, in which case the Junior
Subordinated Debentures will be subject to optional prepayment, in whole but not
in part, on or after the Initial Optional Prepayment Date.
If the Corporation elects not to prepay the Junior Subordinated Debentures
prior to maturity in accordance with their terms and either elects not to or is
unable to liquidate the Trust and distribute the Junior Subordinated Debentures
to holders of the Trust Securities, the Trust Securities will remain outstanding
until the repayment of the Junior Subordinated Debentures on the Stated Maturity
Date.
After the liquidation date is fixed for any distribution of Junior
Subordinated Debentures to holders of the Trust Securities, (i) the Trust
Securities will no longer be deemed to be outstanding, (ii) each registered
global certificate, if any, representing Trust Securities and held by DTC or its
nominee will be exchanged for a registered global certificate representing the
Junior Subordinated Debentures to be delivered upon such distribution and (iii)
any certificates representing Trust Securities not held by DTC or its nominee
will be deemed to represent Junior Subordinated Debentures having a principal
amount equal to the Liquidation Amount of such Trust Securities, and bearing
accrued and unpaid interest in an amount equal to the
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accumulated and unpaid Distributions on such Trust Securities until such
certificates are presented to the Administrative Trustees or their agent for
cancellation, whereupon the Corporation will issue to such holder, and the
Debenture Trustee will authenticate, a certificate representing such Junior
Subordinated Debentures.
There can be no assurance as to the market prices for the New Capital
Securities or the New Junior Subordinated Debentures that may be distributed in
exchange for the New Capital Securities if a termination and liquidation of the
Trust were to occur. Accordingly, the New Capital Securities, or the New Junior
Subordinated Debentures that the investor may receive on termination and
liquidation of the Trust, may trade at a discount to the price that the investor
paid to purchase the New Capital Securities.
Redemption Procedures. If applicable, Trust Securities shall be redeemed
at the applicable Redemption Price with the proceeds from the contemporaneous
repayment or prepayment of the Junior Subordinated Debentures. Any redemption of
Trust Securities shall be made and the applicable Redemption Price shall be
payable on the Redemption Date only to the extent that the Trust has funds
legally available for the payment of such applicable Redemption Price. See
"-- Subordination of Common Securities."
If the Trust gives a notice of redemption in respect of the Capital
Securities, then, by 12:00 noon, New York City time, on the Redemption Date, to
the extent funds are legally available, with respect to the Capital Securities
held by DTC or its nominees, the Property Trustee will deposit irrevocably with
DTC funds sufficient to pay the applicable Redemption Price. See "-- Form,
Denomination, Book-Entry Procedures and Transfer." With respect to the Capital
Securities held in certificated form, the Property Trustee, to the extent funds
are legally available, will irrevocably deposit with the paying agent for the
Capital Securities funds sufficient to pay the applicable Redemption Price and
will give such paying agent irrevocable instructions and authority to pay the
applicable Redemption Price to the holders thereof upon surrender of their
certificates evidencing the Capital Securities. See "-- Payment and Paying
Agency." Distributions payable on or prior to the Redemption Date shall be
payable to the holders of such Capital Securities on the relevant record dates
for the related Distribution Dates. If notice of redemption shall have been
given and funds deposited as required, then upon the date of such deposit, all
rights of the holders of the Capital Securities will cease, except the right of
the holders of the Capital Securities to receive the applicable Redemption
Price, but without interest on such Redemption Price, and the Capital Securities
will cease to be outstanding. In the event that any Redemption Date of Capital
Securities is not a Business Day, then the applicable Redemption Price payable
on such date will be paid on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay). In the
event that payment of the applicable Redemption Price is improperly withheld or
refused and not paid either by the Trust or by the Corporation pursuant to the
Guarantee as described under "-- Description of the New Guarantee," (i)
Distributions on Capital Securities called for redemption will accumulate on the
Redemption Price at the then applicable rate, from the Redemption Date
originally established by the Trust to the date such applicable Redemption Price
is actually paid, and (ii) the actual payment date will be the Redemption Date
for purposes of calculating the applicable Redemption Price.
Subject to applicable law (including, without limitation, United States
federal securities law), the Corporation or its subsidiaries may at any time and
from time to time purchase outstanding Capital Securities by tender, in the open
market or by private agreement.
Notice of any redemption will be mailed at least 30 days but not more than
60 days prior to the Redemption Date to each holder of Trust Securities at its
registered address. Unless the Corporation defaults in payment of the applicable
Prepayment Price on, or in the repayment of, the Junior Subordinated Debentures,
Distributions will cease to accrue on the Trust Securities called for redemption
on and after the Redemption Date.
Subordination of Common Securities. Payment of Distributions on, and the
Redemption Price of, the Capital Securities and the Common Securities, as
applicable, shall be made pro rata based on the Liquidation Amount of the
Capital Securities and Common Securities; provided, however, that if on any
Distribution Date or Redemption Date a Debenture Event of Default shall have
occurred and be continuing, no payment of any Distribution on, or applicable
Redemption Price of, any of the Common Securities, and no other payment on
account of the redemption, liquidation or other acquisition of the Common
Securities, shall be made unless
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payment in full in cash of all accumulated and unpaid Distributions on all of
the outstanding Capital Securities for all Distribution periods terminating on
or prior thereto or, in the case of Capital Securities called for redemption on
a Redemption Date on or prior thereto, the full amount of the Redemption Price
therefor, shall have been made or provided for, and all funds available to the
Property Trustee shall first be applied to the payment in full in cash of all
Distributions on, or Redemption Price of, the Capital Securities then due and
payable.
In the case of any Event of Default, the Corporation as holder of the
Common Securities will be deemed to have waived any right to act with respect to
such Event of Default until the effect of such Event of Default shall have been
cured, waived or otherwise eliminated. Until any such Event of Default has been
so cured, waived or otherwise eliminated, the Property Trustee shall act solely
on behalf of the holders of the Capital Securities and not on behalf of the
Corporation as holder of the Common Securities, and only the holders of the
Capital Securities will have the right to direct the Property Trustee to act on
their behalf.
Events of Default; Notice. The occurrence of a Debenture Event of Default
(see "-- Description of New Junior Subordinated Debentures -- Debenture Events
of Default") constitutes an "Event of Default" under the Declaration.
Within five Business Days after the occurrence of any Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Event of Default to the holders of the Capital Securities, the
Administrative Trustees and the Corporation, as Sponsor, unless such Event of
Default shall have been cured or waived. The Corporation, as Sponsor, and the
Administrative Trustees are required to file annually with the Property Trustee
a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Declaration.
If a Debenture Event of Default has occurred and is continuing, the Capital
Securities shall have a preference over the Common Securities as described under
"-- Liquidation of the Trust and Distribution of Junior Subordinated Debentures"
and "-- Subordination of Common Securities" above.
Removal of Issuer Trustees. Unless a Debenture Event of Default shall have
occurred and be continuing, any Issuer Trustee may be removed at any time by the
holder of the Common Securities. If a Debenture Event of Default has occurred
and is continuing, the Property Trustee and the Delaware Trustee may be removed
at such time by the holders of a majority in Liquidation Amount of the
outstanding Capital Securities. In no event will the holders of the Capital
Securities have the right to vote to appoint, remove or replace the
Administrative Trustees, which voting rights are vested exclusively in the
Corporation as the holder of the Common Securities. No resignation or removal of
an Issuer Trustee and no appointment of a successor trustee shall be effective
until the acceptance of appointment by the successor Trustee in accordance with
the provisions of the Declaration.
Merger or Consolidation of Issuer Trustees. Any corporation into which the
Property Trustee, the Delaware Trustee or any Administrative Trustee that is not
a natural person may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which such Issuer Trustee shall be a party, or any corporation
succeeding to all or substantially all the corporate trust business of such
Issuer Trustee, shall be the successor of such Issuer Trustee under the
Declaration, provided such corporation shall be otherwise qualified and
eligible.
Mergers, Conversions, Consolidations, Amalgamations or Replacements of the
Trust. The Trust may not merge or convert with or into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to any corporation or
other person, except as described below. The Trust may, at the request of the
Corporation, as Sponsor, with the consent of the Administrative Trustees but
without the consent of the holders of the Capital Securities, merge or convert
with or into, consolidate, amalgamate, or be replaced by or convey, transfer or
lease its properties and assets as an entirety or substantially as an entirety
to a trust organized as such under the laws of any State; provided, that (i)
such successor entity either (a) expressly assumes all of the obligations of the
Trust with respect to the Capital Securities or (b) substitutes for the Capital
Securities other securities having substantially the same terms as the Capital
Securities (the "Successor Securities") so long as the Successor Securities rank
the
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same as the Capital Securities rank in priority with respect to distributions
and payments upon liquidation, redemption and otherwise, (ii) the Corporation
expressly appoints a trustee of such successor entity possessing the same powers
and duties as the Property Trustee with respect to the Junior Subordinated
Debentures, (iii) the Successor Securities are listed, or any Successor
Securities will be listed upon notification of issuance, on any national
securities exchange or other organization on which the Capital Securities are
then listed, if any, (iv) such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not cause the Capital Securities
(including any Successor Securities) to be downgraded by any nationally
recognized statistical rating organization, (v) such merger, conversion,
consolidation, amalgamation, replacement, conveyance, transfer or lease does not
adversely affect the rights, preferences and privileges of the holders of the
Capital Securities (including any Successor Securities) in any material respect,
(vi) such successor entity has a purpose identical to that of the Trust, (vii)
prior to such merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease, the Corporation has received an opinion from
independent counsel to the Trust experienced in such matters to the effect that
(a) such merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the Capital Securities (including any Successor
Securities) in any material respect, and (b) following such merger, conversion,
consolidation, amalgamation, replacement, conveyance, transfer or lease, neither
the Trust nor such successor entity will be required to register as an
investment company under the Investment Company Act of 1940, as amended (the
"Investment Company Act"), and (viii) the Corporation or any permitted successor
or assignee owns all of the common securities of such successor entity and
guarantees the obligations of such successor entity under the Successor
Securities at least to the extent provided by the Guarantee. Notwithstanding the
foregoing, the Trust shall not, except with the consent of holders of 100% in
Liquidation Amount of the Trust Securities, consolidate, amalgamate, merge or
convert with or into, or be replaced by or convey, transfer or lease its
properties and assets as an entirety or substantially as an entirety to any
other entity or permit any other entity to consolidate, amalgamate, merge or
convert with or into, or replace it if such consolidation, amalgamation, merger,
conversion, replacement, conveyance, transfer or lease would cause the Trust or
the successor entity not to be classified as a grantor trust for United States
federal income tax purposes.
Voting Rights; Amendment of the Declaration. Except as provided below and
under "-- Mergers, Conversions, Consolidations, Amalgamations or Replacements of
the Trust" above and "-- Description of the New Guarantee -- Amendments and
Assignment" and as otherwise required by law and the Declaration, the holders of
the Capital Securities will have no voting rights.
The Declaration may be amended from time to time by the Corporation, the
Property Trustee and the Administrative Trustees, without the consent of the
holders of the Trust Securities (i) to cure any ambiguity, correct or supplement
any provisions in the Declaration that may be inconsistent with any other
provision, or to make any other provisions with respect to matters or questions
arising under the Declaration, which shall not be inconsistent with the other
provisions of the Declaration, or (ii) to modify, eliminate or add to any
provisions of the Declaration to such extent as shall be necessary to ensure
that the Trust will be classified for United States federal income tax purposes
as a grantor trust at all times that any Trust Securities are outstanding or to
ensure that the Trust will not be required to register as an "investment
company" under the Investment Company Act; provided, however, that in the case
of clause (i), such action shall not adversely affect in any material respect
the interests of the holders of the Trust Securities, and any amendments of the
Declaration shall become effective when notice thereof is given to the holders
of the Trust Securities. The Declaration may be amended by the Issuer Trustees
and the Corporation (a) with the consent of holders representing a majority
(based upon Liquidation Amount) of the outstanding Trust Securities, and (b)
upon receipt by the Issuer Trustees of an opinion of counsel to the effect that
such amendment or the exercise of any power granted to the Issuer Trustees in
accordance with such amendment will not affect the Trust's status as a grantor
trust for United States federal income tax purposes or the Trust's exemption
from status as an "investment company" under the Investment Company Act,
provided that, without the consent of each holder of Trust Securities, the
Declaration may not be amended to (x) change the amount or timing of any
Distribution or other payment on the Trust Securities or any redemption
provisions or otherwise adversely affect the amount of any Distribution or other
payment required to be made in respect of the Trust Securities as of a specified
date or (y) restrict the right of a holder of Trust Securities to institute suit
for the
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enforcement of any such payment on or after such date. The New Capital
Securities and any Old Capital Securities which remain outstanding after
consummation of the Exchange Offer will vote together as a single class for
purposes of determining whether the holders of the required percentage in
outstanding Liquidation Amount thereof have taken certain actions or exercised
certain rights under the Declaration.
So long as any Junior Subordinated Debentures are held by the Property
Trustee, the Issuer Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
executing any trust or power conferred on the Property Trustee with respect to
the Junior Subordinated Debentures, (ii) waive certain past defaults under the
Indenture, (iii) exercise any right to rescind or annul a declaration of
acceleration of the maturity of the principal of the Junior Subordinated
Debentures or (iv) consent to any amendment, modification or termination of the
Indenture or the Junior Subordinated Debentures, where such consent shall be
required, without, in each case, obtaining the prior approval of the holders of
a majority in Liquidation Amount of all outstanding Capital Securities;
provided, however, that where a consent under the Indenture would require the
consent of each holder of Junior Subordinated Debentures affected thereby, no
such consent shall be given by the Property Trustee without the prior approval
of each holder of the Capital Securities. The Issuer Trustees shall not revoke
any action previously authorized or approved by a vote of the holders of the
Capital Securities except by subsequent vote of such holders. The Property
Trustee shall notify each holder of Capital Securities of any notice of default
with respect to the Junior Subordinated Debentures. In addition to obtaining the
foregoing approvals of such holders of the Capital Securities, prior to taking
any of the foregoing actions, the Issuer Trustees shall obtain an opinion of
counsel experienced in such matters to the effect that the Trust will not be
classified as an association taxable as a corporation for United States federal
income tax purposes on account of such action.
Any required approval of holders of Capital Securities may be given at a
meeting of such holders convened for such purpose or pursuant to written
consent. The Property Trustee will cause a notice of any meeting at which
holders of Capital Securities are entitled to vote, or of any matter upon which
action by written consent of such holders is to be taken, to be given to each
holder of record of Capital Securities in the manner set forth in the
Declaration.
No vote or consent of the holders of Capital Securities will be required
for the Trust to redeem and cancel the Capital Securities in accordance with the
Declaration.
Notwithstanding that holders of the Capital Securities are entitled to vote
or consent under any of the circumstances described above, any of the Capital
Securities that are owned by the Corporation, the Issuer Trustees or any
Affiliate of the Corporation or any Issuer Trustees shall, for purposes of such
vote or consent, be treated as if they were not outstanding.
Form, Denomination, Book-Entry Procedures and Transfer. The New Capital
Securities may be represented by one or more New Capital Securities in
registered, global form (collectively, the "Global New Capital Securities" and,
together with the Old Capital Securities in registered, global form, the "Global
Capital Securities"). The Global New Capital Securities will be deposited upon
issuance with the Property Trustee as custodian for DTC in New York, New York,
and registered in the name of DTC or its nominee, in each case for credit to an
account of a direct or indirect participant in DTC as described below.
Except as set forth below, the Global Capital Securities may be
transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the Global Capital
Securities may not be exchanged for Capital Securities in certificated form
except in the limited circumstances described under "-- Exchange of Book-Entry
Capital Securities for Certificated Capital Securities" below.
Depositary Procedures
DTC has advised the Trust and the Corporation that DTC is a limited-purpose
trust company created to hold securities for its participating organizations
(collectively, the "Participants") and to facilitate the clearance and
settlement of transactions in those securities between Participants through
electronic book-entry changes in accounts of its Participants. The Participants
include securities brokers and dealers (including the
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Initial Purchasers), banks, trust companies, clearing corporations and certain
other organizations. Access to DTC's system is also available to other entities
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly (collectively, the "Indirect Participants"). Persons who are not
Participants may beneficially own securities held by or on behalf of DTC only
through the Participants or the Indirect Participants. The ownership interest
and transfer of ownership interest of each actual purchaser of each security
held by or on behalf of DTC are recorded on the records of the Participants and
Indirect Participants.
DTC has also advised the Trust and the Corporation that, pursuant to
procedures established by it, (i) upon deposit of the Global Capital Securities,
DTC will credit the accounts of Participants with portions of the Liquidation
Amount of the Global Capital Securities and (ii) ownership of such interests in
the Global Capital Securities will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by DTC (with respect
to the Participants) or by the Participants and the Indirect Participants (with
respect to other owners of beneficial interests in the Global Capital
Securities).
Investors in the Global Capital Securities may hold their interests therein
directly through DTC if they are Participants in such system, or indirectly
through organizations which are Participants in such system. All interests in a
Global Capital Security will be subject to the procedures and requirements of
DTC. The laws of some states require that certain persons take physical delivery
in certificated form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Capital Security to such persons will
be limited to that extent. Because DTC can act only on behalf of Participants,
which in turn act on behalf of Indirect Participants and certain banks, the
ability of a person having beneficial interests in a Global Capital Security to
pledge such interests to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests.
Except as described below, owners of interests in the Global New Capital
Securities will not have New Capital Securities registered in their name, will
not receive physical delivery of New Capital Securities in certificated form and
will not be considered the registered owners or holders thereof under the
Declaration for any purpose.
Payments in respect of the Global New Capital Security registered in the
name of DTC or its nominee will be payable by the Property Trustee to DTC in its
capacity as the registered holder under the Declaration. Under the terms of the
Declaration, the Property Trustee will treat the persons in whose names the New
Capital Securities, including the Global New Capital Securities, are registered
as the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Consequently, neither the Property Trustee nor
any agent thereof has or will have any responsibility or liability for (i) any
aspect of DTC's records or any Participant's or Indirect Participant's records
relating to or payments made on account of beneficial ownership interests in the
Global New Capital Securities, or for maintaining, supervising or reviewing any
of DTC's records or any Participant's or Indirect Participant's records relating
to the beneficial ownership interests in the Global New Capital Securities or
(ii) any other matter relating to the actions and practices of DTC or any of its
Participants or Indirect Participants. DTC has advised the Trust and the
Corporation that its current practice, upon receipt of any payment in respect of
securities such as the New Capital Securities, is to credit the accounts of the
relevant Participants with the payment on the payment date, in amounts
proportionate to their respective holdings in Liquidation Amount of beneficial
interests in the relevant security as shown on the records of DTC unless DTC has
reason to believe it will not receive payment on such payment date. Payments by
the Participants and the Indirect Participants to the beneficial owners of
Global New Capital Securities will be governed by standing instructions and
customary practices and will be the responsibility of the Participants or the
Indirect Participants and will not be the responsibility of DTC, the Property
Trustee, the Trust or the Corporation. Neither the Trust nor the Corporation or
the Property Trustee will be liable for any delay by DTC or any of its
Participants in identifying the beneficial owners of the Global New Capital
Securities, and the Trust or the Corporation and the Property Trustee may
conclusively rely on and will be protected in relying on instructions from DTC
or its nominee for all purposes.
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Interests in the Global New Capital Securities will trade in DTC's Same-Day
Funds Settlement System and secondary market trading activity in such interests
will therefore settle in immediately available funds, subject in all cases to
the rules and procedures of DTC and its Participants and Indirect Participants.
Transfers among Participants and Indirect Participants in DTC will be effected
in accordance with DTC's procedures, and will be settled in same-day funds.
DTC has advised the Trust and the Corporation that it will take any action
permitted to be taken by a holder of New Capital Securities only at the
direction of one or more Participants to whose account with DTC interests in the
Global New Capital Securities are credited and only in respect of such portion
of the Liquidation Amount of the New Capital Securities as to which such
Participant or Participants has or have given such direction. However, if there
is an Event of Default under the Declaration, DTC reserves the right to exchange
the Global New Capital Securities for New Capital Securities in certificated
form and to distribute such New Capital Securities to its Participants.
The information in this section concerning DTC and its book-entry system
has been obtained from sources that the Trust and the Corporation believe to be
reliable, but neither the Trust nor the Corporation takes responsibility for the
accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interest in the Global New Capital Securities among Participants in DTC, it
is under no obligation to perform or to continue to perform such procedures, and
such procedures may be discontinued at any time. Neither the Trust nor the
Corporation or the Property Trustee will have any responsibility for the
performance by DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing DTC's
operations.
Exchange of Book-Entry Capital Securities for Certificated Capital Securities
A Global New Capital Security is exchangeable for New Capital Securities in
registered certificated form if (i) DTC (x) notifies the Trust that it is
unwilling or unable to continue as depositary for the Global New Capital
Security (the "Depositary") and the Trust thereupon fails to appoint a successor
Depositary within 90 days or (y) has ceased to be a clearing agency registered
under the Exchange Act, (ii) the Corporation in its sole discretion elects to
cause the issuance of the New Capital Securities in certificated form or (iii)
there shall have occurred and be continuing an Event of Default or any event
which after notice or lapse of time or both would be an Event of Default under
the Declaration. In addition, beneficial interests in a Global New Capital
Security may be exchanged for certificated New Capital Securities upon request
but only upon at least 20 days prior written notice given to the Property
Trustee by or on behalf of DTC in accordance with customary procedures. In all
cases, certificated New Capital Securities delivered in exchange for any Global
New Capital Security or beneficial interests therein will be registered in the
names, and issued in any approved denominations, requested by or on behalf of
the Depositary (in accordance with its customary procedures) unless the Property
Trustee determines otherwise in compliance with applicable law.
Payment and Paying Agency. Payments in respect of the New Capital
Securities held in global form shall be made to the Depositary, which shall
credit the relevant accounts at the Depositary on the applicable Distribution
Dates or in respect of the New Capital Securities that are not held by the
Depositary, such payments shall be made by check mailed to the address of the
holder entitled thereto as such address shall appear on the register. The paying
agent (the "Paying Agent") is initially the Property Trustee and any co-paying
agent chosen by the Property Trustee and acceptable to the Administrative
Trustees and the Corporation. The Paying Agent is permitted to resign as Paying
Agent upon 30 days' written notice to the Property Trustee and the Corporation.
In the event that the Property Trustee shall no longer be the Paying Agent, the
Administrative Trustees shall appoint a successor (which shall be a bank or
trust company acceptable to the Administrative Trustees and the Corporation) to
act as Paying Agent.
Registrar and Transfer Agent. The Property Trustee will act as registrar
and transfer agent for the New Capital Securities.
Registration of transfers of the New Capital Securities will be effected
without charge by or on behalf of the Trust but upon payment of any tax or other
governmental charges that may be imposed in connection with
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any transfer or exchange. The Trust will not be required to register or cause to
be registered the transfer of the New Capital Securities after they have been
called for redemption.
Information Concerning the Property Trustee. The Property Trustee, other
than during the occurrence and continuance of an Event of Default, undertakes to
perform only such duties as are specifically set forth in the Declaration and,
after such Event of Default, must exercise the same degree of care and skill as
a prudent person would exercise or use in the conduct of his or her own affairs.
Subject to this provision, the Property Trustee is under no obligation to
exercise any of the powers vested in it by the Declaration at the request of any
holder of Trust Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby. If no Event of
Default has occurred and is continuing and the Property Trustee is required to
decide between alternative causes of action, construe ambiguous provisions in
the Declaration or is unsure of the application of any provision of the
Declaration, and the matter is not one on which holders of the Capital
Securities or the Common Securities are entitled under the Declaration to vote,
then the Property Trustee shall take such action as is directed by the
Corporation and if not so directed, shall take such action as it deems advisable
and in the best interests of the holders of the Trust Securities and will have
no liability except for its own bad faith, negligence or willful misconduct.
Miscellaneous
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Trust in such a way that the Trust will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act of 1940, as amended (the "Investment Company Act") or
classified as an association taxable as a corporation for United States federal
income tax purposes and so that the Junior Subordinated Debentures will be
treated as indebtedness of the Corporation for United States federal income tax
purposes. In this connection, the Corporation and the Administrative Trustees
are authorized to take any action, not inconsistent with applicable law, the
certificate of trust of the Trust or the Declaration, that the Corporation and
the Administrative Trustees determine in their discretion to be necessary or
desirable for such purposes, as long as such action does not materially
adversely affect the interests of the holders of the Trust Securities.
Holders of the Trust Securities have no preemptive or similar rights.
The Trust may not borrow money, issue debt, execute mortgages or pledge any
of its assets.
DESCRIPTION OF NEW JUNIOR SUBORDINATED DEBENTURES
The Old Junior Subordinated Debentures were issued, and the New Junior
Subordinated Debentures will be issued, as a separate series under the
Indenture. Upon effectiveness of the Registration Statement, the Indenture will
be qualified under the Trust Indenture Act. This summary of certain terms and
provisions of the New Junior Subordinated Debentures and the Indenture does not
purport to be complete and, where reference is made to particular provisions of
the Indenture, such provisions, including the definitions of certain terms, some
of which are not otherwise defined herein, are qualified in their entirety by
reference to all of the provisions of the Indenture and those terms made a part
of the Indenture by the Trust Indenture Act.
General. Concurrently with the issuance of the Old Capital Securities, the
Trust invested the proceeds thereof, together with the consideration paid by the
Corporation for the Common Securities, in the Old Junior Subordinated Debentures
issued by the Corporation. Pursuant to the Exchange Offer the Corporation will
exchange the Old Junior Subordinated Debentures, in an amount corresponding to
the Old Capital Securities accepted for exchange, for a like aggregate principal
amount of the New Junior Subordinated Debentures promptly after the Expiration
Date.
The New Junior Subordinated Debentures will bear interest at the annual
rate of 8.99% of the principal amount thereof, payable semi-annually in arrears
on June 17 and December 17 of each year (each, an "Interest Payment Date"),
commencing June 17, 1997, to the person in whose name each New Junior
Subordinated Debenture is registered, subject to certain exceptions, at the
close of business on the first day of the month in which the relevant payment
date falls. It is anticipated that, until the liquidation, if any, of the
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Trust, each Junior Subordinated Debenture will be held in the name of the
Property Trustee in trust for the benefit of the holders of the Trust
Securities. The amount of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. In the event that any date
on which interest is payable on the New Junior Subordinated Debentures is not a
Business Day, then payment of the interest payable on such date will be made on
the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay). Accrued interest that is not paid
on the applicable Interest Payment Date will bear additional interest on the
amount thereof (to the extent permitted by law) at the rate per annum of 8.99%
thereof, compounded semi-annually. The term "interest," as used herein, shall
include semi-annual interest payments, interest on semi-annual interest payments
not paid on the applicable Interest Payment Date and Additional Sums (as defined
herein), as applicable.
The New Junior Subordinated Debentures will mature on the Stated Maturity
Date. The New Junior Subordinated Debentures will rank pari passu with the Old
Junior Subordinated Debentures and all Other Debentures and will be unsecured
and subordinate and rank junior in right of payment, to the extent and in the
manner set forth in the Indenture, to all Senior Indebtedness. See
"-- Subordination." The Corporation is largely a non-operating holding company
and almost all of the operating assets of the Corporation and its consolidated
subsidiaries are owned by such subsidiaries. The Corporation relies primarily on
the issuance of its debt securities to meet its obligations. The Corporation is
a legal entity separate and distinct from its banking, insurance and other
subsidiaries. The Corporation's subsidiaries include, among others, Advanta
National Bank USA and Advanta National Bank, each national banking associations,
and Advanta Financial Corp., an industrial loan corporation organized under the
laws of the State of Utah (collectively, the "FDIC-insured Subsidiaries"). The
FDIC-insured Subsidiaries are subject to certain restrictions on the transfer of
funds by each of such depository institutions to the Corporation and certain
other affiliates, in the form of loans, extensions of credit, investments or
purchases of assets. Transfers by any one of such FDIC-insured Subsidiaries to
the Corporation or any single affiliate are generally limited in amount as to
the Corporation and as to each of such other affiliates to 10% of such
FDIC-insured Subsidiary's capital and surplus and transfers to all affiliates
are limited in the aggregate to 20% of such FDIC-insured Subsidiary's capital
and surplus. Furthermore, such loans and extensions of credit are also subject
to various collateral requirements. In addition, payment of dividends to the
Corporation by the FDIC-insured Subsidiaries is subject to various limitations
and in certain circumstances requires approval by banking regulatory
authorities. The insurance subsidiaries of the Corporation (the "Insurance
Subsidiaries") also are subject to the laws and regulations of, and supervision
by, the states in which they are domiciled or have obtained the authority to
transact business, including limitations on the amount of dividends that may be
paid by the Insurance Subsidiaries to the Corporation. Because the Corporation
is a holding company, the right of the Corporation to participate in any
distribution of assets of any subsidiary upon such subsidiary's liquidation or
reorganization or otherwise is subject to the prior claims of creditors of the
subsidiary, except to the extent the Corporation may itself be recognized as a
creditor of that subsidiary. Accordingly, the New Junior Subordinated Debentures
will be effectively subordinated to all existing and future liabilities of the
Corporation's subsidiaries. The Indenture does not limit the incurrence or
issuance of other secured or unsecured debt of the Corporation, including Senior
Indebtedness, or of the Corporation's subsidiaries. See "-- Subordination."
Form, Registration and Transfer. If the New Junior Subordinated Debentures
are distributed to the holders of the New Capital Securities, the New Junior
Subordinated Debentures so distributed may be represented by one or more global
certificates registered in the name of Cede & Co. as the nominee of DTC. The
depositary arrangements for the New Junior Subordinated Debentures are expected
to be substantially similar to those in effect for the New Capital Securities.
For a description of DTC and the terms of the depositary arrangements relating
to payments, transfers, voting rights, prepayments and other notices and other
matters, see "-- Description of New Capital Securities -- Form, Denomination,
Book-Entry Procedures and Transfer."
Payment and Paying Agents. Payment of principal of and premium, if any,
and any interest on New Junior Subordinated Debentures will be made at the
office of the Debenture Trustee in New York, New York or at the office of such
Paying Agent or Paying Agents as the Corporation may designate from time to
time, except that at the option of the Corporation payment of any interest may
be made, except in the case of New Junior Subordinated Debentures in global
form, by (i) check mailed to the address of the person entitled
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thereto as such address shall appear in the register for New Junior Subordinated
Debentures or (ii) transfer to an account maintained by the person entitled
thereto, provided that proper transfer instructions have been received by the
relevant record date. Payment of any interest on any New Junior Subordinated
Debenture will be made to the person in whose name such New Junior Subordinated
Debenture is registered at the close of business on the record date for such
interest, except in the case of defaulted interest. The Corporation may at any
time designate additional Paying Agents or rescind the designation of any Paying
Agent; however the Corporation will at all times be required to maintain a
Paying Agent in each place of payment for the New Junior Subordinated
Debentures.
Any moneys deposited with the Debenture Trustee or any Paying Agent, or
then held by the Corporation in trust, for the payment of the principal of and
premium, if any, or interest on any New Junior Subordinated Debenture and
remaining unclaimed for two years after such principal and premium, if any, or
interest has become due and payable shall, at the request of the Corporation, be
repaid to the Corporation and the holder of such New Junior Subordinated
Debenture shall thereafter look, as a general unsecured creditor, only to the
Corporation for payment thereof.
Option to Extend Interest Payment Date. So long as no Debenture Event of
Default has occurred and is continuing, the Corporation will have the right
under the Indenture at any time during the term of the Junior Subordinated
Debentures to defer the payment of interest at any time or from time to time for
a period not exceeding 10 consecutive, semi-annual periods with respect to each
Extension Period, provided that no Extension Period may extend beyond the Stated
Maturity Date. At the end of an Extension Period, the Corporation must pay all
interest then accrued and unpaid (together with interest then accrued at the
annual rate of 8.99%, compounded semi-annually, to the extent permitted by
applicable law). During an Extension Period, interest will continue to accrue
and holders of Junior Subordinated Debentures (and holders of the Trust
Securities while Trust Securities are outstanding) will be required to accrue
interest income for United States federal income tax purposes prior to the
receipt of cash attributable to such income. See "Certain Federal Income Tax
Consequences -- Interest Income and Original Issue Discount."
During any Extension Period, the Corporation may not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Corporation's capital stock
(which includes common and preferred stock), (ii) make any payment of principal,
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Corporation (including any Other Debentures) that rank pari
passu with or junior in right of payment to the Junior Subordinated Debentures
or (iii) make any guarantee payments with respect to any guarantee by the
Corporation of the debt securities of any subsidiary of the Corporation
(including any Other Guarantees) if such guarantee ranks pari passu with or
junior in right of payment to the Junior Subordinated Debentures (other than (a)
dividends or distributions in shares of or options, warrants or rights to
subscribe for or purchase shares of, common stock of the Corporation, (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Guarantee, (d) as a result of a reclassification of the
Corporation's capital stock or the exchange or conversion of one class or series
of the Corporation's capital stock for another class or series of the
Corporation's capital stock, (e) the purchase of fractional interests in shares
of the Corporation's capital stock pursuant to the conversion or exchange
provisions of such capital stock or the security being converted or exchanged,
and (f) purchases of common stock related to the issuance of common stock or
rights under any of the Corporation's benefit plans for its directors, officers
or employees or any of the Corporation's dividend reinvestment plans).
Prior to the termination of any Extension Period, the Corporation may
further extend such Extension Period, provided that such extension does not
cause such Extension Period to exceed 10 consecutive semi-annual periods or to
extend beyond the Stated Maturity Date. Upon the termination of any such
Extension Period and the payment of all amounts then due on any Interest Payment
Date, the Corporation may elect to begin a new Extension Period, subject to the
above requirements. No interest shall be due and payable during an Extension
Period, except at the end thereof. The Corporation must give the Property
Trustee, the Administrative Trustees and the Debenture Trustee notice of its
election of any Extension Period (or an extension thereof) at least five
Business Days prior to the earlier of (i) the date the Distributions on the
Trust
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Securities would have been payable except for the election to begin or extend
such Extension Period or (ii) the date the Administrative Trustees are required
to give notice to any securities exchange or to holders of Capital Securities of
the record date or the date such Distributions are payable, but in any event not
less than five Business Days prior to such record date. The Debenture Trustee
shall give notice of the Corporation's election to begin or extend a new
Extension Period to the holders of the Capital Securities. There is no
limitation on the number of times that the Corporation may elect to begin an
Extension Period.
Optional Prepayment. The Junior Subordinated Debentures will be
prepayable, in whole or in part, at the option of the Corporation on or after
the Initial Optional Prepayment Date, at a price (the "Optional Prepayment
Price") that is equal to the percentage of the outstanding principal amount of
the Junior Subordinated Debentures specified below, plus, in each case, accrued
interest thereon to the date of prepayment if redeemed during the 12-month
period beginning December 17 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
-------------------------------------------------- ----------
<S> <C>
2006.............................................. 104.4950%
2007.............................................. 104.0455%
2008.............................................. 103.5960%
2009.............................................. 103.1465%
2010.............................................. 102.6970%
2011.............................................. 102.2475%
2012.............................................. 101.7980%
2013.............................................. 101.3485%
2014.............................................. 100.8990%
2015.............................................. 100.4495%
2016 and thereafter............................... 100.0000%
</TABLE>
Special Event Prepayment. If a Special Event occurs and is continuing
prior to the Initial Optional Prepayment Date, the Corporation may, at its
option, prepay the Junior Subordinated Debentures in whole (but not in part) at
any time within 90 days of the occurrence of such Special Event, at a prepayment
price (the "Special Event Prepayment Price") equal to the greater of (i) 100% of
the principal amount of such Junior Subordinated Debentures or (ii) the sum, as
determined by a Quotation Agent, of the present values of the principal amount
and premium payable with respect to an optional redemption of Junior
Subordinated Debentures on the Initial Optional Prepayment Date, together with
scheduled payments of interest on the Junior Subordinated Debentures from the
prepayment date to and including the Initial Optional Prepayment Date (the
"Remaining Life"), discounted to the prepayment date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Adjusted
Treasury Rate, plus, in each case, accrued interest thereon to the date of
prepayment.
A "Special Event" means the receipt by the Corporation and the Trust of an
opinion of counsel experienced in such matters to the effect that, as a result
of any amendment to, or change (including any announced prospective change) in,
the laws or any regulations thereunder of the United States or any political
subdivision or taxing authority thereof or therein, or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after December 17, 1996,
there is more than an insubstantial risk that (i) the Trust is, or will be
within 90 days of the date of such opinion, subject to United States federal
income tax with respect to income received or accrued on the Junior Subordinated
Debentures, (ii) interest payable by the Corporation on the Junior Subordinated
Debentures is not, or within 90 days of the date of such opinion will not be,
deductible by the Corporation, in whole or in part, for United States federal
income tax purposes, or (iii) the Trust is, or will be within 90 days of the
date of such opinion, subject to more than a de minimis amount of other taxes,
duties or other governmental charges.
"Adjusted Treasury Rate" means, with respect to any prepayment date, the
rate per annum equal to (i) the yield, under the heading which represents the
average for the immediately prior week, appearing in the most recently published
statistical release designated "H.15 (519)" or any successor publication which
is
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published weekly by the Federal Reserve Board and which establishes yields on
actively traded United States Treasury securities adjusted to constant maturity
under the caption "Treasury Constant Maturities," for the maturity corresponding
to the Remaining Life (if no maturity is within three months before or after the
maturity corresponding to the Remaining Life, yields for the two published
maturities most closely corresponding to the Remaining Life shall be
interpolated, and the Adjusted Treasury Rate shall be interpolated or
extrapolated from such yields on a straight-line basis, rounding to the nearest
month) or (ii) if such release (or any successor release) is not published
during the week preceding the calculation date or does not contain such yields,
the rate per annum equal to the semi-annual equivalent yield to maturity of the
Comparable Treasury Issue, calculated using a price for the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for such prepayment date, in each case calculated on
the third Business Day preceding the prepayment date, plus in each case (a)
1.25% if such prepayment date occurs on or prior to December 31, 1997 and (b)
0.50% in all other cases.
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the Remaining
Life of the Junior Subordinated Debentures that would be utilized, at the time
of selection and in accordance with customary financial practice, in pricing new
issues of corporate debt securities of comparable maturity to the Remaining Life
of the Junior Subordinated Debentures. If no United States Treasury security has
a maturity which is within a period from three months before to three months
after the Initial Optional Prepayment Date, the two most closely corresponding
United States Treasury securities shall be used as the Comparable Treasury
Issue, and the Adjusted Treasury Rate shall be interpolated or extrapolated on a
straight-line basis, rounding to the nearest month, using such securities.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Corporation. "Reference Treasury Dealer" means: (i) Merrill Lynch Government
Securities, Inc. and its respective successors; provided, however, that if the
foregoing shall cease to be a primary U.S. Government securities dealer in New
York City (a "Primary Treasury Dealer"), the Corporation shall substitute
therefor another Primary Treasury Dealer; and (ii) any other Primary Treasury
Dealer selected by the Corporation.
"Comparable Treasury Price" means, with respect to any prepayment date, (i)
the average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
Business Day preceding such prepayment date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is not
published or does not contain such prices on such Business Day, (A) the average
of five Reference Treasury Dealer Quotations for such prepayment date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations, or
(B) if the Debenture Trustee obtains fewer than three such Reference Treasury
Dealer Quotations, the average of all such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any prepayment date, the average, as determined by
the Debenture Trustee, of the bid and asked prices for the Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted in
writing to the Debenture Trustee by such Reference Treasury Dealer at 5:00 p.m.,
New York City time, on the third Business Day preceding such prepayment date.
"Additional Sums" means such additional amounts as may be necessary in
order that the amount of Distributions then due and payable by the Trust on the
outstanding Trust Securities shall not be reduced as a result of any additional
taxes, duties or other governmental charges to which the Trust has become
subject as a result of a Special Event.
Notice of any prepayment will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of Junior Subordinated
Debentures to be prepaid at its registered address. Unless the Corporation
defaults in payment of the prepayment price, on and after the prepayment date
interest ceases to accrue on such Junior Subordinated Debentures called for
prepayment.
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If the Trust is required to pay any additional taxes, duties or other
governmental charges as a result of a Special Event, the Corporation will pay as
additional amounts on the Junior Subordinated Debentures the Additional Sums.
Certain Covenants of the Corporation. The Corporation will also covenant
that it will not, (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Corporation's capital stock (which includes common stock and preferred
stock) or (ii) make any payment of principal, interest or premium, if any, on or
repay or repurchase or redeem any debt securities of the Corporation (including
Other Debentures) that rank pari passu with or junior in right of payment to the
New Junior Subordinated Debentures or (iii) make any guarantee payments with
respect to any guarantee by the Corporation of the debt securities of any
subsidiary of the Corporation (including under Other Guarantees) if such
guarantee ranks pari passu or junior in right of payment to the New Junior
Subordinated Debentures (other than (a) dividends or distributions in shares of,
or options, warrants or rights to subscribe for or purchase shares of, common
stock of the Corporation, (b) any declaration of a dividend in connection with
the implementation of a stockholder's rights plan, or the issuance of stock
under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (c) payments under the Guarantee, (d) as a result of a
reclassification of the Corporation's capital stock or the exchange or
conversion of one class or series of the Corporation's capital stock for another
class or series of the Corporation's capital stock, (e) the purchase of
fractional interests in shares of the Corporation's capital stock pursuant to
the conversion or exchange provisions of such capital stock or the security
being converted or exchanged and (f) purchases of common stock related to the
issuance of common stock or rights under any of the Corporation's benefit plans
for its directors, officers or employees or any of the Corporation's dividend
reinvestment plans) if at such time (1) there shall have occurred any event of
which the Corporation has actual knowledge that (A) is, or with the giving of
notice or the lapse of time, or both, would be, a Debenture Event of Default (as
defined herein) and (B) in respect of which the Corporation shall not have taken
reasonable steps to cure, (2) if such Junior Subordinated Debentures are held by
the Trust, the Corporation shall be in default with respect to its payment of
any obligations under the Guarantee or (3) the Corporation shall have given
notice of its election of an Extension Period, or any extension thereof, as
provided in the Indenture and shall not have rescinded such notice, and such
Extension Period, or any extension thereof, shall have commenced.
Debenture Events of Default. The Indenture provides that any one or more
of the following described events with respect to the Junior Subordinated
Debentures constitutes a "Debenture Event of Default" (whatever the reason for
such Debenture Event of Default and whether it shall be voluntary or involuntary
or be effected by operation of law or pursuant to any judgment, decree or order
of any court or any order, rule or regulation of any administrative or
governmental body):
(i) failure for 30 days to pay any interest on the Junior Subordinated
Debentures or any Other Debentures, when due (subject to the deferral of
any due date in the case of an Extension Period): or
(ii) failure to pay any principal or premium, if any, on the Junior
Subordinated Debentures or any Other Debentures when due whether at
maturity, upon redemption, by declaration of acceleration of maturity or
otherwise; or
(iii) failure to observe or perform certain other covenants contained
in the Indenture for 90 days after written notice to the Corporation from
the Debenture Trustee or the holders of at least 25% in aggregate
outstanding principal amount of Junior Subordinated Debentures; or
(iv) certain events in bankruptcy, insolvency or reorganization of the
Corporation.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Debenture
Trustee. The Debenture Trustee or the holders of not less than 25% in aggregate
outstanding principal amount of the Junior Subordinated Debentures may declare
the principal due and payable immediately upon a Debenture Event of Default. The
holders of a majority in aggregate outstanding principal amount of the Junior
Subordinated Debentures may annul such declaration and waive the default if
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the default (other than the nonpayment of the principal of the Junior
Subordinated Debentures which has become due solely by such acceleration) has
been cured and a sum sufficient to pay all matured installments of interest and
principal due otherwise than by acceleration has been deposited with the
Debenture Trustee.
The holders of a majority in aggregate outstanding principal amount of the
Junior Subordinated Debentures affected thereby may, on behalf of the holders of
all the Junior Subordinated Debentures, waive any past default except a default
in the payment of principal of or premium, if any, on or interest (unless such
default has been cured and a sum sufficient to pay all matured installments of
interest and premium, if any, and principal due otherwise than by acceleration
has been deposited with the Debenture Trustee) or a default in respect of a
covenant or provision which under the Indenture cannot be modified or amended
without the consent of the holder of each outstanding Junior Subordinated
Debenture.
The Indenture requires the annual filing by the Corporation with the
Debenture Trustee of a certificate as to the absence of certain defaults under
the Indenture.
Enforcement of Certain Rights by Holders of Capital Securities. If a
Debenture Event of Default shall have occurred and be continuing and shall be
attributable to the failure of the Corporation to pay interest or premium, if
any, on principal of the Junior Subordinated Debentures on the due date, a
holder of Capital Securities may institute a Direct Action. The Corporation may
not amend the Indenture to remove the foregoing right to bring a Direct Action
without the prior written consent of the holders of all of the Capital
Securities. Notwithstanding any payments made to a holder of Capital Securities
by the Corporation in connection with a Direct Action, the Corporation shall
remain obligated to pay the principal of or premium, if any, or interest on the
Junior Subordinated Debentures, and the Corporation shall be subrogated to the
rights of the holder of such Capital Securities with respect to payments on the
Capital Securities to the extent of any payments made by the Corporation to such
holder in any Direct Action.
The holders of the Capital Securities will not be able to exercise directly
any remedies, other than those set forth in the preceding paragraph, available
to the holders of the Junior Subordinated Debentures unless there shall have
been an Event of Default under the Declaration. See "-- Description of New
Capital Securities -- Events of Default; Notice."
Consolidation, Merger, Sale of Assets and Other Transactions. The
Indenture provides that the Corporation shall not consolidate with or merge into
any other person or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any person, and no person shall
consolidate with or merge into the Corporation or convey, transfer or lease its
properties and assets as an entirety or substantially as an entirety to the
Corporation, unless: (i) in case the Corporation consolidates with or merges
into another person or conveys or transfers its properties and assets
substantially as an entirety to any person, the successor person is organized
under the laws of the United States or any State or the District of Columbia,
and such successor person expressly assumes the Corporation's obligations on the
Junior Subordinated Debentures; (ii) immediately after giving effect thereto, no
Debenture Event of Default, and no event which, after notice or lapse of time or
both, would become a Debenture Event of Default, shall have occurred and be
continuing; and (iii) certain other conditions as prescribed in the Indenture
are met.
The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged or other
transaction involving the Corporation that may adversely affect holders of the
Junior Subordinated Debentures.
Modification of the Indenture. From time to time the Corporation and the
Debenture Trustee may, without the consent of the holders of Junior Subordinated
Debentures, amend, waive or supplement the Indenture for specified purposes,
including, among other things, curing ambiguities, defects or inconsistencies
(provided that any such action does not materially adversely affect the
interests of the holders of Junior Subordinated Debentures) and qualifying, or
maintaining the qualification of, the Indenture under the Trust Indenture Act.
The Indenture contains provisions permitting the Corporation and the Debenture
Trustee, with the consent of the holders of a majority in principal amount of
Junior Subordinated Debentures, to modify the Indenture in a manner affecting
the rights of the holders of Junior Subordinated Debentures; provided that no
such modification may, without the consent of the holders of each outstanding
Junior Subordinated Debenture so affected, (i) change the Stated Maturity or any
provisions governing redemption, or reduce the principal
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amount of the Junior Subordinated Debentures or reduce the rate or extend the
time of payment of interest thereon or (ii) reduce the percentage of principal
amount of Junior Subordinated Debentures, the holders of which are required to
consent to any such modification of the Indenture.
Satisfaction and Discharge. The Indenture provides that when, among other
things, all Junior Subordinated Debentures not previously delivered to the
Debenture Trustee for cancellation (i) have become due and payable or (ii) will
become due and payable at maturity within one year, and the Corporation deposits
or causes to be deposited with the Debenture Trustee funds, in trust, for the
purpose and in an amount sufficient to pay and discharge the entire indebtedness
on the Junior Subordinated Debentures not previously delivered to the Debenture
Trustee for cancellation, for the principal and premium, if any, and interest to
the date of the deposit or to the Stated Maturity Date, as the case may be, then
the Indenture will cease to be of further effect (except as to the Corporation's
obligations to pay all other sums due pursuant to the Indenture and to provide
the officers' certificates and opinions of counsel described therein), and the
Corporation will be deemed to have satisfied and discharged the Indenture.
Subordination. In the Indenture, the Corporation has covenanted and agreed
that any Junior Subordinated Debentures issued thereunder will be subordinate
and junior in right of payment to all Senior Indebtedness to the extent provided
in the Indenture. Upon any payment or distribution of assets to creditors upon
any liquidation, dissolution, winding up, reorganization, assignment for the
benefit of creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Corporation, the holders of Senior Indebtedness
will first be entitled to receive payment in full before the holders of Junior
Subordinated Debentures will be entitled to receive or retain any payment in
respect thereof.
In the event of the acceleration of the maturity of Junior Subordinated
Debentures, the holders of all Senior Indebtedness outstanding at the time of
such acceleration will first be entitled to receive payment in full before the
holders of Junior Subordinated Debentures will be entitled to receive or retain
any payment in respect of the Junior Subordinated Debentures.
No payments on account of principal or premium, if any, or interest, if
any, in respect of the Junior Subordinated Debentures may be made if there shall
have occurred and be continuing a default in any payment with respect to Senior
Indebtedness, or an event of default with respect to any Senior Indebtedness
resulting in the acceleration of the maturity thereof, or if any judicial
proceeding shall be pending with respect to any such default.
"Senior Indebtedness" shall mean all Indebtedness for Money Borrowed,
whether outstanding on the date of execution of the Indenture or thereafter
created, assumed or incurred, unless the terms thereof specifically provide that
it is not superior in right of payment to the Junior Subordinated Debentures,
and any deferrals, renewals or extensions of such Senior Indebtedness.
"Indebtedness for Money Borrowed" shall mean any obligation of, or any
obligation guaranteed by, the Corporation for the repayment of borrowed money,
whether or not evidenced by bonds, debentures, notes or other written
instruments.
The Corporation is largely a non-operating holding company and almost all
of the operating assets of the Corporation and its consolidated subsidiaries are
owned by such subsidiaries. The Corporation is a legal entity separate and
distinct from its banking, insurance and other subsidiaries. The principal
source of the Corporation's funds is the issuance of its debt securities. The
FDIC-insured Subsidiaries are subject to certain restrictions on the transfer of
funds by each of such depository institutions to the Corporation and certain
other affiliates, in the form of loans, extensions of credit, investments or
purchases of assets. Transfers by any one of such FDIC-insured Subsidiaries to
the Corporation or any single affiliate are generally limited in amount as to
the Corporation and as to each of such other affiliates to 10% of such
FDIC-insured Subsidiaries' capital and surplus and transfers to all affiliates
are limited in the aggregate to 20% of such FDIC-insured Subsidiaries' capital
and surplus. In addition, payment of dividends to the Corporation by the
FDIC-insured Subsidiaries is subject to various limitations and in certain
circumstances requires approval by banking regulatory authorities. The Insurance
Subsidiaries also are subject to the laws and regulations of, and supervision by
the states in
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which they are domiciled or have obtained the authority to transact business,
including limitations on the amount of dividends that may be paid by the
Insurance Subsidiaries to the Corporation. Because the Corporation is a holding
company, the right of the Corporation to participate in any distribution of
assets of any subsidiary upon such subsidiary's liquidation or reorganization or
otherwise, is subject to the prior claims of creditors of the subsidiary, except
to the extent the Corporation may itself be recognized as a creditor of that
subsidiary. Accordingly, the Junior Subordinated Debentures will be effectively
subordinated to all existing and future liabilities of the Corporation's
subsidiaries.
The Indenture places no limitation on the amount of additional Senior
Indebtedness that may be incurred by the Corporation. The Corporation expects
from time to time to incur additional indebtedness constituting Senior
Indebtedness.
Governing Law. The Indenture and the New Junior Subordinated Debentures
will be governed by, and construed in accordance with, the laws of the State of
New York.
Information Concerning the Debenture Trustee. Subject to the provisions of
the Trust Indenture Act, the Debenture Trustee is under no obligation to
exercise any of the powers vested in it by the Indenture at the request of any
holder of Junior Subordinated Debentures, unless offered reasonable indemnity by
such holder against the costs, expenses and liabilities which might be incurred
thereby. The Debenture Trustee is not required to expend or risk its own funds
or otherwise incur personal financial liability in the performance of its duties
if the Debenture Trustee reasonably believes that repayment or adequate
indemnity is not reasonably assured to it.
DESCRIPTION OF THE NEW GUARANTEE
The Old Guarantee was executed and delivered by the Corporation
concurrently with the issuance by the Trust of the Old Capital Securities for
the benefit of the holders from time to time of the Old Capital Securities.
Promptly after the Expiration Date, the Old Guarantee will be exchanged for the
New Guarantee for the benefit of the holders from time to time of the New
Capital Securities. The Chase Manhattan Bank will act as indenture trustee
("Guarantee Trustee") under the New Guarantee. When executed and delivered, the
New Guarantee will be qualified under the Trust Indenture Act. This summary of
certain provisions of the New Guarantee does not purport to be complete and is
subject to, and qualified in its entirety by reference to, all of the provisions
of the New Guarantee, including the definitions therein of certain terms, and
the Trust Indenture Act. The Guarantee Trustee will hold the New Guarantee for
the benefit of the holders of the New Capital Securities.
General. The Corporation will irrevocably agree to pay in full on a
subordinated basis, to the extent set forth herein, the Guarantee Payments (as
defined below) to the holders of the New Capital Securities, as and when due,
regardless of any defense, right of set-off or counterclaim that the Trust may
have or assert other than the defense of payment. The following payments with
respect to the New Capital Securities, to the extent not paid by or on behalf of
the Trust (the "Guarantee Payments"), will be subject to the New Guarantee: (i)
any accumulated and unpaid Distributions required to be paid on New Capital
Securities, to the extent the Trust has funds on hand legally available
therefor, (ii) the Redemption Price with respect to any New Capital Securities
called for redemption, to the extent that the Trust has funds on hand legally
available therefor, or (iii) upon a voluntary or involuntary termination and
liquidation of the Trust (unless the New Junior Subordinated Debentures are
distributed to holders of the New Capital Securities), the lesser of (a) the
portion of the Liquidation Distribution payable to holders of New Capital
Securities and (b) the amount of assets of the Trust remaining available for
distribution to holders of New Capital Securities. The Corporation's obligation
to make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Corporation to the holders of the New Capital Securities or by
causing the Trust to pay such amounts to such holders.
The New Guarantee will rank subordinate and junior in right of payment to
all Senior Indebtedness to the extent provided therein. See "-- Status of the
New Guarantee." Because the Corporation is a holding company, the right of the
Corporation to participate in any distribution of assets of any subsidiary upon
such subsidiary's liquidation or reorganization or otherwise is subject to the
prior claims of creditors of that
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subsidiary, except to the extent the Corporation may itself be recognized as a
creditor of that subsidiary. Accordingly, the Corporation's obligations under
the New Guarantee will be effectively subordinated to all existing and future
liabilities of the Corporation's subsidiaries. See "-- Description of New Junior
Subordinated Debentures -- General." The New Guarantee does not limit the
incurrence or issuance of other secured or unsecured debt of the Corporation,
including Senior Indebtedness, whether under the Indenture, any other indenture
that the Corporation may enter into in the future or otherwise.
The Corporation will, through the New Guarantee, the Declaration, the New
Junior Subordinated Debentures and the Indenture, taken together, fully,
irrevocably and unconditionally guarantee all of the Trust's obligations under
the New Capital Securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
Trust's obligations under the New Capital Securities. See "Relationship Among
the New Capital Securities, the New Junior Subordinated Debentures and the New
Guarantee."
Status of the New Guarantee. The New Guarantee will constitute an
unsecured obligation of the Corporation and will rank subordinate and junior in
right of payment to all Senior Indebtedness in the same manner as the New Junior
Subordinated Debentures, except in the case of a bankruptcy or insolvency
proceeding in respect of the Corporation, in which case the New Guarantee will
rank subordinate and junior in right of payment to all liabilities (other than
the Old Guarantee and Other Guarantees) of the Corporation.
The New Guarantee will rank pari passu with the Old Guarantee and all Other
Guarantees issued by the Corporation. The New Guarantee will constitute a
guarantee of payment and not of collection (i.e., the guaranteed party may
institute a legal proceeding directly against the Corporation to enforce its
rights under the New Guarantee without first instituting a legal proceeding
against any other person or entity). The New Guarantee will be held for the
benefit of the holders of the New Capital Securities. The New Guarantee will not
be discharged except by payment of the Guarantee Payments in full to the extent
not paid by the Trust or upon distribution of the New Junior Subordinated
Debentures to the holders of the New Capital Securities. The New Guarantee does
not place a limitation on the amount of additional Senior Indebtedness that may
be incurred by the Corporation. The Corporation expects from time to time to
incur additional indebtedness constituting Senior Indebtedness.
Amendments and Assignment. Except with respect to any changes that do not
materially adversely affect the rights of holders of the New Capital Securities
(in which case no consent will be required), the New Guarantee may not be
amended without the prior approval of the holders of a majority of the
Liquidation Amount of such outstanding New Capital Securities. The manner of
obtaining any such approval will be as set forth under "-- Description of New
Capital Securities --Voting Rights; Amendment of the Declaration." All
guarantees and agreements contained in the New Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the Corporation
and shall inure to the benefit of the holders of the New Capital Securities then
outstanding.
Events of Default. An event of default under the New Guarantee will occur
upon the failure of the Corporation to perform any of its payment or other
obligations thereunder. The holders of a majority in Liquidation Amount of the
New Capital Securities will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Guarantee Trustee
in respect of the New Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the New Guarantee.
Any holder of the New Capital Securities may institute a legal proceeding
directly against the Corporation to enforce its rights under the New Guarantee
without first instituting a legal proceeding against the Trust, the Guarantee
Trustee or any other person or entity.
The Corporation, as guarantor, will be required to file annually with the
Guarantee Trustee a certificate as to whether or not the Corporation is in
compliance with all the conditions and covenants applicable to it under the New
Guarantee.
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Termination of the New Guarantee. The New Guarantee will terminate and be
of no further force and effect upon full payment of the applicable Redemption
Price of the New Capital Securities, upon full payment of the Liquidation Amount
payable upon liquidation of the Trust or upon distribution of New Junior
Subordinated Debentures to the holders of the New Capital Securities. The New
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of the New Capital Securities must restore payment
of any sums paid under the New Capital Securities or the New Guarantee.
Information Concerning the Guarantee Trustee. The Guarantee Trustee, other
than during the continuance of a default with respect to the New Guarantee, will
undertake to perform only such duties as are specifically set forth in the New
Guarantee and, after default, must exercise the same degree of care as a prudent
individual would exercise in the conduct of his or her own affairs. Subject to
such provisions, the Guarantee Trustee will be under no obligation to exercise
any of the powers vested in it by the New Guarantee at the request of any holder
of New Capital Securities, unless offered reasonable indemnity against the
costs, expenses and liabilities which might be incurred thereby. The Guarantee
Trustee is not required to expend or risk its own funds or otherwise incur
personal financial liability in the performance of its duties if it reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
The Corporation or its affiliates maintain certain accounts and other
banking relationships with the Guarantee Trustee and its affiliates in the
ordinary course of business.
Governing Law. The New Guarantee will be governed by, and construed in
accordance with, the laws of the State of New York.
DESCRIPTION OF OLD SECURITIES
The terms of the Old Securities are identical in all material respects to
the terms of the New Securities, except that: (i) the Old Securities have not
been registered under the Securities Act, are subject to certain restrictions on
transfer and are entitled to certain rights under the Registration Rights
Agreement (which rights will terminate upon consummation of the Exchange Offer,
except under limited circumstances); (ii) the New Capital Securities will not
contain the $100,000 minimum Liquidation Amount transfer restriction and certain
other transfer restrictions applicable to Old Capital Securities; (iii) the New
Capital Securities will not provide for any increase in the Distribution Rate
thereon; (iv) the New Junior Subordinated Debentures will not contain the
$100,000 minimum principal amount transfer restriction; and (v) the New Junior
Subordinated Debentures will not provide for any increase in the interest rate
thereon. The Old Securities provide that, in the event that a registration
statement relating to the Exchange Offer has not been filed within 150 days
after December 17, 1996 and been declared effective on or prior to the 30th day
after such required filing date, or, in certain limited circumstances, in the
event a shelf registration statement (the "Shelf Registration Statement") with
respect to the resale of the Old Capital Securities is not declared effective on
or prior to the 30th day after such required filing date, then interest will
accumulate (in addition to the stated interest rate on the Old Junior
Subordinated Debentures) at the rate of 0.25% per annum on the principal amount
of the Old Junior Subordinated Debentures and Distributions will accrue (in
addition to the stated Distribution Rate on the Old Capital Securities) at the
rate of 0.25% per annum on the Liquidation Amount of the Old Capital Securities,
for the period from the occurrence of such event until such time as such
required Exchange Offer is consummated or any required Shelf Registration
Statement is effective. The New Securities are not, and upon consummation of the
Exchange Offer the Old Securities will not be, entitled to any such additional
interest or Distributions. Accordingly, holders of Old Capital Securities should
review the information set forth under "Risk Factors -- Certain Consequences of
a Failure to Exchange Old Capital Securities" and "Description of New
Securities."
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RELATIONSHIP AMONG THE NEW CAPITAL SECURITIES, THE
NEW JUNIOR SUBORDINATED DEBENTURES AND THE NEW GUARANTEE
FULL AND UNCONDITIONAL GUARANTEE
Payments of Distributions and other amounts due on the New Capital
Securities (to the extent the Trust has funds on hand legally available for the
payment of such Distributions) will be irrevocably guaranteed by the Corporation
as and to the extent set forth under "Description of New
Securities -- Description of the New Guarantee." Taken together, the
Corporation's obligations under the New Junior Subordinated Debentures, the
Indenture, the Declaration and the New Guarantee will provide, in the aggregate,
a full, irrevocable and unconditional guarantee of payments of Distributions and
other amounts due on the New Capital Securities. No single document standing
alone or operating in conjunction with fewer than all of the other documents
constitutes such guarantee. It is only the combined operation of these documents
that has the effect of providing a full, irrevocable and unconditional guarantee
of the Trust's obligations under the New Capital Securities. If and to the
extent that the Corporation does not make the required payments on the New
Junior Subordinated Debentures, the Trust will not have sufficient funds to make
the related payments, including Distributions, on the New Capital Securities.
The New Guarantee will not cover any such payment when the Trust does not have
sufficient funds on hand legally available therefor. In such event, the remedy
of a holder of New Capital Securities is to institute a Direct Action. The
obligations of the Corporation under the New Guarantee will be subordinate and
junior in right of payment to all Senior Indebtedness.
SUFFICIENCY OF PAYMENTS
As long as payments of interest and other payments are made when due on the
New Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the New Capital Securities, primarily
because: (i) the aggregate principal amount or Prepayment Price of the New
Junior Subordinated Debentures will be equal to the sum of the Liquidation
Amount or Redemption Price, as applicable, of the New Capital Securities; (ii)
the interest rate and interest and other payment dates on the New Junior
Subordinated Debentures will match the Distribution Rate and Distribution and
other payment dates for the New Capital Securities; (iii) the Corporation shall
pay for all and any costs, expenses and liabilities of the Trust except the
Trust's obligations to holders of Trust Securities under such Trust Securities;
and (iv) the Declaration provides that the Trust is not authorized to engage in
any activity that is not consistent with the limited purposes thereof.
ENFORCEMENT OF RIGHTS OF HOLDERS OF NEW CAPITAL SECURITIES
A holder of any New Capital Security may institute a legal proceeding
directly against the Corporation to enforce its rights under the New Guarantee
without first instituting a legal proceeding against the Guarantee Trustee, the
Trust or any other person or entity.
A default or event of default under any Senior Indebtedness would not
constitute a default or Event of Default under the Declaration. However, in the
event of payment defaults under, or acceleration of, Senior Indebtedness, the
subordination provisions of the Indenture provide that no payments may be made
in respect of the Junior Subordinated Debentures until such Senior Indebtedness
has been paid in full or any payment default thereunder has been cured or
waived. Failure to make required payments on Junior Subordinated Debentures
would constitute an Event of Default under the Declaration.
LIMITED PURPOSE OF THE TRUST
The New Capital Securities will represent preferred beneficial interests in
the Trust, and the Trust exists for the sole purpose of issuing and selling the
Trust Securities, using the proceeds from the sale of the Trust Securities to
acquire the Junior Subordinated Debentures and engaging in only those other
activities necessary, advisable or incidental thereto. A principal difference
between the rights of a holder of a New Capital Security and a holder of a New
Junior Subordinated Debenture is that a holder of a New Junior Subordinated
Debenture will be entitled to receive from the Corporation the principal amount
of and premium, if any, and interest on New Junior Subordinated Debentures held,
while a holder of New Capital
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Securities is entitled to receive Distributions from the Trust (or, in certain
circumstances, from the Corporation under the New Guarantee) if and to the
extent the Trust has funds on hand legally available for the payment of such
Distributions.
RIGHTS UPON TERMINATION
Unless the Junior Subordinated Debentures are distributed to holders of the
Trust Securities, upon any voluntary or involuntary termination and liquidation
of the Trust, the holders of the Trust Securities will be entitled to receive,
out of assets held by the Trust, the Liquidation Distribution in cash. See
"Description of New Securities -- Description of Capital
Securities -- Liquidation of the Trust and Distribution of New Junior
Subordinated Debentures." Upon any voluntary or involuntary liquidation or
bankruptcy of the Corporation, the Property Trustee, as holder of the New Junior
Subordinated Debentures, would be a subordinated creditor of the Corporation,
subordinated in right of payment to all Senior Indebtedness as set forth in the
Indenture, but entitled to receive payment in full of principal (and premium, if
any) and interest, before any stockholders of the Corporation receive payments
or distributions. Since the Corporation will be the guarantor under the
Guarantee and will agree to pay for all costs, expenses and liabilities of the
Trust (other than the Trust's obligations to the holders of its Trust
Securities), the positions of a holder of Capital Securities and a holder of
Junior Subordinated Debentures relative to stockholders of the Corporation in
the event of liquidation or bankruptcy of the Corporation are expected to be
substantially the same.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL
In the opinion of Wolf, Block, Schorr and Solis-Cohen, counsel to the
Corporation and the Trust ("Tax Counsel"), the following is a summary of certain
of the material United States federal income tax consequences of the purchase,
ownership and disposition of Capital Securities held as capital assets by a
holder who purchases such Capital Securities upon initial issuance. It does not
deal with special classes of holders such as banks, thrifts, real estate
investment trusts, regulated investment companies, insurance companies, dealers
in securities or currencies, tax-exempt investors, or persons that will hold the
Capital Securities as a position in a "straddle," as part of a "synthetic
security" or "hedge," as part of a "conversion transaction" or other integrated
investment, or as other than a capital asset. This summary also does not address
the tax consequences to persons that have a functional currency other than the
U.S. dollar or the tax consequences to shareholders, partners or beneficiaries
of a holder of Capital Securities. Further, it does not include any description
of any alternative minimum tax consequences or the tax laws of any state or
local government or of any foreign government that may be applicable to the
Capital Securities. This summary is based on the Internal Revenue Code of 1986,
as amended (the "Code"), Treasury regulations thereunder, the administrative and
judicial interpretations thereof, as of the date hereof, all of which are
subject to change, possibly on a retroactive basis.
EXCHANGE OF CAPITAL SECURITIES
The exchange of Old Capital Securities for New Capital Securities should
not be a taxable event to holders for United States federal income tax purposes.
The exchange of Old Capital Securities for New Capital Securities pursuant to
the Exchange Offer should not be treated as an "exchange" for United States
federal income tax purposes because the New Capital Securities should not be
considered to differ materially in kind or extent from the Old Capital
Securities and because the exchange will occur by operation of the terms of the
Old Capital Securities. If, however, the exchange of the Old Capital Securities
for the New Capital Securities were treated as an exchange for federal income
tax purposes, such exchange should constitute a recapitalization for United
States federal income tax purposes. Accordingly, the new Capital Securities
should have the same issue price as the Old Capital Securities, and a holder
should have the same adjusted tax basis and holding period in the New Capital
Securities as the holder had in the Old Capital Securities immediately before
the exchange.
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CLASSIFICATION OF THE JUNIOR SUBORDINATED DEBENTURES
In connection with the issuance of the Junior Subordinated Debentures, Tax
Counsel will render its opinion generally to the effect that, under then current
law and assuming full compliance with the terms of the Indenture (and certain
other documents), and based on certain facts and assumptions contained in such
opinion, the Junior Subordinated Debentures will be classified for United States
federal income tax purposes as indebtedness of the Corporation. An opinion of
Tax Counsel, however, is not binding on the Internal Revenue Service (the "IRS")
or the courts. Prospective investors should note that no rulings have been or
are expected to be sought from the IRS with respect to any of these issues and
no assurance can be given that the IRS will not take contrary positions.
Moreover, no assurance can be given that any of the opinions expressed herein
will not be challenged by the IRS or, if challenged, that such a challenge would
not be successful.
CLASSIFICATION OF THE TRUST
In connection with the issuance of the Capital Securities, Tax Counsel will
render its opinion generally to the effect that, under then current law and
assuming full compliance with the terms of the Declaration and the Indenture
(and certain other documents), and based on certain facts and assumptions
contained in such opinion, the Trust will be classified for United States
federal income tax purposes as a grantor trust and not as an association taxable
as a corporation. Accordingly, for United States federal income tax purposes,
each holder of Capital Securities generally will be considered the owner of an
undivided interest in the Junior Subordinated Debentures, and each holder will
be required to include in its gross income any interest (or OID accrued) with
respect to its allocable share of those Junior Subordinated Debentures.
INTEREST INCOME AND ORIGINAL ISSUE DISCOUNT
Under recently issued Treasury regulations (the "Regulations") applicable
to debt instruments on or after August 13, 1996, a "remote" contingency that
stated interest will not be timely paid will be ignored in determining whether a
debt instrument is issued with OID. The Corporation believes that the likelihood
of its exercising its option to defer payments of interest is "remote" since
exercising that option would prevent the Corporation from declaring dividends on
any class of its equity securities. Accordingly, the Corporation intends to take
the position, based on the advice of Tax Counsel, that the Junior Subordinated
Debentures will not be considered to be issued with OID and, accordingly, stated
interest on the Junior Subordinated Debentures generally will be taxable to a
holder as ordinary income at the time it is paid or accrued in accordance with
such holder's method of accounting.
Under the Regulations, if the Corporation were to exercise its option to
defer payments of interest, the Junior Subordinated Debentures would at that
time be treated as issued with OID, and all stated interest on the Junior
Subordinated Debentures would be treated as OID as long as the Junior
Subordinated Debentures remain outstanding. Thereafter, all of a holder's
taxable interest income with respect to the Junior Subordinated Debentures would
thereafter be accounted for on an economic accrual basis regardless of such
holder's method of tax accounting, and actual distributions of stated interest
would not be reported as taxable income. Consequently, a holder of Capital
Securities would be required to include in gross income OID even though the
Corporation would not make actual cash payments during an Extension Period.
Moreover, under the Regulations, if the option to defer the payment of interest
was determined not to be "remote," the Junior Subordinated Debentures would be
treated as having been originally issued with OID. In such event, all of a
holder's taxable interest income with respect to the Junior Subordinated
Debentures would be accounted for on an economic accrual basis regardless of
such holder's method of tax accounting, and actual distributions of stated
interest would not be reported as taxable income.
Because income on the Capital Securities will constitute interest or OID,
corporate holders of the Capital Securities will not be entitled to a
dividends-received deduction with respect to any income recognized with respect
to the Capital Securities.
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RECEIPT OF JUNIOR SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF THE TRUST
The Corporation will have the right at any time to liquidate the Trust and
cause the Junior Subordinated Debentures to be distributed to the holders of the
Trust Securities. Under current law, such a distribution, for United States
federal income tax purposes, would be treated as a nontaxable event to each
holder, and each holder would receive an aggregate tax basis in the Junior
Subordinated Debentures equal to such holder's aggregate tax basis in its
Capital Securities. A holder's holding period in the Junior Subordinated
Debentures so received in liquidation of the Trust would include the period
during which the Capital Securities were held by such holder. If, however, the
Trust is characterized for United States federal income tax purposes as an
association taxable as a corporation at the time of its dissolution, the
distribution of the Junior Subordinated Debentures may constitute a taxable
event to holders of Capital Securities and a holder's holding period in Junior
Subordinated Debentures would begin on the date such Junior Subordinated
Debentures were received.
Under certain circumstances described herein (see "Description of Capital
Securities"), the Junior Subordinated Debentures may be redeemed for cash and
the proceeds of such redemption distributed to holders in redemption of their
Capital Securities. Under current law, such a redemption would, for United
States federal income tax purposes, constitute a taxable disposition of the
redeemed Capital Securities, and a holder could recognize gain or loss as if it
sold such redeemed Capital Securities for cash. See "-- Sales of Capital
Securities."
SALES OF CAPITAL SECURITIES
A holder that sells Capital Securities will recognize gain or loss equal to
the difference between its adjusted tax basis in the Capital Securities and the
amount realized on the sale of such Capital Securities (other than with respect
to accrued and unpaid interest which has not yet been included in income, which
will be treated as ordinary income). A holder's adjusted tax basis in the
Capital Securities generally will be its initial purchase price increased by OID
(if any) previously includable in such holder's gross income to the date of
disposition and decreased by payments (if any) received on the Capital
Securities in respect of OID. Such gain or loss generally will be a capital gain
or loss and generally will be a long-term capital gain or loss if the Capital
Securities have been held for more than one year.
The Capital Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
Junior Subordinated Debentures. A holder who uses the accrual method of
accounting for tax purposes (and a cash method holder, if the Junior
Subordinated Debentures are deemed to have been issued with OID) who disposes of
such holder's Capital Securities between record dates for payments of
distributions thereon will be required to include accrued but unpaid interest on
the Junior Subordinated Debentures through the date of disposition in income as
ordinary income (i.e., interest or, possibly, OID), and to add such amount to
such holder's adjusted tax basis in such holder's pro rata share of the
underlying Junior Subordinated Debentures deemed disposed of. To the extent the
selling price is less than the holder's adjusted tax basis (which will include
all accrued but unpaid interest), a holder will recognize a capital loss.
Subject to certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax purposes.
PROPOSED TAX LEGISLATION
On February 6, 1997, the Treasury Department proposed the Proposed
Legislation, which would, among other things, generally deny corporate issuers a
deduction for interest in respect of certain debt obligations, such as the
Junior Subordinated Debentures, issued on or after the "date of first committee
action" if such debt obligations have a maximum term in excess of 15 years and
are not shown as indebtedness on the issuer's applicable consolidated balance
sheet. Neither of the tax-writing committees of the Congress has considered or
acted upon the Proposed Legislation and the New Junior Subordinated Debentures
should be considered as having been issued on December 17, 1996. If the Proposed
Legislation were enacted with the effective date proposed by the Treasury
Department, such legislation would not apply to the Junior Subordinated
Debentures. There can be no assurance, however, that such effective date will be
incorporated into the Proposed Legislation, if enacted, or that other
legislation enacted after the date hereof will not otherwise adversely affect
the ability of the Corporation to deduct the interest payable on the Junior
Subordinated
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Debentures. Accordingly, there can be no assurance that a Special Event will not
occur. The occurrence of a Special Event may result in the redemption of the
Junior Subordinated Debentures for cash, in which event the holders of the
Capital Securities would receive cash in redemption of their Capital Securities.
See "Description of New Securities -- Description of New Capital
Securities -- Redemption" and "Description of New Securities -- Description of
New Junior Subordinated Debentures -- Special Event Prepayment."
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
corporation, individual, partnership, estate or trust that is not a U.S. Holder
for United States federal income tax purposes.
A "U.S. Holder" is a holder of Capital Securities who or which is a citizen
or individual resident (or is treated as a citizen or individual resident) of
the United States for federal income tax purposes, a corporation or partnership
created or organized (or treated as created or organized for federal income tax
purposes) in or under the laws of the United States or any political subdivision
thereof, or a trust or estate the income of which is includable in its gross
income for federal income tax purposes without regard to its source.
Notwithstanding the foregoing, for taxable years beginning after December 31,
1996 (or for the immediately preceding taxable year, if the trustee of a trust
so elects), a trust is a U.S. Holder for federal income tax purposes if, and
only if, (i) a court within the United States is able to exercise primary
supervision over the administration of the trust and (ii) one or more United
States trustees have the authority to control all substantial decisions of the
trust.
Under present United States federal income tax laws: (i) payments by the
Trust or any of its paying agents to any holder of a Capital Security who or
which is a United States Alien Holder will not be subject to United States
federal withholding tax; provided that, (a) the beneficial owner of the Capital
Security does not actually or constructively own 10 percent or more of the total
combined voting power of all classes of stock of the Corporation entitled to
vote, (b) the beneficial owner of the Capital Security is not a controlled
foreign corporation that is related to the Corporation through stock ownership,
and (c) either (A) the beneficial owner of the Capital Security certifies to the
Trust or its agent, under penalties of perjury, that it is not a United States
holder and provides its name and address or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution"), and holds the Capital Security in such capacity, certifies to the
Trust or its agent, under penalties of perjury, that such statement has been
received from the beneficial owner by it or by a Financial Institution between
it and the beneficial owner and furnishes the Trust or its agent with a copy
thereof; and (ii) a United States Alien Holder of a Capital Security will not be
subject to United States federal withholding tax on any gain realized upon the
sale or other disposition of a Capital Security.
INFORMATION REPORTING TO HOLDERS
Generally, income on the Capital Securities will be reported to holders on
Forms 1099, which forms should be mailed to holders of Capital Securities by
January 31 following each calendar year.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Capital Securities may
be subject to a "backup" withholding tax of 31% unless the holder complies with
certain identification requirements. Any withheld amounts will be allowed as a
credit against the holder's United States federal income tax, provided the
required information is provided to the IRS.
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 TAX ADVISORS WITH RESPECT TO
THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE
CAPITAL SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN
AND OTHER TAX LAWS AND
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THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
The Corporation, the obligor with respect to the New Junior Subordinated
Debentures held by the Trust, and its affiliates and the Property Trustee may be
considered a "party in interest" (within the meaning of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) or a "disqualified person"
(within the meaning of Section 4975 of the Code) with respect to many employee
benefit plans ("Plans") that are subject to ERISA. Any purchaser proposing to
acquire New Capital Securities with assets of any Plan should consult with its
counsel. The purchase and/or holding of New Capital Securities by a Plan that is
subject to the fiduciary responsibility provisions of ERISA or the prohibited
transaction provisions of Section 4975 of the Code (including individual
retirement arrangements and other plans described in Section 4975(e)(1) of the
Code) and with respect to which the Corporation, the Property Trustee or any
affiliate is a service provider (or otherwise is a party in interest or a
disqualified person) may constitute or result in a prohibited transaction under
ERISA or Section 4975 of the Code, unless such New Capital Securities are
acquired pursuant to and in accordance with an applicable exemption, such as
Prohibited Transaction Class Exemption ("PTCE") 84-14 (an exemption for certain
transactions determined by an independent qualified professional asset manager),
PTCE 91-38 (an exemption for certain transactions involving bank collective
investment funds), PTCE 90-1 (an exemption for certain transactions involving
insurance company pooled separate accounts), PTCE 95-60 (an exemption for
transactions involving certain insurance company general accounts) or PTCE 95-23
(an exemption for certain transactions determined by an in-house asset manager).
In addition, a Plan fiduciary considering the purchase of Capital Securities
should be aware that the assets of the Trust may be considered "plan assets" for
ERISA purposes. Therefore, a Plan fiduciary should consider whether the purchase
of New Capital Securities could result in a delegation of fiduciary authority to
the Property Trustee, and, if so, whether such a delegation of authority is
permissible under the Plan's governing instrument or any investment management
agreement with the Plan. In making such determination, a Plan fiduciary should
note that the Property Trustee is a U.S. bank qualified to be an investment
manager (within the meaning of section 3(38) of ERISA) to which such a
delegation of authority generally would be permissible under ERISA. Further,
prior to an Event of Default with respect to the New Junior Subordinated
Debentures, the Property Trustee will have only limited custodial and
ministerial authority with respect to Trust assets.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives New Capital Securities for its own account
in connection with the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Capital Securities. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by Participating Broker-Dealers during the period referred to below in
connection with resales of New Capital Securities received in exchange for Old
Capital Securities if such Old Capital Securities were acquired by such
Participating Broker-Dealers for their own accounts as a result of market-making
activities or other trading activities. The Corporation and the Trust have
agreed that this Prospectus, as it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer in connection with resales of
such New Capital Securities for a period ending 90 days after the Expiration
Date (subject to extension under certain limited circumstances described herein)
or, if earlier, when all such New Capital Securities have been disposed of by
such Participating Broker-Dealer. However, a Participating Broker-Dealer who
intends to use this Prospectus in connection with the resale of New Capital
Securities received in exchange for Old Capital Securities pursuant to the
Exchange Offer must notify the Corporation or the Trust, or cause the
Corporation or the Trust to be notified, on or prior to the Expiration Date,
that it is a Participating Broker-Dealer. Such notice may be given in the space
provided for that purpose in the Letter of Transmittal or may be delivered to
the Exchange Agent at one of the addresses set forth herein under "The Exchange
Offer -- Exchange Agent." See "The Exchange Offer -- Resales of New Capital
Securities."
The Corporation or the Trust will not receive any cash proceeds from the
issuance of the New Capital Securities offered hereby. New Capital Securities
received by broker-dealers for their own accounts in connection with the
Exchange Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the New Capital Securities or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Capital Securities.
Any broker-dealer that resells New Capital Securities that were received by
it for its own account in connection with the Exchange Offer and any broker or
dealer that participates in a distribution of such New Capital Securities may be
deemed to be an "underwriter" within the meaning of the Securities Act, and any
profit on any such resale of New Capital Securities and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that, by
acknowledging that it will deliver and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
LEGAL MATTERS
Certain legal matters relating to the New Capital Securities will be passed
upon on behalf of the Corporation by Gene S. Schneyer, Esquire, Vice President,
Secretary and General Counsel of the Corporation. Certain other legal matters
relating to the New Capital Securities will be passed upon on behalf of the
Corporation by Wolf, Block, Schorr and Solis-Cohen, Philadelphia, Pennsylvania.
Certain legal matters relating to the New Junior Subordinated Debentures and the
New Guarantee will be passed upon on behalf of the Corporation by Brown & Wood
LLP, New York, New York. Wolf, Block, Schorr and Solis-Cohen will also pass upon
certain matters relating to United States federal income taxation
considerations.
EXPERTS
The consolidated financial statements and schedules of the Corporation and
subsidiaries, incorporated by reference in this Prospectus and elsewhere in the
Registration Statement, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
incorporated herein in reliance upon the authority of said firm as experts in
giving said reports.
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UNTIL , 1997 ALL PARTICIPATING BROKER-DEALERS EFFECTING
TRANSACTIONS IN THE NEW SECURITIES ACQUIRED IN THE EXCHANGE OFFER WILL BE
REQUIRED TO DELIVER A PROSPECTUS.
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THIS EXCHANGE
OFFER AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE CORPORATION OR THE TRUST. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE CORPORATION OR THE TRUST SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR A SOLICITATION 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 ANYONE TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information................................................................. 7
Incorporation of Certain Documents by Reference....................................... 8
Summary............................................................................... 9
Risk Factors.......................................................................... 15
Advanta Corp.......................................................................... 20
Use of Proceeds....................................................................... 20
Ratios of Earnings to Fixed Charges................................................... 20
Capitalization........................................................................ 21
Summary Financial Data................................................................ 22
Recent Developments................................................................... 23
Advanta Capital Trust I............................................................... 24
The Exchange Offer.................................................................... 25
Description of New Securities......................................................... 34
Description of Old Securities......................................................... 53
Relationship Among the New Capital Securities, the New Junior Subordinated Debentures
and the New Guarantee............................................................... 54
Certain Federal Income Tax Consequences............................................... 55
ERISA Considerations.................................................................. 59
Plan of Distribution.................................................................. 60
Legal Matters......................................................................... 60
Experts............................................................................... 60
</TABLE>
<PAGE> 63
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides, inter alia,
that under specified circumstances a corporation shall have the power to
indemnify any person who is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding by reason of the
fact that such person is or was a director, officer, employee or agent of the
corporation, against expenses, attorneys' fees, judgments, fines and
settlements. The By-Laws of the Corporation provide that the Corporation shall
indemnify any director, officer, employee or agent of the Corporation to the
fullest extent now or hereafter permitting by law in connection with any such
action, suit or proceeding. The By-Laws further provide that the Board of
Directors of the Corporation may, by resolution, indemnify any person other than
a director, officer, employee or agent of the Corporation for liabilities
incurred in connection with services rendered for or at the request of the
Corporation or its subsidiaries. In addition, consistent with Section 102 of the
Delaware General Corporation Law, the Corporation's Certificate of Incorporation
limits the personal liability of the Corporation's directors to the Corporation
or its stockholders for monetary damages for certain breaches of fiduciary duty.
The Corporation maintains director and officer liability insurance which would
provide coverage against certain securities law liabilities.
Pursuant to the Declaration, the Corporation has agreed, subject to certain
conditions, to indemnify, to the full extent permitted by law, each
Administrative Trustee, its Affiliates, officers, directors, shareholders,
members, partners, employees and agents, and any officer, employee or agent of
the Trust, who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding by reason of the
fact that such person is or was an Administrative Trustee, or an Affiliate,
officer, director, shareholder, member, partner, employee or agent thereof or an
officer, employee or agent of the Trust, against expenses, attorney's fees,
judgments, fines and settlements. In addition, each of the Administrative
Trustees of the Trust is an employee or officer of, or is affiliated with, the
Corporation. Accordingly, the Administrative Trustees are subject to and covered
by the Corporation's indemnification and liability policies described above for
actions taken as an Administrative Trustee.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
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<C> <S>
4.1 Indenture dated as of December 17, 1996 between Advanta Corp. and The Chase
Manhattan Bank, as trustee relating to the Junior Subordinated Debentures
(incorporated by reference to Exhibit 4-g to the Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996)
4.2 Form of Certificate of New Junior Subordinated Debenture
4.3 Certificate of Trust dated as of December 5, 1996 of Advanta Capital Trust I
4.4 Declaration of Trust dated as of December 5, 1996 of Advanta Capital Trust I
(incorporated by reference to Exhibit 4-h to the Corporation's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996)
4.5 Amended and Restated Declaration of Trust dated as of December 17, 1996 for
Advanta Capital Trust I (incorporated by reference to Exhibit 4-i to the
Corporation's Annual Report on Form 10-K for the fiscal year ended December 31,
1996)
4.6 Form of New Capital Security Certificate for Advanta Capital Trust I
4.7 Form of New Guarantee of Advanta Corp. relating to the New Capital Securities
4.8 Registration Rights Agreement dated as of December 11, 1996 between Advanta
Corp. and the Initial Purchasers (incorporated by reference to Exhibit 4-j to
the Corporation's Annual Report on Form 10-K for the fiscal year ended December
31, 1996)
5.1 Opinion and consent of Wolf, Block, Schorr and Solis-Cohen as to legality of the
New Capital Securities to be issued by Advanta Capital Trust I*
5.2 Opinion and consent of Brown & Wood LLP as to legality of the New Junior
Subordinated Debentures and the New Guarantee to be issued by Advanta Corp.*
8 Opinion of Wolf, Block, Schorr and Solis-Cohen, as to certain federal income tax
matters*
12 Computation of ratio of earnings to fixed charges
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT
- ---------
<C> <S>
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Wolf, Block, Schorr and Solis-Cohen (included in Exhibits 5.1 and 8)*
23.3 Consent of Brown & Wood LLP (included in Exhibit 5.2)*
24 Power of Attorney of certain officers and directors of Advanta Corp. (included
on signature page)
25.1 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as trustee
under the Indenture
25.2 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as trustee
under the Amended and Restated Declaration of Trust of Advanta Capital Trust I
25.3 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as trustee
under the New Guarantee for the benefit of the holders of New Capital Securities
of Advanta Capital Trust I
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery*
99.3 Form of Exchange Agent Agreement*
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 22. UNDERTAKINGS
Each of the undersigned Registrants hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of a Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of each
undersigned Registrant pursuant to the provisions, or otherwise, each Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by each undersigned Registrant of
expenses incurred or paid by a director, officer of controlling person of each
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, each Registrant will, unless in the opinion of its
counsel the matter has been settled by the controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Advanta Corp.
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Lower Gwynedd Township, Montgomery County, Commonwealth of
Pennsylvania, on April 3, 1997.
Advanta Corp.
By: /s/ ALEX W. HART
------------------------------------
Alex W. Hart, Chief
Executive Officer and Director
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned does hereby
constitute and appoint Dennis Alter, Alex W. Hart, William A. Rosoff, David D.
Wesselink, John J. Calamari, and Gene S. Schneyer, or any of them (with full
power to each of them to act alone), his or her true and lawful attorney-in-fact
and agent, with full power of substitution, for him or her and on his or her
behalf to sign, execute and file this Registration Statement and any or all
amendments (including, without limitation, post-effective amendments and any
amendment or amendments increasing the amount of securities for which
registration is being sought) to this Registration Statement, with all exhibits
and any and all documents required to be filed with respect thereto, with the
Securities and Exchange Commission or any regulatory authority, granting unto
such attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in and about the premises in order to effectuate the same as fully to all
intents and purposes as he or she might or could do if personally present,
hereby ratifying and confirming all that such attorneys-in-fact and agents, or
any of them, or their substitute or substitutes, may lawfully do or cause to be
done.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE DATE
- --------------------------------------------- ----------------------------------------
<S> <C>
/s/ DENNIS ALTER April 3, 1997
- ---------------------------------------------
Dennis Alter
Chairman and Director
/s/ ALEX W. HART April 3, 1997
- ---------------------------------------------
Alex W. Hart
Chief Executive Officer and Director
/s/ WILLIAM A. ROSOFF April 3, 1997
- ---------------------------------------------
William A. Rosoff
Vice Chairman and Director
/s/ DAVID D. WESSELINK April 3, 1997
- ---------------------------------------------
David D. Wesselink
Senior Vice President and Chief Financial
Officer
/s/ JOHN J. CALAMARI April 3, 1997
- ---------------------------------------------
John J. Calamari
Vice President, Finance, and
Chief Accounting Officer
</TABLE>
II-3
<PAGE> 66
<TABLE>
<CAPTION>
SIGNATURE DATE
- --------------------------------------------- ----------------------------------------
<S> <C>
/s/ ARTHUR P. BELLIS April 3, 1997
- ---------------------------------------------
Arthur P. Bellis, Director
/s/ MAX BOTEL April 3, 1997
- ---------------------------------------------
Max Botel, Director
/s/ RICHARD J. BRAEMER April 3, 1997
- ---------------------------------------------
Richard J. Braemer, Director
/s/ WILLIAM C. DUNKELBERG April 3, 1997
- ---------------------------------------------
William C. Dunkelberg, Director
/s/ DANA BECKER DUNN April 3, 1997
- ---------------------------------------------
Dana Becker Dunn, Director
/s/ ROBERT C. HALL April 3, 1997
- ---------------------------------------------
Robert C. Hall, Director
/s/ JAMES E. KSANSNAK April 3, 1997
- ---------------------------------------------
James E. Ksansnak, Director
/s/ RONALD J. NAPLES April 3, 1997
- ---------------------------------------------
Ronald J. Naples, Director
/s/ PHILLIP A. TURBERG April 3, 1997
- ---------------------------------------------
Phillip A. Turberg, Director
/s/ RONALD LUBNER April 3, 1997
- ---------------------------------------------
Ronald Lubner, Director
</TABLE>
II-4
<PAGE> 67
Pursuant to the requirements of the Securities Act of 1933, Advanta Capital
Trust I certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Wilmington, and State of Delaware, on April 3, 1997.
ADVANTA CAPITAL TRUST I
By: /s/ JEFFREY D. BECK
------------------------------------
Jeffrey D. Beck,
as Administrative Trustee
By: /s/ RONALD V. SAMUELS
------------------------------------
Ronald V. Samuels,
as Administrative Trustee
By: /s/ VERA REGOLI
------------------------------------
Vera Regoli,
as Administrative Trustee
II-5
<PAGE> 68
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -------------------------------------------------------------------------------------
<C> <S>
4.1 Indenture dated as of December 17, 1996 between Advanta Corp. and The Chase Manhattan
Bank, as trustee relating to the Junior Subordinated Debentures (incorporated by
reference to Exhibit 4-g to the Corporation's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996)
4.2 Form of Certificate of New Junior Subordinated Debenture
4.3 Certificate of Trust dated as of December 5, 1996 of Advanta Capital Trust I
4.4 Declaration of Trust dated as of December 5, 1996 of Advanta Capital Trust I
(incorporated by reference to Exhibit 4-h to the Corporation's Annual Report on Form
10-K for the fiscal year ended December 31, 1996)
4.5 Amended and Restated Declaration of Trust dated as of December 17, 1996 for Advanta
Capital Trust I (incorporated by reference to Exhibit 4-i to the Corporation's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996)
4.6 Form of New Capital Security Certificate for Advanta Capital Trust I
4.7 Form of New Guarantee of Advanta Corp. relating to the New Capital Securities
4.8 Registration Rights Agreement dated as of December 11, 1996 between Advanta Corp. and
the Initial Purchasers (incorporated by reference to Exhibit 4-j to the Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996)
5.1 Opinion and consent of Wolf, Block, Schorr and Solis-Cohen as to legality of the New
Capital Securities to be issued by Advanta Capital Trust I*
5.2 Opinion and consent of Brown & Wood LLP as to legality of the New Junior Subordinated
Debentures and the New Guarantee to be issued by Advanta Corp.*
8 Opinion of Wolf, Block, Schorr and Solis-Cohen, as to certain federal income tax
matters*
12 Computation of ratio of earnings to fixed charges
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Wolf, Block, Schorr and Solis-Cohen (included in Exhibits 5.1 and 8)*
23.3 Consent of Brown & Wood LLP (included in Exhibit 5.2)*
24 Power of Attorney of certain officers and directors of Advanta Corp. (included on
signature page)
25.1 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as trustee under
the Indenture
25.2 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as trustee under
the Amended and Restated Declaration of Trust of Advanta Capital Trust I
25.3 Form T-1 Statement of Eligibility of The Chase Manhattan Bank to act as trustee under
the New Guarantee for the benefit of the holders of New Capital Securities of Advanta
Capital Trust I
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery*
99.3 Form of Exchange Agent Agreement*
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 4.2
(FACE OF SECURITY)
[IF THE SECURITY IS A GLOBAL SECURITY, INSERT: THIS SECURITY IS A
GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND
IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS
SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER
THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF
THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY
A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE
DEPOSITARY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
[IF THIS SECURITY IS A PRIVATE EXCHANGE SECURITY, INSERT: THIS
SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE
SECURITIES LAW. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
"AFFILIATE" OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
THIS SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS
SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A"), TO A PERSON IT REASONABLY
<PAGE> 2
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT
IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW
TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE RIGHT OF THE
CORPORATION PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D)
OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR
OTHER INFORMATION SATISFACTORY TO THE CORPORATION, AND (ii) PURSUANT TO CLAUSE
(D), TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE
REVERSE OF THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEREE TO THE
COMPANY. SUCH HOLDER FURTHER AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND.]
<PAGE> 3
No.
---
ADVANTA CORP.
8.99% SERIES B JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE
DUE DECEMBER 17, 2026
Advanta Corp., a Delaware corporation (the "Company," which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to or registered assigns, the principal
sum of Dollars ($ ) on December 17, 2026 (the "Maturity Date"), unless
previously redeemed, and to pay interest on the outstanding principal amount
hereof from December 17, 1996, or from the most recent interest payment date
(each such date, an "Interest Payment Date") to which interest has been paid or
duly provided for, semi-annually (subject to deferral as set forth herein) in
arrears on June 17 and December 17 of each year, commencing June 17, 1997, at
the rate of 8.99% per annum until the principal hereof shall have become due and
payable, and on any overdue principal and premium, if any, and (without
duplication and to the extent that payment of such interest is enforceable under
applicable law) on any overdue installment of interest at the same rate per
annum compounded semi-annually. The amount of interest payable on any Interest
Payment Date shall be computed on the basis of a 360-day year of twelve 30-day
months and, for any period less than a full calendar month, the number of days
elapsed in such month. In the event that any date on which the principal of (or
premium, if any) or interest on this Security is payable is not a Business Day,
then payment payable on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other payment in respect of any
such delay), with the same force and effect as if made on such date.
The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities, as defined in said Indenture) is registered at the close of business
on the regular record date for such interest installment, which shall be the
first day of the month in which the relevant interest payment date falls. Any
such interest installment not punctually paid or duly provided for shall
forthwith cease to be payable to the holders on such regular record date and may
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a special record date to
be fixed by the Trustee for the payment of such defaulted interest, notice
whereof shall be given to the holders of Securities not less than 10 days prior
to such special record date, or may be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities exchange on
which the Securities may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in the Indenture.
The principal of (and premium, if any) and interest on this
Security shall be payable at the office or agency of the Trustee in New York,
New York maintained for that purpose in any coin or currency of the United
States of America that at the time of payment is legal tender for payment of
public and private debts; provided, however, that, payment of
<PAGE> 4
interest may be made at the option of the Company by (i) check mailed to the
holder at such address as shall appear in the Security Register or (ii) by
transfer to an account maintained by the Person entitled thereto, provided that
proper written transfer instructions have been received by the relevant record
date. Notwithstanding the foregoing, so long as the Holder of this Security is
the Property Trustee, the payment of the principal of (and premium, if any) and
interest on this Security will be made in immediately available funds at such
place and to such account as may be designated by the Property Trustee.
The indebtedness evidenced by this Security is, to the extent
provided in the Indenture, subordinate and junior in right of payment to the
prior payment in full of all Senior Indebtedness, and this Security is issued
subject to the provisions of the Indenture with respect thereto. Each holder of
this Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his or her
attorney-in-fact for any and all such purposes. Each holder hereof, by his or
her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.
This Security shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any purpose
until the Certificate of Authentication hereon shall have been signed by or on
behalf of the Trustee.
The provisions of this Security are continued on the reverse
side hereof and such provisions shall for all purposes have the same effect as
though fully set forth at this place.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
ADVANTA CORP.
Dated: By: __________________________
Name:
Title:
Attest:
By: ______________________________
Name:
Title:
<PAGE> 5
CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the
within-mentioned Indenture.
The Chase Manhattan Bank, as Trustee
By: ______________________________
Authorized Officer
<PAGE> 6
(REVERSE OF SECURITY)
This Security is one of the Securities of the Company (herein
sometimes referred to as the "Securities"), specified in the Indenture, all
issued or to be issued under and pursuant to an Indenture, dated as of December
17, 1996 (the "Indenture"), duly executed and delivered between the Company and
The Chase Manhattan Bank, as Trustee (the "Trustee"), to which Indenture
reference is hereby made for a description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Trustee, the Company and
the holders of the Securities.
Upon the occurrence and continuation of a Special Event prior to
December 17, 2006, the Company shall have the right to redeem this Security in
whole (but not in part) at the Special Event Redemption Price. "Special Event
Redemption Price" shall mean, an amount in cash equal to the greater of (i) 100%
of the principal amount hereof or (ii) the sum, as determined by a Quotation
Agent, of the present values of 104.4950% of the principal amount hereof,
together with scheduled payments of interest hereon for the Remaining Life,
discounted to the redemption date on a semi-annual basis (assuming a 360-day
year consisting of twelve 30-day months) at the Adjusted Treasury Rate, plus, in
each case, any accrued and unpaid interest thereon, including Compounded
Interest and Additional Interest, if any, to the date of such redemption.
In addition, the Company shall have the right to redeem this
Security, in whole or in part, at any time on or after December 17, 2006, at the
Optional Redemption Price as set forth below (expressed as a percentage of the
outstanding principal amount to be redeemed) plus, in each case, accrued and
unpaid interest thereon (including Additional Interest and Compounded Interest,
if any) to the applicable date of redemption if redeemed during the 12-month
period beginning December 17 of the year indicated below.
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C> <C>
2006 104.4950%
2007 104.0455%
2008 103.5960%
2009 103.1465%
2010 102.6970%
2011 102.2475%
2012 101.7980%
2013 101.3485%
2014 100.8990%
2015 100.4495%
</TABLE>
<PAGE> 7
<TABLE>
<S> <C> <C>
2016 and thereafter 100.000%
--------
</TABLE>
The Optional Redemption Price or the Special Event Redemption
Price, as the case requires, shall be paid prior to 12:00 noon, New York City
time, on the date of such redemption or at such earlier time as the Company
determines, provided, that the Company shall deposit with the Trustee an amount
sufficient to pay the applicable Redemption Price by 10:00 a.m., New York City
time, on the date such Redemption Price is to be paid. Any redemption pursuant
to this paragraph will be made upon not less than 30 days nor more than 60 days
notice. If the Securities are only partially redeemed by the Company pursuant to
an Optional Redemption, the Securities will be redeemed pro rata or by lot or by
any other method as the Trustee shall determine; provided, that if, at the time
of redemption, the Securities are registered as a Global Security, the
Depositary shall determine the particular Securities to be redeemed in
accordance with its procedures.
In the event of redemption of this Security in part only, a new
Security or Securities for the unredeemed portion hereof will be issued in the
name of the holder hereof upon the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall
have occurred and be continuing, the principal of all of the Securities may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of a majority in aggregate principal
amount of the Securities at the time outstanding, as defined in the Indenture,
to execute supplemental indentures for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of modifying in any manner the rights of the holders of the Securities;
provided, however, that no such supplemental indenture shall, without the
consent of each holder of Securities then outstanding and affected thereby, (i)
extend the Maturity Date of any Securities, or reduce the principal amount
thereof, or change any redemption provisions applicable thereto, or reduce the
rate or extend the time of payment of interest thereon (subject to Article
Sixteen of the Indenture), or make the principal of, or interest or premium on,
the Securities payable in any coin or currency other than U.S. dollars, or
impair or affect the right of any holder of Securities to institute suit for the
payment thereof, or (ii) reduce the aforesaid percentage of Securities, the
holders of which are required to consent to any such supplemental indenture. The
Indenture also contains provisions permitting the holders of a majority in
aggregate principal amount of the Securities at the time outstanding affected
thereby, on behalf of all of the holders of the Securities, to waive any past
default in the performance of any of the covenants contained in the Indenture,
or established pursuant to the Indenture, and its consequences, except a default
in the payment of the principal of or premium, if any, or interest on any of the
Securities or a default in respect of any covenant or provision under which the
Indenture cannot be modified or amended without the consent of each holder of
Securities then outstanding. Any such consent or waiver by the holder of this
Security (unless revoked as
<PAGE> 8
provided in the Indenture) shall be conclusive and binding upon such holder and
upon all future holders and owners of this Security and of any Security issued
in exchange heretofore or in place hereof (whether by registration of transfer
or otherwise), irrespective of whether or not any notation of such consent or
waiver is made upon this Security.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Security at the time and place and at the
rate and in the money herein prescribed.
The Company shall have the right, at any time and from time to
time during the term of the Securities, to defer payments of interest by
extending the interest payment period of such Securities for a period not
exceeding 10 consecutive semi-annual periods, including the first such
semi-annual period during such extension period, and not to extend beyond the
Maturity Date of the Securities (an "Extended Interest Payment Period" ), at the
end of which period the Company shall pay all interest then accrued and unpaid
together with interest thereon at the rate specified for the Securities to the
extent that payment of such interest is enforceable under applicable law).
Before the termination of any such Extended Interest Payment Period, the Company
may further defer payments of interest by further extending such Extended
Interest Payment Period, provided that such Extended Interest Payment Period,
together with all such previous and further extensions within such Extended
Interest Payment Period, shall not exceed 10 consecutive semi-annual periods,
including the first semi-annual period during such Extended Interest Payment
Period, or extend beyond the Maturity Date of the Securities. Upon the
termination of any such Extended Interest Payment Period and the payment of all
accrued and unpaid interest and any additional amounts then due, the Company may
commence a new Extended Interest Payment Period, subject to the foregoing
requirements.
The Company has agreed that it will not (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of the Company's capital stock (which
includes common and preferred stock) or (ii) make any payment of principal,
interest or premium, if any, on or repay or repurchase or redeem any debt
securities of the Company that rank pari passu with or junior in right of
payment to the Securities or make any guarantee payments with respect to any
guarantee by the Company of the debt securities or any Subsidiary of the Company
if such guarantee ranks pari passu or junior in right of payment to the
Securities (other than (a) dividends or distributions in shares of, or options,
warrants or rights to subscribe for or purchase shares of, Common Stock of the
Company, (b) any declaration of a dividend in connection with the implementation
of a stockholder's rights plan, or the issuance of stock under any such plan in
the future, or the redemption or repurchase of any such rights pursuant thereto,
(c) payments under the Capital Securities Guarantee, (d) as a result of a
reclassification of the Company's capital stock or the exchange or the
conversion of one class or series of the Company's capital stock for another
class or series of the Company's capital stock, (e) the purchase of fractional
interests in shares of the Company's capital stock pursuant to the exchange or
conversion of such capital stock or the security being exchanged or converted
and (f) purchases of Common Stock related to the
<PAGE> 9
issuance of Common Stock or rights under any of the Company's benefit plans for
its directors, officers or employees or any of the Company's dividend
reinvestment plans) if at such time (i) there shall have occurred any event of
which the Company has actual knowledge that (a) is, or with the giving of notice
or the lapse of time, or both, would be, an Event of Default and (b) in respect
of which the Company shall not have taken reasonable steps to cure, (ii) if such
Securities are held by Advanta Capital Trust, the Company shall be in default
with respect to its payment of any obligations under the Capital Securities
Guarantee or (iii) the Company shall have given notice of its election of the
exercise of its right to extend the interest payment period and any such
extension shall be continuing.
The Securities are issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to the transfer restrictions limitations
as may be contained herein and therein from time to time, this Security is
transferable by the holder hereof on the Security Register of the Company, upon
surrender of this Security for registration of transfer at the office or agency
of the Trustee in the City and State of New York accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company or the
Trustee duly executed by the holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Securities of authorized denominations
and for the same aggregate principal amount and series will be issued to the
designated transferee or transferees. No service charge will be made for any
such transfer, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer of this
Security, the Company, the Trustee, any paying agent and the registrar may deem
and treat the holder hereof as the absolute owner hereof (whether or not this
Security shall be overdue and notwithstanding any notice of ownership or writing
hereon made by anyone other than the Security Registrar) for the purpose of
receiving payment of or on account of the principal hereof and premium, if any,
and interest due hereon and for all other purposes, and neither the Company nor
the Trustee nor any paying agent nor any registrar shall be affected by any
notice to the contrary.
No recourse shall be had for the payment of the principal of or
premium, if any, or interest on this Security, or for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture, against
any incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor Person, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
All terms used in this Security that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
<PAGE> 10
THE INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICT OF LAW PROVISIONS THEREOF.
<PAGE> 1
EXHIBIT 4.3
CERTIFICATE OF TRUST
The undersigned, the trustees of Advanta Capital Trust I, desiring to
form a business trust pursuant to Delaware Business Trust Act, 12 Del. C.
Section 3810, hereby certify as follows:
(a) The name of the business trust being formed hereby (the
"Trust") is Advanta Capital Trust I."
(b) The name and business address of the trustee of the Trust which has its
principal place of business in the State of Delaware is as follows:
Chase Manhattan Bank Delaware
1201 Market Street
Wilmington, Delaware 19801
Attention: Corporate Trust Administration
(c) This Certificate of Trust shall be effective as of the date of the filing.
Dated: December 4, 1996
/s/ William A. Rosoff
---------------------
Name: William A. Rosoff
Title: Regular Trustee
/s/ Richard A. Greenawalt
-------------------------
Name: Richard A. Greenawalt
Title: Regular Trustee
/s/ David D. Wesselink
----------------------
Name: David D. Wesselink
Title: Regular Trustee
Chase Manhattan Bank Delaware
By: /s/ John J. Cashin
------------------
Name: John J. Cashin
Title: Senior Trust Officer
<PAGE> 1
EXHIBIT 4.6
FORM OF CAPITAL SECURITY CERTIFICATE
[FORM OF FACE OF SECURITY]
[IF THIS CERTIFICATE IS A GLOBAL CAPITAL SECURITY, INSERT:
THIS CAPITAL SECURITY IS A GLOBAL CAPITAL SECURITY WITHIN THE MEANING OF THE
DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY TRUST COMPANY (THE "CLEARING AGENCY") OR A NOMINEE OF THE CLEARING
AGENCY. THIS CAPITAL SECURITY IS EXCHANGEABLE FOR CAPITAL SECURITIES REGISTERED
IN THE NAME OF A PERSON OTHER THAN THE CLEARING AGENCY OR ITS NOMINEE ONLY IN
THE LIMITED CIRCUMSTANCES DESCRIBED IN THE DECLARATION AND NO TRANSFER OF THIS
CAPITAL SECURITY (OTHER THAN A TRANSFER OF THIS CAPITAL SECURITY AS A WHOLE BY
THE CLEARING AGENCY TO A NOMINEE OF THE CLEARING AGENCY OR BY A NOMINEE OF THE
CLEARING AGENCY TO THE CLEARING AGENCY OR ANOTHER NOMINEE OF THE CLEARING
AGENCY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES. UNLESS THIS CAPITAL
SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE TRUST OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CAPITAL SECURITY ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO., OR IN SUCH OTHER NAME AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC, AND ANY PAYMENT HEREON IS MADE TO CEDE &
CO., OR TO SUCH OTHER PERSON AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.]
[IF THIS SECURITY IS A PRIVATE EXCHANGE SECURITY, INSERT: THIS
CAPITAL SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS OR ANY OTHER
APPLICABLE SECURITIES LAW. NEITHER THIS CAPITAL SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS CAPITAL SECURITY BY ITS ACCEPTANCE HEREOF
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS CAPITAL SECURITY, PRIOR TO THE
DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE
LATER OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY "AFFILIATE" OF THE COMPANY WAS THE OWNER OF THIS CAPITAL SECURITY
(OR ANY PREDECESSOR OF THIS CAPITAL SECURITY) ONLY (A) TO THE COMPANY, (B)
<PAGE> 2
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) SO LONG AS THIS CAPITAL SECURITY IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A") TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE
MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES
ACT THAT IS ACQUIRING THIS CAPITAL SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO ANY OTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT,
SUBJECT TO THE RIGHT OF THE TRUST AND THE COMPANY PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER (i) PURSUANT TO CLAUSE (D) OR (E) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND (ii) PURSUANT TO CLAUSE (D), TO REQUIRE THAT A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THE REVERSE OF THIS CAPITAL SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEREE TO THE TRUST. SUCH HOLDER FURTHER
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS CAPITAL SECURITY IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.]
Certificate Number: Number of Capital Securities:
CUSIP NO.
Certificate Evidencing Capital Securities
of
ADVANTA CAPITAL TRUST I
8.99% Series B Capital Securities
(liquidation amount of $1,000 per Capital Security)
ADVANTA CAPITAL TRUST I, a statutory business trust formed
under the laws of the State of Delaware (the "Trust"), hereby certifies that
_______ (the "Holder") is the registered owner of _______ ( ) securities of
the Trust representing undivided beneficial interests in the assets of the
Trust designated the 8.99% Series B Capital Securities (liquidation amount of
$1,000 per Capital Security) (the "Capital Securities"). The Capital Securities
are transferable on the books and records of the Trust, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer. The designation, rights, privileges, restrictions,
preferences and other terms and
<PAGE> 3
provisions of the Capital Securities represented hereby are issued and shall in
all respects be subject to the provisions of the Amended and Restated
Declaration of Trust of the Trust dated as of December 17, 1996 as the same may
be amended from time to time (the "Declaration"), including the designation of
the terms of the Capital Securities as set forth in Annex I to the Declaration.
Capitalized terms used but not defined herein shall have the meaning given them
in the Declaration. The Sponsor will provide a copy of the Declaration, the
Capital Securities Guarantee and the Indenture to a Holder without charge upon
written request to the Trust at its principal place of business.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the Capital Securities Guarantee to the extent provided therein.
By acceptance, the Holder agrees to treat, for United States
federal income tax purposes, the Debentures as indebtedness and the Capital
Securities as evidence of indirect beneficial ownership in the Debentures.
IN WITNESS WHEREOF, the Trust has executed this certificate
this day of , 1997.
ADVANTA CAPITAL TRUST I
By:
---------------------------
Name:
Administrative Trustee
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Capital Securities referred to in the
within-mentioned Declaration.
Dated:
THE CHASE MANHATTAN BANK
as Property Trustee
By:
---------------------------
Name:
Title
<PAGE> 4
[REVERSE OF SECURITY]
Distributions payable on each Capital Security will be fixed at a
rate per annum of 8.99% (the "Coupon Rate") of the liquidation amount of $1,000
per Capital Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for more
than one semi-annual period will bear interest thereon compounded semi-annually
at the Coupon Rate (to the extent permitted by applicable law). Pursuant to the
Registration Rights Agreement, in certain limited circumstances the Debenture
Issuer will be required to pay Liquidated Damages (as defined in the
Registration Rights Agreement) with respect to the Debentures. The term
"Distributions", as used herein, includes such cash distributions and any such
interest and such Liquidated Damages payable unless otherwise stated. A
Distribution is payable only to the extent that payments are made in respect of
the Debentures held by the Property Trustee and to the extent the Property
Trustee has funds on hand legally available therefor.
Distributions on the Capital Securities will be cumulative, will
accumulate from the most recent date to which Distributions have been paid or,
if any Distributions have been paid, from December 17, 1996 and will be payable
semi-annually in arrears, on June 17 and December 17 of each year, commencing on
June 17, 1997, except as otherwise described below. Distributions shall be
computed on the basis of a 360-day year consisting of twelve 30-day months and,
for any period less than a full calendar month, the number of days elapsed in
such month. As long as no Event of Default has occurred and is continuing under
the Indenture, the Debenture Issuer has the right under the Indenture to defer
payments of interest by extending the interest payment period at any time and
from time to time on the Debentures for a period not exceeding 10 consecutive
calendar semi-annual periods, including the first such semi-annual period during
such extension period (each an "Extension Period"), provided that no Extension
Period shall extend beyond the Maturity Date of the Debentures. As a consequence
of such deferral, Distributions will also be deferred. Despite such deferral,
semi-annual Distributions will continue to accumulate with interest thereon (to
the extent permitted by applicable law, but not at a rate exceeding the rate of
interest then accruing on the Debentures) at the Coupon Rate compounded
semi-annually during any such Extension Period. Prior to the termination of any
such Extension Period, the Debenture Issuer may further defer payments of
interest by further extending such Extension Period; provided that such
Extension Period, together with all such previous and further extensions within
such Extension Period, may not exceed 10 consecutive semi-annual periods,
including the first semi-annual period during such Extension Period, or extend
beyond the Maturity Date of the Debentures. Payments of accumulated
Distributions will be payable to Holders as they appear on the books and records
of the Trust on the first record date after the end of the Extension Period.
Upon the termination of any Extension Period and the payment of all amounts then
due, the Debenture Issuer may commence a new Extension Period, subject to the
above requirements.
<PAGE> 5
Subject to certain conditions set forth in the Declaration and
the Indenture, the Property Trustee may, at the direction of the Sponsor, at any
time liquidate the Trust and cause the Debentures to be distributed to the
holders of the Securities in liquidation of the Trust or, simultaneous with any
redemption of the Debentures, cause a Like Amount of the Securities to be
redeemed by the Trust.
The Capital Securities shall be redeemable as provided in the
Declaration.
<PAGE> 6
[IF THIS SECURITY IS A PRIVATE EXCHANGE SECURITY, ATTACH:
---------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Capital Security Certificate to:
- -------------------------------------
- -------------------------------------
- -------------------------------------
(Insert assignee's social security or tax identification number)
- -------------------------------------
- -------------------------------------
- -------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- -------------------------------------
- -------------------------------------
- -------------------------------------agent to transfer this Capital Security
Certificate on the books of the Trust. The agent may substitute another to act
for him or her.
Date:
-------------------
Signature:
------------------------
(Sign exactly as your name appears on the other side of this Capital Security
Certificate)
Signature Guarantee:
-------------------------
- ------------------
* Signature must be guaranteed by an "eligible guarantor
institution" that is a bank, stockbroker, savings and loan association or credit
union meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities and Exchange Act of 1934, as amended.
<PAGE> 7
In connection with any transfer of any of the Capital Securities evidenced by
this certificate, the undersigned confirms that such Capital Securities are
being:
CHECK ONE BOX BELOW
(1) / / exchanged for the undersigned's own account without transfer;
or
(2) / / transferred pursuant to and in compliance with Rule 144A
under the Securities Act of 1933; or
(3) / / to an institutional "accredited investor" within the meaning
of subparagraph (a)(1), (2), (3) or (7) of Rule 501 under the
Securities Act of 1933 that is acquiring the Capital
Securities for its own account, or for the account of such an
institutional "accredited investor," for investment purposes
and not with a view to, or for offer or sale in connection
with, any distribution in violation of the Securities Act of
1933; or
(4) / / transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933; or
(5) / / transferred pursuant to an effective registration statement.
Unless one of the boxes is checked, the Exchange Agent will refuse to register
any of the Capital Securities evidenced by this certificate in the name of any
person other than the registered Holder thereof; provided, however, that if box
(3) or (4) is checked, the Exchange Agent may require, prior to registering any
such transfer of the Capital Securities such legal opinions, certifications and
other information as the Trust has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act of 1933, such as
the exemption provided by Rule 144 under such Act; provided further, that (i) if
box (2) is checked, the transferee must also certify that it is a qualified
institutional buyer as defined in Rule 144A or (ii) if box (3) is checked, the
transferee must also provide to the Exchange Agent a Transferee Letter of
Representation in the form attached to the Offering Memorandum of the Trust
dated December 11, 1996; provided, further, that after the date that a
Registration Statement has been filed and so long as such Registration Statement
continues to be effective, the Exchange Agent may only permit transfers for
which box (5) has been checked.
---------------------------------
Signature]
<PAGE> 1
EXHIBIT 4.7
========================================
SERIES B CAPITAL SECURITIES GUARANTEE AGREEMENT
Advanta Corp.
Dated as of , 1997
========================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I
DEFINITIONS AND INTERPRETATION............................................ -2-
SECTION 1.1 Definitions and Interpretation................................ -2-
ARTICLE II
TRUST INDENTURE ACT....................................................... -6-
SECTION 2.1 Trust Indenture Act; Application.............................. -6-
SECTION 2.2 Lists of Holders of Securities................................ -6-
SECTION 2.3 Reports by the Capital Securities Guarantee Trustee........... -6-
SECTION 2.4 Periodic Reports to Capital Securities Guarantee Trustee...... -6-
SECTION 2.5 Evidence of Compliance with Conditions Precedent.............. -7-
SECTION 2.6 Events of Default; Waiver..................................... -7-
SECTION 2.7 Event of Default; Notice...................................... -7-
SECTION 2.8 Conflicting Interests......................................... -8-
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
CAPITAL SECURITIES GUARANTEE TRUSTEE...................................... -8-
SECTION 3.1 Powers and Duties of the Capital Securities Guarantee Trustee
............................................................. -8-
SECTION 3.2 Certain Rights of Capital Securities Guarantee Trustee....... -10-
SECTION 3.3. Not Responsible for Recitals or Issuance of Series B Capital
Securities Guarantee............................................. -12-
ARTICLE IV
CAPITAL SECURITIES GUARANTEE TRUSTEE...................................... -12-
SECTION 4.1 Capital Securities Guarantee Trustee; Eligibility............ -12-
SECTION 4.2 Appointment, Removal and Resignation of Capital Securities
Guarantee Trustee................................................ -13-
ARTICLE V
GUARANTEE................................................................. -14-
SECTION 5.1 Guarantee.................................................... -14-
SECTION 5.2 Waiver of Notice and Demand.................................. -14-
SECTION 5.3 Obligations Not Affected..................................... -14-
SECTION 5.4 Rights of Holders............................................ -15-
SECTION 5.5 Guarantee of Payment......................................... -16-
SECTION 5.6 Subrogation.................................................. -16-
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 5.7 Independent Obligations.............................. -16-
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION........................ -16-
SECTION 6.1 Limitation of Transactions........................... -16-
SECTION 6.2 Ranking.............................................. -17-
ARTICLE VII
TERMINATION...................................................... -17-
SECTION 7.1 Termination.......................................... -17-
ARTICLE VIII
INDEMNIFICATION.................................................. -18-
SECTION 8.1 Exculpation.......................................... -18-
SECTION 8.2 Indemnification...................................... -18-
ARTICLE IX
MISCELLANEOUS.................................................... -19-
SECTION 9.1 Successors and Assigns............................... -19-
SECTION 9.2 Amendments........................................... -19-
SECTION 9.3 Notices.............................................. -19-
SECTION 9.4 Benefit.............................................. -20-
SECTION 9.5 Governing Law........................................ -21-
</TABLE>
-iii-
<PAGE> 4
SERIES B CAPITAL SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Series B Capital Securities Guarantee"),
dated as of , 1997 is executed and delivered by Advanta Corp., a Delaware
corporation (the "Guarantor"), and The Chase Manhattan Bank, as trustee
(sometimes referred to hereinafter as the "Capital Securities Guarantee
Trustee"), for the benefit of the Holders (as defined herein) from time to time
of the Series B Capital Securities (as defined herein) of Advanta Capital Trust
I, a Delaware statutory business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of December 17, 1996, among the trustees of the Issuer,
the Guarantor, as sponsor, and the holders from time to time of undivided
beneficial interests in the assets of the Issuer, the Issuer (i) issued on
December 17, 1996 100,000 capital securities, having an aggregate liquidation
amount of $100,000,000, such capital securities being designated the 8.99%
Series A Capital Securities (collectively the "Series A Capital Securities") and
(ii) executed and delivered the Series A Capital Securities Guarantee (as
defined in the Declaration) for the benefit of the Holders (as defined herein)
of the Series A Capital Securities.
WHEREAS, certain Holders of Series A Capital Securities have exchanged
in the Exchange Offer (as defined in the Declaration), Series A Capital
Securities for an equal number of 8.99% Series B Capital Securities of the
Issuer (the "Series B Capital Securities");
WHEREAS, pursuant to the Series A Capital Securities Guarantee, the
Guarantor is obligated in connection with the Exchange Offer to execute and
deliver this Series B Capital Securities Guarantee, by which the Guarantor
irrevocably and unconditionally agrees to pay to the Holders of the Series B
Capital Securities the Guarantee Payments (as defined below), and the Guarantor
agrees to make certain other payments on the terms and conditions set forth
herein.
WHEREAS, the Guarantor has executed and delivered a guarantee agreement
(the "Common Securities Guarantee"), for the benefit of the holders of the
Common Securities (as defined herein), the terms of which provide that if an
Event of Default (as defined in the Declaration) has occurred and is continuing,
the rights of holders of the Common Securities to receive Guarantee Payments
under the Common Securities Guarantee are subordinated, to the extent and in the
manner set forth in the Common Securities Guarantee, to the rights of Holders of
Series A Capital Securities and the Series B Capital Securities to receive
Guarantee Payments under this Series B Capital Securities Guarantee and the
Series A Capital Securities Guarantee, as the case may be.
NOW, THEREFORE, in consideration of these presents, the Guarantor
executes and delivers this Series B Capital Securities Guarantee for the benefit
of the Holders.
<PAGE> 5
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation
In this Series B Capital Securities Guarantee, unless the
context otherwise requires:
(a) Capitalized terms used in this Series B Capital Securities
Guarantee but not defined in the preamble above have the respective meanings
assigned to them in this Section 1.1;
(b) Terms defined in the Declaration as at the date of
execution of this Series B Capital Securities Guarantee have the same meaning
when used in this Series B Capital Securities Guarantee unless otherwise defined
in this Series B Capital Securities Guarantee;
(c) a term defined anywhere in this Series B Capital
Securities Guarantee has the same meaning throughout;
(d) all references to "the Series B Capital Securities
Guarantee" or "this Series B Capital Securities Guarantee" are to this Series B
Capital Securities Guarantee as modified, supplemented or amended from time to
time;
(e) all references in this Series B Capital Securities
Guarantee to Articles and Sections are to Articles and Sections of this Series B
Capital Securities Guarantee, unless otherwise specified;
(f) a term defined in the Trust Indenture Act has the same
meaning when used in this Series B Capital Securities Guarantee, unless
otherwise defined in this Series B Capital Securities Guarantee or unless the
context otherwise requires; and
(g) a reference to the singular includes the plural and vice
versa.
"Affiliate" has the same meaning as given to that term in
Rule 405 under the Securities Act of 1933, as amended, or any successor rule
thereunder.
"Business Day" shall mean any day other than a Saturday or a
Sunday, or a day on which banking institutions in New York, New York or
Wilmington, Delaware are authorized or required by law or executive order to
close.
"Capital Securities" shall mean the Series A Capital
Securities and the Series B Capital Securities.
-2-
<PAGE> 6
"Capital Securities Guarantee Trustee" shall mean The Chase
Manhattan Bank, until a Successor Capital Securities Guarantee Trustee has been
appointed and has accepted such appointment pursuant to the terms of this Series
B Capital Securities Guarantee and thereafter means each such Successor Capital
Securities Guarantee Trustee.
"Common Securities" shall mean the securities representing
common undivided beneficial interests in the assets of the Issuer.
"Corporate Trust Office" shall mean the office of the Capital
Securities Guarantee Trustee at which the corporate trust business of the
Capital Securities Guarantee Trustee shall, at any particular time, be
principally administered, which office at the date of execution of this
Agreement is located at 450 West 33rd Street, 15th Floor, New York, New York
10001.
"Covered Person" shall mean any Holder or beneficial owner of
Series B Capital Securities.
"Debentures" mean collectively the Series A Debentures and the
Series B Debentures.
"Event of Default" shall mean a default by the Guarantor on
any of its payment or other obligations under this Series B Capital Securities
Guarantee.
"Guarantee Payments" shall mean the following payments or
distributions, without duplication, with respect to the Series B Capital
Securities, to the extent not paid or made by the Issuer: (i) any accumulated
and unpaid Distributions (as defined in the Declaration) that are required to be
paid on such Series B Capital Securities to the extent the Issuer has funds on
hand legally available therefor at such time, (ii) the redemption price,
including all accumulated and unpaid Distributions to the date of redemption
(the "Redemption Price") to the extent the Issuer has funds on hand legally
available therefor at such time, with respect to any Series B Capital Securities
called for redemption by the Issuer, and (iii) upon a voluntary or involuntary
termination and liquidation of the Issuer (other than in connection with the
distribution of Series B Debentures to the Holders in exchange for Series B
Capital Securities as provided in the Declaration), the lesser of (a) the
aggregate of the liquidation amount and all accumulated and unpaid Distributions
on the Series B Capital Securities to the date of payment, to the extent the
Issuer has funds on hand legally available therefor, and (b) the amount of
assets of the Issuer remaining available for distribution to Holders in
liquidation of the Issuer. If an Event of Default has occurred and is
continuing, no Guarantee Payments under the Common Securities Guarantee with
respect to the Common Securities or any guarantee payment under any Other Common
Securities Guarantees shall be made until the Holders of Series B Capital
Securities shall be paid in full the Guarantee Payments to which they are
entitled under this Series B Capital Securities Guarantee.
"Holder" shall mean any holder, as registered on the books and
records of the Issuer, of any Series B Capital Securities or Series A Capital
Securities, as the case may be;
-3-
<PAGE> 7
provided, however, that, in determining whether the holders of the requisite
percentage of any class of the Capital Securities have given any request,
notice, consent or waiver hereunder, "Holder" shall not include the Guarantor or
any Affiliate of the Guarantor.
"Indemnified Person" shall mean the Capital Securities
Guarantee Trustee, any Affiliate of the Capital Securities Guarantee Trustee, or
any officers, directors, shareholders, members, partners, employees,
representatives, nominees, custodians or agents of the Capital Securities
Guarantee Trustee.
"Indenture" shall mean the Indenture dated as of December 17,
1996 among the Guarantor (the "Debenture Issuer") and The Chase Manhattan Bank,
as trustee, pursuant to which the Debentures are to be issued to the Property
Trustee of the Issuer.
"Majority in liquidation amount of the Series B Capital
Securities" shall mean, except as provided by the Trust Indenture Act, a vote by
Holder(s) of Series B Capital Securities, voting separately as a class, of more
than 50% of the aggregate liquidation amount (including the stated amount that
would be paid on redemption, liquidation or otherwise, plus accumulated and
unpaid Distributions to the date upon which the voting percentages are
determined) of all outstanding Series B Capital Securities.
"Officers' Certificate" shall mean, with respect to any
person, a certificate signed by the Chairman, a Vice Chairman, the Chief
Executive Officer, the President, a Vice President or the Treasurer of the
Guarantor. Any Officers' Certificate delivered with respect to compliance with a
condition or covenant provided for in this Series B Capital Securities Guarantee
shall include:
(a) a statement that each officer signing the Officers'
Certificate has read the covenant or condition and the definitions relating
thereto;
(b) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is necessary to
enable such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(c) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
"Other Common Securities Guarantees" shall have the same
meaning as "Other Guarantees" in the Common Securities Guarantee.
"Other Debentures" shall mean all junior subordinated
debentures issued by the Guarantor from time to time and sold to trusts other
than the Issuer to be established by the Guarantor (if any), in each case
similar to the Issuer.
-4-
<PAGE> 8
"Other Guarantees" shall mean all guarantees to be issued by
the Guarantor with respect to capital securities (if any) similar to the Series
B Capital Securities issued by trusts other than the Issuer to be established by
the Guarantor (if any), in each case similar to the Issuer.
"Person" shall mean a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement, dated as of December 11, 1996 by and among the Guarantor, the
Issuer and the Initial Purchasers named therein as such agreement may be
amended, modified or supplemented from time to time.
"Responsible Officer" shall mean, with respect to the Capital
Securities Guarantee Trustee, any officer within the Corporate Trust Office of
the Capital Securities Guarantee Trustee with direct responsibility for the
administration of this Series B Capital Securities Guarantee and also means,
with respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of that officer's knowledge of and familiarity
with the particular subject.
"Series A Debentures" shall mean the series of subordinated
debt securities of the Guarantor designated the 8.99% Series A Junior
Subordinated Deferrable Interest Debentures due December 17, 2026 held by the
Property Trustee (as defined in the Declaration).
"Series B Debentures" shall mean the series of subordinated
debt securities of the Guarantor designated the 8.99% Series B Junior
Subordinated Deferrable Interest Debentures due December 17, 2026 held by the
Property Trustee.
"Successor Capital Securities Guarantee Trustee" shall mean a
successor Capital Securities Guarantee Trustee possessing the qualifications to
act as Capital Securities Guarantee Trustee under Section 4.1.
"Trust Indenture Act" shall mean the Trust Indenture Act of
1939, as amended.
"Trust Securities" shall mean the Common Securities and the
Series A Capital Securities and Series B Capital Securities, collectively.
-5-
<PAGE> 9
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application
(a) This Series B Capital Securities Guarantee is subject to
the provisions of the Trust Indenture Act that are required to be part of this
Series B Capital Securities Guarantee and shall, to the extent applicable, be
governed by such provisions; and
(b) if and to the extent that any provision of this Series B
Capital Securities Guarantee limits, qualifies or conflicts with the duties
imposed by Section 310 to 317, inclusive, of the Trust Indenture Act, such
imposed duties shall control.
SECTION 2.2 Lists of Holders of Securities
(a) The Guarantor shall provide the Capital Securities
Guarantee Trustee (unless the Capital Securities Guarantee Trustee is otherwise
the registrar of the Capital Securities) with a list, in such form as the
Capital Securities Guarantee Trustee may reasonably require, of the names and
addresses of the Holders of the Series B Capital Securities ("List of Holders")
as of such date, (i) within one Business Day after June 1 and December 1 of each
year, and (ii) at any other time within 30 days of receipt by the Guarantor of a
written request for a List of Holders as of a date no more than 14 days before
such List of Holders is given to the Capital Securities Guarantee Trustee;
provided, that the Guarantor shall not be obligated to provide such List of
Holders at any time the List of Holders does not differ from the most recent
List of Holders given to the Capital Securities Guarantee Trustee by the
Guarantor. The Capital Securities Guarantee Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.
(b) The Capital Securities Guarantee Trustee shall comply with
its obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust
Indenture Act.
SECTION 2.3 Reports by the Capital Securities Guarantee Trustee
Within 60 days after May 15 of each year, commencing May 15,
1997, the Capital Securities Guarantee Trustee shall provide to the Holders of
the Series B Capital Securities such reports as are required by Section 313 of
the Trust Indenture Act, if any, in the form and in the manner provided by
Section 313 of the Trust Indenture Act. The Capital Securities Guarantee Trustee
shall also comply with the requirements of section 313(d) of the Trust Indenture
Act.
SECTION 2.4 Periodic Reports to Capital Securities Guarantee Trustee
The Guarantor shall provide to the Capital Securities
Guarantee Trustee such documents, reports and information as required by Section
314 (if any) and the compliance
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certificate required by Section 314 of the Trust Indenture Act in the form, in
the manner and at the times required by Section 314 of the Trust Indenture Act.
Delivery of such reports, information and documents to the Capital Securities
Guarantee Trustee is for informational purposes only and the Capital Securities
Guarantee Trustee's receipt of such shall not constitute constructive notice of
any information contained therein or determinable from information contained
therein, including the Guarantor's compliance with any of its covenants
hereunder (as to which the Capital Securities Guarantee Trustee is entitled to
rely exclusively on Officers' Certificates).
SECTION 2.5 Evidence of Compliance with Conditions Precedent
The Guarantor shall provide to the Capital Securities
Guarantee Trustee such evidence of compliance with any conditions precedent, if
any, provided for in this Series B Capital Securities Guarantee that relate to
any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
14(c)(1) may be given in the form of an Officers' Certificate.
SECTION 2.6 Events of Default; Waiver
The Holders of a Majority in liquidation amount of Series B
Capital Securities may, by vote, on behalf of the Holders of all of the Series B
Capital Securities, waive any past Event of Default and its consequences. Upon
such waiver, any such Event of Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured, for every purpose
of this Series B Capital Securities Guarantee, but no such waiver shall extend
to any subsequent or other default or Event of Default or impair any right
consequent thereon.
SECTION 2.7 Event of Default; Notice
(a) The Capital Securities Guarantee Trustee shall, within 90
days after the occurrence of a default with respect to this Series B Capital
Securities Guarantee, mail by first class postage prepaid, to all Holders of the
Series B Capital Securities, notices of all defaults actually known to a
Responsible Officer of the Capital Securities Guarantee Trustee, unless such
defaults have been cured before the giving of such notice; provided, that,
except in the case of default in the payment of any Guarantee Payment, the
Capital Securities Guarantee Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee, or a
trust committee of directors and/or Responsible Officers of the Capital
Securities Guarantee Trustee in good faith determines that the withholding of
such notice is in the interests of the holders of the Series B Capital
Securities.
(b) The Capital Securities Guarantee Trustee shall not be
deemed to have knowledge of any Event of Default unless the Capital Securities
Guarantee Trustee shall have received written notice, or a Responsible Officer
of the Capital Securities Guarantee
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Trustee charged with the administration of the Declaration shall have obtained
actual knowledge, of such Event of Default.
SECTION 2.8 Conflicting Interests
The Declaration shall be deemed to be specifically described
in this Series B Capital Securities Guarantee for the purposes of clause (i) of
the first proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the Capital Securities Guarantee Trustee
(a) This Series B Capital Securities Guarantee shall be held
by the Capital Securities Guarantee Trustee for the benefit of the Holders of
the Series B Capital Securities, and the Capital Securities Guarantee Trustee
shall not transfer this Series B Capital Securities Guarantee to any Person
except a Holder of Series B Capital Securities exercising his or her rights
pursuant to Section 5.4(b) or to a Successor Capital Securities Guarantee
Trustee on acceptance by such Successor Capital Securities Guarantee Trustee of
its appointment to act as Successor Capital Securities Guarantee Trustee. The
right, title and interest of the Capital Securities Guarantee Trustee shall
automatically vest in any Successor Capital Securities Guarantee Trustee, and
such vesting and succession of title shall be effective whether or not
conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Capital Securities Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible
Officer of the Capital Securities Guarantee Trustee has occurred and is
continuing, the Capital Securities Guarantee Trustee shall enforce this Series B
Capital Securities Guarantee for the benefit of the Holders of the Series B
Capital Securities.
(c) The Capital Securities Guarantee Trustee, before the
occurrence of any Event of Default and after the curing of all Events of Default
that may have occurred, shall undertake to perform only such duties as are
specifically set forth in this Series B Capital Securities Guarantee, and no
implied covenants shall be read into this Series B Capital Securities Guarantee
against the Capital Securities Guarantee Trustee. In case an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.6) and is
actually known to a Responsible Officer of the Capital Securities Guarantee
Trustee, the Capital Securities Guarantee Trustee shall exercise such of the
rights and powers vested in it by this Series B Capital Securities Guarantee,
and use the same degree of care and skill in its exercise thereof, as a prudent
person would exercise or use under the circumstances in the conduct of his or
her own affairs.
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(d) No provision of this Series B Capital Securities Guarantee
shall be construed to relieve the Capital Securities Guarantee Trustee from
liability for its own negligent action, its own negligent failure to act, or its
own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default
and after the curing or waiving of all such Events of Default
that may have occurred:
(A) the duties and obligations of the
Capital Securities Guarantee Trustee shall be
determined solely by the express provisions of this
Series B Capital Securities Guarantee, and the
Capital Securities Guarantee Trustee shall not be
liable except for the performance of such duties and
obligations as are specifically set forth in this
Series B Capital Securities Guarantee, and no implied
covenants or obligations shall be read into this
Series B Capital Securities Guarantee against the
Capital Securities Guarantee Trustee; and
(B) in the absence of bad faith on the part
of the Capital Securities Guarantee Trustee, the
Capital Securities Guarantee Trustee may conclusively
rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon
any certificates or opinions furnished to the Capital
Securities Guarantee Trustee and conforming to the
requirements of this Series B Capital Securities
Guarantee; provided, however, that in the case of any
such certificates or opinions that by any provision
hereof are specifically required to be furnished to
the Capital Securities Guarantee Trustee, the Capital
Securities Guarantee Trustee shall be under a duty to
examine the same to determine whether or not they
conform to the requirements of this Series B Capital
Securities Guarantee;
(ii) the Capital Securities Guarantee Trustee shall
not be liable for any error of judgment made in good faith by
a Responsible Officer of the Capital Securities Guarantee
Trustee, unless it shall be proved that the Capital Securities
Guarantee Trustee was negligent in ascertaining the pertinent
facts upon which such judgment was made;
(iii) the Capital Securities Guarantee Trustee shall
not be liable with respect to any action taken or omitted to
be taken by it in good faith in accordance with the direction
of the Holders of a Majority in liquidation amount of the
Series B Capital Securities relating to the time, method and
place of conducting any proceeding for any remedy available to
the Capital Securities Guarantee Trustee, or exercising any
trust or power conferred upon the Capital Securities Guarantee
Trustee under this Series B Capital Securities Guarantee; and
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(iv) no provision of this Series B Capital Securities
Guarantee shall require the Capital Securities Guarantee
Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers, if
the Capital Securities Guarantee Trustee shall have reasonable
grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of
this Series B Capital Securities Guarantee or indemnity,
reasonably satisfactory to the Capital Securities Guarantee
Trustee, against such risk or liability is not reasonably
assured to it.
SECTION 3.2 Certain Rights of Capital Securities Guarantee Trustee
(a) Subject to the provisions of Section 3.1:
(i) The Capital Securities Guarantee Trustee may
conclusively rely, and shall be fully protected in acting or
refraining from acting, upon any resolution, certificate,
statement instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document believed
by it to be genuine and to have been signed, sent or presented
by the proper party or parties.
(ii) Any direction or act of the Guarantor
contemplated by this Series B Capital Securities Guarantee may
be sufficiently evidenced by an Officers' Certificate.
(iii) Whenever, in the administration of this Series
B Capital Securities Guarantee, the Capital Securities
Guarantee Trustee shall deem it desirable that a matter be
proved or established before taking, suffering or omitting any
action hereunder, the Capital Securities Guarantee Trustee
(unless other evidence is herein specifically prescribed) may,
in the absence of bad faith on its part, request and
conclusively rely upon an Officers' Certificate which, upon
receipt of such request, shall be promptly delivered by the
Guarantor.
(iv) The Capital Securities Guarantee Trustee shall
have no duty to see to any recording, filing or registration
of any instrument (or any rerecording, refiling or
registration thereof).
(v) The Capital Securities Guarantee Trustee may
consult with counsel of its selection, and the advice or
opinion of such counsel with respect to legal matters shall be
full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good
faith and in accordance with such advice or opinion. Such
counsel may be counsel to the Guarantor or any of its
Affiliates and may include any of its employees. The Capital
Securities Guarantee Trustee shall have the right at any time
to seek instructions concerning
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the administration of this Series B Capital Securities
Guarantee from any court of competent jurisdiction.
(vi) The Capital Securities Guarantee Trustee shall
be under no obligation to exercise any of the rights or powers
vested in it by this Series B Capital Securities Guarantee at
the request or direction of any Holder, unless such Holder
shall have provided to the Capital Securities Guarantee
Trustee such security and indemnity, reasonably satisfactory
to the Capital Securities Guarantee Trustee, against the
costs, expenses (including attorneys' fees and expenses and
the expenses of the Capital Securities Guarantee Trustee's
agents, nominees or custodians) and liabilities that might be
incurred by it in complying with such request or direction,
including such reasonable advances as may be requested by the
Capital Securities Guarantee Trustee; provided, that nothing
contained in this Section 3.2(a)(vi) shall be taken to relieve
the Capital Securities Guarantee Trustee, upon the occurrence
of an Event of Default, of its obligation to exercise the
rights and powers vested in it by this Series B Capital
Securities Guarantee.
(vii) The Capital Securities Guarantee Trustee shall
not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Capital
Securities Guarantee Trustee, in its discretion, may make such
further inquiry or investigation into such facts or matters as
it may see fit.
(viii) The Capital Securities Guarantee Trustee may
execute any of the trusts or powers hereunder or perform any
duties hereunder either directly or by or through agents,
nominees, custodians or attorneys, and the Capital Securities
Guarantee Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed
with due care by it hereunder.
(ix) Any action taken by the Capital Securities
Guarantee Trustee or its agents hereunder shall bind the
Holders of the Series B Capital Securities, and the signature
of the Capital Securities Guarantee Trustee or its agents
alone shall be sufficient and effective to perform any such
action. No third party shall be required to inquire as to the
authority of the Capital Securities Guarantee Trustee to so
act or as to its compliance with any of the terms and
provisions of this Series B Capital Securities Guarantee, both
of which shall be conclusively evidenced by the Capital
Securities Guarantee Trustee's or its agent's taking such
action.
(x) Whenever in the administration of this Series B
Capital Securities Guarantee the Capital Securities Guarantee
Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other
action hereunder, the Capital Securities Guarantee Trustee (i)
may request instructions from the Holders of a Majority in
liquidation amount of the Series B
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Capital Securities, (ii) may refrain from enforcing such
remedy or right or taking such other action until such
instructions are received, and (iii) shall be protected in
conclusively relying on or acting in accordance with such
instructions.
(xi) The Capital Securities Guarantee Trustee shall
not be liable for any action taken, suffered, or omitted to be
taken by it in good faith, without negligence, and reasonably
believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Series B Capital
Securities Guarantee.
(b) No provision of this Series B Capital Securities Guarantee
shall be deemed to impose any duty or obligation on the Capital Securities
Guarantee Trustee to perform any act or acts or exercise any right, power, duty
or obligation conferred or imposed on it in any jurisdiction in which it shall
be illegal, or in which the Capital Securities Guarantee Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Capital Securities Guarantee
Trustee shall be construed to be a duty.
SECTION 3.3. Not Responsible for Recitals or Issuance of Series B Capital
Securities Guarantee
The recitals contained in this Series B Capital Securities
Guarantee shall be taken as the statements of the Guarantor, and the Capital
Securities Guarantee Trustee does not assume any responsibility for their
correctness. The Capital Securities Guarantee Trustee makes no representation as
to the validity or sufficiency of this Series B Capital Securities Guarantee.
ARTICLE IV
CAPITAL SECURITIES GUARANTEE TRUSTEE
SECTION 4.1 Capital Securities Guarantee Trustee; Eligibility
(a) There shall at all times be a Capital Securities Guarantee
Trustee that shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business
under the laws of the United States of America or any State or
Territory thereof or of the District of Columbia, or a
corporation or Person permitted by the Securities and Exchange
Commission to act as an institutional trustee under the Trust
Indenture Act, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus
of at least 50 million U.S. dollars ($50,000,000), and subject
to supervision or examination by Federal, State, Territorial
or District of Columbia authority. If such corporation
publishes reports of condition at least
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annually, pursuant to law or to the requirements of the
supervising or examining authority referred to above, then,
for the purposes of this Section 4.1(a)(ii), the combined
capital and surplus of such corporation shall be deemed to be
its combined capital and surplus as set forth in its most
recent report of condition so published.
(b) If at any time the Capital Securities Guarantee Trustee
shall cease to be eligible to so act under Section 4.1(a), the Capital
Securities Guarantee Trustee shall immediately resign in the manner and with the
effect set out in Section 4.2(c).
(c) If the Capital Securities Guarantee Trustee has or shall
acquire any "conflicting interest" within the meaning of Section 310(b) of the
Trust Indenture Act, the Capital Securities Guarantee Trustee and Guarantor
shall in all respects comply with the provisions of Section 310(b) of the Trust
Indenture Act.
SECTION 4.2 Appointment, Removal and Resignation of Capital Securities Guarantee
Trustee
(a) Subject to Section 4.2(b), the Capital Securities
Guarantee Trustee may be appointed or removed without cause at any time by the
Guarantor except during an Event of Default.
(b) The Capital Securities Guarantee Trustee shall not be
removed in accordance with Section 4.2(a) until a Successor Capital Securities
Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Capital Securities Guarantee
Trustee and delivered to the Guarantor.
(c) The Capital Securities Guarantee Trustee shall hold office
until a Successor Capital Securities Guarantee Trustee shall have been appointed
or until its removal or resignation. The Capital Securities Guarantee Trustee
may resign from office (without need for prior or subsequent accounting) by an
instrument in writing executed by the Capital Securities Guarantee Trustee and
delivered to the Guarantor, which resignation shall not take effect until a
Successor Capital Securities Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Capital Securities Guarantee Trustee and delivered to the Guarantor and the
resigning Capital Securities Guarantee Trustee.
(d) If no Successor Capital Securities Guarantee Trustee shall
have been appointed and accepted appointment as provided in this Section 4.2
within 60 days after delivery of an instrument of removal or resignation, the
Capital Securities Guarantee Trustee resigning or being removed may petition any
court of competent jurisdiction for appointment of a Successor Capital
Securities Guarantee Trustee. Such court may thereupon, after prescribing such
notice, if any, as it may deem proper, appoint a Successor Capital Securities
Guarantee Trustee.
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(e) No Capital Securities Guarantee Trustee shall be liable
for the acts or omissions to act of any Successor Capital Securities Guarantee
Trustee.
(f) Upon termination of this Series B Capital Securities
Guarantee or removal or resignation of the Capital Securities Guarantee Trustee
pursuant to this Section 4.2, the Guarantor shall pay to the Capital Securities
Guarantee Trustee all amounts due to the Capital Securities Guarantee Trustee
accrued to the date of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee
The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim that the Issuer may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer to pay such amounts to the Holders.
SECTION 5.2 Waiver of Notice and Demand
The Guarantor hereby waives notice of acceptance of this
Series B Capital Securities Guarantee and of any liability to which it applies
or may apply, presentment, demand for payment, any right to require a proceeding
first against the Issuer or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
SECTION 5.3 Obligations Not Affected
The obligations, covenants, agreements and duties of the
Guarantor under this Series B Capital Securities Guarantee shall in no way be
affected or impaired by reason of the happening from time to time of any of the
following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Series B Capital
Securities to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all
or any portion of the Distributions, Redemption Price, Liquidation Distribution
or any other sums payable under the terms of the Series B Capital Securities or
the extension of time for the performance of any other obligation under, arising
out of, or in connection with, the Series B Capital Securities (other than an
extension of time for payment of Distributions, Redemption
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Price, Liquidation Distribution or other sum payable that results from the
extension of any interest payment period on the Debentures permitted by the
Indenture);
(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right, privilege, power
or remedy conferred on the Holders pursuant to the terms of the Series B Capital
Securities, or any action on the part of the Issuer granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment
of debt of, or other similar proceedings affecting, the Issuer or any of the
assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the Series
B Capital Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred;
(g) the consummation of the Exchange Offer; or
(h) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 5.3 that the obligations of the Guarantor with
respect to the Guarantee Payments shall be absolute and unconditional under any
and all circumstances.
There shall be no obligation of the Holders to give notice to,
or obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.4 Rights of Holders
(a) The Holders of a Majority in liquidation amount of the
Series B Capital Securities have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Capital Securities
Guarantee Trustee in respect of this Series B Capital Securities Guarantee or
exercising any trust or power conferred upon the Capital Securities Guarantee
Trustee under this Series B Capital Securities Guarantee.
(b) If the Capital Securities Guarantee Trustee fails to
enforce such Series B Capital Securities Guarantee, any Holder of Series B
Capital Securities may institute a legal proceeding directly against the
Guarantor to enforce the Capital Securities Guarantee Trustee's rights under
this Series B Capital Securities Guarantee, without first instituting a legal
proceeding against the Issuer, the Capital Securities Guarantee Trustee or any
other person or entity. The Guarantor waives any right or remedy to require that
any action be brought first against the Issuer or any other person or entity
before proceeding directly against the Guarantor.
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SECTION 5.5 Guarantee of Payment
This Series B Capital Securities Guarantee creates a guarantee
of payment and not of collection.
SECTION 5.6 Subrogation
The Guarantor shall be subrogated to all (if any) rights of
the Holders of Series B Capital Securities against the Issuer in respect of any
amounts paid to such Holders by the Guarantor under this Series B Capital
Securities Guarantee; provided, however, that the Guarantor shall not (except to
the extent required by mandatory provisions of law) be entitled to enforce or
exercise any right that it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of payment under this
Series B Capital Securities Guarantee, if, at the time of any such payment, any
amounts are due and unpaid under this Series B Capital Securities Guarantee. If
any amount shall be paid to the Guarantor in violation of the preceding
sentence, the Guarantor agrees to hold such amount in trust for the Holders and
to pay over such amount to the Holders.
SECTION 5.7 Independent Obligations
The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Series B
Capital Securities, and that the Guarantor shall be liable as principal and as
debtor hereunder to make Guarantee Payments pursuant to the terms of this Series
B Capital Securities Guarantee notwithstanding the occurrence of any event
referred to in subsections (a) through (h), inclusive, of Section 5.3 hereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions
So long as any Capital Securities remain outstanding, the
Guarantor shall not (i) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Guarantor's capital stock (which includes common and preferred stock) or
(ii) make any payment of principal, interest or premium, if any, on or repay or
repurchase or redeem any debt securities of the Guarantor (including any Other
Debentures) that rank pari passu with or junior in right of payment to the
Debentures or (iii) make any guarantee payments with respect to any guarantee by
the Guarantor of the debt securities of any subsidiary of the Guarantor
(including Other Guarantees) if such guarantee ranks pari passu or junior in
right of payment to the Debentures (other than (a) dividends or distributions in
shares of, or options, warrants, rights to subscribe for or purchase shares of,
common stock of the Guarantor, (b) any declaration of a dividend in connection
with the implementation of a stockholder's rights plan, or the issuance of stock
under any such plan in the
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future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Capital Securities Guarantee, (d) as a result of a
reclassification of the Guarantor's capital stock or the exchange or the
conversion of one class or series of the Guarantor's capital stock for another
class or series of the Guarantor's capital stock, (e) the purchase of fractional
interests in shares of the Guarantor's capital stock pursuant to the conversion
or exchange provisions of such capital stock or the security being converted or
exchanged, and (f) purchases of common stock related to the issuance of common
stock or rights under any of the Guarantor's benefit plans for its directors,
officers or employees or any of the Guarantor's dividend reinvestment plans) if
at such time (i) there shall have occurred any event of which the Guarantor has
actual knowledge that (a) is, or with the giving of notice or the lapse of time,
or both, would be, an Event of Default and (b) in respect of which the Guarantor
shall not have taken reasonable steps to cure, (ii) if such Debentures are held
by the Property Trustee, the Guarantor shall be in default with respect to its
payment of any obligations under this Series B Capital Securities Guarantee or
(iii) the Guarantor shall have given notice of its election of the exercise of
its right to extend the interest payment period pursuant to Section 16.01 of the
Indenture and any such extension shall be continuing.
SECTION 6.2 Ranking
This Series B Capital Securities Guarantee will constitute an
unsecured obligation of the Guarantor and will rank (i) subordinate and junior
in right of payment to Senior Indebtedness (as defined in the Indenture), to the
same extent and in the same manner that the Debentures are subordinated to
Senior Indebtedness pursuant to the Indenture (except as indicated below), it
being understood that the terms of Article XV of the Indenture shall apply to
the obligations of the Guarantor under this Series B Capital Securities
Guarantee as if (x) such Article XV were set forth herein in full and (y) such
obligations were substituted for the term "Securities" appearing in such Article
XV, except that with respect to Section 15.03 of the Indenture only, the term
"Senior Indebtedness" shall mean all liabilities of the Guarantor, whether or
not for money borrowed (other than obligations in respect of Other Guarantees),
(ii) pari passu with the most senior preferred or preference stock now or
hereafter issued by the Guarantor, the Series A Capital Securities Guarantee and
with any Other Guarantee (as defined herein) and any Other Common Securities
Guarantee and any guarantee now or hereafter entered into by the Guarantor in
respect of any preferred or preference stock of any Affiliate of the Guarantor,
and (iii) senior to the Guarantor's common stock.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination
This Series B Capital Securities Guarantee shall terminate (i)
upon full payment of the Redemption Price (as defined in the Declaration) of all
Series B Capital Securities, or (ii) upon liquidation of the Issuer, the full
payment of the amounts payable in accordance with the Declaration or the
distribution of the Debentures to the Holders of all of the
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Securities. Notwithstanding the foregoing, this Series B Capital Securities
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any Holder of Series B Capital Securities must restore
payment of any sums paid under the Series B Capital Securities or under this
Series B Capital Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation
(a) No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith in accordance with this Series
B Capital Securities Guarantee and in a manner that such Indemnified Person
reasonably believed to be within the scope of the authority conferred on such
Indemnified Person by this Series B Capital Securities Guarantee or by law,
except that an Indemnified Person shall be liable for any such loss, damage or
claim incurred by reason of such Indemnified Person's negligence or willful
misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence and
amount of assets from which Distributions to Holders of Series B Capital
Securities might properly be paid.
SECTION 8.2 Indemnification
The Guarantor agrees to indemnify each Indemnified Person for,
and to hold each Indemnified Person harmless against, any and all loss,
liability, damage, claim or expense incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or administration
of the trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against, or
investigating, any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The obligation to
indemnify as set forth in this Section 8.2 shall survive the termination of this
Series B Capital Securities Guarantee.
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ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns
All guarantees and agreements contained in this Series B
Capital Securities Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of the Guarantor and shall inure to the benefit of
the Holders of the Series B Capital Securities then outstanding.
SECTION 9.2 Amendments
Except with respect to any changes that do not materially
adversely affect the rights of Holders (in which case no consent of Holders will
be required), this Series B Capital Securities Guarantee may only be amended
with the prior approval of the Holders of a Majority in liquidation amount of
the Securities (including the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Distributions to the date upon
which the voting percentages are determined). The provisions of Section 12.2 of
the Declaration with respect to meetings of Holders of the Securities apply to
the giving of such approval.
SECTION 9.3 Notices
All notices provided for in this Series B Capital Securities
Guarantee shall be in writing, duly signed by the party giving such notice, and
shall be delivered, telecopied or mailed by first class mail, as follows:
(a) If given to the Issuer, in care of the Administrative
Trustee at the Issuer's mailing address set forth below (or such other address
as the Issuer may give notice of to the Capital Securities Guarantee Trustee and
the Holders of the Series B Capital Securities):
Advanta Capital Trust I
c/o Advanta Corp.
501 Carr Road
Wilmington, Delaware 19809
Attention: Jeffrey Beck
Telecopy: (302) 791-6540
-19-
<PAGE> 23
(b) If given to the Capital Securities Guarantee Trustee, at
the Capital Securities Guarantee Trustee's mailing address set forth below (or
such other address as the Capital Securities Guarantee Trustee may give notice
of to the Holders of the Series B Capital Securities):
The Chase Manhattan Bank
450 West 33rd Street
15th Floor
New York, New York 10001
Attention: Corporate Trustee Administration Department
Telecopy: (212) 946-8161
(c) If given to the Guarantor, at the Guarantor's mailing
address set forth below (or such other address as the Guarantor may give notice
of to the Capital Securities Guarantee Trustee and the Holders of the Series B
Capital Securities):
Advanta Corp.
Welsh and McKean Roads
P.O. Box 844
Spring House, Pennsylvania 19477
Attention: Gene S. Schneyer, Esquire
Telecopy: (215) 444-5025
(d) If given to any Holder of Series B Capital Securities, at
the address set forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 9.4 Benefit
This Series A Capital Securities Guarantee is solely for the
benefit of the Holders of the Series A Capital Securities and, subject to
Section 3.1(a), is not separately transferable from the Series A Capital
Securities.
-20-
<PAGE> 24
SECTION 9.5 Governing Law
THIS SERIES B CAPITAL SECURITIES GUARANTEE SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.
THIS SERIES B CAPITAL SECURITIES GUARANTEE is executed as of
the day and year first above written.
ADVANTA CORP., as Guarantor
By:_________________________________
Name:________________________
Title:_______________________
THE CHASE MANHATTAN BANK, as Capital
Securities Guarantee Trustee
By:_________________________________
Name:________________________
Title:_______________________
-21-
<PAGE> 1
EXHIBIT 12.1
ADVANTA CORP.
AND SUBSIDIARIES
STATEMENTS SETTING FORTH DETAILS OF COMPUTATION OF RATIO
OF EARNINGS TO FIXED CHARGES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31ST,
------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net earnings...................... $175,657 $136,677 $106,063 $ 77,920 $ 48,037
Federal and state income taxes.... 89,104 75,226 59,144 45,335 29,063
-------- -------- -------- -------- --------
Earnings before income taxes...... 264,761 211,903 165,207 123,255 77,100
-------- -------- -------- -------- --------
Fixed charges:
Interest........................ 269,700 166,032 94,758 79,303 93,545
One-third of all rentals........ 2,833 1,641 1,809 1,591 1,252
Preferred stock dividend of
subsidiary trust............. 340 0 0 0 0
-------- -------- -------- -------- --------
Total fixed charges..... 272,873 167,673 96,567 80,894 94,797
-------- -------- -------- -------- --------
Earnings before income taxes and
fixed charges................... $537,634 $379,576 $261,774 $204,149 $171,897
-------- -------- -------- -------- --------
Ratio of earnings to fixed
charges(1)...................... 1.97x 2.26x 2.71x 2.52x 1.81x
</TABLE>
- ---------------
(1) For purposes of computing these ratios, "earnings" represent income before
income taxes plus fixed charges, and "fixed charges" consist of interest
expense and one-third (the proportion deemed representative of the interest
factor) of rental expense on operating leases.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this Form S-4 Registration Statement of our reports dated
January 21, 1997 on the Advanta Corp. consolidated financial statements included
in the Advanta Corp. Form 10-K for the year ended December 31, 1996 and to all
references to our Firm included in this Form S-4 Registration Statement.
ARTHUR ANDERSEN LLP
Philadelphia, PA
April 3, 1997
<PAGE> 1
EXHIBIT 25.1
-------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
---------------------------------------------
ADVANTA CORP.
(Exact name of obligor as specified in its charter)
DELAWARE 23-2804492
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
WELSH & MCKEAN ROADS
P.O. BOX 844
SPRING HOUSE, PENNSYLVANIA 19477
(Address of principal executive offices) (Zip Code)
-------------------------------------------------
SERIES B JUNIOR SUBORDINATED DEBT SECURITIES OF ADVANTA CORP.
(Title of the indenture securities)
-------------------------------------------------------------
<PAGE> 2
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, State House, Albany,
New York 12110.
Board of Governors of the Federal Reserve System, Washington,
D.C., 20551
Federal Reserve, Bank of New York, District No. 2, 33 Liberty
Street, New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
- 2 -
<PAGE> 3
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of Amendment
dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4
to Form T-1 filed in connection with Registration Statement No. 333-06249, which
is incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee,
published pursuant to law or the requirements of its supervising or examining
authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 3rd day of April, 1997.
THE CHASE MANHATTAN BANK
By /s/ James D. Heaney
-----------------------------
James D. Heaney
Vice President
- 3 -
<PAGE> 4
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business December 31, 1996, in accordance
with a call made by the Federal Reserve Bank of this District
pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
ASSETS IN MILLIONS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin ............................................ $ 11,509
Interest-bearing balances .................................... 8,457
Securities: ......................................................
Held to maturity securities........................................ 3,128
Available for sale securities...................................... 40,534
Federal Funds sold and securities purchased under
agreements to resell in domestic offices of the
bank and of its Edge and Agreement subsidiaries,
and in IBF's:
Federal funds sold ........................................... 9,222
Securities purchased under agreements to resell .... 422
Loans and lease financing receivables:
Loans and leases, net of unearned income $133,935
Less: Allowance for loan and lease losses 2,789
Less: Allocated transfer risk reserve ......... 16
----------
Loans and leases, net of unearned income,
allowance, and reserve ....................................... 131,130
Trading Assets .................................................... 49,876
Premises and fixed assets (including capitalized leases)........... 2,877
Other real estate owned ........................................... 290
Investments in unconsolidated subsidiaries and
associated companies.......................................... 124
Customer's liability to this bank on acceptances
outstanding .................................................. 2,313
Intangible assets ................................................. 1,316
Other assets ...................................................... 11,231
---------
TOTAL ASSETS ...................................................... $272,429
=========
</TABLE>
- 4 -
<PAGE> 5
LIABILITIES
<TABLE>
<CAPTION>
Deposits
<S> <C> <C>
In domestic offices .......................................... $ 87,006
Noninterest-bearing ...................................$35,783
Interest-bearing ...................................... 51,223
-------
In foreign offices, Edge and Agreement subsidiaries,
and IBF's ................................................... 73,206
Noninterest-bearing ......................................... $ 4,347
Interest-bearing ............................................ 68,859
Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBF's
Federal funds purchased ..................................... 14,980
Securities sold under agreements to repurchase .............. 10,125
Demand notes issued to the U.S. Treasury ......................... 1,867
Trading liabilities .............................................. 34,783
Other Borrowed money:
With a remaining maturity of one year or less ............... 14,639
With a remaining maturity of more than one year ............. 425
Mortgage indebtedness and obligations under capitalized leases.... 40
Bank's liability on acceptances executed and outstanding 2,267
Subordinated notes and debentures ................................ 5,471
Other liabilities................................................. 11,343
TOTAL LIABILITIES ................................................ 256,152
Limited-Life Preferred stock and related surplus 550
EQUITY CAPITAL
Common stock ..................................................... 1,251
Surplus........................................................... 10,243
Undivided profits and capital reserves ........................... 4,526
Net unrealized holding gains (Losses) on available-for-sale
securities ....................................................... (309)
Cumulative foreign currency translation adjustments .............. 16
TOTAL EQUITY CAPITAL ............................................. 15,727
--------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED
STOCK AND EQUITY CAPITAL .................................... $272,429
========
</TABLE>
I, Joseph L. Sclafani, S.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
EDWARD D. MILLER )DIRECTORS
THOMAS G. LABRECQUE )
- 5 -
<PAGE> 1
EXHIBIT 25.2
-------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
---------------------------------------------
ADVANTA CAPITAL TRUST I
(Exact name of obligor as specified in its charter)
DELAWARE 23-2869132
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
C/O ADVANTA CORP.
501 CARR ROAD
WILMINGTON, DELAWARE 19809
(Address of principal executive offices) (Zip Code)
-------------------------------------------------------
SERIES B CAPITAL SECURITIES OF ADVANTA CAPITAL TRUST I
(Title of the indenture securities)
------------------------------------------------------------
<PAGE> 2
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, State House, Albany,
New York 12110.
Board of Governors of the Federal Reserve System, Washington,
D.C., 20551
Federal Reserve Bank of New York, District No. 2,
33 Liberty Street, New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
- 2 -
<PAGE> 3
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of Amendment
dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4
to Form T-1 filed in connection with Registration Statement No. 333-06249, which
is incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee,
published pursuant to law or the requirements of its supervising or examining
authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 3rd day of April, 1997.
THE CHASE MANHATTAN BANK
By /s/ James D. Heaney
----------------------------
James D. Heaney
Vice President
- 3 -
<PAGE> 4
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business December 31, 1996, in accordance
with a call made by the Federal Reserve Bank of this District
pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
ASSETS IN MILLIONS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin ............................................ $ 11,509
Interest-bearing balances .................................... 8,457
Securities: ......................................................
Held to maturity securities........................................ 3,128
Available for sale securities...................................... 40,534
Federal Funds sold and securities purchased under
agreements to resell in domestic offices of the
bank and of its Edge and Agreement subsidiaries,
and in IBF's:
Federal funds sold ........................................... 9,222
Securities purchased under agreements to resell .............. 422
Loans and lease financing receivables:
Loans and leases, net of unearned income $133,935
Less: Allowance for loan and lease losses 2,789
Less: Allocated transfer risk reserve ......... 16
----------
Loans and leases, net of unearned income,
allowance, and reserve ....................................... 131,130
Trading Assets .................................................... 49,876
Premises and fixed assets (including capitalized leases)........... 2,877
Other real estate owned ........................................... 290
Investments in unconsolidated subsidiaries and
associated companies.......................................... 124
Customer's liability to this bank on acceptances
outstanding .................................................. 2,313
Intangible assets ................................................. 1,316
Other assets ...................................................... 11,231
---------
TOTAL ASSETS ...................................................... $272,429
=========
</TABLE>
- 4 -
<PAGE> 5
LIABILITIES
<TABLE>
<CAPTION>
Deposits
<S> <C> <C>
In domestic offices .......................................... $ 87,006
Noninterest-bearing ...................................$35,783
Interest-bearing ...................................... 51,223
-------
In foreign offices, Edge and Agreement subsidiaries,
and IBF's .................................................... 73,206
Noninterest-bearing ...................................$ 4,347
Interest-bearing ...................................... 68,859
Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBF's
Federal funds purchased ..................................... 14,980
Securities sold under agreements to repurchase .............. 10,125
Demand notes issued to the U.S. Treasury ......................... 1,867
Trading liabilities .............................................. 34,783
Other Borrowed money:
With a remaining maturity of one year or less ............... 14,639
With a remaining maturity of more than one year ............. 425
Mortgage indebtedness and obligations under capitalized
leases....................................................... 40
Bank's liability on acceptances executed and outstanding 2,267
Subordinated notes and debentures ................................ 5,471
Other liabilities................................................. 11,343
TOTAL LIABILITIES ................................................ 256,152
--------
Limited-Life Preferred stock and related surplus 550
EQUITY CAPITAL
Common stock ..................................................... 1,251
Surplus .......................................................... 10,243
Undivided profits and capital reserves ........................... 4,526
Net unrealized holding gains (Losses)
on available-for-sale securities ................................. (309)
Cumulative foreign currency translation adjustments .............. 16
TOTAL EQUITY CAPITAL ............................................. 15,727
------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED
STOCK AND EQUITY CAPITAL .................................... $272,429
========
</TABLE>
I, Joseph L. Sclafani, S.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
EDWARD D. MILLER )DIRECTORS
THOMAS G. LABRECQUE )
- 5 -
<PAGE> 1
EXHIBIT 25.3
-------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
---------------------------------------------
ADVANTA CAPITAL TRUST I
(Exact name of obligor as specified in its charter)
DELAWARE 23-2869132
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
C/O ADVANTA CORP.
501 CARR ROAD
WILMINGTON, DELAWARE 19809
(Address of principal executive offices) (Zip Code)
-------------------------------------------
ADVANTA CORP. SERIES B GUARANTEE WITH RESPECT TO THE
SERIES B CAPITAL SECURITIES OF ADVANTA CAPITAL TRUST I
(Title of the indenture securities)
-----------------------------------------------------------
<PAGE> 2
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
New York State Banking Department, State House, Albany,
New York 12110.
Board of Governors of the Federal Reserve System, Washington,
D.C., 20551
Federal Reserve Bank of New York, District No. 2,
33 Liberty Street, New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
- 2 -
<PAGE> 3
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of Amendment
dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985, December 2, 1991 and July 10, 1996 (see Exhibit 1 to Form T-1
filed in connection with Registration Statement No. 333-06249, which is
incorporated by reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference. On July 14, 1996, in
connection with the merger of Chemical Bank and The Chase Manhattan Bank
(National Association), Chemical Bank, the surviving corporation, was renamed
The Chase Manhattan Bank).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4
to Form T-1 filed in connection with Registration Statement No. 333-06249, which
is incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference. On July 14, 1996, in connection
with the merger of Chemical Bank and The Chase Manhattan Bank (National
Association), Chemical Bank, the surviving corporation, was renamed The Chase
Manhattan Bank).
7. A copy of the latest report of condition of the Trustee,
published pursuant to law or the requirements of its supervising or examining
authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 3rd day of APRIL, 1997.
THE CHASE MANHATTAN BANK
By /s/ James D. Heaney
----------------------------
James D. Heaney
Vice President
- 3 -
<PAGE> 4
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business December 31, 1996, in accordance
with a call made by the Federal Reserve Bank of this District
pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
ASSETS IN MILLIONS
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin ............................................ $ 11,509
Interest-bearing balances .................................... 8,457
Securities: ......................................................
Held to maturity securities........................................ 3,128
Available for sale securities...................................... 40,534
Federal Funds sold and securities purchased under
agreements to resell in domestic offices of the
bank and of its Edge and Agreement subsidiaries,
and in IBF's:
Federal funds sold ........................................... 9,222
Securities purchased under agreements to resell .... 422
Loans and lease financing receivables:
Loans and leases, net of unearned income $133,935
Less: Allowance for loan and lease losses 2,789
Less: Allocated transfer risk reserve ......... 16
----------
Loans and leases, net of unearned income,
allowance, and reserve ....................................... 131,130
Trading Assets .................................................... 49,876
Premises and fixed assets (including capitalized leases)........... 2,877
Other real estate owned ........................................... 290
Investments in unconsolidated subsidiaries and
associated companies.......................................... 124
Customer's liability to this bank on acceptances
outstanding .................................................. 2,313
Intangible assets ................................................. 1,316
Other assets ...................................................... 11,231
---------
TOTAL ASSETS ...................................................... $272,429
=========
</TABLE>
- 4 -
<PAGE> 5
LIABILITIES
<TABLE>
<CAPTION>
Deposits
<S> <C> <C>
In domestic offices .......................................... $ 87,006
Noninterest-bearing ...................................$35,783
Interest-bearing ...................................... 51,223
--------
In foreign offices, Edge and Agreement subsidiaries,
and IBF's ............................................. 73,206
Noninterest-bearing ...................................$ 4,347
Interest-bearing ...................................... 68,859
Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBF's
Federal funds purchased ..................................... 14,980
Securities sold under agreements to repurchase .............. 10,125
Demand notes issued to the U.S. Treasury ......................... 1,867
Trading liabilities .............................................. 34,783
Other Borrowed money:
With a remaining maturity of one year or less ............... 14,639
With a remaining maturity of more than one year ............. 425
Mortgage indebtedness and obligations under capitalized
leases....................................................... 40
Bank's liability on acceptances executed and outstanding 2,267
Subordinated notes and debentures ................................ 5,471
Other liabilities................................................. 11,343
TOTAL LIABILITIES ................................................ 256,152
--------
Limited-Life Preferred stock and related surplus 550
EQUITY CAPITAL
Common stock ..................................................... 1,251
Surplus .......................................................... 10,243
Undivided profits and capital reserves ........................... 4,526
Net unrealized holding gains (Losses)
on available-for-sale securities ................................. (309)
Cumulative foreign currency translation adjustments .............. 16
TOTAL EQUITY CAPITAL ............................................. 15,727
--------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED
STOCK AND EQUITY CAPITAL .................................... $272,429
========
</TABLE>
I, Joseph L. Sclafani, S.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
EDWARD D. MILLER )DIRECTORS
THOMAS G. LABRECQUE )
