<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF
THE SECURITIES EXCHANGE ACT OF 1934)
ADVANTA CORP.
- --------------------------------------------------------------------------------
(NAME OF ISSUER)
ADVANTA CORP.
- --------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING STATEMENT)
CLASS A COMMON STOCK
CLASS A PURCHASE RIGHTS
CLASS B COMMON STOCK
CLASS B PURCHASE RIGHTS
DEPOSITARY SHARES EACH REPRESENTING ONE ONE-HUNDREDTH INTEREST IN A
SHARE OF 6 3/4% CONVERTIBLE CLASS B PREFERRED STOCK, SERIES 1995
(STOCK APPRECIATION INCOME LINKED SECURITIES (SAILS))
- --------------------------------------------------------------------------------
(TITLES OF CLASSES OF SECURITIES)
007942 10 5
007942 11 3
007942 20 4
007942 12 1
007942 30 3
- --------------------------------------------------------------------------------
(CUSIP NUMBERS OF CLASSES OF SECURITIES)
ELIZABETH MAI, ESQ.
WELSH AND MCKEAN ROADS, P.O. BOX 844
SPRING HOUSE, PENNSYLVANIA 19477
(215) 444-5000
- --------------------------------------------------------------------------------
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICES AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
COPY TO:
JAY A. DUBOW, ESQ.
WOLF, BLOCK, SCHORR AND SOLIS-COHEN LLP
TWELFTH FLOOR PACKARD BUILDING
111 SOUTH 15TH STREET
PHILADELPHIA, PA 19102-2678
JANUARY 20, 1998
(DATE TENDER OFFER FIRST PUBLISHED, SENT OR GIVEN TO SECURITY HOLDERS)
CALCULATION OF FILING FEE
<TABLE>
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- --------------------------------------------------------------------------------------------
Transaction Valuation* Amount of Filing Fee
- --------------------------------------------------------------------------------------------
$850,012,904.00 $170,002.58
- --------------------------------------------------------------------------------------------
</TABLE>
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
<TABLE>
<S> <C> <C> <C>
Amount previously paid: ---------------- Filing party: ----------------
Form or registration no.: ---------------- ----------------
Date filed:
</TABLE>
- ---------------
* 1/50 of one percent of an assumed purchase of an aggregate of 7,882,750 shares
of Class A Common Stock, 12,482,850 shares of Class B Common Stock at $40 per
Share and 1,078,930 SAILS Depositary Shares at $32.80 per Share.
================================================================================
<PAGE> 2
ITEM 1. SECURITY AND ISSUER.
(a) The Issuer of the securities to which this Issuer Tender Offer
Statement on Schedule 13E-4 (the "Statement") relates is Advanta Corp., a
Delaware corporation (the "Company"), and the address of its principal executive
office is Welsh and McKean Roads, Spring House, Pennsylvania 19477.
(b) This Statement relates to a tender offer by the Company to purchase
7,882,750 shares (or such lesser number of shares as are validly tendered and
not withdrawn) of its Class A Common Stock, $.01 par value (the "Class A Common
Stock"), including the associated Class A Purchase Rights issued pursuant to the
Rights Agreement (the "Rights Agreement") dated as of March 14, 1997 between the
Company and ChaseMellon Shareholder Services, L.L.C. (the "Class A Rights" and
together with the Class A Common Stock, the "Class A Shares"), and 12,482,850
shares (or such lesser number of shares as are validly tendered and not
withdrawn) of its Class B Common Stock, $.01 par value (the "Class B Common
Stock"), including the associated Class B Purchase Rights issued pursuant to the
Rights Agreement (the "Class B Rights" and together with the Class B Common
Stock, the "Class B Shares") (the Class A Shares and the Class B Shares are
herein referred to as the "Common Shares"), each at a purchase price, net to the
seller in cash of $40 per Common Share (the "Common Stock Purchase Price"), and
1,078,930 shares (or such lesser number of shares as are validly tendered and
not withdrawn) of its depositary shares each representing one one-hundredth
interest in a share of 6 3/4% Convertible Class B Preferred Stock, Series 1995
(Stock Appreciation Income Linked Securities (SAILS)) (the "SAILS Depositary
Shares"), at a purchase price, net to the seller in cash of $32.80 per SAILS
Depositary Share (the "SAILS Purchase Price") (the Class A Shares, Class B
Shares and SAILS Depositary Shares are hereinafter referred to as the "Shares"),
without interest thereon, upon the terms and subject to the conditions set forth
in the Offer to Purchase, dated January 20, 1998 (the "Offer to Purchase"), and
in the related Letters of Transmittal (which together constitute the "Offer"),
copies of which are filed as Exhibits (a)(1), (a)(2), (a)(3) and (a)(4). Unless
the Rights are redeemed by the Company, a tender of Common Shares will also
constitute a tender of the associated Rights. Unless the context requires
otherwise, all references herein to the Shares or the Common Shares shall
include the associated Rights. The information set forth in the "Introduction,"
"Section 1. Number of Shares; Proration," "Section 8. Interest of Directors and
Executive Officers; Transactions and Arrangements Concerning the Shares,"
"Section 10. Purpose of the Offer; Certain Effects of the Offer," and "Section
15. Extension of the Offer; Termination; Amendments" of the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth in "Section 7. Price Range of Shares" of the
Offer to Purchase is incorporated herein by reference.
(d) This Statement is being filed by the Issuer.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in "Section 9. Source and Amount of
Funds" of the Offer to Purchase is incorporated herein by reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
The information set forth in the "Introduction" and "Section 10. Purpose of
the Offer; Certain Effects of the Offer" of the Offer to Purchase is
incorporated herein by reference.
(a)-(j) The information set forth in the "Introduction," "Section 8.
Interest of Directors and Executive Officers; Transactions and Arrangements
Concerning the Shares," "Section 9. Source and Amount of Funds," "Section 10.
Purpose of the Offer; Certain Effects of the Offer," "Section 11. Certain
Information About the Company" and "Section 12. Effects of the Offer on the
Market for Shares; Registration under the Exchange Act" of the Offer to Purchase
is incorporated herein by reference.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
The information set forth in "Section 8. Interest of Directors and
Executive Officers; Transactions and Arrangements Concerning the Shares" of the
Offer to Purchase is incorporated herein by reference.
1
<PAGE> 3
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
The information set forth in the "Introduction," "Section 8. Interest of
Directors and Executive Officers; Transactions and Arrangements Concerning the
Shares" and "Section 11. Certain Information About the Company" of the Offer to
Purchase is incorporated herein by reference.
ITEM 6. PERSONS RETAINED, OR EMPLOYED OR TO BE COMPENSATED.
The information set forth in the "Introduction" and "Section 16. Fees and
Expenses" of the Offer to Purchase is incorporated herein by reference.
ITEM 7. FINANCIAL INFORMATION.
The incorporation by reference herein of the financial information
described below does not constitute an admission that such information is
material to a stockholder's decision to tender, sell, or hold Shares being
sought in the Offer.
(a)-(b) The information set forth in "Section 11. Certain Information About
the Company" of the Offer to Purchase is incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION.
The incorporation by reference herein of the information described below
does not constitute an admission that such information is material to a
stockholder's decision to tender, sell, or hold Shares being sought in the
Offer.
(a) Not applicable.
(b) The information set forth in "Section 13. Certain Legal Matters;
Regulatory Approvals" of the Offer to Purchase is incorporated herein by
reference.
(c) The information set forth in "Section 12. Effects of the Offer on the
Market for Shares; Registration under the Exchange Act" of the Offer to Purchase
is incorporated herein by reference.
(d) Not applicable.
(e) Reference is hereby made to the Offer to Purchase and the related
Letters of Transmittal, copies of which are attached hereto as Exhibits (a)(1),
(a)(2), (a)(3) and (a)(4) and incorporated in their entirety herein by
reference.
2
<PAGE> 4
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
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(a)(1) Form of Offer to Purchase, dated January 20, 1998.
(a)(2) Form of Letter of Transmittal for the Class A Shares.
(a)(3) Form of Letter of Transmittal for the Class B Shares.
(a)(4) Form of Letter of Transmittal for the SAILS Depositary Shares.
(a)(5) Form of Notice of Guaranteed Delivery.
(a)(6) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
(a)(7) Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(8) Form of Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(9) Form of Press Release issued by the Company on January 20, 1998.
(a)(10) Form of Letter to the Company's stockholders from the Chairman of the Board and
Chief Executive Officer of the Company, dated January 20, 1998.
(a)(11) Form of Summary Advertisement, dated January 20, 1998.
(a)(12) Form of Letter to Participants in the Advanta Corp. Employee Savings Plan.
(b) Not applicable.
(c)(1) Voting Agreement, dated as of October 28, 1997, by and between Fleet Financial
Group, Inc. and Dennis Alter, Chairman and Chief Executive Officer of the
Company.
(c)(2) Contribution Agreement, dated as of October 28, 1997, by and between the
Company and Fleet Financial Group, Inc.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
</TABLE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
ADVANTA CORP.
By: /s/ ELIZABETH H. MAI
------------------------------------
Elizabeth H. Mai
Senior Vice President,
Secretary and General Counsel
Dated: January 20, 1998
3
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------------------------------------------------------------------------------
<S> <C>
(a)(1) Form of Offer to Purchase, dated January 20, 1998.
(a)(2) Form of Letter of Transmittal for the Class A Shares.
(a)(3) Form of Letter of Transmittal for the Class B Shares.
(a)(4) Form of Letter of Transmittal for the SAILS Depositary Shares.
(a)(5) Form of Notice of Guaranteed Delivery.
(a)(6) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees.
(a)(7) Form of Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(8) Form of Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(9) Form of Press Release issued by the Company on January 20, 1998.
(a)(10) Form of Letter to the Company's stockholders from the Chairman of the Board and
Chief Executive Officer of the Company, dated January 20, 1998.
(a)(11) Form of Summary Advertisement, dated January 20, 1998.
(a)(12) Form of Letter to Participants in the Advanta Corp. Employee Savings Plan.
(b) Not applicable.
(c)(1) Voting Agreement, dated as of October 28, 1997, by and between Fleet Financial
Group, Inc. and Dennis Alter, Chairman and Chief Executive Officer of the Company.
(c)(2) Contribution Agreement, dated as of October 28, 1997, by and between the Company
and Fleet Financial Group, Inc.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
</TABLE>
4
<PAGE> 1
OFFER BY
ADVANTA CORP.
TO PURCHASE FOR CASH
UP TO 7,882,750 SHARES OF ITS CLASS A COMMON STOCK
AT $40 PER SHARE NET
AND
UP TO 12,482,850 SHARES OF ITS CLASS B COMMON STOCK
AT $40 PER SHARE NET
AND
UP TO 1,078,930 OF ITS DEPOSITARY SHARES
EACH REPRESENTING ONE ONE-HUNDREDTH INTEREST IN A
SHARE OF 6 3/4% CONVERTIBLE CLASS B PREFERRED STOCK, SERIES 1995
(STOCK APPRECIATION INCOME LINKED SECURITIES (SAILS))
AT $32.80 PER DEPOSITARY SHARE NET
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON FRIDAY, FEBRUARY 20, 1998, UNLESS THE OFFER IS EXTENDED.
Advanta Corp., a Delaware corporation (the "Company"), hereby invites its
stockholders to tender shares of its Class A Common Stock, par value $.01 per
share ("Class A Common Stock"), including the associated Class A Purchase Rights
(the "Class A Rights" and together with the Class A Common Stock, the "Class A
Shares"), and shares of its Class B Common Stock, par value $.01 per share
("Class B Common Stock"), including the associated Class B Purchase Rights (the
"Class B Rights" and together with the Class B Common Stock, the "Class B
Shares") (the Class A Shares and Class B Shares are hereinafter referred to as
the "Common Shares") each at a purchase price, net to the seller in cash of $40
per Common Share (the "Common Stock Purchase Price"), and depositary shares each
representing one one-hundredth interest in a share of 6 3/4% Convertible Class B
Preferred Stock, Series 1995 (Stock Appreciation Income Linked Securities
(SAILS)), par value $0.01 per share (the "SAILS Depositary Shares", and together
with the Common Shares, the "Shares") at a purchase price, net to the seller in
cash of $32.80 per SAILS Depositary Share (the "SAILS Purchase Price", and
together with the Common Stock Purchase Price, the "Purchase Price"), upon the
terms and subject to the conditions set forth in this Offer to Purchase and in
the related Letters of Transmittal (which together constitute the "Offer"). The
Company will, upon the terms and subject to the conditions of the Offer,
purchase 7,882,750 Class A Shares (or such lesser number of Class A Shares as
are properly tendered and not withdrawn) and 12,482,850 Class B Shares (or such
lesser number of Class B Shares as are properly tendered and not withdrawn) and
1,078,930 SAILS Depositary Shares (or such lesser number of SAILS Depositary
Shares as are properly tendered and not withdrawn) pursuant to the Offer. The
Company will purchase, at the applicable Purchase Price, all Shares properly
tendered and not withdrawn on or prior to the Expiration Date (as defined in
Section 1) upon the terms and subject to the conditions of the Offer, including
provisions relating to proration, conditional tenders and "odd lot" tenders
described herein. The Purchase Price will be paid in cash, net to the seller,
without interest thereon, with respect to all Shares purchased. All Shares not
purchased because of proration and Shares that were conditionally tendered and
not accepted for purchase will be returned. The Company reserves the right, in
its sole discretion, to purchase more than 7,882,750 Class A Shares, more than
12,482,850 Class B Shares and more than 1,078,930 SAILS Depositary Shares
pursuant to the Offer, but has no current intention to do so.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS, INCLUDING
THE CLOSING OF THE CONTRIBUTION (AS HEREINAFTER DEFINED) PURSUANT TO THE
CONTRIBUTION AGREEMENT, DATED AS OF OCTOBER 28, 1997, BETWEEN THE COMPANY AND
FLEET FINANCIAL GROUP, INC. SEE SECTION 6.
The Shares are listed and principally traded on the NASDAQ/National Market
System ("NASDAQ/NMS") under the symbols "ADVNA", "ADVNB" and "ADVNZ",
respectively. On January 16, 1998, the last full trading day prior to the date
of this Offer to Purchase, the closing per Share sales price of the Class A
Shares as reported on the NASDAQ/NMS was $28.25, the closing per Share sales
price of the Class B Shares as reported on the NASDAQ/NMS was $28.00 and the
closing per Share sales price of the SAILS Depositary Shares as reported on the
NASDAQ/NMS was $27.50. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR THE SHARES. SEE SECTION 7.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER,
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY
STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES.
STOCKHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO,
HOW MANY SHARES TO TENDER. THE COMPANY HAS BEEN ADVISED THAT EACH OF ITS
DIRECTORS AND EXECUTIVE OFFICERS WHO OWNS SHARES, INCLUDING DENNIS ALTER,
CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF THE COMPANY, WILL TENDER SHARES PURSUANT
TO THE OFFER, BUT HAS NOT DETERMINED HOW MANY SHARES TO TENDER.
------------------------
The Dealer Manager for the Offer is:
BT ALEX. BROWN INCORPORATED
January 20, 1998
<PAGE> 2
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (1) complete and sign the appropriate Letter of Transmittal
(or a facsimile thereof) in accordance with the instructions in the Letter of
Transmittal (the BLUE Letter of Transmittal for the Class A Shares, the YELLOW
Letter of Transmittal for the Class B Shares and the PINK Letter of Transmittal
for the SAILS Depositary Shares), mail or deliver it and any other required
documents to the Depositary, and either mail or deliver the stock certificates
for such Shares to the Depositary along with the appropriate Letter of
Transmittal or follow the procedure for book-entry delivery set forth in Section
3, or (2) request such stockholder's broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for such stockholder. A
stockholder having Shares registered in the name of a broker, dealer, commercial
bank, trust company or other nominee must contact such broker, dealer,
commercial bank, trust company or other nominee if such stockholder desires to
tender such Shares. Stockholders who desire to tender Shares and whose
certificates for such Shares are not immediately available or who cannot comply
with the procedure for book-entry transfer by the expiration of the Offer must
tender such Shares by following the procedures for guaranteed delivery set forth
in Section 3.
Questions and requests for assistance or for additional copies of this
Offer to Purchase, the Letters of Transmittal or the Notice of Guaranteed
Delivery may be directed to the Information Agent or the Dealer Manager at their
respective addresses and telephone numbers set forth on the back cover of this
Offer to Purchase. Stockholders may also contact their broker, dealer,
commercial bank, trust company or other nominee for assistance concerning the
Offer.
THE COMPANY HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON
BEHALF OF THE COMPANY AS TO WHETHER STOCKHOLDERS SHOULD TENDER OR REFRAIN FROM
TENDERING SHARES PURSUANT TO THE OFFER. THE COMPANY HAS NOT AUTHORIZED ANY
PERSON TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH
THE OFFER OTHER THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTERS
OF TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION, INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY.
i
<PAGE> 3
SUMMARY
This general summary is solely for the convenience of the Company's
stockholders and is qualified in its entirety by reference to the full text and
more specific details in this Offer to Purchase.
Purchase Price............. The Company will purchase shares of its Class A
Common Stock and Class B Common Stock each at a
purchase price of $40 per Share, net to the seller
in cash and will purchase shares of its SAILS
Depositary Shares at a purchase price of $32.80 per
Share, net to the Seller in cash.
Number of Shares to be
Purchased................ 7,882,750 shares of Class A Common Stock (or such
lesser number as are properly tendered and not
withdrawn), 12,482,850 shares of Class B Common
Stock (or such lesser number as are properly
tendered and not withdrawn) and 1,078,930 SAILS
Depositary Shares (or such lesser number as are
properly tendered and not withdrawn).
How to Tender Shares....... See Section 3. Call the Information Agent, the
Dealer Manager or consult your broker for
assistance.
Brokerage Commissions...... None for registered stockholders who tender their
Shares directly to the Depositary. Stockholders
holding Shares through brokers or other nominees
are urged to consult such brokers or other nominees
to determine whether transaction costs are
applicable if stockholders tender Shares through
such brokers or other nominees and not directly to
the Depositary.
Stock Transfer Tax......... None, if payment is made to the registered holder.
Expiration and Proration
Dates...................... Friday, February 20, 1998, at 12:00 Midnight, New
York City time, unless extended by the Company.
Payment Date............... As soon as practicable after the expiration of the
Offer.
Position of the Company and
its Directors.............. Neither the Company nor its Board of Directors
makes any recommendation to stockholders as to
whether to tender or refrain from tendering their
Shares. Each stockholder must make the decision
whether to tender Shares and, if so, how many
Shares should be tendered. The Company has been
advised that each of its directors and executive
officers who owns Shares intends to tender Shares
pursuant to the Offer but has not determined how
many Shares to tender.
Withdrawal Rights.......... Tendered Shares may be withdrawn at any time until
12:00 Midnight, New York City time, on Friday,
February 20, 1998 unless the Offer is extended by
the Company, and unless previously purchased, after
12:00 Midnight, New York City time, on Tuesday,
March 17, 1998. See Section 4.
Odd Lots................... There will be no proration of Shares of a
particular class tendered by any stockholder owning
beneficially or of record less than 100 Shares of
such class as of the close of business on January
19, 1998 and as of the Expiration Date, if such
stockholder tenders all such Shares prior to the
Expiration Date and checks the "Odd Lots" box in
the applicable Letter of Transmittal. See Section
1.
ii
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
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SECTION PAGE
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Introduction........................................................................ 1
1. Number of Shares; Proration.................................................... 4
2. Tenders by Owners of Fewer than 100 Shares..................................... 6
3. Procedure for Tendering Shares; Conditional Tender of Shares................... 7
4. Withdrawal Rights.............................................................. 10
5. Acceptance for Payment of Shares and Payment of Purchase Price................. 11
6. Certain Conditions of the Offer................................................ 12
7. Price Range of Shares.......................................................... 14
8. Interest of Directors and Executive Officers; Transactions and
Arrangements Concerning the Shares........................................... 15
9. Source and Amount of Funds..................................................... 17
10. Purpose of the Offer; Certain Effects of the Offer............................. 17
11. Certain Information About the Company.......................................... 18
12. Effects of the Offer on the Market for Shares; Registration under the Exchange
Act............................................................................... 32
13. Certain Legal Matters; Regulatory Approvals.................................... 32
14. Certain Federal Income Tax Consequences........................................ 33
15. Extension of the Offer; Termination; Amendments................................ 37
16. Fees and Expenses.............................................................. 38
17. Miscellaneous.................................................................. 38
</TABLE>
THIS OFFER TO PURCHASE CONTAINS CERTAIN "FORWARD LOOKING STATEMENTS" THAT
ARE SUBJECT TO RISK AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS AND
PERFORMANCE COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED DEPENDING ON, AMONG
OTHER THINGS, CUSTOMER DEMAND FOR THE COMPANY'S SERVICES, COMPETITIVE PRESSURES
FROM OTHER PROVIDERS OF MORTGAGE AND OTHER FINANCIAL SERVICES AND THE AMOUNT AND
COST OF FINANCING AVAILABLE TO THE COMPANY AND ITS SUBSIDIARIES.
iii
<PAGE> 5
To the Holders of Shares of
Advanta Corp.:
INTRODUCTION
Advanta Corp., a Delaware corporation (the "Company"), hereby invites its
stockholders to tender shares of its Class A Common Stock, par value $.01 per
share (the "Class A Common Stock"), including the associated Class A Purchase
Rights (the "Class A Rights" and together with the Class A Common Stock, the
"Class A Shares") issued pursuant to the Rights Agreement (as defined below),
and its Class B Common Stock, par value $.01 per share (the "Class B Common
Stock" and together with the Class A Common Stock, the "Common Stock"),
including the associated Class B Purchase Rights (the "Class B Rights" and
together with the Class B Common Stock, the "Class B Shares") (the Class A
Shares and Class B Shares are herein referred to as the "Common Shares") issued
pursuant to the Rights Agreement, to the Company each at a purchase price of $40
per Common Share (the "Common Stock Purchase Price"), and depositary shares each
representing one one-hundredth of a share of its 6 3/4% Convertible Class B
Preferred Stock, Series 1995 (Stock Appreciation Income Linked Securities
(SAILS)), par value $.01 per share (the "SAILS Depositary Shares" and together
with the Common Shares, the "Shares") to the Company at a purchase price of
$32.80 per SAILS Depositary Share (the "SAILS Purchase Price" and together with
the Common Stock Purchase Price, the "Purchase Price"), net to the seller in
cash, upon the terms and subject to the conditions set forth in this Offer to
Purchase and in the related Letters of Transmittal (which together constitute
the "Offer"). The Company will, upon the terms and subject to the conditions of
the Offer, purchase 7,882,750 Class A Shares (or such lesser number of Class A
Shares as are properly tendered and not withdrawn), 12,482,850 Class B Shares
(or such lesser number of Class B Shares as are properly tendered and not
withdrawn) 1,078,930 and SAILS Depositary Shares (or such lesser number of SAILS
Depositary Shares as are properly tendered and not withdrawn) pursuant to the
Offer. The Company will purchase all Shares properly tendered and not withdrawn
prior to the Expiration Date (as defined in Section 1), upon the terms and
subject to the conditions of the Offer, including the provisions relating to
proration, conditional tenders and "odd lot" tenders described below. The
Purchase Price will be paid in cash, net to the seller, without interest
thereon, with respect to all Shares purchased. All Shares not purchased because
of proration and Shares that were conditionally tendered and not accepted for
purchase will be returned. The Company reserves the right, in its sole
discretion, to purchase more than 7,882,750 Class A Shares, more than 12,482,850
Class B Shares and more than 1,078,930 SAILS Depositary Shares pursuant to the
Offer but has no current intention to do so. See Sections 1 and 15.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS, INCLUDING
THE CLOSING OF THE CONTRIBUTION (AS DEFINED BELOW). SEE SECTION 6.
On October 28, 1997, the Company announced that it had entered into a
Contribution Agreement (the "Contribution Agreement") with Fleet Financial
Group, Inc., a Rhode Island corporation ("Fleet"), pursuant to which each of the
Company and certain of its subsidiaries will contribute and transfer (the
"Contribution") to a newly formed Rhode Island limited liability company (the
"LLC"), and the LLC will accept and assume, substantially all of the assets and
liabilities of the Company's consumer credit card business, and each of Fleet
and certain of its subsidiaries will contribute and transfer to the LLC, and the
LLC will accept and assume, substantially all of the assets and liabilities of
Fleet's consumer credit card business. THE OFFER IS CONDITIONED UPON, AMONG
OTHER THINGS, THE CLOSING OF THE CONTRIBUTION (THE "CONTRIBUTION CONDITION").
The Contribution is more fully described in Section 11.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER,
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY
STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES.
STOCKHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO,
HOW MANY SHARES TO TENDER. THE COMPANY HAS BEEN ADVISED THAT EACH OF ITS CURRENT
DIRECTORS AND EXECUTIVE OFFICERS WHO OWNS SHARES, INCLUDING DENNIS ALTER,
CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF THE COMPANY, WILL TENDER SHARES PURSUANT
TO THE OFFER BUT HAS NOT DETERMINED HOW MANY SHARES TO TENDER.
<PAGE> 6
If, prior to the Expiration Date, more than 7,882,750 Class A Shares (or
such greater number of Class A Shares as the Company may elect to purchase) are
properly tendered and not withdrawn, the Company will, upon the terms and
subject to the conditions of the Offer, accept Class A Shares for purchase first
from all Odd Lot Owners (as defined in Section 2) who properly tender all their
Class A Shares and then on a pro rata basis from all other stockholders whose
Class A Shares are properly tendered and not withdrawn. Similarly, if, prior to
the Expiration Date, more than 12,482,850 Class B Shares (or such greater number
of Class B Shares as the Company may elect to purchase) are properly tendered
and not withdrawn, the Company will, upon the terms and subject to the
conditions of the Offer, accept Class B Shares for purchase first from all Odd
Lot Owners who properly tender all their Class B Shares and then on a pro rata
basis from all other stockholders whose Class B Shares are properly tendered and
not withdrawn, and if prior to the Expiration Date, more than 1,078,930 SAILS
Depositary Shares (or such greater number of SAILS Depositary Shares as the
Company may elect to purchase) are properly tendered and not withdrawn, the
Company will, upon the terms and subject to the conditions of the Offer, accept
SAILS Depositary Shares for purchase first from all Odd Lot Owners who properly
tender all their SAILS Depositary Shares and then on a pro rata basis from all
other stockholders whose SAILS Depositary Shares are properly tendered and not
withdrawn. See Sections 1 and 2. The Company will return all Shares not
purchased under the Offer, including Shares not purchased because of proration
and Shares that were conditionally tendered and not accepted for purchase.
Tendering registered stockholders will not be obligated to pay brokerage fees or
commissions, solicitation fees or, subject to Instruction 6 of the Letters of
Transmittal, stock transfer taxes on the Company's purchase of Shares pursuant
to the Offer. Stockholders holding Shares through brokers, banks or other
nominees should consult with such institutions to determine if any transaction
costs are applicable. In addition, the Company will pay all fees and expenses of
BT Alex. Brown Incorporated, which is acting as the Dealer Manager (the "Dealer
Manager"), First City Transfer Company, which is acting as the Depositary (the
"Depositary"), PNC Bank, N.A., which is acting as the Escrow Agent (the "Escrow
Agent"), and D.F. King & Co., Inc., which is acting as the Information Agent
(the "Information Agent"), in connection with the Offer. See Section 16.
ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE AND SIGN THE
SUBSTITUTE FORM W-9 THAT IS INCLUDED IN THE APPLICABLE LETTER OF TRANSMITTAL MAY
BE SUBJECT TO UNITED STATES FEDERAL INCOME TAX WITHHOLDING EQUAL TO 31% OF THE
GROSS PROCEEDS PAYABLE TO SUCH STOCKHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER.
SEE SECTIONS 2 AND 14.
The Company is making the Offer at this time as part of its ongoing
repositioning and reorganization program which was initiated in March, 1997. The
purpose of the program is to improve the Company's financial strength and
enhance values for the Company's stockholders by building upon the historic
strength and success of the Company. The Company believes that given the current
market price of the Shares and the Company's business, assets and prospects, the
purchase of Shares pursuant to the Offer is an attractive investment which will
benefit the Company and its remaining stockholders. After considering other
alternatives, such as paying a cash dividend, the Board of Directors concluded
that the Offer was the preferable alternative for enhancing stockholder value.
The Offer gives stockholders the opportunity to sell Shares at a price
greater than market prices prevailing prior to commencement of the Offer. The
Offer also provides stockholders who are considering a sale of all or a portion
of their Shares the opportunity to sell those Shares for cash without the usual
transaction costs associated with open-market sales. In addition, stockholders
owning an aggregate of less than 100 Shares of a class whose Shares are
purchased pursuant to the Offer not only will avoid the payment of brokerage
commissions, but also avoid the applicable odd lot discounts payable on a sale
of their Shares in a NASDAQ/NMS transaction. Stockholders who determine not to
accept the Offer will obtain a proportionate increase in their equity interest
in the Company if any Shares are purchased pursuant to the Offer.
As of January 8, 1998, there were 18,201,385 Class A Shares outstanding and
an additional 63,770 Class A Shares were reserved for issuance upon the exercise
of outstanding stock options under the Company's stock option plans (the "Stock
Option Plans"). The Company anticipates that options to purchase an aggregate of
63,770 Class A Shares will be exercisable as of the Expiration Date. The
7,882,750 Class A Shares that the Company is offering to purchase represent
approximately 43 percent of the Class A Shares outstanding as of January 8,
1998, or approximately 43 percent of the Class A Shares then outstanding on a
2
<PAGE> 7
fully diluted basis. As of January 8, 1998, there were 26,144,481 Class B Shares
outstanding and an additional 3,826,070 Class B Shares were reserved for
issuance upon the exercise of outstanding stock options under the Company's
Stock Option Plans. The Company anticipates that options to purchase an
aggregate of 2,779,580 Class B Shares will be exercisable as of the Expiration
Date. In addition, there were an additional 2,500,000 Class B Shares reserved
for issuance upon the conversion of outstanding SAILS Depositary Shares. The
12,482,850 Class B Shares that the Company is offering to purchase represent
approximately 48 percent of the Class B Shares outstanding as of January 8,
1998, or approximately 39 percent of the Class B Shares then outstanding on a
fully diluted basis (assuming the exercise of all outstanding options and the
conversion of all outstanding SAILS Depositary Shares), or approximately 43
percent of the Class B Shares then outstanding on a fully diluted basis
(assuming the exercise of all outstanding options which the Company anticipates
would be exercisable as of the Expiration Date and no conversion of any
outstanding SAILS Depositary Shares). As of January 8, 1998 there were 2,500,000
SAILS Depositary Shares outstanding, each of which is presently convertible at
the option of the holder thereof into 0.8197 of a Class B Share. The 1,078,930
SAILS Depositary Shares that the Company is offering to purchase represent
approximately 43 percent of the SAILS Depositary Shares outstanding as of
January 8, 1998.
The Class A Shares are listed and principally traded on the NASDAQ/NMS
under the symbol "ADVNA", the Class B Shares are listed and principally traded
on the NASDAQ/NMS under the symbol "ADVNB" and the SAILS Depositary Shares are
listed and principally traded on the NASDAQ/NMS under the symbol "ADVNZ." On
January 16, 1998, the last full trading day prior to the date of this Offer to
Purchase, the closing per share sales price as reported on the NASDAQ/NMS of the
Class A Shares was $28.25, the Class B Shares was $28.00 and the SAILS
Depositary Shares was $27.50. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR THE SHARES. SEE SECTION 7.
Shares of Common Stock acquired by the Company pursuant to the Offer will
be restored to the status of authorized and unissued shares and, therefore, will
be available for subsequent issuance by the Company. The shares of 6 3/4%
Convertible Class B Preferred Stock, Series 1995 (Stock Appreciation Income
Linked Securities (SAILS)) acquired by the Company in connection with its
acquisition of SAILS Depositary Shares pursuant to the Offer will be restored to
the status of authorized and unissued shares of Class B Preferred Stock, par
value $.01 per share, of the Company, without further designation as to series
until such shares are once more designated as part of a particular series by the
Company's Board of Directors. Except for the issuance of Shares under current
employee benefit plans and the Advanta Dividend Reinvestment and Stock Purchase
Plan, the Company has no current plans for reissuance of the repurchased Shares.
Stock Option Plans. Present and former directors and employees who hold
options to purchase Common Shares which were granted under the Company's Stock
Option Plans and are exercisable as of the Expiration Date may tender such
options in lieu of first exercising such options and tendering the underlying
Common Shares. Such holders of options for which the underlying Common Shares
are accepted for purchase in the Offer will receive in payment thereof the
product of the number of Common Shares so accepted for purchase times the amount
by which the Common Stock Purchase Price exceeds the exercise price of the
applicable option, and the number of Common Shares for which such option is then
exercisable will be reduced accordingly. In the event that proration of tendered
Shares is required, each separate option grant will be so prorated consistent
with the proration of the Common Shares as described in Section 1.
The Rights. The Company has distributed one Class A Right for each
outstanding Class A Share and one Class B Right for each outstanding Class B
Share pursuant to the Rights Agreement, dated as of March 14, 1997, between the
Company and ChaseMellon Shareholder Services, L.L.C. (the "Rights Agreement").
The Rights are presently attached to all shares of the Common Stock. The Company
is not offering any additional consideration for Rights purchased in the Offer.
The Rights acquired by the Company pursuant to the Offer will be canceled.
Except as set forth above, neither the Contribution nor the Offer will have any
effect on the Rights then outstanding.
3
<PAGE> 8
THE OFFER
1. NUMBER OF SHARES; PRORATION.
Upon the terms and subject to the conditions of the Offer, the Company will
accept for payment and purchase 7,882,750 Class A Shares or such lesser number
of Class A Shares as are properly tendered on or prior to the Expiration Date
(and not properly withdrawn in accordance with Section 4), 12,482,850 Class B
Shares or such lesser number of Class B Shares as are properly tendered on or
prior to the Expiration Date (and not properly withdrawn in accordance with
Section 4) and 1,078,930 SAILS Depositary Shares or such lesser number of SAILS
Depositary Shares as are properly tendered on or prior to the Expiration Date
(and not properly withdrawn in accordance with Section 4). The term "Expiration
Date" means 12:00 Midnight, New York City time, on February 20, 1998, unless the
Company, in its sole discretion, shall have extended the period of time during
which the Offer is open, in which event the term "Expiration Date" shall refer
to the latest time and date at which the Offer, as so extended by the Company,
shall expire. See Section 15 for a description of the Company's right to extend
the time during which the Offer is open and to delay, terminate or amend the
Offer. See also Section 6. The proration period for the Offer also expires on
the Expiration Date.
THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS, INCLUDING
THE CONTRIBUTION CONDITION. SEE SECTION 6.
The Company reserves the right, in its sole discretion, to purchase more
than 7,882,750 Class A Shares, more than 12,482,850 Class B Shares or more than
1,078,930 SAILS Depositary Shares pursuant to the Offer but has no current
intention to do so. If (a) the Company (i) increases or decreases the price at
which Class A Shares, Class B Shares or SAILS Depositary Shares will be
purchased, (ii) increases the number of Class A Shares, Class B Shares or SAILS
Depositary Shares being sought and any such increase in the number of Shares
being sought exceeds 2% of the outstanding Shares of such class, or (iii)
decreases the number of Class A Shares, Class B Shares or SAILS Depositary
Shares being sought, and (b) the Offer is scheduled to expire less than ten
business days from and including the date that notice of such increase or
decrease is first published, sent or given in the manner specified in Section
15, the Offer will be extended for ten business days from and including the date
of such notice. For purposes of the Offer, a "business day" means any day other
than a Saturday, Sunday or Federal holiday and consists of the time period from
12:01 A.M. through 12:00 Midnight, New York City time.
All Common Shares purchased pursuant to the Offer will be purchased at the
Common Stock Purchase Price and all SAILS Depositary Shares purchased pursuant
to the Offer will be purchased at the SAILS Purchase Price, paid in cash, net to
the seller, without interest thereon. All Shares not purchased pursuant to the
Offer, including Shares not purchased because of proration or because they were
conditionally tendered and not accepted for purchase, will be returned to the
tendering stockholders at the Company's expense as promptly as practicable
following the Expiration Date.
If the number of Class A Shares properly tendered and not withdrawn prior
to the Expiration Date is less than or equal to 7,882,750 (or such greater
number as the Company may elect to purchase pursuant to the Offer), the Company
will, upon the terms and subject to the conditions of the Offer, purchase at the
Common Stock Purchase Price all Class A Shares so tendered and not withdrawn.
Similarly, if the number of Class B Shares properly tendered and not withdrawn
prior to the Expiration Date is less than or equal to 12,482,850 (or such
greater number as the Company may elect to purchase pursuant to the Offer), the
Company will, upon the terms and subject to the conditions of the Offer,
purchase at the Common Stock Purchase Price all Class B Shares so tendered and
not withdrawn, and if the number of SAILS Depositary Shares properly tendered
and not withdrawn prior to the Expiration Date is less than or equal to
1,078,930 (or such greater number as the Company may elect to purchase pursuant
to the Offer), the Company will, upon the terms and subject to the conditions of
the Offer, purchase at the SAILS Purchase Price all SAILS Depositary Shares so
tendered and not withdrawn.
4
<PAGE> 9
Upon the terms and subject to the conditions of the Offer, if more than
7,882,750 Class A Shares (or such greater number of Class A Shares as the
Company elects to purchase) are properly tendered and not withdrawn on or prior
to the Expiration Date, the Company will purchase Class A Shares in the
following order of priority:
(a) first, all Class A Shares properly tendered and not withdrawn on
or prior to the Expiration Date by any Odd Lot Owner (as defined below)
who:
(1) tenders all Class A Shares beneficially owned by such Odd Lot
Owner (partial tenders will not qualify for this preference); and
(2) completes the box captioned "Odd Lots" on the applicable
Letters of Transmittal and, if applicable, on the Notice of Guaranteed
Delivery; and
(b) then, after purchase of all of the foregoing Class A Shares,
subject to the conditional tender provisions described in Section 3, all
other Class A Shares properly tendered and not withdrawn on or prior to the
Expiration Date on a pro rata basis, if necessary (with appropriate
adjustments to avoid purchases of fractional Class A Shares).
Upon the terms and subject to the conditions of the Offer, if more than
12,482,850 Class B Shares (or such greater number of Class B Shares as the
Company elects to purchase) are properly tendered and not withdrawn on or prior
to the Expiration Date, the Company will purchase Class B Shares in the
following order of priority:
(a) first, all Class B Shares properly tendered and not withdrawn on
or prior to the Expiration Date by any Odd Lot Owner who:
(1) tenders all Class B Shares beneficially owned by such Odd Lot
Owner (partial tenders will not qualify for this preference); and
(2) completes the box captioned "Odd Lots" on the applicable
Letters of Transmittal and, if applicable, on the Notice of Guaranteed
Delivery; and
(b) then, after purchase of all of the foregoing Class B Shares,
subject to the conditional tender provisions described in Section 3, all
other Class B Shares properly tendered and not withdrawn on or prior to the
Expiration Date on a pro rata basis, if necessary (with appropriate
adjustments to avoid purchases of fractional Class B Shares).
Upon the terms and subject to the conditions of the Offer, if more than
1,078,930 SAILS Depositary Shares (or such greater number of SAILS Depositary
Shares as the Company elects to purchase) are properly tendered and not
withdrawn on or prior to the Expiration Date, the Company will purchase SAILS
Depositary Shares in the following order of priority:
(a) first, all SAILS Depositary Shares properly tendered and not
withdrawn on or prior to the Expiration Date by any Odd Lot Owner who:
(1) tenders all SAILS Depositary Shares beneficially owned by such
Odd Lot Owner (partial tenders will not qualify for this preference);
and
(2) completes the box captioned "Odd Lots" on the applicable
Letters of Transmittal and, if applicable, on the Notice of Guaranteed
Delivery; and
(b) then, after purchase of all of the foregoing SAILS Depositary
Shares, subject to the conditional tender provisions described in Section
3, all other SAILS Depositary Shares properly tendered and not withdrawn on
or prior to the Expiration Date on a pro rata basis, if necessary (with
appropriate adjustments to avoid purchases of fractional SAILS Depositary
Shares).
In the event that proration of tendered Shares is required, the Company
will determine the final proration factor or factors as promptly as practicable
after the Expiration Date. Proration for each stockholder tendering Shares other
than Odd Lot Owners shall be based on the ratio of the number of Class A Shares,
Class B
5
<PAGE> 10
Shares or SAILS Depositary Shares, as the case may be, tendered by such
stockholder and not withdrawn prior to the Expiration Date to the total number
of Class A Shares, Class B Shares or SAILS Depositary Shares, as the case may
be, tendered by all stockholders other than Odd Lot Owners and not withdrawn
prior to the Expiration Date. Although the Company does not expect to be able to
announce the final results of such proration or prorations until approximately
seven NASDAQ/NMS trading days after the Expiration Date, if proration of
tendered Shares is required, because of the difficulty in determining the number
of Shares validly tendered (including Shares tendered pursuant to the guaranteed
delivery procedure described in Section 3) and not withdrawn prior to the
Expiration Date and as a result of the "odd lot" procedure described in Section
2, preliminary results of proration will be announced by press release as
promptly as practicable after the Expiration Date. Stockholders may obtain such
preliminary information from the Dealer Manager or the Information Agent and may
also be able to obtain such information from their brokers or financial
advisors. A "trading day" is any day on which the NASDAQ/NMS is open for
business.
As described in Section 14, the number of Shares that the Company will
purchase from a stockholder may affect the Federal income tax consequences to
the stockholder of such purchase and therefore may be relevant to a
stockholder's decision whether to tender Shares.
2. TENDERS BY HOLDERS OF FEWER THAN 100 SHARES OF A CLASS.
The Company, upon the terms and subject to the conditions of the Offer,
will accept for payment, without proration, all Shares of a particular class
properly tendered and not withdrawn prior to the Expiration Date by or on behalf
of stockholders who beneficially own, as of the close of business on January 19,
1998, and continue to own beneficially as of the Expiration Date, an aggregate
of fewer than 100 Class A Shares, Class B Shares or SAILS Depositary Shares, as
the case may be ("Odd Lot Owners"). See Section 1. To avoid proration, however,
an Odd Lot Owner must properly tender all Class A Shares, Class B Shares or
SAILS Depositary Shares, as the case may be, that such Odd Lot Owner
beneficially owns; partial and conditional tenders will not qualify for this
preference. This preference is not available with respect to a particular class
to beneficial holders of 100 or more Shares of such class, even if such holders
have separate stock certificates for fewer than 100 Shares of such class. Any
Odd Lot Owner wishing to tender all Shares of a class beneficially owned by such
owner free of proration pursuant to the Offer must complete the section
captioned "Odd Lots" in the applicable Letters of Transmittal and, if
applicable, in the Notice of Guaranteed Delivery. See Section 3. By accepting
the Offer, stockholders owning fewer than 100 Shares of a class would not only
avoid the payment of brokerage commissions but would also avoid any applicable
odd lot discounts payable on a sale of their Shares of such class in a
transaction effected on a securities exchange.
As of January 8, 1998 there were approximately 419 holders of record of
Class A Shares, approximately 855 holders of record of Class B Shares and
approximately 5 holders of record of SAILS Depositary Shares. Approximately 199
of the holders of record of Class A Shares held individually fewer than 100
Class A Shares and held in the aggregate approximately 5,046 Class A Shares;
approximately 478 of the holders of record of Class B Shares held individually
fewer than 100 Class B Shares and held in the aggregate approximately 17,397
Class B Shares; and none of the holders of record of SAILS Depositary Shares
held individually fewer than 100 SAILS Depositary Shares. Because of the large
number of Shares held in the name of brokers and nominees, the Company is unable
to estimate the number of beneficial owners of fewer than 100 Class A Shares,
Class B Shares or SAILS Depositary Shares or the aggregate number of Class A
Shares, Class B Shares or SAILS Depositary Shares they own. Any stockholder
wishing to tender all of such stockholder's Shares of a particular class
pursuant to this Section should complete the box captioned "Odd Lots" on the
applicable Letters of Transmittal and, if applicable, on the Notice of
Guaranteed Delivery.
The Company also reserves the right, but will not be obligated, to purchase
all Shares of a particular class validly tendered by any stockholder who
tendered all Shares of such class beneficially owned and who, as a result of
proration, would then beneficially own an aggregate of fewer than 100 Shares of
such class. If the Company exercises this right, it will increase the number of
Shares of such class that it is offering to purchase in the Offer by the number
of Shares of such class purchased through the exercise of such right.
6
<PAGE> 11
3. PROCEDURE FOR TENDERING SHARES; CONDITIONAL TENDER OF SHARES.
Proper Tender of Shares. For Shares to be properly tendered pursuant to
the Offer, either
(a) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) with any required signature guarantees, or an Agent's Message
(as defined below) in connection with a book-entry transfer, and any other
documents required by the applicable Letter of Transmittal, must be received on
or before the Expiration Date by the Depositary at its address set forth on the
back cover of this Offer to Purchase, and either certificates for such Shares to
be tendered must be transmitted to and received by the Depositary at such
address or such Shares must be tendered pursuant to the procedures for
book-entry transfer described below (and a confirmation of such tender received
by the Depositary), in each case by the Expiration Date; or
(b) the tendering stockholder must comply with the guaranteed delivery
procedure set forth below.
Odd Lot Owners who tender all their Shares must complete the section
entitled "Odd Lots" in the applicable Letters of Transmittal and, if applicable,
on the Notice of Guaranteed Delivery in order to qualify for the preferential
treatment available to Odd Lot Owners as set forth in Section 1.
Signature Guarantees and Method of Delivery. No signature guarantee is
required on the Letters of Transmittal (i) if the applicable Letter of
Transmittal is signed by the registered holder of the Shares exactly as the name
of the registered holder appears on the certificate (which term, for purposes of
this Section 3, includes any participant in The Depository Trust Company
("DTC"), whose name appears on a security position listing as the holder of the
Shares) tendered therewith, and payment and delivery are to be made directly to
such registered holder at such holder's address shown on the records of the
Company, or (ii) if Shares are tendered for the account of a bank, broker,
dealer, credit union, savings association or other entity that is a member in
good standing of a recognized Medallion Program approved by The Securities
Transfer Association Inc. (each such entity being hereinafter referred to as an
"Eligible Institution"). In all other cases, all signatures on the Letters of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 1 of
the Letters of Transmittal. If a certificate representing Shares is registered
in the name of a person other than the signer of a Letter of Transmittal, or if
payment is to be made, or certificates for Shares not purchased or tendered are
to be issued, to a person other than the registered holder, the certificate must
be endorsed or accompanied by an appropriate stock power, in either case signed
exactly as the name of the registered holder appears on the certificate, with
the signature on the certificate or stock power guaranteed by an Eligible
Institution. In all cases, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of certificates for such Shares (or a timely confirmation of a book-entry
transfer of such Shares into the Depositary's account at DTC), a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) with
any required signature guarantees and any other documents required by the
applicable Letter of Transmittal. THE METHOD OF DELIVERY OF ALL DOCUMENTS,
INCLUDING STOCK CERTIFICATES, THE LETTERS OF TRANSMITTAL AND ANY OTHER REQUIRED
DOCUMENTS, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY
IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY
DELIVERY.
Federal Income Tax Backup Withholding. Unless an exemption applies under
the applicable law and regulations concerning "backup withholding" of Federal
income tax, or unless the stockholder or other payee provides such person's tax
identification number (social security number or employer identification number)
and certifies that such number is correct, the Depositary will be required to
withhold, and will withhold, 31% of the gross proceeds otherwise payable to a
stockholder or other payee pursuant to the Offer. Each tendering stockholder,
other than a non-corporate foreign stockholder, should complete and sign the
main signature form and the Substitute Form W-9 included as part of the
applicable Letter of Transmittal, so as to provide the information and
certification necessary to avoid backup withholding, whether or not exempt. See
the Letter of Transmittal for further instructions. Foreign stockholders (as
defined in Section 14) should generally complete and sign a Form W-8,
Certificate of Foreign Status, a copy of which may be obtained from the
Depositary, in order to avoid backup withholding. In the case of any
non-corporate foreign stockholder, the Depositary will withhold 30% of the
purchase price of Shares purchased from such stockholder in order to
7
<PAGE> 12
satisfy certain additional Federal withholding requirements, unless such foreign
stockholder proves in a manner satisfactory to the Company and the Depositary
that either: (i) the sale of its Shares pursuant to the Offer will qualify as an
"exchange" (rather than as a distribution taxable as a dividend) for Federal
income tax purposes (see Section 14), in which case no withholding will be
required; or (ii) the non-corporate foreign stockholder is eligible, under a tax
treaty, for a reduced rate of withholding, or an exemption from withholding,
with respect to dividend income, in which case the Depositary will withhold at
the reduced treaty rate or not at all, as the case may be. Each stockholder
should consult his or her own tax advisor as to whether such stockholder is
subject to or exempt from Federal income tax withholding.
For a discussion of certain other Federal income tax consequences to
tendering stockholders, see Section 14.
Book-Entry Delivery. The Depositary will establish an account with respect
to the Shares at DTC for purposes of the Offer within two business days after
the date of this Offer to Purchase. Any financial institution that is a
participant in DTC's system may make book-entry delivery of the Shares by
causing DTC to transfer such Shares into the Depositary's account in accordance
with DTC's procedure for such transfer. Even though delivery of Shares may be
effected through book-entry transfer into the Depositary's account at DTC, a
properly completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof), together with any required signature guarantees or an
Agent's Message (as defined below) in connection with a book-entry transfer, and
other required documents must, in any case, be transmitted to and received by
the Depositary at its address set forth on the back cover of this Offer to
Purchase by the Expiration Date, or the guaranteed delivery procedure set forth
below must be followed. DELIVERY OF THE APPLICABLE LETTER OF TRANSMITTAL AND ANY
OTHER REQUIRED DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY
AND WILL NOT CONSTITUTE A VALID TENDER. The term "Agent's Message" means a
message transmitted by DTC to, and received by, the Depositary and forming a
part of a Book-Entry confirmation, which states that DTC has received an express
acknowledgment from the participant in DTC tendering the Shares that such
participant has received and agrees to be bound by the terms of the applicable
Letter of Transmittal and that the Company may enforce such agreement against
such participant.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates are not immediately available (or
the procedures for book-entry transfer cannot be completed on a timely basis) or
time will not permit all required documents to reach the Depositary by the
Expiration Date, such Shares may nevertheless be tendered provided that all of
the following conditions are satisfied:
(a) such tender is made by or through an Eligible Institution;
(b) the Depositary receives (by hand, mail, telegram or facsimile
transmission), by the Expiration Date, a properly completed and duly
executed Notice of Guaranteed Delivery (with any required signature
guarantees) substantially in the form the Company has provided with this
Offer to Purchase; and
(c) the certificates for all tendered Shares in proper form for
transfer (or confirmation of book-entry transfer of such Shares into the
Depositary's account at DTC), together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), unless an Agent's
Message in connection with book-entry transfer is used, and any other
documents required by the applicable Letter of Transmittal, are received by
the Depositary within three NASDAQ/NMS trading days after the date the
Depositary receives such Notice of Guaranteed Delivery.
Dividend Reinvestment Plan. Stockholders who participate in the Advanta
Dividend Reinvestment and Stock Purchase Plan (the "DRP Plan") and who wish to
tender DRP Shares held in their account under the DRP Plan pursuant to the Offer
should so indicate by checking the box captioned "Tendered Dividend Reinvestment
and Stock Purchase Plan Shares" in the section of the applicable Letter of
Transmittal captioned "Description of Shares Tendered" and returning to the
Depositary the properly completed and duly executed Letter of Transmittal or
facsimile thereof with any required signature guarantees and any other documents
required by the applicable Letter of Transmittal. If a participant authorizes
the tender of any of
8
<PAGE> 13
such participant's DRP Shares, all such Shares beneficially owned by such
participant pursuant to the DRP Plan, including fractional Shares, will be
tendered. No partial tenders of DRP Shares will be accepted. In addition, if a
participant authorizes the tender of such participant's DRP Shares and such DRP
Shares are actually purchased under the terms and subject to the conditions of
the Offer, Mellon Bank, N.A. will, as Plan Administrator, reduce the number of
Class B Shares in the participant's DRP Plan account by the number of DRP Shares
that are actually purchased. Any DRP Shares tendered but not purchased will be
returned to the participant's DRP Plan account. In the event of proration with
respect to the offer to purchase Class B Shares, Class B Shares other than DRP
Shares tendered by a stockholder will be purchased before any DRP Shares
tendered by such stockholder unless otherwise indicated on the applicable Letter
of Transmittal.
Order of Priority. In the event that proration of tendered Shares is
required, the Company will allow a stockholder who owns Shares beneficially
through the Company's Employee Savings Plan (a 401(k) Plan) and/or the DRP Plan
to combine, for purposes of proration, such Shares with Shares that are
represented by certificates and as to which such stockholder is record holder,
and to designate the order in which such Shares should be purchased. The Company
will endeavor to purchase Shares in the order indicated on the applicable
Letters of Transmittal to the extent practicable. The terms of the Employee
Savings Plan and the DRP Plan allow individual participants to elect whether and
when the Class B Shares in their respective Plan accounts should be sold.
Determination of Validity; Rejection of Shares; Waiver of Defects; No
Obligation to Give Notice of Defects. All questions as to the number of Shares
to be accepted, the form of documents and the validity, form, eligibility
(including the time of receipt) and acceptance for payment of any tender of
Shares will be determined by the Company, in its sole discretion, which
determination shall be final and binding on all parties. The Company reserves
the absolute right to reject any or all tenders it determines not to be in
proper form or the acceptance of or payment for which may be unlawful. The
Company also reserves the absolute right to waive any of the conditions of the
Offer or any defect or irregularity in the tender of any particular Shares and
the Company's interpretation of the terms of the Offer (including the
Instructions in the Letters of Transmittal) will be final and binding on all
parties. No tender of Shares will be deemed to be properly made until all
defects and irregularities have been cured or waived. None of the Company, the
Dealer Manager, the Depositary, the Escrow Agent, the Information Agent or any
other person is or will be obligated to give notice of any defects or
irregularities in tenders, and none of them will incur any liability for failure
to give such notice.
Rule 14e-4. It is a violation of Rule 14e-4 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), for a person
(directly or indirectly) to tender Shares for such person's own account unless
the person so tendering (i) has a net long position equal to or greater than the
number of (x) Shares of the applicable class tendered or (y) other securities
immediately convertible into, exercisable, or exchangeable for the number of
Shares of the applicable class tendered and will acquire such Shares for tender
by conversion, exercise or exchange of such other securities, and (ii) will
cause such Shares to be delivered in accordance with the terms of the Offer.
Rule 14e-4 provides a similar restriction applicable to the tender or guarantee
of a tender on behalf of another person. The tender of Shares pursuant to any
one of the procedures described above will constitute the tendering
stockholder's acceptance of the terms and conditions of the Offer as well as the
tendering stockholder's representation and warranty that (i) such stockholder
has a net long position in the Shares being tendered within the meaning of Rule
14e-4 and (ii) the tender of such Shares complies with Rule 14e-4. The Company's
acceptance for payment of Shares tendered pursuant to the Offer will constitute
a binding agreement between the tendering stockholder and the Company upon the
terms and subject to the conditions of the Offer, including the tendering
stockholder's representations for purposes of Rule 14e-4.
Conditional Tender of Shares. Under certain circumstances and subject to
the exceptions set forth in Sections 1 and 2, the Company may prorate the number
of Shares purchased pursuant to the Offer. As discussed in Section 14, the
number of Shares to be purchased from a particular stockholder might affect the
tax treatment of such purchase to such stockholder and such stockholder's
decision whether to tender. EACH STOCKHOLDER IS URGED TO CONSULT WITH SUCH
STOCKHOLDER'S OWN TAX ADVISER. A stockholder may tender Shares of a particular
class subject to the condition that a specified minimum number of such holder's
Shares of such
9
<PAGE> 14
class tendered pursuant to a Letter of Transmittal or, if applicable, a Notice
of Guaranteed Delivery must be purchased if any such Shares so tendered are
purchased, and any stockholder desiring to make such a conditional tender must
so indicate in the box captioned "Conditional Tender" in such Letter of
Transmittal or Notice of Guaranteed Delivery. In order to make a conditional
tender, a stockholder must properly tender all Class A Shares, Class B Shares or
SAILS Depositary Shares, as the case may be, that such stockholder beneficially
owns; partial tenders will not qualify for this option.
Any tendering stockholder wishing to make a conditional tender must
calculate and appropriately indicate such minimum number of Shares. If the
effect of accepting tenders on a pro rata basis would be to reduce the number of
Shares to be purchased from any stockholder (tendered pursuant to a Letter of
Transmittal or Notice of Guaranteed Delivery) below the minimum number so
specified, such tender will automatically be regarded as withdrawn (except as
provided in the next paragraph) and all Shares tendered by such stockholder
pursuant to such Letter of Transmittal or Notice of Guaranteed Delivery will be
returned as promptly as practicable thereafter.
If conditional tenders, which would otherwise be so regarded as withdrawn,
would cause the total number of Class A Shares to be purchased to fall below
7,882,750, the total number of Class B Shares to be purchased to fall below
12,482,850 or the total number of SAILS Depositary Shares to be purchased to
fall below 1,078,930, then, to the extent feasible, the Company will select
enough of such conditional tenders that would otherwise have been so withdrawn
to permit the Company to purchase 7,882,750 Class A Shares (or such greater
number of Class A Shares as the Company may elect to purchase), 12,482,850 Class
B Shares (or such greater number of Class B Shares as the Company may elect to
purchase), or 1,078,930 SAILS Depositary Shares (or such greater number of SAILS
Depositary Shares as the Company may elect to purchase), as the case may be. In
selecting among such conditional tenders, the Company will select by lot and
will limit its purchase in each case to the minimum number of Shares designated
by the stockholder in the applicable Letter of Transmittal or Notice of
Guaranteed Delivery as a condition to such stockholder's tender.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, the tender of Shares
pursuant to the Offer is irrevocable. Shares tendered pursuant to the Offer may
be withdrawn at any time on or prior to the Expiration Date and, unless
theretofore accepted for payment by the Company, may also be withdrawn after
12:00 Midnight, New York City time, on March 17, 1998.
For a withdrawal to be effective, the Depositary must timely receive (at
its address set forth on the back cover of this Offer to Purchase) a written or
facsimile transmission notice of withdrawal. Any such notice of withdrawal must
specify the name of the person who tendered the Shares to be withdrawn, the
number of Shares to be withdrawn, and, if different from that of the person who
tendered such Shares, the name of the registered owner of such Shares. If the
certificates have been delivered or otherwise identified to the Depositary,
then, prior to the release of such certificates, the tendering stockholder must
also submit the serial numbers shown on the particular certificates evidencing
the Shares to be withdrawn and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution (except in the case of Shares tendered by
an Eligible Institution). If Shares have been tendered pursuant to the procedure
for book-entry transfer set forth in Section 3, the notice of withdrawal must
specify the name and the number of the account at the applicable Book-Entry
Transfer Facility to be credited with the withdrawn Shares and otherwise comply
with the procedures of such facility.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Company in its sole discretion,
which determination shall be final and binding on all parties. None of the
Company, the Dealer Manager, the Depositary, the Escrow Agent, the Information
Agent or any other person is or will be obligated to give notice of any defects
or irregularities in any notice of withdrawal, nor shall any of them incur any
liability for failure to give such notice. Any Shares properly withdrawn will
thereafter be deemed not properly tendered for purposes of the Offer.
Withdrawals of Shares may not be rescinded and any Shares withdrawn will
thereafter be deemed not properly tendered for purposes of the Offer
10
<PAGE> 15
unless such withdrawn Shares are properly retendered on or before the Expiration
Date by again following one of the procedures described in Section 3.
If the Company extends the period of time during which the Offer is open,
is delayed in accepting for payment or paying for Shares or is unable to accept
for payment or pay for Shares pursuant to the Offer for any reason, then,
without prejudice to the Company's rights under the Offer, the Depositary may,
on behalf of the Company, retain all Shares tendered, and such Shares may not be
withdrawn except as otherwise provided in this Section 4, subject to Rule
13e-4(f)(5) under the Exchange Act, which provides that the issuer making the
tender offer shall either pay the consideration offered, or return the tendered
securities promptly after the termination or withdrawal of the tender offer.
5. ACCEPTANCE FOR PAYMENT OF SHARES AND PAYMENT OF PURCHASE PRICE.
Upon the terms and subject to the conditions of the Offer, the Company will
accept for payment (and thereby purchase) and pay for Shares properly tendered
and not withdrawn as permitted in Section 4, as promptly as practicable after
the Expiration Date. For purposes of the Offer, the Company will be deemed to
have accepted for payment (and thereby purchased), subject to the proration and
conditional tender provisions of the Offer, Shares which are properly tendered
and not withdrawn when, as and if the Company gives oral or written notice to
the Depositary of its acceptance of such Shares for payment pursuant to the
Offer.
Upon the terms and subject to the conditions of the Offer, the Company will
accept for payment and pay the per Share Common Stock Purchase Price for
7,882,750 Class A Shares (subject to increase or decrease as provided in Section
1 and Section 15) or such lesser number of Class A Shares as are properly
tendered (and not withdrawn as permitted in Section 4) and 12,432,850 Class B
Shares (subject to increase or decrease as provided in Section 1 and Section 15)
or such lesser number of Class B Shares as are properly tendered (and not
withdrawn as permitted in Section 4), as promptly as practicable after the
Expiration Date and will accept for payment and pay the per Share SAILS Purchase
Price for 1,078,930 SAILS Depositary Shares (subject to increase or decrease as
provided in Section 1 and Section 15) or such lesser number of SAILS Depositary
Shares as are properly tendered (and not withdrawn as permitted in Section 4),
as promptly as practicable after the Expiration Date.
In the event of proration, the Company will determine the applicable
proration factor and pay for those tendered Shares accepted for payment as
promptly as practicable after the Expiration Date. The Company, however, does
not expect to be able to announce the final results of any such proration until
approximately seven NASDAQ/NMS trading days after the Expiration Date.
Certificates for all Shares not purchased, including all Shares not purchased
due to proration and Shares that were conditionally tendered and not accepted
will be returned to the tendering stockholders (or, in the case of Shares
tendered by book-entry transfer, such Shares will be credited to the account
maintained with DTC by the participant therein who so delivered such Shares) as
promptly as practicable after the Expiration Date or termination of the Offer
without expense to the tendering stockholder.
Payment for Shares purchased pursuant to the Offer will be made by
depositing the aggregate Purchase Price therefor with the Escrow Agent, which
will thereafter transfer such Purchase Price to the Depositary, which will act
as agent for tendering stockholders for the purpose of receiving payment from
the Company and transmitting payment to the tendering stockholders.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of certificates for such Shares (or a timely
confirmation by DTC of book-entry transfer of such Shares to the Depositary), a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) with any required signature guarantees, or an Agent's Message in
connection with a book-entry transfer, and other required documents. Under no
circumstances will the Company pay interest on the Purchase Price regardless of
any delay in making such payment. In addition, if certain events occur, the
Company may not be obligated to purchase Shares pursuant to the Offer. See
Section 6.
The Company will pay all stock transfer taxes, if any, payable on the
transfer to it of Shares purchased pursuant to the Offer; provided, however,
that (i) if payment of the Purchase Price is to be made to, or (ii) (in
11
<PAGE> 16
the circumstances permitted by the Offer) if unpurchased Shares are to be
registered in the name of, any person other than the registered owner, or if
tendered certificates are registered in the name of any person other than the
person signing the applicable Letter of Transmittal, the amount of all stock
transfer taxes, if any (whether imposed on the registered owner or such other
person), payable on account of the transfer to such person will be deducted from
the Purchase Price unless evidence satisfactory to the Company of the payment of
such taxes or exemption therefrom is submitted. See Instruction 6 of the Letters
of Transmittal.
ANY TENDERING STOCKHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY AND
SIGN THE SUBSTITUTE FORM W-9 INCLUDED IN THE APPLICABLE LETTER OF TRANSMITTAL
(OR, IN THE CASE OF A FOREIGN INDIVIDUAL, FORM W-8 WHICH MAY BE OBTAINED FROM
THE DEPOSITARY) MAY BE SUBJECT TO REQUIRED FEDERAL INCOME TAX WITHHOLDING OF 31%
OF THE GROSS PROCEEDS PAID TO SUCH STOCKHOLDER OR OTHER PAYEE PURSUANT TO THE
OFFER. SEE SECTION 3.
6. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, and in addition to (and
not in limitation of) the Company's right to extend or amend the Offer at any
time in its sole discretion, the Company shall not be required to accept for
payment or pay for any Shares tendered, and may terminate or amend the Offer or
may postpone (subject to the requirements of the Exchange Act for prompt payment
for or return of Shares) the acceptance for payment of, and payment for, Shares
tendered if (i) the Contribution Condition shall not have been satisfied, or
(ii) at any time on or after January 20, 1998, and before acceptance for payment
or payment for any such Shares, any of the following shall have occurred (or
shall have been determined in the judgment of the Company to have occurred) and,
in the Company's sole judgment, in any such case and regardless of the
circumstances (including any action or omission to act by the Company) giving
rise to such circumstance, such event makes it inadvisable to proceed with the
Offer or with such acceptance for payment or payment:
(a) there shall have been threatened, instituted or pending any action
or proceeding by any government or governmental, regulatory or
administrative agency, authority or tribunal or any other person, domestic
or foreign, or before any court or governmental, regulatory or
administrative authority, agency or tribunal, domestic or foreign, which,
directly or indirectly: (i) challenges the making of the Offer, the
acquisition of some or all of the Shares pursuant to the Offer or otherwise
relates in any manner to the Offer; or (ii) in the Company's sole judgment,
could materially and adversely affect the business, condition (financial or
other), income, operations or prospects of the Company and its
subsidiaries, taken as a whole, or otherwise materially impair in any way
the contemplated future conduct of the business of the Company or any of
its subsidiaries or materially impair the contemplated benefits of the
Offer to the Company; or
(b) there shall have been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment, order or
injunction threatened, proposed, sought, promulgated, enacted, entered,
amended, enforced, issued or deemed to be applicable to the Offer or the
Company or any of its subsidiaries, by any court or any government or
governmental, regulatory or administrative authority, agency or tribunal,
domestic or foreign, which, in the Company's sole judgment, would or might
directly or indirectly: (i) make the acceptance for payment of, or payment
for, some or all of the Shares illegal or otherwise restrict or prohibit
consummation of the Offer; (ii) delay or restrict the ability of the
Company, or render the Company unable, to accept for payment or pay for
some or all of the Shares; (iii) materially impair the contemplated
benefits of the Offer to the Company; or (iv) materially affect the
business, condition (financial or other), income, operations or prospects
of the Company and its subsidiaries, taken as a whole, or otherwise
materially impair in any way the contemplated future conduct of the
business of the Company or any of its subsidiaries; or
(c) there shall have occurred: (i) the declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States; (ii) any general suspension of trading in, or limitation on prices
for, securities on any United States national securities exchange or in the
over-the-counter market; (iii) the commencement of a war, armed hostilities
or any other national or international crisis directly or indirectly
involving the United States; (iv) any limitation (whether or not mandatory)
by any governmental, regulatory or administrative agency or authority on,
or any event which, in the Company's
12
<PAGE> 17
sole judgment, might affect, the extension of credit by banks or other
lending institutions in the United States; (v) any significant decrease in
the market price of the Shares; (vi) any change in the general political,
market, economic or financial conditions in the United States or abroad
that could, in the Company's sole judgment, have a material adverse effect
on the Company's business, condition (financial or other), income,
operations or prospects or the trading in the Shares; (vii) in the case of
any of the foregoing existing at the time of the commencement of the Offer,
in the Company's sole judgment, a material acceleration or worsening
thereof; or (viii) any decline in either the Dow Jones Industrial Average
(7753.55 at the close of business on January 16, 1998) or the Standard and
Poor's Index of 500 Industrial Companies (961.51 at the close of business
on January 16, 1998) by an amount in excess of 10 percent measured from the
close of business on January 16, 1998; or
(d) any change shall occur or be threatened in the business, condition
(financial or other), income, operations, or prospects of the Company and
its subsidiaries, taken as a whole, which, in the Company's sole judgment,
is or may be materially adverse to the Company or any of its subsidiaries
or any other event shall have occurred which, in the Company's sole
judgment, materially impairs the contemplated benefits of the Offer to the
Company; or
(e) any tender or exchange offer with respect to some or all of the
Shares (other than the Offer), or any merger, business combination or
acquisition proposal, disposition of assets (other than in the ordinary
course of business) or other similar transaction with or involving the
Company or any subsidiary of the Company (other than the Contribution),
shall have been proposed, announced or made by any person or entity; or
(f) (i) any person, entity, or "group" (as that term is used in
Section 13(d)(3) of the Exchange Act) shall have acquired or proposed to
acquire beneficial ownership of more than 5% of the outstanding Class A
Shares or Class B Shares (other than any such person, entity or group which
had publicly disclosed such ownership in a Schedule 13D or Schedule 13G (or
an amendment thereto) on file with the Securities and Exchange Commission
(the "Commission") prior to January 20, 1998); (ii) any such person,
entity, or group who had filed a Schedule 13D or Schedule 13G with the
Commission prior to January 20, 1998 shall have acquired or proposed to
acquire beneficial ownership of an additional 2% or more of the outstanding
Class A Shares or Class B Shares; (iii) any new group shall have been
formed which beneficially owns more than 5% of the outstanding Class A
Shares or Class B Shares (options for and other rights to acquire Shares
which are acquired or proposed to be acquired being deemed for purposes of
this clause (f) to be immediately exercisable or convertible); or (iv) any
person, entity or group shall have filed a Notification and Report Form
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or made a
public announcement reflecting an intent to acquire the Company or any of
its subsidiaries or any of their respective assets or securities other than
pursuant to the Contribution.
The foregoing conditions are for the Company's sole benefit and may be
asserted by the Company regardless of the circumstances (including any action or
inaction by the Company) giving rise to any such condition and any such
condition may be waived by the Company, in whole or in part, at any time and
from time to time in its sole discretion. The Company's failure at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right; the waiver of any such right with respect to particular facts and
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances; and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time. Any determination by the Company
concerning the events described in this Section 6 and any related judgment by
the Company regarding the inadvisability of proceeding with the acceptance for
payment or payment for any tendered Shares shall be final and shall be binding
on all parties.
13
<PAGE> 18
7. PRICE RANGE OF SHARES.
The Class A Shares are listed and principally traded on the NASDAQ/NMS
under the symbol "ADVNA." The following table sets forth for the calendar
quarter periods indicated the high and low sales prices per Class A Share on the
NASDAQ/NMS as compiled from published financial sources:
<TABLE>
<CAPTION>
DIVIDENDS
DECLARED
HIGH LOW PER CLASS A SHARE
------ ------ -----------------
<S> <C> <C> <C>
Calendar 1995:
1st Quarter..................................... $34.75 $25.50 $ 0.067
2nd Quarter..................................... 42.50 33.00 0.067
3rd Quarter..................................... 46.25 39.50 0.067
4th Quarter..................................... 48.88 37.50 0.09
Calendar 1996:
1st Quarter..................................... $53.50 $34.75 $ 0.09
2nd Quarter..................................... 58.25 46.50 0.09
3rd Quarter..................................... 53.00 41.00 0.09
4th Quarter..................................... 50.00 40.00 0.11
Calendar 1997:
1st Quarter..................................... $53.25 $26.88 $ 0.11
2nd Quarter..................................... 36.75 20.31 0.11
3rd Quarter..................................... 36.69 28.06 0.11
4th Quarter..................................... 38.50 24.75 0.11
Calendar 1998:
1st Quarter (through January 16, 1998)............ $28.38 $26.81 --
</TABLE>
On January 16, 1998, the last trading day prior to the date of this Offer
to Purchase, the closing per Class A Share sales price as reported on the
NASDAQ/NMS was $28.25. THE COMPANY URGES STOCKHOLDERS TO OBTAIN CURRENT MARKET
QUOTATIONS FOR THE CLASS A SHARES.
The Class B Shares are listed and principally traded on the NASDAQ/NMS
under the symbol "ADVNB." The following table sets forth for the calendar
quarter periods indicated the high and low sales prices per Class B Share on the
NASDAQ/NMS as compiled from published financial sources:
<TABLE>
<CAPTION>
DIVIDENDS
DECLARED
HIGH LOW PER CLASS B SHARE
------ ------ -----------------
<S> <C> <C> <C>
Calendar 1995:
1st Quarter..................................... $32.25 $24.50 $ 0.08
2nd Quarter..................................... 38.75 30.75 0.08
3rd Quarter..................................... 42.50 36.00 0.08
4th Quarter..................................... 45.00 35.13 0.108
Calendar 1996:
1st Quarter..................................... $49.25 $33.75 $ 0.108
2nd Quarter..................................... 52.50 43.50 0.108
3rd Quarter..................................... 48.25 39.75 0.108
4th Quarter..................................... 48.50 38.25 0.132
Calendar 1997:
1st Quarter..................................... $51.56 $25.88 $ 0.132
2nd Quarter..................................... 35.69 19.50 0.132
3rd Quarter..................................... 35.63 26.50 0.132
4th Quarter..................................... 37.50 24.00 0.132
Calendar 1998:
1st Quarter (through January 16, 1998)............ $28.00 $25.63 --
</TABLE>
On January 16, 1998, the last trading day prior to the date of this Offer
to Purchase, the closing per Class B Share sales price as reported on the
NASDAQ/NMS was $28.00. THE COMPANY URGES STOCKHOLDERS TO OBTAIN CURRENT MARKET
QUOTATIONS FOR THE CLASS B SHARES.
14
<PAGE> 19
The SAILS Depositary Shares are listed and principally traded on the
NASDAQ/NMS under the symbol "ADVNZ." The following table sets forth for the
calendar quarter periods indicated the high and low sales prices per SAILS
Depositary Share on the NASDAQ/NMS as compiled from published financial sources:
<TABLE>
<CAPTION>
DIVIDENDS
DECLARED
PER SAILS
HIGH LOW DEPOSITARY SHARE
------ ------ ----------------
<S> <C> <C> <C>
Calendar 1995:
3rd Quarter...................................... $43.00 $37.13
4th Quarter...................................... 44.00 36.63 $ 0.797813
Calendar 1996:
1st Quarter...................................... $46.75 $36.25 $ 0.624375
2nd Quarter...................................... 49.25 42.50 0.624375
3rd Quarter...................................... 47.00 39.13 0.624375
4th Quarter...................................... 45.75 38.00 0.624375
Calendar 1997:
1st Quarter...................................... $49.50 $28.50 $ 0.624375
2nd Quarter...................................... 35.75 22.00 0.624375
3rd Quarter...................................... 37.00 29.75 0.624375
4th Quarter...................................... 37.50 25.00 0.624375
Calendar 1998:
1st Quarter (through January 16, 1998)........... $28.75 $26.00 --
</TABLE>
On January 16, 1998, the last trading day prior to the date of this Offer
to Purchase, the closing per SAILS Depositary Share sales price as reported on
the NASDAQ/NMS was $27.50. THE COMPANY URGES STOCKHOLDERS TO OBTAIN CURRENT
MARKET QUOTATIONS FOR THE SAILS DEPOSITARY SHARES.
The Company has paid regular cash dividends to holders of Common Stock
since the first quarter of 1990. The amount and frequency of dividends in the
future will depend on circumstances existing at the time. Under the terms of the
SAILS Depositary Shares, holders of SAILS Depositary Shares are entitled to
receive annual cumulative dividends at a rate of $2.4975 per SAILS Depositary
Share per annum, payable quarterly in arrears on each December 15, March 15,
June 15 and September 15 or, if any such date is not a business day, on the next
succeeding business day.
8. INTEREST OF DIRECTORS AND EXECUTIVE OFFICERS; TRANSACTIONS AND ARRANGEMENTS
CONCERNING THE SHARES.
As of January 8, 1998, there were 18,201,385 Class A Shares outstanding and
an additional 63,770 Class A Shares were reserved for issuance upon the exercise
of outstanding stock options under the Company's Stock Option Plans. The Company
anticipates that options to purchase an aggregate of 63,770 Class A Shares will
be exercisable as of the Expiration Date. The 7,882,750 Class A Shares that the
Company is offering to purchase represent approximately 43 percent of the Class
A Shares outstanding as of January 8, 1998, or approximately 43 percent of the
Class A Shares then outstanding on a fully diluted basis. As of January 8, 1998,
there were 26,144,481 Class B Shares outstanding and an additional 3,826,070
Class B Shares were reserved for issuance upon the exercise of outstanding stock
options under the Company's Stock Option Plans. The Company anticipates that
options to purchase an aggregate of 2,779,580 Class B Shares will be exercisable
as of the Expiration Date. In addition, there were an additional 2,500,000 Class
B Shares reserved for issuance upon the conversion of outstanding SAILS
Depositary Shares. The 12,482,850 Class B Shares that the Company is offering to
purchase represent approximately 48 percent of the Class B Shares outstanding as
of January 8, 1998, or approximately 39 percent of the Class B Shares then
outstanding on a fully diluted basis (assuming the exercise of all outstanding
options and the conversion of all outstanding SAILS Depositary Shares), or
approximately 43 percent of the Class B Shares then outstanding on a fully
diluted basis (assuming the exercise of all outstanding options which the
Company anticipates would be exercisable as of the Expiration Date and no
conversion of any outstanding SAILS Depositary Shares). As of January 8, 1998
there were 2,500,000 SAILS Depositary Shares outstanding, each of which is
presently convertible at the option of the holder thereof into 0.8197 of a Class
B Share. The 1,078,930 SAILS
15
<PAGE> 20
Depositary Shares that the Company is offering to purchase represent
approximately 43% percent of the SAILS Depositary Shares outstanding as of
January 8, 1998.
As of January 8, 1998, all of the Company's current directors and executive
officers as a group beneficially owned an aggregate of 5,034,411 Class A Shares,
representing approximately 28 percent of the then outstanding Class A Shares, or
approximately 28 percent of the Class A Shares then outstanding on a fully
diluted basis and an aggregate of 3,996,887 Class B Shares, representing
approximately 15 percent of the then outstanding Class B Shares, or
approximately 12 percent of the Class B Shares then outstanding on a fully
diluted basis (assuming the exercise of all then outstanding options and the
conversion of all outstanding SAILS Depositary Shares). As of January 8, 1998,
Dennis Alter, Chairman and Chief Executive Officer of the Company beneficially
owned 4,868,854 Class A Shares and 2,687,922 Class B Shares (excluding 499,465
Class A Shares, 357,885 Class B Shares and 1,010 shares of the Company's Class A
Preferred Stock owned by the estate of J.R. Alter, the father of Dennis Alter,
and 75,000 Class A Shares and Class B Shares owned by Helen Alter, the mother of
Dennis Alter and including (i) presently exercisable options to purchase 337,500
Class B Shares and (ii) an aggregate of 1,468,286 Class A Shares and 347,794
Class B Shares held by Mr. Alter's wife and various trusts as to which Mr. Alter
disclaims beneficial ownership) representing approximately 27 percent of the
outstanding Class A Shares and 10 percent of the outstanding Class B Shares. The
Company has been advised that each of its current directors and executive
officers who owns Shares will tender Shares pursuant to the Offer but has not
determined how many Shares to tender.
In connection with the Transaction, the Board of Directors of the Company
agreed that, prior to the Expiration Date, approximately 43% of the then
non-exercisable portion of stock options granted under the Company Stock Option
Plans and held by current and former employees, officers and directors of the
Company will be accelerated.
Present and former directors, officers and employees who hold options to
purchase Common Shares which were granted under the Company Stock Option Plans
and are exercisable as of the Expiration Date may tender such options in lieu of
first exercising such options and tendering the underlying Common Shares. Such
holders of options for which the underlying Common Shares are accepted for
purchase in the Offer will receive in payment thereof the product of the number
of Common Shares so accepted for purchase times the amount by which the Common
Stock Purchase Price exceeds the exercise price of the applicable option, and
the number of Common Shares for which such option is then exercisable will be
reduced accordingly. In the event that proration of tendered Shares is required,
each separate option grant will be so prorated consistent with the proration of
the Common Shares as described in Section 1.
The Board of Directors of the Company has agreed that, following the
consummation of the Offer, the Company will exchange rights (the "Substitute
Rights") for previously granted options for certain current directors of the
Company, in order to facilitate such directors receiving sale rather than
dividend treatment for Common Shares sold in the Offer. Each of the Substitute
Rights will replace then outstanding options granted under the Company's Stock
Option Plans (the "Canceled Options"), and will have identical terms and
conditions as the Canceled Options, which will be canceled when exchanged. Each
Substitute Right will result in a cash payment at the time the Substitute Right
is exercised. The cash payment for each Substitute Right will equal the product
of the number of Common Shares subject to the related Canceled Option times the
excess, if any, of the fair market value of the applicable class of Common
Shares at the time of exercise of the Substitute Right over the exercise price
of the related Canceled Option. All other terms and conditions otherwise
applicable to the Canceled Options will be applicable to the Substitute Rights.
As a result of the Transaction, certain provisions of the employment
agreement of William A. Rosoff, Vice Chairman of the Company, relating to
restricted Class B Shares previously granted to him will be affected by the
Transaction by removing restrictions with respect to 50,000 Class B Shares and
certain previously agreed to benefits relating to such Shares.
On October 28, 1997, Dennis Alter entered into a Voting Agreement with
Fleet pursuant to which Mr. Alter agreed, among other things, to vote all of the
3,400,570 Class A Shares beneficially owned by him in favor of a proposal to
approve the Contribution at the Company's Special Meeting of Stockholders.
Although
16
<PAGE> 21
stockholder approval of the Contribution is not required by Delaware law, the
Contribution Agreement provides that the affirmative vote of holders of Company
shares representing a majority of the votes which all stockholders are entitled
to cast approving the Contribution is a condition to consummation of the
Contribution.
Although the Company has no present intention to acquire additional Shares,
the Company may in the future purchase additional Shares on the open market, in
private transactions, through tender offers or otherwise. Any such purchases may
be on the same terms or on terms which are more or less favorable to
stockholders than the terms of the Offer. However, Rule 13e-4(f)(6) under the
Exchange Act prohibits the Company and its affiliates from purchasing any
Shares, other than pursuant to the Offer, until at least ten business days after
the Expiration Date. Any possible future purchases by the Company will depend on
many factors, including the market price of the Shares, the results of the
Offer, the Company's business and financial position and general economic and
market conditions.
Neither the Company, nor any subsidiary of the Company nor, to the best of
the Company's knowledge, any of the Company's directors or executive officers,
nor any affiliates of any of the foregoing, had any transactions involving the
Shares during the 40 business days prior to the date hereof.
Except as set forth above and except for stock options to purchase Shares
granted from time to time to certain employees (including executive officers)
and directors of the Company pursuant to the Company's stock option plans,
neither the Company nor, to the best of the Company's knowledge, any of its
affiliates, directors or executive officers, is a party to any contract,
arrangement, understanding or relationship with any other person relating,
directly or indirectly, to the Offer with respect to any securities of the
Company including, but not limited to, any contract, arrangement, understanding
or relationship concerning the transfer or the voting of any such securities,
joint ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies, consents or
authorizations.
9. SOURCE AND AMOUNT OF FUNDS.
Assuming that the Company purchases 20,365,600 Common Shares and 1,078,930
SAILS Depositary Shares pursuant to the Offer, the Company expects the aggregate
cost, including all fees and expenses applicable to the Offer, to be
approximately $850.9 million. All funds so required will be obtained from the
Company's available cash and cash equivalents. Such funds represent a portion of
the approximately $1.3 billion in cash, cash equivalents and investments which,
following the closing of the Contribution, will no longer be required in
connection with the Company's consumer credit card business.
10. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER.
The Company is making the Offer at this time because the Board of Directors
of the Company believes that, given the current market price of the Shares and
the Company's business, assets and prospects, the purchase of Shares pursuant to
the Offer is in the best interests of the Company and its stockholders and that
it will enhance stockholder value both in the short term and long term. The
Board of Directors also believes that the Company's financial condition and its
borrowing capacity afford the Company the opportunity to allow those
stockholders desiring to receive cash for a portion of their Shares an
opportunity to do so at a price in excess of the recent trading prices for the
Shares. After considering other alternatives, such as paying a cash dividend,
the Board of Directors concluded that the Offer was the preferable alternative
for enhancing stockholder value.
The Offer gives stockholders the opportunity to sell Shares at prices
greater than market prices prevailing prior to announcement of the Offer. The
Offer provides stockholders who are considering a sale of all or a portion of
their Shares the opportunity, if Shares are purchased pursuant to the Offer, to
sell Shares for cash without the usual transaction costs associated with
open-market sales. The Offer also allows stockholders to sell a portion of their
Shares while retaining a continuing equity interest in the Company if they so
desire. Any stockholders owning an aggregate of less than 100 Shares of a
particular class whose Shares are purchased pursuant to the Offer not only will
avoid any payment of brokerage commissions, but also will avoid any applicable
odd lot discounts payable on sales of odd lots in transactions effected on a
securities exchange. To
17
<PAGE> 22
the extent that the purchase of Shares in the Offer results in a reduction in
the number of stockholders of record, the costs of the Company for services to
stockholders may be reduced.
Stockholders who retain Shares following the consummation of the Offer will
realize an increase in their percentage ownership interest in the Company and,
thus, in the Company's future earnings and assets. Because of the smaller number
of Shares outstanding after consummation of the Offer, if Shares are purchased
by the Company pursuant to the Offer, increases or decreases in net earnings
will result in proportionately greater increases or decreases in earnings per
Share. See Section 11.
Projected future cash flows, together with credit available under the
Company's existing credit facilities, are expected to be adequate for the
Company's normal operations, anticipated capital expenditures and debt service.
In addition, the Company's management believes that, in light of the Company's
financial position, the consummation of the Offer would not preclude the Company
from pursuing certain other opportunities which may become available to it.
See Section 12 for information regarding certain effects of the Offer on
the market for the Shares.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER. HOWEVER,
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO ANY
STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ANY OR ALL OF SUCH
STOCKHOLDER'S SHARES AND HAS NOT AUTHORIZED ANY PERSON TO MAKE ANY SUCH
RECOMMENDATION. STOCKHOLDERS ARE URGED TO EVALUATE CAREFULLY ALL INFORMATION IN
THE OFFER, CONSULT THEIR OWN INVESTMENT AND TAX ADVISORS AND MAKE THEIR OWN
DECISIONS WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER.
Shares the Company acquires pursuant to the Offer will be returned to the
status of authorized and unissued Shares and will be available for the Company
to issue without further stockholder action (except as required by applicable
law or the rules of NASDAQ/NMS or any other securities exchange on which the
Shares are then listed). Such Shares could be issued without stockholder
approval for such purposes as, among others, the acquisition of other
businesses, the raising of additional capital for use in the Company's business,
the distribution of stock dividends and the implementation of, or the
satisfaction of obligations under, employee benefit plans. Except for the
issuance of Shares under current employee benefit plans and the DRP Plan, the
Company has no current plans for reissuance of the Shares it may acquire
pursuant to the Offer or issuance of any other authorized but unissued shares.
Except as disclosed in this Offer to Purchase, the Company has no present
plans or proposals which relate to or would result in the following: (a) the
acquisition by any person of additional securities of the Company or the
disposition of securities of the Company; (b) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Company or any of its subsidiaries; (c) a sale or transfer of a material amount
of assets of the Company or any of its subsidiaries; (d) any change in the
present Board of Directors or management of the Company, including, but not
limited to any plan or proposal to change the number or the term of office of
directors, to fill any existing vacancy on the Board of Directors or to change
any material term of the employment contract of any executive officer (except
for the annual election of directors at the Company's annual meeting of
stockholders); (e) any material change in the present dividend rate or policy or
indebtedness or capitalization of the Company; (f) any other material change in
the Company's corporate structure or business; (g) any change in the Company's
Certificate of Incorporation or By-Laws or any other actions which may impede
the acquisition of control of the Company by any person; (h) a class of the
Company's equity securities ceasing to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association;
(i) a class of the Company's equity securities becoming eligible for termination
of registration pursuant to Section 12(g)(4) of the Exchange Act; or (j) the
suspension of the Company's obligation to file reports pursuant to Section 15(d)
of the Exchange Act.
11. CERTAIN INFORMATION ABOUT THE COMPANY.
The Company is a financial services company which serves consumers and
small businesses through innovative products and services primarily via direct,
cost-effective delivery systems. The Company originates and services credit
cards and mortgages and provides small-ticket equipment, leasing, auto finance,
credit
18
<PAGE> 23
insurance and deposit products. Following the consummation of the Contribution,
the Company will continue to operate its mortgage and business services
companies.
The Company was incorporated in 1974 as Teachers Service Organization, Inc.
under the laws of the State of Delaware, and its principal executive offices are
located at Welsh and McKean Roads, Spring House, Pennsylvania 19477. The
Company's telephone number is (215) 444-5000.
Certain Recent Developments. On March 17, 1997, the Company announced that
it expected to report a net profit for 1997 of approximately $1.50 per share,
which was well below previous expectations. For the first quarter of 1997, the
Company reported a loss of $19.8 million, or $0.43 per share. On July 16, 1997,
the Company announced its return to profitability and reported net income of
$5.4 million, or earnings per share of $0.12, for the second quarter. On October
15, 1997, the Company announced that net income for the third quarter totaled
$42.4 million, or $0.92 per share. This interruption in the Company's historical
pattern of strong financial results reflected a number of factors, including
continuing increases in consumer bankruptcies and charge-offs and lower
receivables balances than originally anticipated in its consumer credit card
business. The Company announced in March 1997 that it was pursuing a number of
steps designed to return the Company to its historical level of financial
performance by increasing revenues and stemming consumer credit card losses.
These steps included repricing certain segments of the consumer credit card
portfolio, improving the Company's collection process, tightening underwriting
standards and developing new marketing programs. The Company's mortgage
financing, leasing and insurance businesses have continued to perform well.
On March 17, 1997, the Company also announced that it had retained BT
Wolfensohn to explore strategic alternatives that would build upon the historic
strength and success of the Company as a whole and of its business units with
the aim of maximizing the Company's value. In connection with its investigation
of strategic alternatives, the Company stated that it would explore a possible
strategic alliance with another company, an alliance or initial public offering
involving one or more of the Company's operating units, a sale of one or more of
the Company's operating units or a merger or sale involving the Company as a
whole. In that regard the Company provided a number of financial services
companies with information regarding the Company's financial services
businesses. After preliminary due diligence review, six of the companies showing
interest were permitted to undertake more extensive due diligence, including
meetings with management. As part of such due diligence, representatives of the
Company met with representatives of each of the companies to determine whether a
transaction which would be in the best interests of the Company and its
stockholders was advisable. There were also discussions with a seventh company.
Each of the parties interested in exploring a possible transaction with the
Company was primarily motivated by its interest in acquiring the consumer credit
card business.
During such discussions representatives of Fleet advised the Company that
based on their initial due diligence investigations, Fleet valued the Company's
consumer credit card business at approximately $1.3 billion. On approximately
July 22, 1997, the Company's Chairman, Vice Chairman and others met with Fleet's
Vice Chairman, Managing Director and others to discuss a possible transaction.
Thereafter, representatives of the two companies, including, in addition to the
previously identified individuals, the Company's General Counsel, attorneys from
the Company's outside legal counsel and a Fleet Senior Vice President, its
General Counsel and attorneys from Fleet's outside legal counsel held a number
of meetings to discuss a possible transaction and to negotiate the terms of the
Contribution Agreement, the LLC Operating Agreement and related ancillary
agreements. The Company determined to pursue a transaction with Fleet because
the Company's Board of Directors determined that the transaction with Fleet
represented the best overall value for the Company's stockholders. Moreover, the
Company chose the contribution structure over other possible forms of
transactions that had been initially proposed by Fleet and other interested
parties because the structure of that transaction provided the highest after-tax
value to the Company's stockholders, including allowing the Company to retain a
continuing equity stake in the consumer credit card business while effecting a
tax-free gain to the Company. Notwithstanding the ongoing discussions with
Fleet, the Company continued discussions with two other interested parties. The
discussions with one of those other parties was put on hold in early October
1997, as the potential transaction with Fleet was a superior alternative at that
time. The discussions with the other remaining interested party terminated on
October 28, 1997, when the Company
19
<PAGE> 24
reached agreement with Fleet as to the Contribution, which terms were superior
to those being discussed with the other remaining interested party.
On October 23, 1997, the Boards of Directors of both the Company and Fleet
met independently to consider the proposed transaction. Representatives of the
Company's financial advisor and legal counsel attended the Company Board
meeting. At the Company Board meeting, the Company's financial advisor, BT
Wolfensohn, made a presentation concerning its opinion on the fairness of the
Contribution, the assumptions made, matters considered and limits of the review
undertaken. In addition to the BT Wolfensohn presentation, at the Board meeting,
the Vice Chairman described the then current status of the proposed transaction
to the Board and the General Counsel described the material terms of the
Contribution Agreement and related ancillary agreements. The Contribution was
approved by all of the Company's directors present at the meeting subject to the
resolution of certain significant open issues, including matters relating
directly to the value of the Contribution such as the applicable adjustment to
the consideration in the event that aggregate managed receivables at the time of
the closing were less than or exceeded $12.1 billion. The Board authorized the
Chairman and the Vice Chairman to negotiate the open issues with representatives
of Fleet and to execute definitive agreements if such open issues could be
resolved. At the October 23, 1997 meeting, the Company's Board of Directors also
approved the Voting Agreement which was proposed to be entered into between
Fleet and Dennis Alter and thereby provided that Section 203 of the Delaware
General Corporation Law, pursuant to which an interested stockholder may not
enter into a business combination with a company unless previously approved by
the Board, would not be applicable to Fleet as a result of entering into such
Voting Agreement. Three of the Company's thirteen directors were not present at
the October 23, 1997 meeting, but all three indicated that they approved of the
proposed transaction based on the information available to them prior to the
meeting. Subsequently, each of such directors confirmed his approval of the
Contribution. Fleet's Board of Directors also approved the Contribution at its
meeting held on October 23, 1997, subject to resolution of certain open issues.
Following the meetings of the respective Boards of Directors, the Company and
Fleet negotiated resolutions to the outstanding open issues. The Contribution
Agreement was executed on October 28, 1997.
Pursuant to the Contribution Agreement, in exchange for the issuance of an
aggregate 4.99% membership interest in a newly formed Rhode Island limited
liability company at the closing and the assumption of liabilities by the LLC
relating to the Company's consumer credit card business, the Company and certain
of its subsidiaries will transfer and assign to the LLC substantially all of the
assets of the Company's consumer credit card business. The Company will retain
certain liabilities relating to its consumer credit card business including: (i)
any liability or obligation relating to certain consumer credit card accounts
generated in specific programs which comprise a very small portion of the
Company's consumer credit card receivables; and (ii) any obligations of the
Company incurred on or prior to the closing under the credit insurance policies
and debt cancellation contracts sold by or on behalf of the Company to certain
of its customers on or before the closing. The Company will also retain certain
immaterial assets relating to its consumer credit card business which are not
necessary for the operation of the business, including all reserves relating to
the credit insurance business.
The Contribution Agreement provides that the balance sheet value of the
liabilities transferred to the LLC by the Company at the closing will exceed the
balance sheet value of the assets transferred by $510 million (the "Agreed
Deficit"), subject to an increase or decrease depending on the amount of managed
receivables so transferred and the percentage of managed receivables so
transferred with introductory interest rates. The Agreed Deficit will be
decreased or increased by 4.38% of the amount by which the managed receivables
transferred to the LLC by the Company are less than or exceed $12.1 billion. The
Agreed Deficit will be further decreased or increased by 2.19% of the amount by
which managed receivables with introductory interest rates exceed or are less
than $2,192,520,000. Following the closing of the Contribution, an audit of the
assets and liabilities transferred by the Company to the LLC will be performed
and to the extent that the amount by which the balance sheet value of the
transferred liabilities exceeds the balance sheet value of the transferred
assets is not equal to the Agreed Deficit, as adjusted, the Company will pay to
the LLC, or the LLC will pay to the Company, as the case may be, cash in an
amount equal to the difference.
20
<PAGE> 25
Fleet and its subsidiaries will contribute the assets and liabilities of
Fleet's consumer credit card business to the LLC in consideration of the
remaining membership interests in LLC. Following the closing, Fleet will operate
and control the LLC, although certain actions of the LLC will be prohibited,
such as the distribution of any portion of the Company's contributed assets
relating to goodwill, going concern value or work force in place, without the
consent of the Company.
On December 3, 1997, the Company announced that it expects net after tax
income from continuing operations to be approximately $70 million in 1998. The
Company said that it expects to earn approximately $60 million from its rapidly
growing mortgage business and approximately $10 million from the business
services operations. The Company also affirmed its expectation to earn
approximately $1.50 per share in 1997.
Certain holders of the Company's Medium Term Notes have questioned whether
the Contribution would require their consent. At the request of such holders,
the trustee under the indenture and under the indenture for the Company's Junior
Subordinated Debentures and the related declaration of trust for the Capital
Securities called a meeting of holders of the Company's Medium Term Notes, Value
Notes, and Capital Securities for January 15, 1998, and it has informed the
Company that it intends to call a meeting of the holders of the Company's Senior
Investment Notes and RediReserve Certificates. While there is no assurance that
such holders will not pursue legal remedies, including trying to require the
Company to seek their consent or seeking a determination that the maturity of
such instruments should be accelerated upon consummation of the Contribution,
the Company believes that the Contribution does not require the consent of the
holders of such instruments and will not seek such consent, and further believes
that the holders would not be successful in the pursuit of such remedies. No
action was taken at the January 15, 1998 meeting and the bondholders present at
the meeting did not indicate that they had reached any conclusion as to whether
the Company is correct.
SUMMARY HISTORICAL FINANCIAL INFORMATION
Set forth below is certain summary consolidated historical financial
information of the Company and its subsidiaries. The historical information
(other than the ratio of earnings to fixed charges) was derived from the audited
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1996 (the "Company's 1996 Annual
Report"), and from the unaudited consolidated financial statements included in
the Company's Quarterly Report on Form 10-Q for the period ended September 30,
1997 (the "Company's 1997 Third Quarter Report") and other information and data
contained in the Company's 1996 Annual Report and the Company's 1997 Third
Quarter Report. More comprehensive financial information is included in such
reports and the financial information which follows is qualified in its entirety
by reference to such reports and all of the financial statements and related
notes contained therein, copies of which may be obtained as set forth below.
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<PAGE> 26
ADVANTA CORP. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
-------------------------- --------------------------
1997 1996 1996 1995
----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net operating revenues(1)................. $ 652,919 $ 610,127 $ 850,977 $ 615,914
Net interest income..................... 92,372 56,247 78,265 72,900
Noninterest revenues.................... 560,547 587,700 806,532 543,014
Provision for credit losses............... 158,886 66,963 96,862 53,326
Operating expenses........................ 456,279 379,249 523,174 350,685
Income before income taxes and
extraordinary items.................. 37,754 197,735 264,761 211,903
Income before extraordinary items....... 28,013 130,506 175,657 136,677
Net income................................ 28,013 130,506 175,657 136,677
Ratio of earnings to fixed charges (2).... 1.15x 1.97x 1.97x 2.26x
========== ========== ========== ==========
PER COMMON SHARE DATA
Income before extraordinary items......... $ 0.60 $ 2.89 $ 3.89 $ 3.20
Net income................................ 0.60 2.89 3.89 3.20
Book value................................ 18.04 17.14 18.06 14.35
Average shares used to compute EPS(3)..... 46,108 45,097 45,073 42,670
========== ========== ========== ==========
FINANCIAL CONDITION -- PERIOD END
Total assets.............................. 6,702,667 5,606,676 5,583,959 4,524,259
Deposits.................................. 2,942,115 1,820,894 1,860,058 1,906,601
Long-term debt............................ 1,411,987 1,385,880 1,393,095 587,877
Stockholders' equity...................... 880,187 798,395 852,036 672,964
Capital securities(4)..................... 100,000 0 100,000 0
Stockholders' equity, long-term debt and
capital securities...................... 2,392,174 2,184,275 2,345,131 1,260,841
========== ========== ========== ==========
</TABLE>
- ---------------
(1) Excludes gain on sales of credit card relationships in 1996.
(2) For purpose of computing these ratios, "earnings" represent income before
income taxes plus fixed charges, and "fixed charges" consist of interest
expense, one-third (the portion deemed representative of the interest
factor) of rental expense on operating leases, and preferred stock dividends
of subsidiary trust.
(3) Includes common stock equivalents. 1997, 1996 and 1995 amounts include
equivalent shares related to convertible Class B Preferred Stock.
(4) Represents Company-obligated mandatorily redeemable preferred securities of
subsidiary trust holding solely subordinated debentures of the Company.
22
<PAGE> 27
PRO FORMA FINANCIAL INFORMATION
The following pro forma unaudited consolidated financial information is
based on historical information which has been adjusted to reflect (i) the
Contribution only and (ii) the Contribution together with the assumed purchase
pursuant to the Offer of up to 7,882,750 Class A Shares and 12,482,850 Class B
Shares at $40 per share net and up to 1,078,930 SAILS Depositary Shares at
$32.80 per share net. The pro forma consolidated income statements were prepared
assuming that the transactions had occurred January 1, 1997 and January 1, 1996
for the nine months ended September 30, 1997 and the twelve months ended
December 31, 1996, respectively. The pro forma consolidated balance sheets were
prepared assuming that the Contribution had occurred September 30, 1997 and
December 31, 1996.
The unaudited pro forma consolidated financial statements presented below
do not purport to represent what the results of operations or financial position
would actually have been if the Contribution and the Offer had occurred on the
dates referred to above. Also, the unaudited pro forma consolidated financial
statements are not indicative of the future results of operations or financial
position of the Company to be expected in future periods. A substantial portion
of corporate expenses incurred in the past have been to support the operations
to be contributed. Also, the Company has incurred expenditures in the past for
new businesses and product development. Associated with the Contribution, the
Company intends to substantially reduce corporate expenses and expenses
associated with business and product development not directly associated with
its mortgage and business service companies. No pro forma adjustments have been
reflected associated with the Company's plans to reduce these expenses. Further
the Pro Forma Adjustments do not reflect a restructuring charge or similar
charges related to the planned reduction in corporate expenses or transaction
expenses associated with the Contribution. The restructuring charge and
transaction expenses will be incurred in the period that the transaction is
consummated. The Pro Forma Adjustments are based upon available information and
certain assumptions that the Company believes are reasonable.
23
<PAGE> 28
ADVANTA CORP. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONSOLIDATED INCOME STATEMENT
NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ADVANTA CORP. CONTRIBUTION REPURCHASE ADVANTA CORP.
AND SUBSIDIARIES PRO FORMA PRO FORMA AND SUBSIDIARIES
HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
---------------- ----------- ----------- ----------------
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income:
Loans and leases.................. $224,994 $(154,490)[A] $ -- $ 70,504
Investments....................... 107,051 (22,522)[A] (34,649)[E] 49,880
-------- --------- -------- --------
Total interest income............... 332,045 (177,012) (34,649) 120,384
-------- --------- -------- --------
Total interest expense.............. 239,673 (138,947)[B] -- 100,726
-------- --------- -------- --------
Net interest income................. 92,372 (38,065) (34,649) 19,658
-------- --------- -------- --------
Provision for credit losses......... 158,886 (141,231)[A] -- 17,655
-------- --------- -------- --------
Net interest income (loss) after
provision for credit losses....... (66,514) 103,166 (34,649) 2,003
-------- --------- -------- --------
Noninterest revenues:
Gain on sale of credit cards...... -- --[A] -- --
Other noninterest revenues........ 560,547 (405,747)[A] -- 154,800
-------- --------- -------- --------
Total noninterest revenues.......... 560,547 (405,747) -- 154,800
-------- --------- -------- --------
Operating expenses:
Amortization of credit card
deferred origination costs,
net............................ 47,916 (44,543)[A] -- 3,373
Other operating expenses.......... 408,363 (216,937)[C] 19,372[E] 210,798
-------- --------- -------- --------
Total operating expenses............ 456,279 (261,480) 19,372 214,171
Income (loss) before income taxes... 37,754 (41,101) (54,021) (57,368)
-------- --------- -------- --------
Provision (benefit) for income
taxes............................. 9,741 (14,385)[D] (18,907)[D] (23,551)
-------- --------- -------- --------
Net income (loss)................... $ 28,013 $ (26,716) $ (35,114) $(33,817)
======== ========= ======== ========
Earnings per common share........... $ 0.60 $ (1.40)[F]
======== ========
Average common shares outstanding... 46,108 (22,679) 23,429
======== ======== ========
Ratio of earnings to fixed
charges........................... 1.15x [G]
======== ========
</TABLE>
- ---------------
NOTES FOR PRO FORMA UNAUDITED CONSOLIDATED INCOME STATEMENT FOR THE NINE MONTHS
ENDED
SEPTEMBER 30, 1997
[A] The pro forma consolidated income statement reflects the elimination of
income and expense related to the results of operations reflected in the
Unaudited Historical Combined Financial Statements of Advanta Personal
Payment Services (the "Division") as if the transaction had occurred for
the periods presented.
[B] The pro forma consolidated income statement reflects (1) interest expense
reflected in the Unaudited Historical Combined Financial Statements of the
Division, and (2) an adjustment of approximately $55.2 million to reflect
approximately $1.3 billion of additional interest bearing liabilities to be
transferred in the Contribution above the amount of interest bearing
liabilities reflected in the Unaudited Historical Combined Financial
Statements of the Division. The $1.3 billion of additional interest bearing
liabilities will be transferred from Advanta National Bank (ANB), where the
predominance of the credit card operations are conducted and were incurred
in the ordinary course of ANB's business.
24
<PAGE> 29
NOTES FOR PRO FORMA UNAUDITED CONSOLIDATED INCOME STATEMENT FOR THE NINE MONTHS
ENDED
SEPTEMBER 30, 1997 -- (CONTINUED)
[C] The pro forma consolidated income statement reflects the reduction in other
operating expenses related to (1) the results of operations reflected in
the Unaudited Historical Combined Financial Statements of the Division had
the transaction occurred for the periods presented, (2) $399,000 of
additional depreciation expense for fixed assets to be transferred to the
LLC that were not dedicated to the Division, and (3) $3.2 million of
operating expenses for an Advanta Corp. support group whose operations will
be transferred to the LLC.
[D] The pro forma consolidated income statement reflects the net effects of the
Pro Forma Adjustments at the statutory federal tax rate of 35% for the
period presented.
[E] The pro forma consolidated income statement reflects the repurchase of
Shares as if the transaction had occurred for the periods presented. The
pro forma consolidated income statement reflects (1) the reduction of
interest income by approximately $34.6 million to reflect the sale of $812
million of investments to repurchase the Class A Shares, the Class B Shares
and the SAILS Depositary Shares and (2) the increase in compensation
expense related to the tender of Common Shares underlying options granted
under the Company's Stock Option Plans. The $812 million of investments
sold reflects $850 million of Shares at the applicable Purchase Price per
Share primarily net of the difference between $40 per Share and the option
exercise price of options anticipated to be exercised in connection with
the Offer.
[F] Pro forma earnings per share (1) includes a $3.8 million increase to net
income for the excess of the carrying value of the SAILS Depositary Shares
redeemed over the amount paid upon redemption and (2) reflects $2.9 million
of preferred stock dividends.
[G] For the nine month period ended September 30, 1997, pro forma earnings were
inadequate to cover pro forma fixed charges. The deficiency was
approximately $57.4 million.
25
<PAGE> 30
ADVANTA CORP. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
ADVANTA CORP. CONTRIBUTION REPURCHASE ADVANTA CORP.
AND SUBSIDIARIES PRO FORMA PRO FORMA AND SUBSIDIARIES
HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
---------------- ----------- ----------- ----------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash................................ $ 109,787 $ (106,179)[A] $ -- $ 3,608
Federal funds sold and
interest-bearing deposits with
banks............................. 1,406,688 (515,430)[A] -- 891,258
Investments available for sale...... 1,399,007 -- (811,928)[G] 587,079
Loan and lease receivables, net:
Available for sale................ 1,040,028 (374,431)[A] -- 665,597
Other loan and lease receivables,
net............................ 1,599,045 (1,239,534)[A] -- 359,511
---------- ----------- --------- ----------
Total loan and lease receivables,
net............................... 2,639,073 (1,613,965) -- 1,025,108
---------- ----------- --------- ----------
Premises and equipment, net......... 136,636 (84,243)[B] -- 52,393
Amounts due from credit card
securitizations................... 286,680 (286,680)[A] -- --
Other assets........................ 724,796 (231,650)[C] -- 493,146
---------- ----------- --------- ----------
Total assets.............. $6,702,667 $(2,838,147) $(811,928) $3,052,592
========== =========== ========= ==========
LIABILITIES
Deposits............................ $2,942,115 $(2,184,938)[D] $ -- $ 757,177
Debt and other borrowings........... 2,517,552 (1,089,931)[D] -- 1,427,621
Other liabilities................... 262,813 (93,278)[E] (6,780)[G] 162,755
---------- ----------- --------- ----------
Total liabilities......... 5,722,480 (3,368,147) (6,780) 2,347,553
---------- ----------- --------- ----------
Company-obligated mandatorily
redeemable preferred securities of
subsidiary trust holding solely
subordinated debentures of the
Company........................... 100,000 -- -- 100,000
STOCKHOLDERS' EQUITY
Class A preferred stock............. 1,010 -- -- 1,010
Class B preferred stock............. -- -- -- --
Class A common stock................ 182 -- (78)[H] 104
Class B common stock................ 264 -- (112)[H] 152
Additional paid-in capital, net..... 342,806 -- (155,467)[H] 187,339
Retained earnings, net.............. 548,638 530,000[F] (649,491)[H] 429,147
Less: Treasury stock at cost........ (12,713) -- (12,713)
---------- ----------- --------- ----------
Total stockholders'
equity.................. 880,187 530,000 (805,148) 605,039
---------- ----------- --------- ----------
Total liabilities and
stockholders' equity.... $6,702,667 $(2,838,147) $(811,928) $3,052,592
========== =========== ========= ==========
Common shares outstanding at end of
period............................ 43,806 23,627
Book value per common share......... 18.04 23.41
</TABLE>
26
<PAGE> 31
NOTES TO PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997
[A] Represents the contribution to the LLC of assets and liabilities reflected
in the Unaudited Historical Combined Financial Statements of Advanta
Personal Payment Services (the "Division") had the Contribution occurred at
the balance sheet date.
[B] Represents (1) the contribution to the LLC of property and equipment
dedicated to the Division and (2) $6.3 million of fixed assets to be
transferred to the LLC that were not dedicated to the Division.
[C] Represents (1) the contribution to the LLC of other assets dedicated to the
Division except for $8.7 million of Credit Insurance Business related
assets that will not be transferred to the LLC and (2) the Company's
membership interest in the LLC valued at $20 million.
[D] Represents the contribution to the LLC of deposits, debt and other
borrowings by an amount equaling total assets of the Division plus an
additional $510 million of liabilities representing a portion of the
premium received by the Company, less other liabilities transferred to the
LLC in accordance with the Contribution Agreement.
[E] Represents the reduction of other liabilities related to (1) the balance
reflected in the Unaudited Historical Combined Financial Statements of the
Division had the Contribution occurred at the balance sheet date and (2)
$40 million of accrued interest payable on the deposits, debt and other
borrowings discussed in [D] above, net of (3) $11.8 million of Credit
Insurance Business related liabilities that will not be transferred to the
LLC.
[F] Represents the increase in retained earnings resulting from the gain of
$530 million on the transaction, consisting of liabilities in excess of
assets transferred of $510 million and the Company's membership interest in
the LLC valued at $20 million.
[G] Represents the sale of $812 million of investments to repurchase the Common
Shares and the SAILS Depositary Shares, and the tax benefit related to the
tender of Common Shares underlying options granted under the Company's
Stock Option Plans. The $812 million of investments sold reflects $850
million of Shares at the applicable Purchase Price per Share primarily net
of the difference between $40 per Share and the option exercise price of
options anticipated to be exercised in connection with the Offer.
[H] Represents (1) the repurchase of approximately 7.8 million Class A Shares
and approximately 11.2 million Class B Shares at $40 per Share; (2) the
repurchase of approximately 1.1 million SAILS Depositary Shares at $32.80
per Share and (3) the tender of approximately 1.2 million Common Shares
underlying options at a cost to the Company of the amount by which $40 per
Share exceeds the option exercise price.
27
<PAGE> 32
ADVANTA CORP. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONSOLIDATED INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
ADVANTA CORP. CONTRIBUTION REPURCHASE ADVANTA CORP.
AND SUBSIDIARIES PRO FORMA PRO FORMA AND SUBSIDIARIES
HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
---------------- ----------- ----------- ----------------
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income:
Loans and leases................. $267,823 $(220,745)[A] $ -- $ 47,078
Investments...................... 80,142 (14,657)[A] (46,557)[E] 18,928
-------- --------- -------- --------
Total interest income.............. 347,965 (235,402) (46,557) 66,006
Total interest expense............. 269,700 (230,642)[B] -- 39,058
-------- --------- -------- --------
Net interest income................ 78,265 (4,760) (46,557) 26,948
-------- --------- -------- --------
Provision for credit losses........ 96,862 (104,128)[A] -- (7,266)
-------- --------- -------- --------
Net interest income (loss) after
provision for credit losses...... (18,597) 99,368 (46,557) 34,214
-------- --------- -------- --------
Noninterest revenues:
Gain on sale of credit cards..... 33,820 (33,820)[A] -- --
Other noninterest revenues....... 772,712 (605,000)[A] -- 167,712
-------- --------- -------- --------
Total noninterest revenues......... 806,532 (638,820) -- 167,712
-------- --------- -------- --------
Operating expenses:
Amortization of credit card
deferred origination costs,
net........................... 88,517 (86,088)[A] -- 2,429
Other operating expenses......... 434,657 (246,467)[C] 27,703[E] 215,893
-------- --------- -------- --------
Total operating expenses........... 523,174 (332,555) 27,703 218,322
Income before income taxes......... 264,761 (206,897) (74,260) (16,396)
-------- --------- -------- --------
Provision for income taxes......... 89,104 (72,414)[D] (25,991)[D] (9,301)
-------- --------- -------- --------
Net income......................... $175,657 $(134,483) $ (48,269) $ (7,095)
======== ========= ======== ========
Earnings per common share.......... $ 3.89 $ (0.30)[F]
======== ========
Average common shares
outstanding...................... 45,073 (21,637) 23,436
======== ======== ========
Ratio of earnings to fixed
charges.......................... 1.97x [G]
======== ========
</TABLE>
- ---------------
NOTES TO PRO FORMA UNAUDITED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED
DECEMBER 31, 1996.
[A] The pro forma consolidated income statement reflects the elimination of
income and expense related to the results of operations reflected in the
Unaudited Historical Combined Financial Statements of Advanta Personal
Payment Services (the "Division") as if the transaction had occurred for the
periods presented.
[B] The pro forma consolidated income statement reflects (1) interest expense
reflected in the Unaudited Historical Combined Financial Statements of the
Division, and (2) an adjustment of approximately $67.4 million to reflect
approximately $1.3 billion of additional interest bearing liabilities to be
transferred in the Contribution above the amount of interest bearing
liabilities reflected in the Unaudited Historical Combined Financial
Statements of the Division. The $1.3 billion of additional interest bearing
liabilities will be transferred from Advanta National Bank (ANB), where the
28
<PAGE> 33
NOTES TO PRO FORMA UNAUDITED CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED
DECEMBER 31, 1996. -- (CONTINUED)
predominance of the credit card operations are conducted and were incurred
in the ordinary course of ANB's business.
[C] The pro forma consolidated income statement reflects the reduction in other
operating expenses related to (1) the results of operations reflected in the
Unaudited Historical Combined Financial Statements of the Division had the
transaction occurred for the periods presented, (2) $302,000 of additional
depreciation expense for fixed assets to be transferred to the LLC that were
not dedicated to the Division, and (3) $3.9 million of operating expenses
for an Advanta Corp. support group whose operations will be transferred to
the LLC.
[D] The pro forma consolidated income statement reflects the net effects of the
Pro Forma Adjustments at the statutory federal tax rate of 35% for the
period presented.
[E] The pro forma consolidated income statement reflects the repurchase of
Shares as if the transaction had occurred for the periods presented. The
pro forma consolidated income statement reflects (1) the reduction of
interest income by approximately $46.6 million to reflect the sale of $813
million of federal funds sold, interest bearing deposits and investments to
repurchase the Class A Shares, the Class B Shares and the SAILS Depositary
Shares and (2) the increase in compensation expense related to the tender
of Common Shares underlying options granted under the Company's Stock
Option Plans. The $813 million of federal funds sold, interest bearing
deposits and investments sold reflects $850 million of Shares at the
applicable Purchase Price per Share primarily net of the difference between
$40 per Share and the option exercise price of options anticipated to be
exercised in connection with the Offer.
[F] Pro forma earnings per share (1) includes a $3.9 million increase to net
income for the excess of the carrying value of the SAILS Depositary Shares
redeemed over the amount paid upon redemption and (2) reflects $3.8 million
of preferred stock dividends.
[G] For the year ended December 31, 1996, pro forma earnings were inadequate to
cover pro forma fixed charges. The deficiency was approximately $16.4
million.
29
<PAGE> 34
ADVANTA CORP. AND SUBSIDIARIES
PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
ADVANTA CORP. CONTRIBUTION REPURCHASE ADVANTA CORP.
AND SUBSIDIARIES PRO FORMA PRO FORMA AND SUBSIDIARIES
HISTORICAL ADJUSTMENTS ADJUSTMENTS PRO FORMA
---------------- ----------- ----------- ----------------
($ IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash............................... $ 165,875 $ (161,982)[B] $ -- $ 3,893
Federal funds sold and
interest-bearing deposits with
banks............................ 885,709 (338,923)[B] (338,317) 208,469
Investments available for sale..... 785,600 (17,925) (474,990)[H] 292,685
Loan and lease receivables, net:
Available for sale............... 1,476,146 (1,062,930)[A] -- 413,216
Other loan and lease receivables,
net........................... 1,136,857 (941,157)[A] -- 195,700
---------- ----------- -------- ----------
Total loan and lease receivables,
net.............................. 2,613,003 (2,004,087) -- 608,916
---------- ----------- -------- ----------
Premises and equipment, net........ 108,130 (73,022)[C] -- 35,108
Amounts due from credit card
securitizations.................. 399,359 (399,359)[A] -- --
Other assets....................... 626,283 (167,457)[D] -- 458,826
---------- ----------- -------- ----------
Total assets............. $5,583,959 $(3,162,755) $(813,307) $ 1,607,897
========== =========== ======== ==========
LIABILITIES
Deposits........................... $1,860,058 $(1,809,337)[E] $ -- $ 50,721
Debt and other borrowings.......... 2,462,084 (1,804,598)[E] -- 657,486
Other liabilities.................. 309,781 (78,820)[F] (9,696)[H] 221,265
---------- ----------- -------- ----------
Total liabilities........ 4,631,923 (3,692,755) (9,696) 929,472
---------- ----------- -------- ----------
Company-obligated mandatorily
redeemable preferred securities
of subsidiary trust holding
solely subordinated debentures of
the Company...................... 100,000 -- -- 100,000
STOCKHOLDERS' EQUITY
Class A preferred stock............ 1,010 -- -- 1,010
Class B preferred stock............ -- -- -- --
Class A common stock............... 179 -- (77)[I] 102
Class B common stock............... 256 -- (110)[I] 146
Additional paid-in capital, net.... 309,250 -- (147,288)[I] 161,962
Retained earnings, net............. 541,383 530,000[G] (656,136)[I] 415,247
Less: Treasury stock at cost....... (42) -- (42)
---------- ----------- -------- ----------
Total stockholders'
equity................. 852,036 530,000 (803,611) 578,425
---------- ----------- -------- ----------
Total liabilities and
stockholders' equity... $5,583,959 $(3,162,755) $(813,307) $ 1,607,897
========== =========== ======== ==========
Common shares outstanding at end of
period........................... 42,198 22,027
Book value per common share........ 18.06 23.92
</TABLE>
- ---------------
NOTES TO PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996
[A] Represents the contribution to the LLC of assets and liabilities reflected
in the Unaudited Historical Combined Financial Statements of Advanta
Personal Payment Services (the "Division") had the Contribution occurred at
the balance sheet date.
30
<PAGE> 35
NOTES TO PRO FORMA UNAUDITED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31,
1996 -- (CONTINUED)
[B] Represents (1) the contribution to the LLC of cash, federal funds sold and
interest bearing deposits dedicated to the Division and (2) a $5 million
redemption of federal funds sold that were not dedicated to the Division.
[C] Represents (1) the contribution to the LLC of property and equipment
dedicated to the Division and (2) $8 million of fixed assets to be
transferred to the LLC that were not dedicated to the Division.
[D] Represents (1) the contribution to the LLC of other assets dedicated to the
Division except for $10.2 million of Credit Insurance Business related
assets that will not be transferred to the LLC and (2) the Company's
membership interest in the LLC valued at $20 million.
[E] Represents the contribution to the LLC of deposits, debt and other
borrowings by an amount equaling total assets of the Division plus an
additional $510 million of liabilities representing a portion of the premium
received by the Company, less other liabilities transferred to the LLC in
accordance with the Contribution Agreement.
[F] Represents the reduction of other liabilities related to (1) the balance
reflected in the Unaudited Historical Combined Financial Statements of the
Division had the Contribution occurred at the balance sheet date and (2)
$34.7 million of accrued interest payable on the deposits, debt and other
borrowings discussed in [E] above, net of (3) $11.1 million of Credit
Insurance Business related liabilities that will not be transferred to the
LLC.
[G] Represents the increase in retained earnings resulting from the gain of $530
million on the transaction, consisting of liabilities in excess of assets
transferred of $510 million and the Company's membership interest in the LLC
valued at $20 million.
[H] Represents the sale of $813 million of federal funds sold, interest bearing
deposits and investments to repurchase the Common Shares and the SAILS
Depositary Shares, and the tax benefit related to the tender of Common
Shares underlying options granted under the Company's Stock Option Plans.
The $813 million of federal funds sold, interest bearing deposits and
investments sold reflects $850 million of Shares at the applicable Purchase
Price per Share primarily net of the difference between $40 per Share and
the option exercise price of options anticipated to be exercised in
connection with the Offer.
[I] Represents (1) the repurchase of approximately 7.7 million Class A Shares
and approximately 11.0 million Class B Shares at $40 per Share; (2) the
repurchase of approximately 1.1 million SAILS Depositary Shares at $32.80
per Share and (3) the tender of approximately 1.4 million Common Shares
underlying options at a cost to the Company of the amount by which $40 per
Share exceeds the option exercise price.
31
<PAGE> 36
Additional Information About the Company. The Company's Annual Report on
Form 10-K for the year ended December 31, 1996, its Quarterly Reports on Form
10-Q for the quarters ended March 31, 1997, June 30, 1997 and September 30,
1997, its Current Reports on Form 8-K dated March 17, 1997, April 16, 1997, July
14, 1997, July 16, 1997, July 28, 1997, August 7, 1997, September 26, 1997,
October 15, 1997, October 28, 1997 and December 3, 1997, its Proxy Statement
with respect to the Special Meeting of Stockholders to consider and vote upon
the Contribution and its Proxy Statement with respect to its 1997 annual meeting
have been filed with the Commission. Copies of such documents may be obtained
from Advanta Corp., Welsh and McKean Roads, Spring House, Pennsylvania 19477,
Attention: Corporate Secretary, telephone (215) 444-5000. The Company is subject
to the informational requirements of the Exchange Act and in accordance
therewith files with the Commission through its Electronic Data Gathering,
Analysis and Retrieval ("EDGAR") system periodic reports, proxy statements and
other information relating to its business, financial condition and other
matters. The Company is required to disclose in such proxy statements and
reports certain information, as of particular dates, concerning the Company's
directors and officers, their remuneration, stock options granted to them, the
principal owners of the Company's securities and any material interest of such
persons in transactions with the Company. The Company has also filed with the
Commission through its EDGAR system an Issuer Tender Offer Statement on Schedule
13E-4 (the "Schedule 13E-4") which includes certain additional information
relating to the Offer.
Such material may be inspected at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and (with the exception of the Schedule 13E-4, which may not be
available at the Commission's regional offices) also should be available for
inspection and copying at the following regional offices of the Commission:
Seven World Trade Center, Suite 1300, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. In addition, such material
(including the Schedule 13E-4) is publicly available through the Commission's
site on the Internet's World Wide Web, located at http://www.sec.gov. Reports,
proxy materials and other information about the Company should also be available
at the offices of the NASDAQ/NMS, National Association of Securities Dealers,
Inc., 1735 K Street, Washington, D.C. 20006. Copies may also be obtained by mail
for prescribed rates from the Commission's Public Reference Room, 450 Fifth
Street, N.W., Washington, D.C. 20549.
12. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; REGISTRATION UNDER THE
EXCHANGE ACT.
The Company's purchase of Shares pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly and is likely to reduce the
number of stockholders. Nonetheless, the Company anticipates that there will
still be a sufficient number of Shares outstanding and publicly traded following
the Offer to ensure a continued trading market in the Shares. Based on the
published guidelines of the NASDAQ/NMS, the Company does not believe that its
purchase of Shares pursuant to the Offer will cause its remaining Shares to be
delisted from the NASDAQ/NMS.
The Shares are currently "margin securities" under the rules of the Federal
Reserve Board. This has the effect, among other things, of allowing brokers to
extend credit on the collateral of the Shares. The Company believes that,
following the repurchase of Shares pursuant to the Offer, the Shares will
continue to be "margin securities" for purposes of the Federal Reserve Board's
margin regulations.
The Shares are registered under the Exchange Act which requires, among
other things, that the Company furnish certain information to its stockholders
and to the Commission and comply with the Commission's proxy rules in connection
with meetings of the Company's stockholders. The Company believes that its
purchase of Shares pursuant to the Offer will not result in the Shares becoming
eligible for deregistration under the Exchange Act.
13. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
The Company's obligations under the Offer to accept for payment and pay for
Shares are subject to certain conditions, including the satisfaction of the
Contribution Condition. See Section 6. The consummation of the Contribution is
in turn subject to the satisfaction of certain conditions, including certain
regulatory approvals. The Company's investment in the LLC will require approval
from the Office of the Comptroller of
32
<PAGE> 37
the Currency ("OCC"). Fleet's investment in the LLC requires the filing of a
Bank Merger Act application with the OCC for approval to acquire liabilities,
including insured deposits, from the Company and Advanta National Bank through
the LLC. In addition, (a) Fleet filed a notice with the OCC that Fleet's
investment in the LLC is a permissible investment for Fleet without the OCC's
prior approval and (b) a notice was provided to the Federal Deposit Insurance
Corporation in connection with the transfer of Advanta National Bank's insured
deposits to Fleet National Bank.
The Contribution is subject to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 ("HSR Act"), which provides that certain acquisition transactions
may not be consummated unless certain information has been furnished to the
Antitrust Division of the Department of Justice and the Federal Trade Commission
(the "FTC") and certain waiting period requirements have been satisfied. Each of
Fleet and the Company filed a Notification and Report Form with respect to the
Contribution under the HSR Act on December 19, 1997. Early termination of the
waiting period under the HSR Act was granted by the FTC on January 12, 1998.
Except as set forth in this Offer to Purchase, the Company is not aware of
any license or regulatory permit that appears to be material to its business
that might be adversely affected by its acquisition of Shares as contemplated in
the Offer or of any approval or other action by any government or governmental,
administrative or regulatory authority or agency, domestic or foreign, that
would be required for the Company's acquisition of Shares as contemplated by the
Offer. Should any such approval or other action be required, the Company
currently contemplates that it will seek such approval or other action. The
Company cannot predict whether it may determine that it is required to delay the
acceptance for payment of, or payment for, Shares tendered pursuant to the Offer
pending the outcome of any such matter. There can be no assurance that any such
approval or other action, if needed, would be obtained or would be obtained
without substantial conditions or that the failure to obtain any such approval
or other action might not result in adverse consequences to the Company's
business.
14. CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The following summary is a general discussion of certain of the U.S.
Federal income tax consequences relating to the sale of Shares pursuant to the
Offer.
This summary does not purport to cover all aspects of Federal income
taxation that may be relevant to stockholders. In addition, certain stockholders
(including insurance companies, tax-exempt organizations, financial
institutions, foreign persons, broker dealers, holders of options and
stockholders who have acquired their Shares upon the exercise of options or
otherwise as compensation) may be subject to special rules not discussed below.
This summary is based on the Internal Revenue Code of 1986, as amended (the
"Code"), regulations, rulings and decisions now in effect, all of which are
subject to change (and any such changes may be retroactive so as to apply to
transactions before the date such changes are made).
No rulings as to any of the matters discussed in this summary have been
requested or received from the Internal Revenue Service (the "Service"). The
consequences to any particular stockholder may differ depending on that
stockholder's own circumstances and tax position. Furthermore, this summary does
not discuss any aspects of state, local, foreign or other tax laws.
EACH STOCKHOLDER IS URGED TO CONSULT AND RELY ON SUCH STOCKHOLDER'S OWN TAX
ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO SUCH STOCKHOLDER TENDERING
SHARES PURSUANT TO THE OFFER.
In General. A stockholder's sale of Shares for cash pursuant to the Offer
will be a taxable transaction for Federal income tax purposes. The tax
consequences of the sale will be determined in part under the stock redemption
rules of Section 302 of the Code. The amount and characterization of income
recognized by a stockholder in connection with a sale pursuant to the Offer will
depend on whether the sale is treated as an "exchange" or as a "dividend" for
Federal income tax purposes. For purposes of this discussion, stockholders are
assumed to hold their Shares as capital assets within the meaning of Section
1221 of the Code.
Treatment as a Sale or Exchange. Under Section 302 of the Code, a sale of
Shares to the Company pursuant to the Offer will, as a general rule, be treated
as an "exchange" of the Shares (rather than as a
33
<PAGE> 38
distribution by the Company with respect to the Shares held by the tendering
stockholder) for Federal income tax purposes if the receipt of cash upon the
sale: (a) is "substantially disproportionate" with respect to the stockholder;
(b) is in "complete redemption" of the stockholder's interest in the Company; or
(c) is "not essentially equivalent to a dividend" with respect to the
stockholder. These tests (the "Section 302 tests") are explained more fully
below. Notwithstanding the foregoing, if the Company were determined to be a
"collapsible corporation," a stockholder's gain would be taxable as ordinary
income, rather than capital gain. Because of its long operating history, the
nature of its assets and other factors, the Company believes it is not a
"collapsible corporation."
If any of the Section 302 tests are satisfied so that the sale of the
Shares is treated as an "exchange" rather than a dividend distribution for
Federal income tax purposes, a tendering stockholder will recognize capital gain
or loss equal to the difference between the amount of cash received by the
stockholder pursuant to the Offer and the stockholder's tax basis in the Shares
sold pursuant to the Offer. Therefore, if any of the Section 302 tests would be
satisfied, a tendering stockholder may wish to take into account the various tax
bases and holding periods of such stockholder's Shares, if such characteristics
are not uniform, in determining which Shares to tender so as to minimize the
amount of the stockholder's taxable gain or to maximize the portion of the gain
or loss which would be long-term capital gain or loss. It should also be noted
that pursuant to the Letters of Transmittal, if Shares are to be purchased by
the Company on a pro rata basis, a stockholder may designate the order in which
the stockholder's certificated Shares and/or Shares held in the Company's
Employee Savings Plan or the DRP Plan are to be purchased.
Constructive Ownership of Stock. In determining whether any of the Section
302 tests are satisfied, it is important to understand that a stockholder must
take into account not only Shares actually owned by the stockholder, but also
Shares that are considered as being owned by the stockholder ("constructive
ownership") pursuant to Section 318 of the Code. Under Section 318, a
stockholder is deemed to own Shares actually owned, and in some cases Shares
constructively owned, by certain related individuals and entities in which the
stockholder has an interest, or, in the case of stockholders that are entities,
by certain individuals or entities that have an interest in the stockholder, as
well as any Shares the stockholder has a right to acquire by exercise of an
option or by the conversion or exchange of a security.
The Section 302 Tests. One of the following tests must be satisfied in
order for the sale of Shares pursuant to the Offer to be treated as an
"exchange" for Federal income tax purposes, rather than as a dividend
distribution:
a. Substantially Disproportionate Test. The receipt of cash by a
stockholder will be "substantially disproportionate" with respect to the
stockholder if the percentage of the outstanding voting stock of the
Company, and of all the outstanding common stock of the Company, whether
voting or non-voting, (determined on a fair market value basis), actually
and constructively owned by the stockholder immediately following the
exchange of Shares pursuant to the Offer (treating Shares acquired by the
Company pursuant to the Offer as not outstanding), is less than 80% of the
percentage of the outstanding voting stock and common stock of the Company
actually and constructively owned by the stockholder immediately before the
exchange (treating Shares acquired by the Company pursuant to the Offer as
outstanding). Each of these 80% tests must be met in order for the
redemption to be treated as substantially disproportionate. The
substantially disproportionate test does not apply in the case of
stockholders who own no voting stock, either directly or constructively,
prior to the redemption. Thus, it would not apply to stockholders who own,
either directly or indirectly, SAILS Depositary Shares or Class B Shares,
only.
b. Complete Redemption Test. The receipt of cash by a stockholder
will be in "complete redemption" of the stockholder's interest if either
(i) all of the stock of the Company that is actually and constructively
owned by the stockholder is sold pursuant to the Offer or (ii) all of the
stock of the Company actually owned by the stockholder is sold pursuant to
the Offer, the stockholder is eligible to waive, and effectively waives,
the attribution of stock of the Company constructively owned by the
stockholder in accordance with the procedures described in Section
302(c)(2) of the Code, the stockholder does not have any other interest
(including an interest as an officer or employee) in the
34
<PAGE> 39
Company (other than as a creditor), and does not acquire such interest
within 10 years from the date of distribution, other than stock acquired by
bequest or inheritance. The waiver of constructive ownership as described
above is permitted only in the case of constructive ownership of Shares
held by family members.
c. Not Essentially Equivalent to a Dividend Test. If the receipt of
cash by a stockholder fails to constitute an "exchange" under the
"substantially disproportionate" test or the "complete redemption" test,
the receipt of cash may constitute an "exchange" under the "not essentially
equivalent to a dividend" test. The receipt of cash by a stockholder will
be "not essentially equivalent to a dividend" if the stockholder's exchange
of Shares pursuant to the Offer results in a "meaningful reduction" of the
stockholder's proportionate interest in the Company. Whether the receipt of
cash by a stockholder will result in a meaningful reduction of the
stockholder's proportionate interest will depend on the stockholder's
particular facts and circumstances. In the case of a small minority
stockholder (who exercises no control over corporate affairs) the Service
has held that even a small reduction may satisfy this test where, as
expected in the case of the Offer because it is likely that not every
stockholder will tender Shares, payments will not be pro rata with respect
to all outstanding Shares.
It may be possible for a tendering stockholder to satisfy one of the above
three tests by contemporaneously in accordance with a plan, selling or otherwise
disposing of all or some of the Shares that are actually owned (or by causing
another person to sell or otherwise dispose of all or some of the Shares that
are constructively owned) by such stockholder but are not purchased pursuant to
the Offer. Correspondingly, a tendering stockholder may not be able to satisfy
one of the above three tests because of contemporaneous acquisitions of Shares
by such stockholder or by some person or entity whose Shares would be treated as
constructively owned by such stockholder.
In the event that the Offer is oversubscribed, the Company's purchase of
Shares pursuant to the Offer will be prorated. See Section 1. Thus, in such case
even if all the Shares actually and constructively owned by a stockholder are
tendered pursuant to the Offer, not all of the Shares will be purchased by the
Company, which in turn may affect the stockholder's ability to satisfy one or
more of the Section 302 tests.
The Section 302 tests are highly complex and as to certain issues there is
an absence of authority or a split in the authorities. Therefore, in applying
these tests, and the various rules relating to them, stockholders should consult
with and rely upon their own tax advisors.
Treatment as a Capital Transaction. If one of the Section 302 tests
applies so that the purchase by the Company is treated as an "exchange" taxable
as a capital gain (or loss), any such gain will be taxed at capital gains tax
rates. Generally, in the case of non-corporate stockholders, if the Shares sold
to the Company were "held" for more than 18 months, any capital gain will be
taxed at a maximum rate of 20%, and if such Shares were held for more than one
year but not for more than 18 months, at a maximum rate of 28%. If the Shares
sold to the Company have not been "held" for more than one year, the gain will
be taxed at ordinary income tax rates (see discussion below). Capital gains of
corporations are taxable at the maximum rate applicable to corporations, but not
at a rate greater than 35%.
Treatment as a Dividend. If none of the Section 302 tests is satisfied and
if as anticipated (although there can be no assurances) the Company has
sufficient "earnings and profits" (as that term is used in Section 316(a) of the
Code), a tendering stockholder will be treated as having received a dividend
includable in gross income in an amount equal to the entire amount of cash
received by the stockholder pursuant to the Offer. This amount will not be
reduced by the stockholder's tax basis in the Shares exchanged pursuant to the
Offer, and (except as described below for corporate stockholders eligible for
the dividends-received deduction) the stockholder's tax basis in those Shares
will be added to the stockholder's tax basis in his or her remaining Shares.
Dividend income is generally taxable to non-corporate taxpayers at a maximum
Federal income tax rate of 39.6% (although income at certain levels may be
subject to a higher effective rate owing to the phase-out of personal exemptions
and certain itemized deductions) and to corporations at a maximum Federal income
tax rate of 35% (although income at certain levels may be subject to a higher
effective rate owing to phase-out of the 15% and 25% brackets). As discussed
below, a corporate stockholder that is treated as receiving a dividend may be
allowed a dividends-received deduction and may be subject to the rules for
"extraordinary dividends." Any cash received for Shares pursuant to the Offer as
a dividend distribution but
35
<PAGE> 40
which is in excess of the Company's "earnings and profits" will be treated,
first, as a non-taxable return of capital to the extent of the stockholder's
basis for such stockholder's Shares, and, thereafter, as a capital gain to the
extent it exceeds such tax basis.
Corporate Stockholder Dividend Treatment. Upon receipt of a dividend from
the Company, a corporate stockholder who owns less than 20% of the stock of the
Company (based on both vote and value) generally is eligible for a
dividends-received deduction equal to 70% of the amount of the distribution,
subject to applicable limitations, including those relating to "debt-financed
portfolio stock" under Section 246A of the Code and to the holding period
requirements of Section 246 of the Code.
In addition, any amount received by a corporate stockholder that is treated
as a dividend will likely constitute an "extraordinary dividend" subject to the
provisions of Section 1059 of the Code. Generally, that section requires a
corporate stockholder to reduce the tax basis of its shares in a corporation by
the portion of the dividend eligible for the dividends-received deduction and,
if such portion (the "non-taxed portion") exceeds the stockholder's adjusted tax
basis for the Shares, to treat any such excess as gain from the sale of the
Shares. In addition, if the distribution in redemption is treated as a dividend
because of the application of the rules providing for constructive ownership of
Shares subject to an option, gain will be recognized to the extent the non-taxed
portion of any such "dividend" exceeds the adjusted income tax basis in the
Shares redeemed. The term "extraordinary dividend" includes any dividend if the
amount thereof exceeds the greater of 10% of the adjusted tax basis of the
stockholder's shares or 10% of the fair market value of the shares (5% in the
case of preferred stock). For the purpose of determining the amount of dividends
received, dividends received that have ex-dividend dates within the same period
of 85 consecutive days of a dividend are aggregated. Further, if a taxpayer
receives an aggregate amount of dividends in excess of 20% of the adjusted basis
of the taxpayer's stock, such dividends having ex-dividend dates within the same
period of 365 consecutive days, then such dividends also constitute
"extraordinary dividends" and the taxpayer must reduce its basis under Section
1059 of the Code. Section 1059 applies only to stock that has not been held for
more than two years before the dividend announcement date unless, among other
things, the redemption is not pro rata to all stockholders or the rules relating
to dividend treatment in a redemption resulting from the constructive ownership
of stock subject to an option apply. The Company expects that the Offer will
likely not result in a pro rata distribution to all stockholders it is likely
that not every stockholder will tender Shares. Additionally, if a corporate
stockholder is required under Section 1059 to reduce its stock basis, then the
non-taxed portion of all dividend distributions within an 85 day or 365 day
period referred to above, including regular dividend distributions by the
Company, reduce the corporate stockholder's basis in the stock of the Company.
Backup Withholding. See Section 3 concerning the potential application of
Federal backup withholding.
Foreign Stockholders. The Company will assume that the exchange is a
dividend as to foreign stockholders and will therefore withhold Federal income
tax at a rate equal to 30% of the gross proceeds paid to a foreign stockholder
or such stockholder's agent pursuant to the Offer, unless the Depositary
determines that a reduced rate of withholding is available pursuant to a tax
treaty or that an exemption from withholding is applicable because the gross
proceeds are effectively connected with the conduct of a trade or business by
the foreign stockholder within the United States. For this purpose, a foreign
stockholder is any stockholder that is not (a) a citizen or resident of the
United States, (b) a corporation, partnership or other entity created or
organized in or under the laws of the United States or a political subdivision
thereof, or (c) an estate or trust the income of which is subject to United
States Federal income taxation regardless of the source of such income.
Generally, the determination of whether a reduced rate of withholding is
applicable is made by reference to a foreign stockholder's address or to a
properly completed Form 1001 furnished by the stockholder, and the determination
of whether an exemption from withholding is available on the grounds that gross
proceeds paid to a foreign stockholder are effectively connected with a United
States trade or business is made on the basis of a properly completed Form 4224
furnished by the stockholder. The Depositary will determine a foreign
stockholder's eligibility for a reduced rate of, or exemption from, withholding
by reference to the stockholder's address and any Forms 1001 or 4224 submitted
to the Depositary by a foreign stockholder unless facts and circumstances
indicate that such reliance is not warranted or unless applicable law requires
some other
36
<PAGE> 41
method for determining whether a reduced rate of withholding is applicable.
These forms can be obtained from the Depositary. See the Instructions to the
Letters of Transmittal.
A foreign stockholder with respect to whom tax has been withheld may be
eligible to obtain a refund of all or a portion of the withheld tax if the
stockholder satisfies one of the Section 302 tests for capital gain treatment or
is otherwise able to establish that no tax or a reduced amount of tax was due.
Foreign stockholders are urged to consult their own tax advisors regarding the
application of Federal income tax withholding, including eligibility for a
withholding tax reduction or exemption and the refund procedure.
THE TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION
ONLY. THE TAX CONSEQUENCES OF A SALE PURSUANT TO THE OFFER MAY VARY DEPENDING
UPON, AMONG OTHER THINGS, THE PARTICULAR CIRCUMSTANCES OF THE TENDERING
STOCKHOLDER.
15. EXTENSION OF THE OFFER; TERMINATION; AMENDMENTS.
The Company expressly reserves the right, at any time or from time to time,
in its sole discretion and regardless of whether any of the conditions specified
in Section 6 shall have been satisfied, to (i) extend the period of time during
which the Offer is open by giving oral or written notice of such extension to
the Depositary or (ii) amend the Offer in any respect by making a public
announcement of such amendment. During any such extension, all Shares previously
tendered and not purchased or withdrawn will remain subject to the Offer, except
to the extent that such Shares may be withdrawn as set forth in Section 4. The
Company also expressly reserves the right, in its sole discretion, to terminate
the Offer and not accept for payment or pay for any Shares not theretofore
accepted for payment or paid for or, subject to applicable law, to postpone
payment for Shares upon the occurrence of any of the conditions specified in
Section 6 hereof by giving oral or written notice of such termination or
postponement to the Depositary and making a public announcement thereof. The
Company's reservation of the right to delay payment for Shares which it has
accepted for payment is limited by Rules 13e-4(f)(2) and 13e-4(f)(5) promulgated
under the Exchange Act. Rule 13e-4(f)(2) requires that the Company permit Shares
tendered pursuant to the Offer to be withdrawn: (i) at any time during the
period that the Offer remains open; and (ii) if not yet accepted for payment,
after the expiration of forty business days from the commencement of the Offer.
Rule 13e-4(f)(5) requires that the Company must either pay the consideration
offered or return the Shares tendered promptly after the termination or
withdrawal of the Offer. Subject to compliance with applicable law, the Company
further reserves the right, in its sole discretion, at any time or from time to
time to amend the Offer in any respect, including increasing or decreasing the
number of Shares the Company may purchase or the range of prices it may pay
pursuant to the Offer. Amendments to the Offer may be made at any time or from
time to time effected by public announcement thereof, such announcement, in the
case of an extension, to be issued no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date. Any
public announcement made pursuant to the Offer will be disseminated promptly to
stockholders in a manner reasonably designed to inform stockholders of such
change. Without limiting the manner in which the Company may choose to make a
public announcement, except as required by applicable law, the Company shall
have no obligation to publish, advertise or otherwise communicate any such
public announcement, other than by making a release to the Dow Jones News
Service.
If the Company materially changes the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer, the
Company will extend the Offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(2) promulgated under the Exchange Act. These rules provide that the
minimum period during which an offer must remain open following material changes
in the terms of the offer or information concerning the offer (other than a
change in price, change in dealer's soliciting fee or a change in percentage of
securities sought) will depend on the facts and circumstances, including the
relative materiality of such terms or information. If (i) the Company increases
or decreases the consideration offered for Shares pursuant to the Offer or the
amount of the dealer's soliciting fee or the Company increases the number of
Shares of any class being sought and any such increase in the number of Shares
being sought exceeds 2% of the outstanding Shares of such class, or the Company
decreases the number of Shares of any class being sought and (ii) the Offer is
scheduled to expire at any time earlier than the expiration of a period ending
on the tenth business day from, and including, the date that notice of such
increase or decrease is first published, sent or given, the Offer will be
extended until the expiration of such period of ten business days.
37
<PAGE> 42
16. FEES AND EXPENSES.
The Company has retained BT Wolfensohn to act as financial advisor to the
Company in connection with the Contribution and its affiliate BT Alex. Brown
Incorporated ("BT Alex. Brown") as Dealer Manager in connection with the Offer.
The Company has retained BT Wolfensohn pursuant to a letter agreement dated
March 14, 1997 (the "Engagement Letter"). As compensation for BT Wolfensohn's
and BT Alex. Brown's services in connection with the Contribution and the Offer,
the Company has paid BT Wolfensohn $1,500,000 and agreed to pay an additional
$6,950,000 upon consummation of the Contribution. Regardless of whether the
Contribution is consummated, the Company has agreed to reimburse BT Wolfensohn
and BT Alex. Brown for all reasonable fees and disbursements of BT Wolfensohn's
and BT Alex. Brown's counsel and all of BT Wolfensohn's and BT Alex. Brown's
reasonable travel and other out-of-pocket expenses incurred in connection with
the Contribution or otherwise arising out of the retention of BT Wolfensohn
under the Engagement Letter or the retention of BT Alex. Brown as Dealer
Manager. The Company has also agreed to indemnify BT Wolfensohn, BT Alex. Brown
and certain related persons to the full extent lawful against certain
liabilities, including certain liabilities under the federal securities laws,
arising out of such retention or the Contribution.
The Company has retained D.F. King & Co., Inc. as Information Agent, First
City Trust Company as Depositary and PNC Bank, N.A. as Escrow Agent in
connection with the Offer. The Information Agent may contact stockholders by
mail, telephone, telex, telegraph and personal interviews, and may request
brokers, dealers and other nominee stockholders to forward materials relating to
the Offer to beneficial owners. The Depositary, the Information Agent and the
Escrow Agent will receive reasonable and customary compensation for their
services. The Company will also reimburse the Depositary and the Information
Agent for out-of-pocket expenses, including reasonable fees and expenses of
counsel, and has agreed to indemnify the Depositary, the Information Agent and
the Escrow Agent against certain liabilities in connection with the Offer,
including certain liabilities under the federal securities laws. Neither the
Information Agent, the Depositary nor the Escrow Agent has been retained to make
solicitations or recommendations in connection with the Offer.
The Company will not pay fees or commissions to any broker, dealer,
commercial bank, trust company or other person for soliciting any Shares
pursuant to the Offer. The Company will, however, on request through the
Information Agent, reimburse such persons for customary handling and mailing
expenses incurred in forwarding materials in respect of the Offer to the
beneficial owners for which they act as nominees. No such broker, dealer,
commercial bank or trust company has been authorized to act as the Company's
agent for purposes of the Offer. The Company will pay (or cause to be paid) any
stock transfer taxes on its purchase of Shares, except as otherwise provided in
Instruction 6 of the Letters of Transmittal.
17. MISCELLANEOUS.
The Offer is not being made to, nor will the Company accept tenders from,
holders of Shares in any jurisdiction in which the Offer or its acceptance would
not comply with the securities or Blue Sky laws of such jurisdiction. The
Company is not aware of any jurisdiction in which the making of the Offer or the
tender of Shares would not be in compliance with the laws of such jurisdiction.
However, the Company reserves the right to exclude holders in any jurisdiction
in which it is asserted that the Offer cannot lawfully be made. So long as the
Company makes a good faith effort to comply with any state law deemed applicable
to the Offer, if it cannot do so, the Company believes that the exclusion of
holders residing in such jurisdiction is permitted under Rule 13e-4(f)(9)
promulgated under the Exchange Act. In any jurisdiction the securities or Blue
Sky laws of which require the Offer to be made by a licensed broker or dealer,
the Offer shall be deemed to be made on the Company's behalf by one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
ADVANTA CORP.
January 20, 1998
38
<PAGE> 43
Manually signed facsimile copies of the Letters of Transmittal will be
accepted. The Letters of Transmittal, certificates for Shares and any other
required documents should be sent or delivered by each stockholder of the
Company or such stockholder's broker, dealer, commercial bank, trust company or
other nominee to the Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
FIRST CITY TRUST COMPANY
<TABLE>
<S> <C>
BY MAIL: BY HAND OR OVERNIGHT COURIER:
First City Trust Company First City Trust Company
P.O. Box 170 505 Thornall Street
Iselin, New Jersey 08830-0170 Suite 303
Edison, New Jersey 08837
</TABLE>
FACSIMILE TRANSMISSION: (732) 906-9269
CONFIRMATION OF FACSIMILE: (732) 906-9227
Any questions or requests for assistance may be directed to the Dealer
Manager or the Information Agent at their respective addresses and telephone
numbers set forth below. Additional copies of this Offer to Purchase, the
Letters of Transmittal and all other materials related to the Offer to Purchase
may be obtained from the Information Agent, and will be furnished promptly at
the Company's expense. You may also contact your broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York
(800) 431-9633
The Dealer Manager for the Offer is:
BT ALEX. BROWN INCORPORATED
1 South Street
Baltimore, Maryland 21202
(800) 638-2596
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF CLASS A COMMON STOCK
(INCLUDING THE ASSOCIATED CLASS A PURCHASE RIGHTS)
OF
ADVANTA CORP.
PURSUANT TO THE OFFER TO PURCHASE
DATED JANUARY 20, 1998
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY,
FEBRUARY 20, 1998, UNLESS THE OFFER IS EXTENDED.
To: FIRST CITY TRANSFER COMPANY, DEPOSITARY
<TABLE>
<CAPTION>
BY HAND OR OVERNIGHT COURIER: BY FACSIMILE: BY MAIL:
<S> <C> <C>
First City Transfer Company (732) 906-9269 First City Transfer Company
505 Thornall Street P.O. Box 170
Suite 303 FOR INFORMATION: Iselin, New Jersey 08830-0170
Edison, New Jersey 08837 Call Collect (732) 906-9227
</TABLE>
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN THOSE SHOWN ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THAT LISTED ABOVE
DOES NOT CONSTITUTE A VALID DELIVERY.
THIS LETTER OF TRANSMITTAL IS TO BE USED ONLY (A) IF CERTIFICATES FOR
SHARES (AS DEFINED BELOW) ARE TO BE FORWARDED HEREWITH OR (B) IF A TENDER OF
SHARES IS TO BE MADE BY BOOK-ENTRY TRANSFER TO THE ACCOUNT MAINTAINED BY THE
DEPOSITARY AT THE DEPOSITORY TRUST COMPANY ("DTC"), PURSUANT TO SECTION 3 OF THE
OFFER TO PURCHASE.
STOCKHOLDERS WHOSE CERTIFICATES ARE NOT IMMEDIATELY AVAILABLE OR WHO
CANNOT DELIVER TO THE DEPOSITARY THEIR CERTIFICATES FOR SHARES AND ALL OTHER
DOCUMENTS THIS LETTER OF TRANSMITTAL REQUIRES AT OR BEFORE THE EXPIRATION DATE
(AS DEFINED IN THE OFFER TO PURCHASE) (OR WHO ARE UNABLE TO COMPLY WITH THE
PROCEDURE FOR BOOK-ENTRY TRANSFER ON A TIMELY BASIS) MUST TENDER THEIR SHARES
ACCORDING TO THE GUARANTEED DELIVERY PROCEDURES SET FORTH IN SECTION 3 OF THE
OFFER TO PURCHASE. SEE INSTRUCTION 2. DELIVERY OF DOCUMENTS TO DTC DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
<PAGE> 2
BOOK-ENTRY TRANSFER
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH DTC AND COMPLETE THE
FOLLOWING:
Name of Tendering Institution:
------------------------------------------------------------------------------
DTC Account Number:
------------------------------------------------------------------------------
Transaction Code Number:
------------------------------------------------------------------------------
GUARANTEED DELIVERY
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s):
------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
--------------------------------------------------------------------
Name of Institution that Guaranteed Delivery:
---------------------------------------------------------------------------
DTC Account Number (if delivered by Book-Entry Transfer):
----------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
(SEE INSTRUCTIONS 3 AND 4)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE(S) TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER
CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Total Shares
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EMPLOYEE SAVINGS PLAN SHARES (401(k))
Indicate number of shares to be tendered:
-------------- Employee Savings Plan Shares
(number of shares; may state "All")
------------------------------------------------------------------------------
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by
any certificates delivered to the Depositary are being tendered. See
Instruction 4.
- --------------------------------------------------------------------------------
Please indicate below the relative order in which you wish the Company to
accept Shares for Purchase pursuant to the Offer if Shares are purchased in the
Offer on a pro rata basis. A "1" indicates the first Shares to be accepted for
purchase in the Offer, a "2" indicates the second Shares to be accepted for
purchase in the Offer, and so forth. The Company will endeavor to purchase
Shares in the order indicated to the extent practicable.
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------------------------------
ORDER OF PURCHASE OF SHARES
(SEE INSTRUCTION 3)
IN THE EVENT THAT THE DEPOSITARY RECEIVES MULTIPLE LETTERS OF TRANSMITTAL FOR CLASS A COMMON STOCK
FROM A SINGLE STOCKHOLDER, THE INSTRUCTIONS RECORDED ON THE LAST DATED LETTER OF TRANSMITTAL RECEIVED
BY THE DEPOSITARY WILL GOVERN WITH RESPECT TO THE ORDER IN WHICH SHARES ARE TO BE PURCHASED IF THE
OFFER IS OVERSUBSCRIBED.
- -------------------------------------------------------------------------------------------------------
TENDERED SHARE DESCRIPTION RELATIVE ORDER
(ATTACH ADDITIONAL LIST IF NECESSARY) (1, 2, 3, . . . .)
- -------------------------------------------------------------------------------------------------------
Certificate No. --------------------------
- -------------------------------------------------------------------------------------------------------
Certificate No. --------------------------
- -------------------------------------------------------------------------------------------------------
Certificate No. --------------------------
- -------------------------------------------------------------------------------------------------------
Certificate No. --------------------------
- -------------------------------------------------------------------------------------------------------
Certificate No. --------------------------
- -------------------------------------------------------------------------------------------------------
Employee Savings Plan Shares (401(k) Plan)
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby tenders to Advanta Corp., a Delaware corporation
(the "Company"), the above-described shares of the Company's Class A Common
Stock, $.01 par value (the "Shares"), (including the associated Class A Purchase
Rights (the "Rights") issued pursuant to the Rights Agreement dated as of March
14, 1997, between the Company and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent), at a price of $40 per Share (the "Purchase Price"), net to the
undersigned in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Company's Offer to Purchase dated January 20, 1998,
receipt of which is hereby acknowledged, and in this Letter of Transmittal
(which together constitute the "Offer"). Unless the Rights are redeemed by the
Company, a tender of Shares will also constitute a tender of the associated
Rights. Unless the content requires otherwise, all references herein to the
Shares shall include the associated Rights.
Subject to and effective upon acceptance for payment of the Shares tendered
hereby in accordance with the terms of the Offer (including, if the Offer is
extended or amended, the terms or conditions of any such extension or
amendment), the undersigned hereby sells, assigns, and transfers to, or upon the
order of, the Company all right, title and interest in and to all Shares
tendered hereby or orders the registration of such Shares tendered by book-entry
transfer that are purchased pursuant to the Offer to, or upon the order of, the
Company and hereby irrevocably constitutes and appoints the Depositary as
attorney-in-fact of the undersigned with respect to such Shares, with full power
of substitution (such power of attorney being an irrevocable power coupled with
an interest), to:
(a) deliver certificates for such Shares, or transfer ownership of
such Shares on the account books maintained by DTC, together in either such
case with all accompanying evidences of transfer and authenticity, to or
upon the order of the Company, upon receipt by the Depositary, as the
undersigned's agent, of the Purchase Price with respect to such Shares;
(b) present certificates for such Shares for cancellation and transfer
of such Shares on the Company's books; and
(c) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares, subject to the next succeeding
paragraph, all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants to the Company that:
(a) the undersigned understands that tenders of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and
in the Instructions hereto will constitute the undersigned's acceptance of
the terms and conditions of the Offer, including the undersigned's
representation and warranty that (i) the undersigned has a net long
position in Shares or equivalent securities at least equal to the Shares
tendered within the meaning of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended, and (ii) such tender of Shares complies
with Rule 14e-4;
<PAGE> 4
(b) when and to the extent the Company accepts the Shares for
purchase, the Company will acquire good, marketable and unencumbered title
to them, free and clear of all security interests, liens, charges,
encumbrances, conditional sales agreements or other obligations relating to
their sale or transfer, and not subject to any adverse claim;
(c) on request, the undersigned will execute and deliver any
additional documents the Depositary or the Company deems necessary or
desirable to complete the assignment, transfer and purchase of the Shares
tendered hereby; and
(d) the undersigned has read and agrees to all of the terms of the
Offer.
The names and addresses of the registered owners should be printed, if they
are not already printed above, exactly as they appear on the certificates
representing Shares tendered hereby. The certificate numbers, the number of
Shares represented by such certificates, and the number of Shares that the
undersigned wishes to tender should be indicated in the appropriate boxes.
The undersigned understands that, upon the terms and subject to the
conditions of the Offer, the Company will purchase 7,882,750 Shares (or such
lesser number of Shares as are properly tendered and not withdrawn) at the
Purchase Price. The undersigned understands that all Shares properly tendered
and not withdrawn prior to the Expiration Date (as such term is defined in the
Offer to Purchase) will be purchased at the Purchase Price, net to the seller in
cash, without interest thereon, upon the terms and subject to the conditions of
the Offer, including its proration and conditional tender provisions, and that
the Company will return all other Shares, including Shares not purchased because
of proration and Shares that were conditionally tendered and not accepted. The
undersigned understands that no separate consideration will be paid for the
Rights, and that tenders of Shares pursuant to any one of the procedures
described in Section 3 of the Offer to Purchase and in the Instructions hereto
will constitute a binding agreement between the undersigned and the Company upon
the terms and subject to the conditions of the Offer.
The undersigned recognizes that under certain circumstances set forth in
the Offer to Purchase, the Company may terminate or amend the Offer or may not
be required to purchase any of the Shares tendered hereby or may accept for
payment fewer than all of the Shares tendered hereby. The undersigned
understands that certificate(s) for any Shares not tendered or not purchased
will be returned to the undersigned at the address indicated above, unless
otherwise indicated under the "Special Payment Instructions" or "Special
Delivery Instructions" below. Similarly, the undersigned understands that
Employee Savings Plan Shares not purchased will be credited to the undersigned's
Employee Savings Plan account. The undersigned recognizes that the Company has
no obligation, pursuant to the "Special Payment Instructions," to transfer any
certificate for Shares from the name of their registered owner, or to order the
registration or transfer of such Shares tendered by book-entry transfer, if the
Company purchases none of the Shares represented by such certificate or tendered
by such book-entry transfer.
The undersigned understands that acceptance of Shares by the Company for
payment will constitute a binding agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Offer.
The check for the Purchase Price for such of the tendered Shares as are
purchased will be issued to the order of the undersigned and mailed to the
address indicated above unless otherwise indicated under the "Special Payment
Instructions" or the "Special Delivery Instructions" below.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive the death or incapacity
of, the undersigned, and any obligations of the undersigned under this Letter of
Transmittal shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
Shares tendered pursuant to the Offer may be withdrawn at any time on or prior
to the Expiration Date and, unless theretofore accepted for payment by the
Company pursuant to the Offer, may also be withdrawn at any time after 12:00
Midnight, New York City time, on March 17, 1998. See Section 4 of the Offer to
Purchase.
<PAGE> 5
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
ODD LOTS
(SEE INSTRUCTION 7)
To be completed ONLY if Shares are being tendered by or on behalf of a
person owning beneficially as of the close of business on January 19, 1998, an
aggregate of fewer than 100 Shares.
The undersigned either (check one box):
[ ] was the beneficial owner as of the close of business on January 19, 1998,
and will continue to be the beneficial owner as of the Expiration Date, of
an aggregate of fewer than 100 Shares, all of which are being tendered, or
[ ] is a broker, dealer, commercial bank, trust company or other nominee which:
(a) is tendering, for the beneficial owners thereof, Shares with respect to
which it is the record owner, and
(b) believes, based upon representations made to it by such beneficial
owners, that each such person was the beneficial owner as of the close
of business on January 19, 1998, and will continue to be the beneficial
owner as of the Expiration Date, of an aggregate of fewer than 100
Shares and is tendering all of such Shares.
<PAGE> 6
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5, 6 AND 9)
To be completed ONLY if certificates for Shares not tendered or not
purchased and/or the check for the Purchase Price of Shares purchased are
to be issued in the name of someone other than the undersigned or if
Shares tendered by book-entry transfer which are not purchased are to be
returned by credit to an account maintained at DTC other than the account
indicated above.
Issue: [ ] check [ ] certificate(s) to:
Name:
----------------------------------------------------
(PLEASE PRINT)
Address:
--------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAXPAYER IDENTIFICATION
OR SOCIAL SECURITY NUMBER)
Credit Shares tendered by book-entry transfer that are not purchased to
DTC Account No.
============================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5, 6 AND 9)
To be completed ONLY if certificates for Shares not tendered or not
purchased and/or the check for the Purchase Price of Shares purchased are
to be sent to someone other than the undersigned, or to the undersigned at
an address other than that shown above.
Mail: [ ] check [ ] certificate(s) to:
Name:
----------------------------------------------------
(PLEASE PRINT)
Address:
--------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
CONDITIONAL TENDER
(SEE INSTRUCTION 8)
A tendering stockholder may condition such stockholder's tender of Shares upon
the purchase by the Company of a specified minimum number of the Shares tendered
hereby, all as described in the Offer to Purchase, particularly in Section 3
thereof. Unless at least such minimum number of Shares is purchased by the
Company pursuant to the terms of the Offer, none of the Shares tendered hereby
will be purchased. In order to make a conditional tender, a stockholder must
properly tender all Shares that such stockholder beneficially owns; partial
tenders will not qualify for this option. It is the tendering stockholder's
responsibility to calculate such minimum number of Shares, and each stockholder
is urged to consult such stockholder's own tax advisor. Unless this box has been
completed by specifying a minimum number of Shares, the tender will be deemed
unconditional.
Minimum number of Shares that must be purchased, if any are purchased:
- ------------------------------ Shares
<PAGE> 7
SIGN HERE
(SEE INSTRUCTIONS 1 AND 5)
(ALSO COMPLETE SUBSTITUTE FORM W-9 CONTAINED HEREIN)
-
--------------------------------------------------------------------------
-
--------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S)
Dated:
--------------------------------- , 1998
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, agents, officers of
corporations or others acting in a fiduciary or representative capacity,
please provide the following information. See Instruction 5.)
Name(s):
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
--------------------------------------------------------------------------
Address:
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
--------------------------------------------------------------------------
Taxpayer Identification or Social Security No.:
---------------------------------------------------------------------------
(COMPLETE SUBSTITUTE FORM W-9 CONTAINED HERIN)
- ------------------------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
--------------------------------------------------------------------------
Name:
--------------------------------------------------------------------------
(PLEASE PRINT)
Title:
--------------------------------------------------------------------------
Name of Firm:
--------------------------------------------------------------------------
Address:
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
--------------------------------------------------------------------------
Dated:
--------------------------------- , 1998
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required if either:
(a) this Letter of Transmittal is signed by the registered owner(s) of the
Shares exactly as the name(s) of the registered owner(s) appear(s) on the
certificate(s) (which term, for purposes of this document, shall include any
participant in DTC whose name appears on a security position listing as the
owner of Shares) tendered with this Letter of Transmittal and payment and
delivery are to be made directly to such registered owner(s) unless such
owner(s) has (have) completed either the box entitled "Special Payment
Instructions" or "Special Delivery Instructions" above; or
(b) such Shares are tendered for the account of a bank, broker, dealer,
credit union, savings association or other entity that is a member in good
standing of a recognized Medallion Program approved by The Securities Transfer
Association Inc. (each such entity an "Eligible Institution").
In all other cases, an Eligible Institution must guarantee all signatures
on this Letter of Transmittal. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES: GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be used only if certificates are
delivered with it to the Depositary (or such certificates will be delivered
pursuant to an applicable Notice of Guaranteed Delivery previously sent to the
Depositary) or, unless an Agent's Message (as defined in the Offer to Purchase)
is used, if tenders are to be made pursuant to the procedure for tender by
book-entry transfer set forth in Section 3 of the Offer to Purchase.
Certificates for all physically tendered Shares or confirmation of a book-entry
transfer into the Depositary's account at DTC of Shares tendered electronically,
together in each case with a properly completed and duly executed Letter of
Transmittal or facsimile of it, or an Agent's Message in connection with a
book-entry delivery of Shares, and any other documents required by this Letter
of Transmittal, should be mailed or delivered to the Depositary at the
appropriate address set forth herein and must be delivered to the Depositary on
or before the Expiration Date (as defined in the Offer to Purchase).
Stockholders whose certificates are not immediately available or who cannot
deliver Shares and all other required documents to the Depositary on or before
the Expiration Date, or whose Shares cannot be delivered on a timely basis
pursuant to the procedures for book-entry transfer, may tender their Shares by
or through any Eligible Institution by properly completing and duly executing
and delivering an applicable Notice of Guaranteed Delivery (or facsimile
thereof) and by otherwise complying with the guaranteed delivery procedure set
forth in Section 3 of the Offer to Purchase. Pursuant to such procedure, the
certificates for all physically tendered Shares, or book-entry confirmation, as
the case may be, as well as a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) (or, in the case of a book-entry delivery, an
Agent's Message) and all other documents required by this Letter of Transmittal,
must be received by the Depositary within three Nasdaq trading days after
receipt by the Depositary of such Notice of Guaranteed Delivery, all as provided
in Section 3 of the Offer to Purchase.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
signature guarantee by an Eligible Institution in the form set forth in such
Notice. For Shares to be properly tendered pursuant to the guaranteed delivery
procedure, the Depositary must receive the applicable Notice of Guaranteed
Delivery on or before the Expiration Date.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED.
Except as set forth in the Offer to Purchase, the Company will not accept
any alternative, conditional or contingent tenders, nor will it purchase any
fractional Shares. All tendering stockholders, by execution of this Letter of
Transmittal (or a facsimile hereof), waive any right to receive any notice of
the acceptance of their tender.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Shares Tendered" or "Order of Purchase of Shares" is inadequate,
the certificate numbers and the number of Shares should be listed on a separate
signed schedule and attached to this Letter of Transmittal.
<PAGE> 9
4. PARTIAL TENDERS AND UNPURCHASED SHARES. (Not applicable to stockholders
who tender by book-entry transfer.) If fewer than all of the Shares evidenced by
any certificate are to be tendered, fill in the number of Shares which are to be
tendered in the column entitled "Number of Shares Tendered". In such case, if
any tendered Shares are purchased, a new certificate for the remainder of the
Shares evidenced by the old certificate(s) will be issued and sent to the
registered owners, unless otherwise specified in either the "Special Payment
Instructions" or "Special Delivery Instructions" boxes on this Letter of
Transmittal, as soon as practicable after the Expiration Date. All Shares
represented by the certificate(s) listed and delivered to the Depositary are
deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS.
(a) If this Letter of Transmittal is signed by the registered owner(s) of
the Shares tendered hereby, the signature(s) must correspond exactly with the
name(s) as written on the face of the certificates without any change
whatsoever.
(b) If the Shares are registered in the names of two or more joint owners,
each such owner must sign this Letter of Transmittal.
(c) If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal (or facsimiles hereof) as there are different
registrations of certificates.
(d) When this Letter of Transmittal is signed by the registered owner(s) of
the Shares listed and transmitted hereby, no endorsements of certificate(s)
representing such Shares or separate stock powers are required unless payment is
to be made, or the certificates for Shares not tendered or not purchased are to
be issued, to a person other than the registered owner(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution. If
this Letter of Transmittal is signed by a person other than the registered
owner(s) of the certificates listed, however, the certificates must be endorsed
or accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered owner(s) appear(s) on the certificate, and the
signature(s) on such certificate or stock powers must be guaranteed by an
Eligible Institution. See Instruction 1.
(e) If this Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and must submit proper
evidence satisfactory to the Company of their authority so to act.
6. STOCK TRANSFER TAXES. Except as provided in this Instruction 6, no
stock transfer tax stamps or funds to cover such stamps need accompany this
Letter of Transmittal. The Company will pay or cause to be paid any stock
transfer taxes payable on the transfer to it of Shares purchased pursuant to the
Offer. If, however:
(a) payment of the Purchase Price is to be made to any person(s) other than
the registered owner(s); or
(b) Shares not tendered or not accepted for purchase are to be registered
in the name of any person(s) other than the registered owner(s); or
(c) tendered certificates are registered in the name(s) of any person(s)
other than the person(s) signing this Letter of Transmittal, then the Depositary
will deduct from the Purchase Price the amount of any stock transfer taxes
(whether imposed on the registered owner(s), such other person(s) or otherwise)
payable on account of the transfer to such person(s) unless satisfactory
evidence of the payment of such taxes or an exemption from them is submitted.
7. ODD LOTS. As described in the Offer to Purchase, if the Company is to
purchase less than all Shares properly tendered and not withdrawn on or before
the Expiration Date, the Shares purchased first will consist of all Shares
tendered by any stockholder who owned beneficially or of record, as of the close
of business on January 19, 1998 and continues to own beneficially or of record
as of the Expiration Date, an aggregate of fewer than 100 Shares and who tenders
all of such stockholder's Shares. Partial and conditional tenders will not
qualify for this preference. This preference will not be available unless the
box captioned "Odd Lots" in this Letter of Transmittal is completed.
8. CONDITIONAL TENDERS. As described in Section 3 of the Offer to
Purchase, stockholders may condition their tenders on all or a minimum number of
their tendered Shares being purchased ("Conditional Tenders"). If the Company is
to purchase less than all Shares tendered before the Expiration Date and not
withdrawn, any Shares tendered pursuant to a Conditional Tender for which the
condition was not satisfied shall be deemed withdrawn. All tendered Shares shall
be deemed unconditionally tendered unless the Conditional Tender section is
completed. Odd Lot Shares, in order to be eligible for preferential treatment,
cannot be conditionally tendered. It is the tendering stockholder's
responsibility to calculate the minimum number of Shares he or she wishes to
tender, and each stockholder is urged to consult his or her own tax adviser in
this regard.
<PAGE> 10
9. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the
Purchase Price of any Shares purchased is to be issued in the name of, and/or
any Shares not tendered or not purchased are to be returned to, a person other
than the person(s) signing this Letter of Transmittal or if the check and/or any
certificates for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal or to an
address other than that shown above in the box captioned "Description of Shares
Tendered," then the boxes captioned "Special Payment Instructions" and/or
"Special Delivery Instructions" on this Letter of Transmittal must be completed.
Stockholders tendering by book-entry transfer may request that Shares not
accepted for payment be credited to such account maintained at DTC as such
stockholder may designate under "Special Payment Instructions." If no such
instructions are given, such Shares not accepted for payment will be returned by
crediting the account at DTC designated in the box captioned "Book-Entry
Transfer" on this Letter of Transmittal. Signatures must be guaranteed as
described in Instruction 1.
10. IRREGULARITIES. The Company will determine, in its sole discretion,
all questions as to the number of Shares to be accepted, the form of documents
and the validity, form, eligibility (including time of receipt) and acceptance
for payment of any tender of Shares and its determination shall be final and
binding on all parties. The Company reserves the absolute right to reject any or
all tenders of Shares determined by it not to be in proper form or the
acceptance of or payment for which may be unlawful. The Company also reserves
the absolute right to waive any of the conditions of the Offer or any defect or
irregularity in the tender of any particular Shares and the Company's
interpretation of the terms of the Offer (including these Instructions) will be
final and binding on all parties. No tender of Shares will be deemed to be
properly made until all defects and irregularities have been cured or waived.
Unless waived, any defects or irregularities in connection with tenders must be
cured within such time as the Company shall determine. None of the Company, the
Dealer Manager, the Depositary, the Information Agent nor any other person is or
will be obligated to give notice of defects or irregularities in tenders, nor
shall any of them incur any liability for failure to give any such notice.
11. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to, or additional copies of the
Offer to Purchase, the Notice of Guaranteed Delivery and this Letter of
Transmittal may be obtained from, the Information Agent at the address and
telephone number set forth at the end of this Letter of Transmittal or from your
broker, dealer, commercial bank, trust company or other nominee.
12. SUBSTITUTE FORM W-9. Each tendering stockholder that is not an exempt
recipient (see "Important Tax Information" below) is required to provide the
Depositary with a correct taxpayer identification number ("TIN") on Substitute
Form W-9 (the "Form W-9") which is provided under "Important Tax Information"
below, and to certify whether such stockholder is subject to backup withholding
of federal income tax. An exempt recipient should also provide the Depositary
with Form W-9 completed in accordance with the enclosed instructions in order to
avoid possible erroneous backup withholding (see "Important Tax Information"
below). If a tendering stockholder is subject to backup withholding, such
stockholder must cross out item (2) of the Certification box of the Form W-9.
Failure to provide the information on Form W-9 may subject the tendering
stockholder to 31% Federal income tax withholding on the payments made to the
stockholder or other payee with respect to Shares purchased pursuant to the
Offer. If the tendering stockholder has not been issued a TIN and has applied
for a number or intends to apply for a number in the near future, such
stockholder should write "Applied For" in the space provided for the TIN in Part
I, and sign and date the Form W-9. If "Applied For" is written in Part I and the
Depositary is not provided with a TIN within sixty (60) days, the Depositary
will withhold 31% on all such payments until a TIN is provided to the
Depositary.
13. WITHHOLDING ON FOREIGN STOCKHOLDERS. The Depositary will withhold
federal income taxes equal to 30% of the gross payments payable to a foreign
stockholder unless the Depositary determines that a reduced rate of withholding
or an exemption from withholding is applicable. For this purpose, a foreign
stockholder is any stockholder that is not (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or any political subdivision
thereof, or (iii) any estate or trust the income of which is subject to United
States federal income taxation regardless of the source of such income. The
Depositary will determine a stockholder's status as a foreign stockholder and
eligibility for a reduced rate of, or an exemption from, withholding by
reference to the stockholder's address and to any outstanding certificates or
statements, including Forms 1001 and 4224 furnished by the stockholder,
concerning eligibility for a reduced rate of, or exemption from, withholding
unless facts and circumstances indicate that such reliance is not warranted. A
foreign stockholder who has not previously submitted the appropriate
certificates or statements with respect to a reduced rate of, or exemption from,
withholding for which such stockholder may be eligible should consider doing so
in order to avoid over withholding. Forms 1001 and 4224 may be obtained from the
Depositary. A foreign stockholder may be eligible to obtain a refund of tax
withheld if such stockholder meets one of the three tests for capital gain or
loss treatment described in Section 14 of the Offer to Purchase or is otherwise
able to establish that no tax or a reduced amount of tax was due.
<PAGE> 11
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE OF IT
(TOGETHER WITH CERTIFICATES FOR SHARES OR CONFIRMATION OF BOOK-ENTRY TRANSFER
AND ALL OTHER REQUIRED DOCUMENTS) OR THE NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE DEPOSITARY ON OR BEFORE THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under Federal income tax law, a stockholder, other than a noncorporate
foreign stockholder, whose tendered Shares are accepted for payment is required
to provide the Depositary with such stockholder's correct TIN on Form W-9 below.
If a tendering stockholder is subject to backup withholding, such stockholder
must cross out item (2) on the certification box of Form W-9. If the Depositary
is not provided with the correct TIN, the Internal Revenue Service may subject
the stockholder or other payee to a $50 penalty. In addition, payments that are
made to such stockholder or other payee with respect to Shares purchased
pursuant to the Offer may be subject to backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are considered "exempt recipients" and are not subject to
these backup withholding and reporting requirements. Exempt recipients, other
than foreign stockholders, should complete Form W-9 pursuant to the instructions
contained in the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9." The Company or the Depositary may
request additional proof of exemption. In order for a foreign stockholder (as
defined in Instruction 13 above) to qualify as an exempt recipient, the
stockholder must submit a Form W-8, signed under penalties of perjury, attesting
to that stockholder's exempt status. Filing of Form W-8 will not exempt such
stockholders from the withholding discussed in Instruction 13 above. A Form W-8
can be obtained from the Depositary. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for more
instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments made to the stockholder or other payee. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
PURPOSE OF FORM W-9
To prevent backup withholding on a payment made to a stockholder or other
payee with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of the stockholder's correct TIN by completing
the form below, certifying that the TIN provided on Form W-9 is correct (or that
such stockholder is awaiting a TIN) and that:
(a) the stockholder is exempt from backup withholding;
(b) the stockholder has not been notified by the Internal Revenue Service
that the stockholder is subject to backup withholding as a result of a failure
to report all interest or dividends; or
(c) the Internal Revenue Service has notified the stockholder that the
stockholder is no longer subject to backup withholding.
The Stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares. If the Shares are in more than one name or are not in the name of the
actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Form W-9" for additional guidance on which number to
report.
<PAGE> 12
PAYER'S NAME:
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- PLEASE PROVIDE YOUR TIN ---------------------------------
FORM W-9 IN THE BOX AT RIGHT AND CERTIFY BY Social Security Number(s)
DEPARTMENT OF THE TREASURY SIGNING AND DATING BELOW. OR
INTERNAL REVENUE SERVICE -----------------------------------
PAYER'S REQUEST FOR TAXPAYER Identification Number
IDENTIFICATION NUMBER (TIN) (If awaiting TIN write "Applied
AND CERTIFICATION For")
----------------------------------------------------------------------
PART II -- For Payees exempt from backup withholding, see the
enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 and complete as instructed therein.
- --------------------------------------------------------------------------------------------------------
CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or a Taxpayer
Identification Number has not been issued to me) and either (a) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate Internal Revenue Service
("IRS") or Social Security Administration office or (b) I intend to mail or deliver an application
in the near future. (I understand that if I do not provide a Taxpayer Identification Number within
(60) days, 31% of all reportable payments made to me thereafter will be withheld until I provide a
number); and
(2) I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I
have not been notified by the IRS that I am subject to backup withholding as a result of a failure
to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to
backup withholding.
CERTIFICATE INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that
you are subject to backup withholding because of underreporting interest or dividends on your tax
return. However, if after being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to backup withholding, do not
cross out item (2). (Also see instructions in the enclosed Guidelines.)
- --------------------------------------------------------------------------------------------------------
SIGNATURE ------------------------------------------------------- - DATE
--------------------------------- , 1998
- --------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York
(800) 431-9633
The Dealer Manager for the Offer is:
BT ALEX. BROWN INCORPORATED
1 South Street
Baltimore, Maryland 21202
(800) 638-2596
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF CLASS B COMMON STOCK
(INCLUDING THE ASSOCIATED CLASS B PURCHASE RIGHTS)
OF
ADVANTA CORP.
PURSUANT TO THE OFFER TO PURCHASE
DATED JANUARY 20, 1998
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY,
FEBRUARY 20, 1998, UNLESS THE OFFER IS EXTENDED.
To: FIRST CITY TRANSFER COMPANY, DEPOSITARY
<TABLE>
<CAPTION>
BY HAND OR OVERNIGHT COURIER: BY FACSIMILE: BY MAIL:
<S> <C> <C>
First City Trust Company (732) 906-9269 First City Trust Company
505 Thornall Street P.O. Box 170
Suite 303 FOR INFORMATION: Iselin, New Jersey 08830-0170
Edison, New Jersey 08837 Call Collect (732) 906-9227
</TABLE>
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN THOSE SHOWN ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THAT LISTED ABOVE
DOES NOT CONSTITUTE A VALID DELIVERY.
THIS LETTER OF TRANSMITTAL IS TO BE USED ONLY (A) IF CERTIFICATES FOR
SHARES (AS DEFINED BELOW) ARE TO BE FORWARDED HEREWITH OR (B) IF A TENDER OF
SHARES IS TO BE MADE BY BOOK-ENTRY TRANSFER TO THE ACCOUNT MAINTAINED BY THE
DEPOSITARY AT THE DEPOSITORY TRUST COMPANY ("DTC"), PURSUANT TO SECTION 3 OF THE
OFFER TO PURCHASE.
STOCKHOLDERS WHOSE CERTIFICATES ARE NOT IMMEDIATELY AVAILABLE OR WHO
CANNOT DELIVER TO THE DEPOSITARY THEIR CERTIFICATES FOR SHARES AND ALL OTHER
DOCUMENTS THIS LETTER OF TRANSMITTAL REQUIRES AT OR BEFORE THE EXPIRATION DATE
(AS DEFINED IN THE OFFER TO PURCHASE) (OR WHO ARE UNABLE TO COMPLY WITH THE
PROCEDURE FOR BOOK-ENTRY TRANSFER ON A TIMELY BASIS) MUST TENDER THEIR SHARES
ACCORDING TO THE GUARANTEED DELIVERY PROCEDURES SET FORTH IN SECTION 3 OF THE
OFFER TO PURCHASE. SEE INSTRUCTION 2. DELIVERY OF DOCUMENTS TO DTC DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
<PAGE> 2
BOOK-ENTRY TRANSFER
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH DTC AND COMPLETE THE
FOLLOWING:
Name of Tendering Institution:
-----------------------------------------------------------------------------
DTC Account Number:
-----------------------------------------------------------------------------
Transaction Code Number:
-----------------------------------------------------------------------------
GUARANTEED DELIVERY
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s):
-----------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
---------------------------------------------------------------------
Name of Institution that Guaranteed Delivery:
----------------------------------------------------------------------------
DTC Account Number (if delivered by Book-Entry Transfer):
-----------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
(SEE INSTRUCTIONS 3 AND 4)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE(S) TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER
CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Total Shares
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TENDERED DIVIDEND REINVESTMENT AND COMMON
STOCK PURCHASE PLAN SHARES
IF YOU ELECT TO TENDER ALL OF YOUR DIVIDEND REINVESTMENT AND COMMON STOCK
PURCHASE PLAN SHARES ("DIVIDEND REINVESTMENT SHARES"), PLEASE CHECK THIS BOX:
[ ]
- --------------------------------------------------------------------------------
EMPLOYEE SAVINGS PLAN SHARES (401(K))
INDICATE NUMBER OF SHARES TO BE TENDERED:
--------------- EMPLOYEE SAVINGS PLAN SHARES
(NUMBER OF SHARES; MAY STATE "ALL")
- --------------------------------------------------------------------------------
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced
by any certificates delivered to the Depositary are being tendered. See
Instruction 4.
- --------------------------------------------------------------------------------
<PAGE> 3
Please indicate below the relative order in which you wish the Company to
accept Shares for Purchase pursuant to the Offer if Shares are purchased in the
Offer on a pro rata basis. A "1" indicates the first Shares to be accepted for
purchase in the Offer, a "2" indicates the second Shares to be accepted for
purchase in the Offer, and so forth. The Company will endeavor to purchase
Shares in the order indicated to the extent practicable.
<TABLE>
<CAPTION>
<S> <C>
- -------------------------------------------------------------------------------------------------------
ORDER OF PURCHASE OF SHARES
(SEE INSTRUCTION 3)
IN THE EVENT THAT THE DEPOSITARY RECEIVES MULTIPLE LETTERS OF TRANSMITTAL FOR CLASS B COMMON STOCK
FROM A SINGLE STOCKHOLDER, THE INSTRUCTIONS RECORDED ON THE LAST DATED LETTER OF TRANSMITTAL RECEIVED
BY THE DEPOSITARY WILL GOVERN WITH RESPECT TO THE ORDER IN WHICH SHARES ARE TO BE PURCHASED IF THE
OFFER IS OVERSUBSCRIBED.
- -------------------------------------------------------------------------------------------------------
TENDERED SHARE DESCRIPTION RELATIVE ORDER
(ATTACH ADDITIONAL LIST IF NECESSARY) (1, 2, 3, . . . .)
- -------------------------------------------------------------------------------------------------------
Certificate No. --------------------------
- -------------------------------------------------------------------------------------------------------
Certificate No. --------------------------
- -------------------------------------------------------------------------------------------------------
Certificate No. --------------------------
- -------------------------------------------------------------------------------------------------------
Certificate No. --------------------------
- -------------------------------------------------------------------------------------------------------
Certificate No. --------------------------
- -------------------------------------------------------------------------------------------------------
Dividend Reinvestment Shares
- -------------------------------------------------------------------------------------------------------
Employee Savings Plan Shares (401(k) Plan)
- -------------------------------------------------------------------------------------------------------
</TABLE>
Ladies and Gentlemen:
The undersigned hereby tenders to Advanta Corp., a Delaware corporation
(the "Company"), the above-described shares of the Company's Class B Common
Stock, $.01 par value (the "Shares"), (including the associated Class B Purchase
Rights (the "Rights") issued pursuant to the Rights Agreement dated as of March
14, 1997, between the Company and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent), at a price of $40 per Share (the "Purchase Price"), net to the
undersigned in cash, without interest thereon, upon the terms and subject to the
conditions set forth in the Company's Offer to Purchase dated January 20, 1998,
receipt of which is hereby acknowledged, and in this Letter of Transmittal
(which together constitute the "Offer"). Unless the Rights are redeemed by the
Company, a tender of Shares will also constitute a tender of the associated
Rights. Unless the content requires otherwise, all references herein to the
Shares shall include the associated Rights.
Subject to and effective upon acceptance for payment of the Shares tendered
hereby in accordance with the terms of the Offer (including, if the Offer is
extended or amended, the terms or conditions of any such extension or
amendment), the undersigned hereby sells, assigns, and transfers to, or upon the
order of, the Company all right, title and interest in and to all Shares
tendered hereby or orders the registration of such Shares tendered by book-entry
transfer that are purchased pursuant to the Offer to, or upon the order of, the
Company and hereby irrevocably constitutes and appoints the Depositary as
attorney-in-fact of the undersigned with respect to such Shares, with full power
of substitution (such power of attorney being an irrevocable power coupled with
an interest), to:
(a) deliver certificates for such Shares, or transfer ownership of
such Shares on the account books maintained by DTC, together in either such
case with all accompanying evidences of transfer and authenticity, to or
upon the order of the Company, upon receipt by the Depositary, as the
undersigned's agent, of the Purchase Price with respect to such Shares;
(b) present certificates for such Shares for cancellation and transfer
of such Shares on the Company's books; and
(c) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares, subject to the next succeeding
paragraph, all in accordance with the terms of the Offer.
<PAGE> 4
The undersigned hereby represents and warrants to the Company that:
(a) the undersigned understands that tenders of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and
in the Instructions hereto will constitute the undersigned's acceptance of
the terms and conditions of the Offer, including the undersigned's
representation and warranty that (i) the undersigned has a net long
position in Shares or equivalent securities at least equal to the Shares
tendered within the meaning of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended, and (ii) such tender of Shares complies
with Rule 14e-4;
(b) when and to the extent the Company accepts the Shares for
purchase, the Company will acquire good, marketable and unencumbered title
to them, free and clear of all security interests, liens, charges,
encumbrances, conditional sales agreements or other obligations relating to
their sale or transfer, and not subject to any adverse claim;
(c) on request, the undersigned will execute and deliver any
additional documents the Depositary or the Company deems necessary or
desirable to complete the assignment, transfer and purchase of the Shares
tendered hereby; and
(d) the undersigned has read and agrees to all of the terms of the
Offer.
The names and addresses of the registered owners should be printed, if they
are not already printed above, exactly as they appear on the certificates
representing Shares tendered hereby. The certificate numbers, the number of
Shares represented by such certificates, and the number of Shares that the
undersigned wishes to tender should be indicated in the appropriate boxes.
The undersigned understands that, upon the terms and subject to the
conditions of the Offer, the Company will purchase 12,482,850 Shares (or such
lesser number of Shares as are properly tendered and not withdrawn) at the
Purchase Price. The undersigned understands that all Shares properly tendered
and not withdrawn prior to the Expiration Date (as such term is defined in the
Offer to Purchase) will be purchased at the Purchase Price, net to the seller in
cash, without interest thereon, upon the terms and subject to the conditions of
the Offer, including its proration and conditional tender provisions, and that
the Company will return all other Shares, including Shares not purchased because
of proration and Shares that were conditionally tendered and not accepted. The
undersigned understands that no separate consideration will be paid for the
Rights, and that tenders of Shares pursuant to any one of the procedures
described in Section 3 of the Offer to Purchase and in the Instructions hereto
will constitute a binding agreement between the undersigned and the Company upon
the terms and subject to the conditions of the Offer.
The undersigned recognizes that under certain circumstances set forth in
the Offer to Purchase, the Company may terminate or amend the Offer or may not
be required to purchase any of the Shares tendered hereby or may accept for
payment fewer than all of the Shares tendered hereby. The undersigned
understands that certificate(s) for any Shares not tendered or not purchased
will be returned to the undersigned at the address indicated above, and that
Dividend Reinvestment and Common Stock Purchase Plan Shares not purchased will
be credited to the undersigned's Dividend Reinvestment and Common Stock Purchase
Plan account, unless otherwise indicated under the "Special Payment
Instructions" or "Special Delivery Instructions" below. Similarly, the
undersigned understands that Employee Savings Plan Shares not purchased will be
credited to the undersigned's Employee Savings Plan account. The undersigned
recognizes that the Company has no obligation, pursuant to the "Special Payment
Instructions," to transfer any certificate for Shares from the name of their
registered owner, or to order the registration or transfer of such Shares
tendered by book-entry transfer, if the Company purchases none of the Shares
represented by such certificate or tendered by such book-entry transfer.
The undersigned understands that acceptance of Shares by the Company for
payment will constitute a binding agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Offer.
The check for the Purchase Price for such of the tendered Shares as are
purchased will be issued to the order of the undersigned and mailed to the
address indicated above unless otherwise indicated under the "Special Payment
Instructions" or the "Special Delivery Instructions" below.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive the death or incapacity
of, the undersigned, and any obligations of the undersigned under this Letter of
Transmittal shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
Shares tendered pursuant to the Offer may be withdrawn at any time on or prior
to the Expiration Date and, unless theretofore accepted for payment by the
Company pursuant to the Offer, may also be withdrawn at any time after 12:00
Midnight, New York City time, on March 17, 1998. See Section 4 of the Offer to
Purchase.
<PAGE> 5
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
ODD LOTS
(SEE INSTRUCTION 7)
To be completed ONLY if Shares are being tendered by or on behalf of a
person owning beneficially as of the close of business on January 19, 1998, an
aggregate of fewer than 100 Shares.
The undersigned either (check one box):
[ ] was the beneficial owner as of the close of business on January 19, 1998,
and will continue to be the beneficial owner as of the Expiration Date, of
an aggregate of fewer than 100 Shares, all of which are being tendered, or
[ ] is a broker, dealer, commercial bank, trust company or other nominee which:
(a) is tendering, for the beneficial owners thereof, Shares with respect to
which it is the record owner, and
(b) believes, based upon representations made to it by such beneficial
owners, that each such person was the beneficial owner as of the close
of business on January 19, 1998, and will continue to be the beneficial
owner as of the Expiration Date, of an aggregate of fewer than 100
Shares and is tendering all of such Shares.
<PAGE> 6
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5, 6 AND 9)
To be completed ONLY if certificates for Shares not tendered or not
purchased and/or the check for the Purchase Price of Shares purchased are
to be issued in the name of someone other than the undersigned or if
Shares tendered by book-entry transfer which are not purchased are to be
returned by credit to an account maintained at DTC other than the account
indicated above.
Issue: [ ] check [ ] certificate(s) to:
Name:
----------------------------------------------------
(PLEASE PRINT)
Address:
--------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAXPAYER IDENTIFICATION
OR SOCIAL SECURITY NUMBER)
Credit Shares tendered by book-entry transfer that are not purchased to
DTC Account No.
============================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5, 6 AND 9)
To be completed ONLY if certificates for Shares not tendered or not
purchased and/or the check for the Purchase Price of Shares purchased are
to be sent to someone other than the undersigned, or to the undersigned at
an address other than that shown above.
Mail: [ ] check [ ] certificate(s) to:
Name:
----------------------------------------------------
(PLEASE PRINT)
Address:
--------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
CONDITIONAL TENDER
(SEE INSTRUCTION 8)
A tendering stockholder may condition such stockholder's tender of Shares upon
the purchase by the Company of a specified minimum number of the Shares tendered
hereby, all as described in the Offer to Purchase, particularly in Section 3
thereof. Unless at least such minimum number of Shares is purchased by the
Company pursuant to the terms of the Offer, none of the Shares tendered hereby
will be purchased. In order to make a conditional tender, a stockholder must
properly tender all Shares that such stockholder beneficially owns; partial
tenders will not qualify for this option. It is the tendering stockholder's
responsibility to calculate such minimum number of Shares, and each stockholder
is urged to consult such stockholder's own tax advisor. Unless this box has been
completed by specifying a minimum number of Shares, the tender will be deemed
unconditional.
Minimum number of Shares that must be purchased, if any are purchased:
- --------------------- Shares
<PAGE> 7
SIGN HERE
(SEE INSTRUCTIONS 1 AND 5)
(ALSO COMPLETE SUBSTITUTE FORM W-9 CONTAINED HEREIN)
-
--------------------------------------------------------------------------
-
--------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S)
Dated:
--------------------------------- , 1998
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, agents, officers of
corporations or others acting in a fiduciary or representative capacity,
please provide the following information. See Instruction 5.)
Name(s):
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
--------------------------------------------------------------------------
Address:
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
--------------------------------------------------------------------------
Taxpayer Identification or Social Security No.:
-------------------------------------------------------------------------
(COMPLETE SUBSTITUTE FORM W-9 CONTAINED HEREIN)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
--------------------------------------------------------------------------
Name:
--------------------------------------------------------------------------
(PLEASE PRINT)
Title:
--------------------------------------------------------------------------
Name of Firm:
--------------------------------------------------------------------------
Address:
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
--------------------------------------------------------------------------
Dated:
--------------------------------- , 1998
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required if either:
(a) this Letter of Transmittal is signed by the registered owner(s) of the
Shares exactly as the name(s) of the registered owner(s) appear(s) on the
certificate(s) (which term, for purposes of this document, shall include any
participant in DTC whose name appears on a security position listing as the
owner of Shares) tendered with this Letter of Transmittal and payment and
delivery are to be made directly to such registered owner(s) unless such
owner(s) has (have) completed either the box entitled "Special Payment
Instructions" or "Special Delivery Instructions" above; or
(b) such Shares are tendered for the account of a bank, broker, dealer,
credit union, savings association or other entity that is a member in good
standing of a recognized Medallion Program approved by The Securities Transfer
Association Inc. (each such entity an "Eligible Institution").
In all other cases, an Eligible Institution must guarantee all signatures
on this Letter of Transmittal. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES: GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be used only if certificates are
delivered with it to the Depositary (or such certificates will be delivered
pursuant to an applicable Notice of Guaranteed Delivery previously sent to the
Depositary) or, unless an Agent's Message (as defined in the Offer to Purchase)
is used, if tenders are to be made pursuant to the procedure for tender by
book-entry transfer set forth in Section 3 of the Offer to Purchase.
Certificates for all physically tendered Shares or confirmation of a book-entry
transfer into the Depositary's account at DTC of Shares tendered electronically,
together in each case with a properly completed and duly executed Letter of
Transmittal or facsimile of it, or an Agent's Message in connection with a
book-entry delivery of Shares, and any other documents required by this Letter
of Transmittal, should be mailed or delivered to the Depositary at the
appropriate address set forth herein and must be delivered to the Depositary on
or before the Expiration Date (as defined in the Offer to Purchase).
Stockholders whose certificates are not immediately available or who cannot
deliver Shares and all other required documents to the Depositary on or before
the Expiration Date, or whose Shares cannot be delivered on a timely basis
pursuant to the procedures for book-entry transfer, may tender their Shares by
or through any Eligible Institution by properly completing and duly executing
and delivering an applicable Notice of Guaranteed Delivery (or facsimile
thereof) and by otherwise complying with the guaranteed delivery procedure set
forth in Section 3 of the Offer to Purchase. Pursuant to such procedure, the
certificates for all physically tendered Shares, or book-entry confirmation, as
the case may be, as well as a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) (or, in the case of a book-entry delivery, an
Agent's Message) and all other documents required by this Letter of Transmittal,
must be received by the Depositary within three Nasdaq trading days after
receipt by the Depositary of such Notice of Guaranteed Delivery, all as provided
in Section 3 of the Offer to Purchase.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
signature guarantee by an Eligible Institution in the form set forth in such
Notice. For Shares to be properly tendered pursuant to the guaranteed delivery
procedure, the Depositary must receive the applicable Notice of Guaranteed
Delivery on or before the Expiration Date.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED.
Except as set forth in the Offer to Purchase, the Company will not accept
any alternative, conditional or contingent tenders, nor will it purchase any
fractional Shares. All tendering stockholders, by execution of this Letter of
Transmittal (or a facsimile hereof), waive any right to receive any notice of
the acceptance of their tender.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Shares Tendered" or "Order of Purchase of Shares" is inadequate,
the certificate numbers and the number of Shares should be listed on a separate
signed schedule and attached to this Letter of Transmittal.
<PAGE> 9
4. PARTIAL TENDERS AND UNPURCHASED SHARES. (Not applicable to stockholders
who tender by book-entry transfer.) If fewer than all of the Shares evidenced by
any certificate are to be tendered, fill in the number of Shares which are to be
tendered in the column entitled "Number of Shares Tendered". In such case, if
any tendered Shares are purchased, a new certificate for the remainder of the
Shares evidenced by the old certificate(s) will be issued and sent to the
registered owners, unless otherwise specified in either the "Special Payment
Instructions" or "Special Delivery Instructions" boxes on this Letter of
Transmittal, as soon as practicable after the Expiration Date. All Shares
represented by the certificate(s) listed and delivered to the Depositary are
deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS.
(a) If this Letter of Transmittal is signed by the registered owner(s) of
the Shares tendered hereby, the signature(s) must correspond exactly with the
name(s) as written on the face of the certificates without any change
whatsoever.
(b) If the Shares are registered in the names of two or more joint owners,
each such owner must sign this Letter of Transmittal.
(c) If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal (or facsimiles hereof) as there are different
registrations of certificates.
(d) When this Letter of Transmittal is signed by the registered owner(s) of
the Shares listed and transmitted hereby, no endorsements of certificate(s)
representing such Shares or separate stock powers are required unless payment is
to be made, or the certificates for Shares not tendered or not purchased are to
be issued, to a person other than the registered owner(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution. If
this Letter of Transmittal is signed by a person other than the registered
owner(s) of the certificates listed, however, the certificates must be endorsed
or accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered owner(s) appear(s) on the certificate, and the
signature(s) on such certificate or stock powers must be guaranteed by an
Eligible Institution. See Instruction 1.
(e) If this Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and must submit proper
evidence satisfactory to the Company of their authority so to act.
6. STOCK TRANSFER TAXES. Except as provided in this Instruction 6, no
stock transfer tax stamps or funds to cover such stamps need accompany this
Letter of Transmittal. The Company will pay or cause to be paid any stock
transfer taxes payable on the transfer to it of Shares purchased pursuant to the
Offer. If, however:
(a) payment of the Purchase Price is to be made to any person(s) other than
the registered owner(s); or
(b) Shares not tendered or not accepted for purchase are to be registered
in the name of any person(s) other than the registered owner(s); or
(c) tendered certificates are registered in the name(s) of any person(s)
other than the person(s) signing this Letter of Transmittal, then the Depositary
will deduct from the Purchase Price the amount of any stock transfer taxes
(whether imposed on the registered owner(s), such other person(s) or otherwise)
payable on account of the transfer to such person(s) unless satisfactory
evidence of the payment of such taxes or an exemption from them is submitted.
7. ODD LOTS. As described in the Offer to Purchase, if the Company is to
purchase less than all Shares properly tendered and not withdrawn on or before
the Expiration Date, the Shares purchased first will consist of all Shares
tendered by any stockholder who owned beneficially or of record, as of the close
of business on January 19, 1998 and continues to own beneficially or of record
as of the Expiration Date, an aggregate of fewer than 100 Shares and who tenders
all of such stockholder's Shares. Partial and conditional tenders will not
qualify for this preference. This preference will not be available unless the
box captioned "Odd Lots" in this Letter of Transmittal is completed.
8. CONDITIONAL TENDERS. As described in Section 3 of the Offer to
Purchase, stockholders may condition their tenders on all or a minimum number of
their tendered Shares being purchased ("Conditional Tenders"). If the Company is
to purchase less than all Shares tendered before the Expiration Date and not
withdrawn, any Shares tendered pursuant to a Conditional Tender for which the
condition was not satisfied shall be deemed withdrawn. All tendered Shares shall
be deemed unconditionally tendered unless the Conditional Tender section is
completed. Odd Lot Shares, in order to be eligible for preferential treatment,
cannot be conditionally tendered. It is the tendering stockholder's
responsibility to calculate the minimum number of Shares he or she wishes to
tender, and each stockholder is urged to consult his or her own tax adviser in
this regard.
<PAGE> 10
9. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the
Purchase Price of any Shares purchased is to be issued in the name of, and/or
any Shares not tendered or not purchased are to be returned to, a person other
than the person(s) signing this Letter of Transmittal or if the check and/or any
certificates for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal or to an
address other than that shown above in the box captioned "Description of Shares
Tendered," then the boxes captioned "Special Payment Instructions" and/or
"Special Delivery Instructions" on this Letter of Transmittal must be completed.
Stockholders tendering by book-entry transfer may request that Shares not
accepted for payment be credited to such account maintained at as such
stockholder may designate under "Special Payment Instructions." If no such
instructions are given, such Shares not accepted for payment will be returned by
crediting the account at DTC designated in the box captioned "Book-Entry
Transfer" on this Letter of Transmittal. Signatures must be guaranteed as
described in Instruction 1.
10. IRREGULARITIES. The Company will determine, in its sole discretion,
all questions as to the number of Shares to be accepted, the form of documents
and the validity, form, eligibility (including time of receipt) and acceptance
for payment of any tender of Shares and its determination shall be final and
binding on all parties. The Company reserves the absolute right to reject any or
all tenders of Shares determined by it not to be in proper form or the
acceptance of or payment for which may be unlawful. The Company also reserves
the absolute right to waive any of the conditions of the Offer or any defect or
irregularity in the tender of any particular Shares and the Company's
interpretation of the terms of the Offer (including these Instructions) will be
final and binding on all parties. No tender of Shares will be deemed to be
properly made until all defects and irregularities have been cured or waived.
Unless waived, any defects or irregularities in connection with tenders must be
cured within such time as the Company shall determine. None of the Company, the
Dealer Manager, the Depositary, the Information Agent nor any other person is or
will be obligated to give notice of defects or irregularities in tenders, nor
shall any of them incur any liability for failure to give any such notice.
11. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to, or additional copies of the
Offer to Purchase, the Notice of Guaranteed Delivery and this Letter of
Transmittal may be obtained from, the Information Agent at the address and
telephone number set forth at the end of this Letter of Transmittal or from your
broker, dealer, commercial bank, trust company or other nominee.
12. SUBSTITUTE FORM W-9. Each tendering stockholder that is not an exempt
recipient (see "Important Tax Information" below) is required to provide the
Depositary with a correct taxpayer identification number ("TIN") on Substitute
Form W-9 (the "Form W-9") which is provided under "Important Tax Information"
below, and to certify whether such stockholder is subject to backup withholding
of federal income tax. An exempt recipient should also provide the Depositary
with Form W-9 completed in accordance with the enclosed instructions in order to
avoid possible erroneous backup withholding (see "Important Tax Information"
below). If a tendering stockholder is subject to backup withholding, such
stockholder must cross out item (2) of the Certification box of the Form W-9.
Failure to provide the information on Form W-9 may subject the tendering
stockholder to 31% Federal income tax withholding on the payments made to the
stockholder or other payee with respect to Shares purchased pursuant to the
Offer. If the tendering stockholder has not been issued a TIN and has applied
for a number or intends to apply for a number in the near future, such
stockholder should write "Applied For" in the space provided for the TIN in Part
I, and sign and date the Form W-9. If "Applied For" is written in Part I and the
Depositary is not provided with a TIN within sixty (60) days, the Depositary
will withhold 31% on all such payments until a TIN is provided to the
Depositary.
13. WITHHOLDING ON FOREIGN STOCKHOLDERS. The Depositary will withhold
federal income taxes equal to 30% of the gross payments payable to a foreign
stockholder unless the Depositary determines that a reduced rate of withholding
or an exemption from withholding is applicable. For this purpose, a foreign
stockholder is any stockholder that is not (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or any political subdivision
thereof, or (iii) any estate or trust the income of which is subject to United
States federal income taxation regardless of the source of such income. The
Depositary will determine a stockholder's status as a foreign stockholder and
eligibility for a reduced rate of, or an exemption from, withholding by
reference to the stockholder's address and to any outstanding certificates or
statements, including Forms 1001 and 4224 furnished by the stockholder,
concerning eligibility for a reduced rate of, or exemption from, withholding
unless facts and circumstances indicate that such reliance is not warranted. A
foreign stockholder who has not previously submitted the appropriate
certificates or statements with respect to a reduced rate of, or exemption from,
withholding for which such stockholder may be eligible should consider doing so
in order to avoid over withholding. Forms 1001 and 4224 may be obtained from the
Depositary. A foreign stockholder may be eligible to obtain a refund of tax
withheld if such stockholder meets one of the three tests for capital gain or
loss treatment described in Section 14 of the Offer to Purchase or is otherwise
able to establish that no tax or a reduced amount of tax was due.
<PAGE> 11
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE OF IT
(TOGETHER WITH CERTIFICATES FOR SHARES OR CONFIRMATION OF BOOK-ENTRY TRANSFER
AND ALL OTHER REQUIRED DOCUMENTS) OR THE NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE DEPOSITARY ON OR BEFORE THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under Federal income tax law, a stockholder, other than a noncorporate
foreign stockholder, whose tendered Shares are accepted for payment is required
to provide the Depositary with such stockholder's correct TIN on Form W-9 below.
If a tendering stockholder is subject to backup withholding, such stockholder
must cross out item (2) on the certification box of Form W-9. If the Depositary
is not provided with the correct TIN, the Internal Revenue Service may subject
the stockholder or other payee to a $50 penalty. In addition, payments that are
made to such stockholder or other payee with respect to Shares purchased
pursuant to the Offer may be subject to backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are considered "exempt recipients" and are not subject to
these backup withholding and reporting requirements. Exempt recipients, other
than foreign stockholders, should complete Form W-9 pursuant to the instructions
contained in the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9." The Company or the Depositary may
request additional proof of exemption. In order for a foreign stockholder (as
defined in Instruction 13 above) to qualify as an exempt recipient, the
stockholder must submit a Form W-8, signed under penalties of perjury, attesting
to that stockholder's exempt status. Filing of Form W-8 will not exempt such
stockholders from the withholding discussed in Instruction 13 above. A Form W-8
can be obtained from the Depositary. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for more
instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments made to the stockholder or other payee. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
PURPOSE OF FORM W-9
To prevent backup withholding on a payment made to a stockholder or other
payee with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of the stockholder's correct TIN by completing
the form below, certifying that the TIN provided on Form W-9 is correct (or that
such stockholder is awaiting a TIN) and that:
(a) the stockholder is exempt from backup withholding;
(b) the stockholder has not been notified by the Internal Revenue Service
that the stockholder is subject to backup withholding as a result of a failure
to report all interest or dividends; or
(c) the Internal Revenue Service has notified the stockholder that the
stockholder is no longer subject to backup withholding.
The Stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares. If the Shares are in more than one name or are not in the name of the
actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Form W-9" for additional guidance on which number to
report.
<PAGE> 12
PAYER'S NAME:
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- PLEASE PROVIDE YOUR TIN ---------------------------------
FORM W-9 IN THE BOX AT RIGHT AND CERTIFY BY Social Security Number(s)
DEPARTMENT OF THE TREASURY SIGNING AND DATING BELOW. OR
INTERNAL REVENUE SERVICE -----------------------------------
Identification Number
PAYER'S REQUEST FOR TAXPAYER (IF AWAITING TIN WRITE "APPLIED
FOR")
IDENTIFICATION NUMBER (TIN)
AND CERTIFICATION
----------------------------------------------------------------------
PART II -- For Payees exempt from backup withholding, see the
enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 and complete as instructed therein.
- --------------------------------------------------------------------------------------------------------
CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or a Taxpayer
Identification Number has not been issued to me) and either (a) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate Internal Revenue Service
("IRS") or Social Security Administration office or (b) I intend to mail or deliver an application
in the near future. (I understand that if I do not provide a Taxpayer Identification Number within
(60) days, 31% of all reportable payments made to me thereafter will be withheld until I provide a
number); and
(2) I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I
have not been notified by the IRS that I am subject to backup withholding as a result of a failure
to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to
backup withholding.
CERTIFICATE INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that
you are subject to backup withholding because of underreporting interest or dividends on your tax
return. However, if after being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to backup withholding, do not
cross out item (2). (Also see instructions in the enclosed Guidelines.)
- --------------------------------------------------------------------------------------------------------
-
SIGNATURE ------------------------------------------------- DATE
--------------------------------------- , 1998
- --------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York
(800) 431-9633
The Dealer Manager for the Offer is:
BT ALEX. BROWN INCORPORATED
1 South Street
Baltimore, Maryland 21202
(800) 638-2596
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER DEPOSITARY SHARES EACH REPRESENTING ONE ONE-HUNDREDTH INTEREST IN A
SHARE OF 6 3/4% CONVERTIBLE CLASS B PREFERRED STOCK, SERIES 1995 (STOCK
APPRECIATION INCOME
LINKED SECURITIES (SAILS))
OF
ADVANTA CORP.
PURSUANT TO THE OFFER TO PURCHASE
DATED JANUARY 20, 1998
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY,
FEBRUARY 20, 1998, UNLESS THE OFFER IS EXTENDED.
To: FIRST CITY TRANSFER COMPANY, DEPOSITARY
<TABLE>
<CAPTION>
BY HAND OR OVERNIGHT COURIER: BY FACSIMILE: BY MAIL:
<S> <C> <C>
First City Trust Company (732) 906-9269 First City Trust Company
505 Thornall Street P.O. Box 170
Suite 303 FOR INFORMATION: Iselin, New Jersey 08830-0170
Edison, New Jersey 08837 Call Collect (732) 906-9227
</TABLE>
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN THOSE SHOWN ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THAT LISTED ABOVE
DOES NOT CONSTITUTE A VALID DELIVERY.
THIS LETTER OF TRANSMITTAL IS TO BE USED ONLY (A) IF CERTIFICATES FOR
SHARES (AS DEFINED BELOW) ARE TO BE FORWARDED HEREWITH OR (B) IF A TENDER OF
SHARES IS TO BE MADE BY BOOK-ENTRY TRANSFER TO THE ACCOUNT MAINTAINED BY THE
DEPOSITARY AT THE DEPOSITORY TRUST COMPANY ("DTC"), PURSUANT TO SECTION 3 OF THE
OFFER TO PURCHASE.
STOCKHOLDERS WHOSE CERTIFICATES ARE NOT IMMEDIATELY AVAILABLE OR WHO
CANNOT DELIVER TO THE DEPOSITARY THEIR CERTIFICATES FOR SHARES AND ALL OTHER
DOCUMENTS THIS LETTER OF TRANSMITTAL REQUIRES AT OR BEFORE THE EXPIRATION DATE
(AS DEFINED IN THE OFFER TO PURCHASE) (OR WHO ARE UNABLE TO COMPLY WITH THE
PROCEDURE FOR BOOK-ENTRY TRANSFER ON A TIMELY BASIS) MUST TENDER THEIR SHARES
ACCORDING TO THE GUARANTEED DELIVERY PROCEDURES SET FORTH IN SECTION 3 OF THE
OFFER TO PURCHASE. SEE INSTRUCTION 2. DELIVERY OF DOCUMENTS TO DTC DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
<PAGE> 2
BOOK-ENTRY TRANSFER
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH DTC AND COMPLETE THE
FOLLOWING:
Name of Tendering Institution:
-----------------------------------------------------------------------------
DTC Account Number:
-----------------------------------------------------------------------------
Transaction Code Number:
-----------------------------------------------------------------------------
GUARANTEED DELIVERY
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s):
-----------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
---------------------------------------------------------------------
Name of Institution that Guaranteed Delivery:
----------------------------------------------------------------------------
DTC Account Number (if delivered by Book-Entry Transfer):
-----------------------------------------------------------
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
(SEE INSTRUCTIONS 3 AND 4)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE(S) TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER
CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Total Shares
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by
any certificates delivered to the Depositary are being tendered. See
Instruction 4.
- --------------------------------------------------------------------------------
Ladies and Gentlemen:
The undersigned hereby tenders to Advanta Corp., a Delaware corporation
(the "Company"), the above-described shares of the Company's depositary shares
each representing one one-hundredth interest in a share of 6 3/4% Convertible
Class B Preferred Stock, Series 1995 (Stock Appreciation Income Linked
Securities (SAILS)) (the "Shares"), at $32.80 per Share (the "Purchase Price"),
net to the undersigned in cash, without interest thereon, upon the terms and
subject to the conditions set forth in the Company's Offer to Purchase dated
January 20, 1998, receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which together constitute the "Offer").
Subject to and effective upon acceptance for payment of the Shares tendered
hereby in accordance with the terms of the Offer (including, if the Offer is
extended or amended, the terms or conditions of any such extension or
amendment), the undersigned hereby sells, assigns, and transfers to, or upon the
order of, the Company all right, title and interest in and to all Shares
tendered hereby or orders the registration of such Shares tendered by book-entry
transfer that are purchased pursuant to the Offer to, or upon the order of, the
Company and hereby irrevocably constitutes and appoints the Depositary as
attorney-in-fact of the undersigned with respect to such Shares, with full power
of substitution (such power of attorney being an irrevocable power coupled with
an interest), to:
(a) deliver certificates for such Shares, or transfer ownership of
such Shares on the account books maintained by DTC, together in either such
case with all accompanying evidences of transfer and authenticity, to or
upon the order of the Company, upon receipt by the Depositary, as the
undersigned's agent, of the Purchase Price with respect to such Shares;
<PAGE> 3
(b) present certificates for such Shares for cancellation and transfer
of such Shares on the Company's books; and
(c) receive all benefits and otherwise exercise all rights of
beneficial ownership of such Shares, subject to the next succeeding
paragraph, all in accordance with the terms of the Offer.
The undersigned hereby represents and warrants to the Company that:
(a) the undersigned understands that tenders of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and
in the Instructions hereto will constitute the undersigned's acceptance of
the terms and conditions of the Offer, including the undersigned's
representation and warranty that (i) the undersigned has a net long
position in Shares or equivalent securities at least equal to the Shares
tendered within the meaning of Rule 14e-4 promulgated under the Securities
Exchange Act of 1934, as amended, and (ii) such tender of Shares complies
with Rule 14e-4;
(b) when and to the extent the Company accepts the Shares for
purchase, the Company will acquire good, marketable and unencumbered title
to them, free and clear of all security interests, liens, charges,
encumbrances, conditional sales agreements or other obligations relating to
their sale or transfer, and not subject to any adverse claim;
(c) on request, the undersigned will execute and deliver any
additional documents the Depositary or the Company deems necessary or
desirable to complete the assignment, transfer and purchase of the Shares
tendered hereby; and
(d) the undersigned has read and agrees to all of the terms of the
Offer.
The names and addresses of the registered owners should be printed, if they
are not already printed above, exactly as they appear on the certificates
representing Shares tendered hereby. The certificate numbers, the number of
Shares represented by such certificates, and the number of Shares that the
undersigned wishes to tender should be indicated in the appropriate boxes.
The undersigned understands that, upon the terms and subject to the
conditions of the Offer, the Company will purchase 1,078,930 Shares (or such
lesser number of Shares as are properly tendered and not withdrawn) at the
Purchase Price. The undersigned understands that all Shares properly tendered
and not withdrawn prior to the Expiration Date (as such term is defined in the
Offer to Purchase) will be purchased at the Purchase Price, net to the seller in
cash, without interest thereon, upon the terms and subject to the conditions of
the Offer, including its proration and conditional tender provisions, and that
the Company will return all other Shares, including Shares not purchased because
of proration and Shares that were conditionally tendered and not accepted. The
undersigned understands that tenders of Shares pursuant to any one of the
procedures described in Section 3 of the Offer to Purchase and in the
Instructions hereto will constitute a binding agreement between the undersigned
and the Company upon the terms and subject to the conditions of the Offer.
The undersigned recognizes that under certain circumstances set forth in
the Offer to Purchase, the Company may terminate or amend the Offer or may not
be required to purchase any of the Shares tendered hereby or may accept for
payment fewer than all of the Shares tendered hereby. The undersigned
understands that certificate(s) for any Shares not tendered or not purchased
will be returned to the undersigned at the address indicated above, unless
otherwise indicated under the "Special Payment Instructions" or "Special
Delivery Instructions" below. The undersigned recognizes that the Company has no
obligation, pursuant to the "Special Payment Instructions," to transfer any
certificate for Shares from the name of their registered owner, or to order the
registration or transfer of such Shares tendered by book-entry transfer, if the
Company purchases none of the Shares represented by such certificate or tendered
by such book-entry transfer.
The undersigned understands that acceptance of Shares by the Company for
payment will constitute a binding agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Offer.
The check for the Purchase Price for such of the tendered Shares as are
purchased will be issued to the order of the undersigned and mailed to the
address indicated above unless otherwise indicated under the "Special Payment
Instructions" or the "Special Delivery Instructions" below.
All authority conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive the death or incapacity
of, the undersigned, and any obligations of the undersigned under this Letter of
Transmittal shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
Shares tendered pursuant to the Offer may be withdrawn at any time on or prior
to the Expiration Date and, unless theretofore accepted for payment by the
Company pursuant to the Offer, may also be withdrawn at any time after 12:00
Midnight, New York City time, on March 17, 1998. See Section 4 of the Offer to
Purchase.
<PAGE> 4
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
ODD LOTS
(SEE INSTRUCTION 7)
To be completed ONLY if Shares are being tendered by or on behalf of a
person owning beneficially as of the close of business on January 19, 1998, an
aggregate of fewer than 100 Shares.
The undersigned either (check one box):
[ ] was the beneficial owner as of the close of business on January 19, 1998,
and will continue to be the beneficial owner as of the Expiration Date, of
an aggregate of fewer than 100 Shares, all of which are being tendered, or
[ ] is a broker, dealer, commercial bank, trust company or other nominee which:
(a) is tendering, for the beneficial owners thereof, Shares with respect to
which it is the record owner, and
(b) believes, based upon representations made to it by such beneficial
owners, that each such person was the beneficial owner as of the close
of business on January 19, 1998, and will continue to be the beneficial
owner as of the Expiration Date, of an aggregate of fewer than 100
Shares and is tendering all of such Shares.
<PAGE> 5
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5, 6 AND 9)
To be completed ONLY if certificates for Shares not tendered or not
purchased and/or the check for the Purchase Price of Shares purchased are
to be issued in the name of someone other than the undersigned or if
Shares tendered by book-entry transfer which are not purchased are to be
returned by credit to an account maintained at DTC other than the account
indicated above.
Issue: [ ] check [ ] certificate(s) to:
Name:
----------------------------------------------------
(PLEASE PRINT)
Address:
--------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAXPAYER IDENTIFICATION
OR SOCIAL SECURITY NUMBER)
Credit Shares tendered by book-entry transfer that are not purchased to
DTC Account No.
============================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 4, 5, 6 AND 9)
To be completed ONLY if certificates for Shares not tendered or not
purchased and/or the check for the Purchase Price of Shares purchased are
to be sent to someone other than the undersigned, or to the undersigned at
an address other than that shown above.
Mail: [ ] check [ ] certificate(s) to:
Name:
----------------------------------------------------
(PLEASE PRINT)
Address:
--------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
CONDITIONAL TENDER
(SEE INSTRUCTION 8)
A tendering stockholder may condition such stockholder's tender of Shares upon
the purchase by the Company of a specified minimum number of the Shares tendered
hereby, all as described in the Offer to Purchase, particularly in Section 3
thereof. Unless at least such minimum number of Shares is purchased by the
Company pursuant to the terms of the Offer, none of the Shares tendered hereby
will be purchased. In order to make a conditional tender, a stockholder must
properly tender all Shares that such stockholder beneficially owns; partial
tenders will not qualify for this option. It is the tendering stockholder's
responsibility to calculate such minimum number of Shares, and each stockholder
is urged to consult such stockholder's own tax advisor. Unless this box has been
completed by specifying a minimum number of Shares, the tender will be deemed
unconditional.
Minimum number of Shares that must be purchased, if any are purchased:
- --------------------- Shares
<PAGE> 6
SIGN HERE
(SEE INSTRUCTIONS 1 AND 5)
(ALSO COMPLETE SUBSTITUTE FORM W-9 CONTAINED HEREIN)
-
--------------------------------------------------------------------------
-
--------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S)
Dated:
--------------------------------- , 1998
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, agents, officers of
corporations or others acting in a fiduciary or representative capacity,
please provide the following information. See Instruction 5.)
Name(s):
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
--------------------------------------------------------------------------
Address:
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
--------------------------------------------------------------------------
Taxpayer Identification or Social Security No.:
---------------------------------------------------------------------------
(COMPLETE SUBSTITUTE FORM W-9 CONTAINED HEREIN)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature:
--------------------------------------------------------------------------
Name:
--------------------------------------------------------------------------
(PLEASE PRINT)
Title:
--------------------------------------------------------------------------
Name of Firm:
--------------------------------------------------------------------------
Address:
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
--------------------------------------------------------------------------
Dated:
--------------------------------- , 1998
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required if either:
(a) this Letter of Transmittal is signed by the registered owner(s) of the
Shares exactly as the name(s) of the registered owner(s) appear(s) on the
certificate(s) (which term, for purposes of this document, shall include any
participant in DTC whose name appears on a security position listing as the
owner of Shares) tendered with this Letter of Transmittal and payment and
delivery are to be made directly to such registered owner(s) unless such
owner(s) has (have) completed either the box entitled "Special Payment
Instructions" or "Special Delivery Instructions" above; or
(b) such Shares are tendered for the account of a bank, broker, dealer,
credit union, savings association or other entity that is a member in good
standing of a recognized Medallion Program approved by The Securities Transfer
Association Inc. (each such entity an "Eligible Institution").
In all other cases, an Eligible Institution must guarantee all signatures
on this Letter of Transmittal. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES: GUARANTEED DELIVERY
PROCEDURES. This Letter of Transmittal is to be used only if certificates are
delivered with it to the Depositary (or such certificates will be delivered
pursuant to an applicable Notice of Guaranteed Delivery previously sent to the
Depositary) or, unless an Agent's Message (as defined in the Offer to Purchase)
is used, if tenders are to be made pursuant to the procedure for tender by
book-entry transfer set forth in Section 3 of the Offer to Purchase.
Certificates for all physically tendered Shares or confirmation of a book-entry
transfer into the Depositary's account at DTC of Shares tendered electronically,
together in each case with a properly completed and duly executed Letter of
Transmittal or facsimile of it, or an Agent's Message in connection with a
book-entry delivery of Shares, and any other documents required by this Letter
of Transmittal, should be mailed or delivered to the Depositary at the
appropriate address set forth herein and must be delivered to the Depositary on
or before the Expiration Date (as defined in the Offer to Purchase).
Stockholders whose certificates are not immediately available or who cannot
deliver Shares and all other required documents to the Depositary on or before
the Expiration Date, or whose Shares cannot be delivered on a timely basis
pursuant to the procedures for book-entry transfer, may tender their Shares by
or through any Eligible Institution by properly completing and duly executing
and delivering an applicable Notice of Guaranteed Delivery (or facsimile
thereof) and by otherwise complying with the guaranteed delivery procedure set
forth in Section 3 of the Offer to Purchase. Pursuant to such procedure, the
certificates for all physically tendered Shares, or book-entry confirmation, as
the case may be, as well as a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) (or, in the case of a book-entry delivery, an
Agent's Message) and all other documents required by this Letter of Transmittal,
must be received by the Depositary within three Nasdaq trading days after
receipt by the Depositary of such Notice of Guaranteed Delivery, all as provided
in Section 3 of the Offer to Purchase.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must include a
signature guarantee by an Eligible Institution in the form set forth in such
Notice. For Shares to be properly tendered pursuant to the guaranteed delivery
procedure, the Depositary must receive the applicable Notice of Guaranteed
Delivery on or before the Expiration Date.
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED.
Except as set forth in the Offer to Purchase, the Company will not accept
any alternative, conditional or contingent tenders, nor will it purchase any
fractional Shares. All tendering stockholders, by execution of this Letter of
Transmittal (or a facsimile hereof), waive any right to receive any notice of
the acceptance of their tender.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Shares Tendered" or "Order of Purchase of Shares" is inadequate,
the certificate numbers and the number of Shares should be listed on a separate
signed schedule and attached to this Letter of Transmittal.
<PAGE> 8
4. PARTIAL TENDERS AND UNPURCHASED SHARES. (Not applicable to stockholders
who tender by book-entry transfer.) If fewer than all of the Shares evidenced by
any certificate are to be tendered, fill in the number of Shares which are to be
tendered in the column entitled "Number of Shares Tendered". In such case, if
any tendered Shares are purchased, a new certificate for the remainder of the
Shares evidenced by the old certificate(s) will be issued and sent to the
registered owners, unless otherwise specified in either the "Special Payment
Instructions" or "Special Delivery Instructions" boxes on this Letter of
Transmittal, as soon as practicable after the Expiration Date. All Shares
represented by the certificate(s) listed and delivered to the Depositary are
deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS.
(a) If this Letter of Transmittal is signed by the registered owner(s) of
the Shares tendered hereby, the signature(s) must correspond exactly with the
name(s) as written on the face of the certificates without any change
whatsoever.
(b) If the Shares are registered in the names of two or more joint owners,
each such owner must sign this Letter of Transmittal.
(c) If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal (or facsimiles hereof) as there are different
registrations of certificates.
(d) When this Letter of Transmittal is signed by the registered owner(s) of
the Shares listed and transmitted hereby, no endorsements of certificate(s)
representing such Shares or separate stock powers are required unless payment is
to be made, or the certificates for Shares not tendered or not purchased are to
be issued, to a person other than the registered owner(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution. If
this Letter of Transmittal is signed by a person other than the registered
owner(s) of the certificates listed, however, the certificates must be endorsed
or accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered owner(s) appear(s) on the certificate, and the
signature(s) on such certificate or stock powers must be guaranteed by an
Eligible Institution. See Instruction 1.
(e) If this Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and must submit proper
evidence satisfactory to the Company of their authority so to act.
6. STOCK TRANSFER TAXES. Except as provided in this Instruction 6, no
stock transfer tax stamps or funds to cover such stamps need accompany this
Letter of Transmittal. The Company will pay or cause to be paid any stock
transfer taxes payable on the transfer to it of Shares purchased pursuant to the
Offer. If, however:
(a) payment of the Purchase Price is to be made to any person(s) other than
the registered owner(s); or
(b) Shares not tendered or not accepted for purchase are to be registered
in the name of any person(s) other than the registered owner(s); or
(c) tendered certificates are registered in the name(s) of any person(s)
other than the person(s) signing this Letter of Transmittal, then the Depositary
will deduct from the Purchase Price the amount of any stock transfer taxes
(whether imposed on the registered owner(s), such other person(s) or otherwise)
payable on account of the transfer to such person(s) unless satisfactory
evidence of the payment of such taxes or an exemption from them is submitted.
7. ODD LOTS. As described in the Offer to Purchase, if the Company is to
purchase less than all Shares properly tendered and not withdrawn on or before
the Expiration Date, the Shares purchased first will consist of all Shares
tendered by any stockholder who owned beneficially or of record, as of the close
of business on January 19, 1998 and continues to own beneficially or of record
as of the Expiration Date, an aggregate of fewer than 100 Shares and who tenders
all of such stockholder's Shares. Partial and conditional tenders will not
qualify for this preference. This preference will not be available unless the
box captioned "Odd Lots" in this Letter of Transmittal is completed.
8 CONDITIONAL TENDERS. As described in Section 3 of the Offer to Purchase,
stockholders may condition their tenders on all or a minimum number of their
tendered Shares being purchased ("Conditional Tenders"). If the Company is to
purchase less than all Shares tendered before the Expiration Date and not
withdrawn, any Shares tendered pursuant to a Conditional Tender for which the
condition was not satisfied shall be deemed withdrawn. All tendered Shares shall
be deemed unconditionally tendered unless the Conditional Tender section is
completed. Odd Lot Shares, in order to be eligible for preferential treatment,
cannot be conditionally tendered. It is the tendering stockholder's
responsibility to calculate the minimum number of Shares he or she wishes to
tender, and each stockholder is urged to consult his or her own tax adviser in
this regard.
<PAGE> 9
9. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the
Purchase Price of any Shares purchased is to be issued in the name of, and/or
any Shares not tendered or not purchased are to be returned to, a person other
than the person(s) signing this Letter of Transmittal or if the check and/or any
certificates for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal or to an
address other than that shown above in the box captioned "Description of Shares
Tendered," then the boxes captioned "Special Payment Instructions" and/or
"Special Delivery Instructions" on this Letter of Transmittal must be completed.
Stockholders tendering by book-entry transfer may request that Shares not
accepted for payment be credited to such account maintained at DTC as such
stockholder may designate under "Special Payment Instructions." If no such
instructions are given, such Shares not accepted for payment will be returned by
crediting the account at DTC designated in the box captioned "Book-Entry
Transfer" on this Letter of Transmittal. Signatures must be guaranteed as
described in Instruction 1.
10. IRREGULARITIES. The Company will determine, in its sole discretion,
all questions as to the number of Shares to be accepted, the form of documents
and the validity, form, eligibility (including time of receipt) and acceptance
for payment of any tender of Shares and its determination shall be final and
binding on all parties. The Company reserves the absolute right to reject any or
all tenders of Shares determined by it not to be in proper form or the
acceptance of or payment for which may be unlawful. The Company also reserves
the absolute right to waive any of the conditions of the Offer or any defect or
irregularity in the tender of any particular Shares and the Company's
interpretation of the terms of the Offer (including these Instructions) will be
final and binding on all parties. No tender of Shares will be deemed to be
properly made until all defects and irregularities have been cured or waived.
Unless waived, any defects or irregularities in connection with tenders must be
cured within such time as the Company shall determine. None of the Company, the
Dealer Manager, the Depositary, the Information Agent nor any other person is or
will be obligated to give notice of defects or irregularities in tenders, nor
shall any of them incur any liability for failure to give any such notice.
11. QUESTIONS AND REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions
and requests for assistance may be directed to, or additional copies of the
Offer to Purchase, the Notice of Guaranteed Delivery and this Letter of
Transmittal may be obtained from, the Information Agent at the address and
telephone number set forth at the end of this Letter of Transmittal or from your
broker, dealer, commercial bank, trust company or other nominee.
12. SUBSTITUTE FORM W-9. Each tendering stockholder that is not an exempt
recipient (see "Important Tax Information" below) is required to provide the
Depositary with a correct taxpayer identification number ("TIN") on Substitute
Form W-9 (the "Form W-9") which is provided under "Important Tax Information"
below, and to certify whether such stockholder is subject to backup withholding
of federal income tax. An exempt recipient should also provide the Depositary
with Form W-9 completed in accordance with the enclosed instructions in order to
avoid possible erroneous backup withholding (see "Important Tax Information"
below). If a tendering stockholder is subject to backup withholding, such
stockholder must cross out item (2) of the Certification box of the Form W-9.
Failure to provide the information on Form W-9 may subject the tendering
stockholder to 31% Federal income tax withholding on the payments made to the
stockholder or other payee with respect to Shares purchased pursuant to the
Offer. If the tendering stockholder has not been issued a TIN and has applied
for a number or intends to apply for a number in the near future, such
stockholder should write "Applied For" in the space provided for the TIN in Part
I, and sign and date the Form W-9. If "Applied For" is written in Part I and the
Depositary is not provided with a TIN within sixty (60) days, the Depositary
will withhold 31% on all such payments until a TIN is provided to the
Depositary.
13. WITHHOLDING ON FOREIGN STOCKHOLDERS. The Depositary will withhold
federal income taxes equal to 30% of the gross payments payable to a foreign
stockholder unless the Depositary determines that a reduced rate of withholding
or an exemption from withholding is applicable. For this purpose, a foreign
stockholder is any stockholder that is not (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or any political subdivision
thereof, or (iii) any estate or trust the income of which is subject to United
States federal income taxation regardless of the source of such income. The
Depositary will determine a stockholder's status as a foreign stockholder and
eligibility for a reduced rate of, or an exemption from, withholding by
reference to the stockholder's address and to any outstanding certificates or
statements, including Forms 1001 and 4224 furnished by the stockholder,
concerning eligibility for a reduced rate of, or exemption from, withholding
unless facts and circumstances indicate that such reliance is not warranted. A
foreign stockholder who has not previously submitted the appropriate
certificates or statements with respect to a reduced rate of, or exemption from,
withholding for which such stockholder may be eligible should consider doing so
in order to avoid over withholding. Forms 1001 and 4224 may be obtained from the
Depositary. A foreign stockholder may be eligible to obtain a refund of tax
withheld if such stockholder meets one of the three tests for capital gain or
loss treatment described in Section 14 of the Offer to Purchase or is otherwise
able to establish that no tax or a reduced amount of tax was due.
<PAGE> 10
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE OF IT
(TOGETHER WITH CERTIFICATES FOR SHARES OR CONFIRMATION OF BOOK-ENTRY TRANSFER
AND ALL OTHER REQUIRED DOCUMENTS) OR THE NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE DEPOSITARY ON OR BEFORE THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under Federal income tax law, a stockholder, other than a noncorporate
foreign stockholder, whose tendered Shares are accepted for payment is required
to provide the Depositary with such stockholder's correct TIN on Form W-9 below.
If a tendering stockholder is subject to backup withholding, such stockholder
must cross out item (2) on the certification box of Form W-9. If the Depositary
is not provided with the correct TIN, the Internal Revenue Service may subject
the stockholder or other payee to a $50 penalty. In addition, payments that are
made to such stockholder or other payee with respect to Shares purchased
pursuant to the Offer may be subject to backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are considered "exempt recipients" and are not subject to
these backup withholding and reporting requirements. Exempt recipients, other
than foreign stockholders, should complete Form W-9 pursuant to the instructions
contained in the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9." The Company or the Depositary may
request additional proof of exemption. In order for a foreign stockholder (as
defined in Instruction 13 above) to qualify as an exempt recipient, the
stockholder must submit a Form W-8, signed under penalties of perjury, attesting
to that stockholder's exempt status. Filing of Form W-8 will not exempt such
stockholders from the withholding discussed in Instruction 13 above. A Form W-8
can be obtained from the Depositary. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for more
instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments made to the stockholder or other payee. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
PURPOSE OF FORM W-9
To prevent backup withholding on a payment made to a stockholder or other
payee with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of the stockholder's correct TIN by completing
the form below, certifying that the TIN provided on Form W-9 is correct (or that
such stockholder is awaiting a TIN) and that:
(a) the stockholder is exempt from backup withholding;
(b) the stockholder has not been notified by the Internal Revenue Service
that the stockholder is subject to backup withholding as a result of a failure
to report all interest or dividends; or
(c) the Internal Revenue Service has notified the stockholder that the
stockholder is no longer subject to backup withholding.
The Stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares. If the Shares are in more than one name or are not in the name of the
actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Form W-9" for additional guidance on which number to
report.
<PAGE> 11
PAYER'S NAME:
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- PLEASE PROVIDE YOUR TIN ---------------------------------
FORM W-9 IN THE BOX AT RIGHT AND CERTIFY BY Social Security Number(s)
DEPARTMENT OF THE TREASURY SIGNING AND DATING BELOW. OR
INTERNAL REVENUE SERVICE -----------------------------------
PAYER'S REQUEST FOR TAXPAYER Identification Number
IDENTIFICATION NUMBER (TIN) (If awaiting TIN write "Applied
AND CERTIFICATION For")
----------------------------------------------------------------------
PART II -- For Payees exempt from backup withholding, see the
enclosed Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 and complete as instructed therein.
- --------------------------------------------------------------------------------------------------------
CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or a Taxpayer
Identification Number has not been issued to me) and either (a) I have mailed or delivered an
application to receive a Taxpayer Identification Number to the appropriate Internal Revenue Service
("IRS") or Social Security Administration office or (b) I intend to mail or deliver an application
in the near future. (I understand that if I do not provide a Taxpayer Identification Number within
(60) days, 31% of all reportable payments made to me thereafter will be withheld until I provide a
number); and
(2) I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I
have not been notified by the IRS that I am subject to backup withholding as a result of a failure
to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to
backup withholding.
CERTIFICATE INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that
you are subject to backup withholding because of underreporting interest or dividends on your tax
return. However, if after being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to backup withholding, do not
cross out item (2). (Also see instructions in the enclosed Guidelines.)
- --------------------------------------------------------------------------------------------------------
SIGNATURE -------------------------------------------------- DATE
--------------------------------------- , 1998
- --------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York
(800) 431-9633
The Dealer Manager for the Offer is:
BT ALEX. BROWN INCORPORATED
1 South Street
Baltimore, Maryland 21202
(800) 638-2596
<PAGE> 1
ADVANTA CORP.
NOTICE OF GUARANTEED DELIVERY
OF SHARES OF
CLASS A COMMON STOCK
(INCLUDING THE ASSOCIATED CLASS A PURCHASE RIGHTS)
AND
CLASS B COMMON STOCK
(INCLUDING THE ASSOCIATED CLASS B PURCHASE RIGHTS)
AND
DEPOSITARY SHARES EACH REPRESENTING ONE ONE-HUNDREDTH
INTEREST IN A SHARE OF 6 3/4% CONVERTIBLE CLASS B PREFERRED STOCK,
SERIES 1995 (STOCK APPRECIATION INCOME LINKED SECURITIES (SAILS))
OFFER TO PURCHASE FOR CASH
UP TO 7,882,750 SHARES OF ITS CLASS A COMMON STOCK
(INCLUDING THE ASSOCIATED CLASS A PURCHASE RIGHTS)
AT $40 PER SHARE NET
AND
UP TO 12,482,850 SHARES OF ITS CLASS B COMMON STOCK
(INCLUDING THE ASSOCIATED CLASS B PURCHASE RIGHTS)
AT $40 PER SHARE NET
AND
UP TO 1,078,930 OF ITS DEPOSITARY SHARES EACH REPRESENTING ONE ONE-HUNDREDTH
INTEREST IN A
SHARE OF 6 3/4% CONVERTIBLE CLASS B PREFERRED STOCK, SERIES 1995 (STOCK
APPRECIATION INCOME
LINKED SECURITIES (SAILS))
AT $32.80 PER SHARE NET
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY,
FEBRUARY 20, 1998, UNLESS THE OFFER IS EXTENDED.
This form or a facsimile hereof must be used to accept the Offer (as defined
below) if:
(a) certificates for the Class A Common Stock, the Class B Common Stock, or the
depositary shares each representing one one-hundredth interest in a share
of 6 3/4% Convertible Class B Preferred Stock, Series 1995 (Stock
Appreciation Income Linked Securities (SAILS)) of Advanta Corp., a Delaware
corporation, are not immediately available; or
(b) the procedure for book-entry transfer cannot be completed on a timely basis;
or
(c) time will not permit the applicable Letter of Transmittal or other required
documents to reach the Depositary prior to the Expiration Date (as defined
in Section 1 of the Offer to Purchase, as defined below).
<PAGE> 2
This form or a facsimile hereof, signed and properly completed, may be
delivered by hand, mail, telegram or facsimile transmission to the Depositary by
the Expiration Date. See Section 3 of the Offer to Purchase.
FIRST CITY TRANSFER COMPANY, DEPOSITARY
<TABLE>
<S> <C>
BY HAND DELIVERY OR OVERNIGHT COURIER: BY MAIL:
First City Transfer Company First City Transfer Company
505 Thornall Street P.O. Box 170
Suite 303 Iselin, New Jersey 08830-0170
Edison, New Jersey 08837
BY FACSIMILE: TO CONFIRM BY TELEPHONE OR FOR INFORMATION:
(732) 906-9269 Call Collect (732) 906-9227
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER
OTHER THAN THE ONE LISTED ABOVE DOES NOT CONSTITUTE A
VALID DELIVERY.
Ladies and Gentlemen:
The undersigned hereby tenders to Advanta Corp., a Delaware corporation,
the number of shares set forth below of its Class A Common Stock, $.01 par value
("Class A Common Stock"), including the associated Class A Purchase Rights (the
"Class A Rights" and together with the Class A Common Stock, the "Class A
Shares"), Class B Common Stock, $.01 par value ("Class B Common Stock"),
including the associated Class B Purchase Rights (the "Class B Rights" and
together with the Class B Common Stock, the "Class B Shares") (the Class A
Shares and the Class B Shares are hereinafter referred to as the "Common
Shares"), and depositary shares each representing one one-hundredth interest in
a share of 6 3/4% Convertible Class B Preferred Stock, Series 1995 (Stock
Appreciation Income Linked Securities (SAILS)) (the "SAILS Depositary Shares")
(the Class A Shares, Class B Shares and SAILS Depositary Shares are hereinafter
referred to as the "Shares"), as the case may be, upon the terms and subject to
the conditions set forth in the Offer to Purchase, dated January 20, 1998 (the
"Offer to Purchase"), and the associated Letters of Transmittal (which together
with the Offer to Purchase constitute the "Offer"), receipt of which is hereby
acknowledged, pursuant to the guaranteed delivery procedure set forth in Section
3 of the Offer to Purchase. Unless the Rights are redeemed by the Company, a
tender of Common Shares will also constitute a tender of the associated Rights.
Unless the context requires otherwise, all references herein to the Common
Shares or Shares shall include the associated Rights.
<PAGE> 3
PLEASE TYPE OR PRINT
Please Check the Relevant Boxes Below:
[ ] Class A Shares
Certificate Nos. ____________
Number of Shares
Tendered ____________
[ ] Class B Shares
Certificate Nos. ____________
Number of Shares
Tendered ____________
[ ] SAILS Depositary Shares
Certificate Nos. ____________
Number of Shares
Tendered ____________
CONDITIONAL TENDER
UNLESS THIS BOX HAS BEEN COMPLETED AND A MINIMUM SPECIFIED, THE TENDER WILL BE
DEEMED UNCONDITIONAL. SEE SECTION 3 OF THE OFFER TO PURCHASE.
Minimum number of Class A Shares that must be purchased, if any are
purchased:
____________ Class A Shares
Minimum number of Class B Shares that must be purchased, if any are
purchased:
____________ Class B Shares
Minimum number of SAILS Depositary Shares that must be purchased, if any
are purchased:
____________ SAILS Depositary Shares
<PAGE> 4
ODD LOTS
To be completed ONLY if Shares are being tendered by or on behalf of a
person owning beneficially, as of the close of business on January 19, 1998, and
who continues to own beneficially as of the Expiration Date, an aggregate of
fewer than 100 Class A Shares.
The undersigned either (check one box):
[ ] was the beneficial owner, as of the close of business on January 19,
1998, and will continue to be the beneficial owner as of the Expiration
Date, of an aggregate of fewer than 100 Class A Shares, and is tendering
all of such Class A Shares, or
[ ] is a broker, dealer, commercial bank, trust company or other nominee
which:
(a) is tendering, for the beneficial owners thereof, Class A Shares
with respect to which it is the record owner, and
(b) believes, based upon representations made to it by such beneficial
owners, that each such person was the beneficial owner as of the
close of business on January 19, 1998, and will continue to be the
beneficial owner as of the Expiration Date, of an aggregate of
fewer than 100 Class A Shares, and is tendering all of such Class A
Shares.
To be completed ONLY if Shares are being tendered by or on behalf of a
person owning beneficially, as of the close of business on January 19, 1998, and
who continues to own beneficially as of the Expiration Date, an aggregate of
fewer than 100 Class B Shares.
The undersigned either (check one box):
[ ] was the beneficial owner, as of the close of business on January 19,
1998, and will continue to be the beneficial owner as of the Expiration
Date, of an aggregate of fewer than 100 Class B Shares, and is tendering
all of such Class B Shares, or
[ ] is a broker, dealer, commercial bank, trust company or other nominee
which:
(a) is tendering, for the beneficial owners thereof, Class B Shares
with respect to which it is the record owner, and
(b) believes, based upon representations made to it by such beneficial
owners, that each such person was the beneficial owner as of the
close of business on January 19, 1998, and will continue to be the
beneficial owner as of the Expiration Date, of an aggregate of
fewer than 100 Class B Shares, and is tendering all of such Class B
Shares.
To be completed ONLY if Shares are being tendered by or on behalf of a
person owning beneficially, as of the close of business on January 19, 1998, and
who continues to own beneficially as of the Expiration Date, an aggregate of
fewer than 100 SAILS Depositary Shares.
The undersigned either (check one box):
[ ] was the beneficial owner, as of the close of business on January 19,
1998, and will continue to be the beneficial owner as of the Expiration
Date, of an aggregate of fewer than 100 SAILS Depositary Shares, and is
tendering all of such SAILS Depositary Shares, or
[ ] is a broker, dealer, commercial bank, trust company or other nominee
which:
(a) is tendering, for the beneficial owners thereof, SAILS Depositary
Shares with respect to which it is the record owner, and
(b) believes, based upon representations made to it by such beneficial
owners, that each such person was the beneficial owner as of the
close of business on January 19, 1998, and will continue to be the
beneficial owner as of the Expiration Date, of an aggregate of
fewer than 100 SAILS Depositary Shares, and is tendering all of
such SAILS Depositary Shares.
<PAGE> 5
- --------------------------------------------------------------------------------
Name(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Address(es)
- --------------------------------------------------------------------------------
Area Code and Telephone Number
- --------------------------------------------------------------------------------
Signature
If Shares will be tendered by book-entry transfer, complete the following:
The Depository Trust Company Account Number
-----------------------------------------------
Dated---------------------------------------------------------------, 1998
GUARANTEE
(Not to be used for signature guarantee)
The undersigned bank, broker, dealer, credit union, savings association, or
other entity that is a member in good standing of a recognized Medallion Program
approved by The Securities Transfer Association Inc. (each, an "Eligible
Institution"), hereby (i) represents that the undersigned has a net long
position in Class A Shares, Class B Shares and SAILS Depositary Shares or
equivalent securities within the meaning of Rule 14e-4 promulgated under the
Securities Exchange Act of 1934, as amended, at least equal to the Class A
Shares, Class B Shares and SAILS Depositary Shares tendered, (ii) represents
that such tender of Shares complies with Rule 14e-4, and (iii) guarantees that
either the certificates representing the Shares tendered hereby in proper form
for transfer, or timely confirmation of the book-entry transfer of such Shares
into the Depositary's account at The Depository Trust Company (pursuant to the
procedures set forth in Section 3 of the Offer to Purchase), together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantee(s) or an Agent's Message (as
defined in the Offer to Purchase) in the case of a book-entry transfer, and any
other documents required by the Letters of Transmittal, will be received by the
Depositary at one of its addresses set forth above within three Nasdaq trading
days (as defined in the Offer to Purchase) after the date of execution hereof.
- ------------------------------------------------------
Name of Firm
- ------------------------------------------------------
Address
- ------------------------------------------------------
Zip Code
Area Code and Tel. No.
------------------------------------------------------
- ------------------------------------------------------
Authorized Signature
- ------------------------------------------------------
Title
Name -----------------------------------------------------
Please Type or Print
Dated ------------------------------------------------, 1998
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE.
SHARE CERTIFICATES SHOULD BE SENT WITH THE APPLICABLE LETTER OF TRANSMITTAL.
<PAGE> 1
ADVANTA CORP.
OFFER TO PURCHASE FOR CASH
UP TO 7,882,750 SHARES OF ITS CLASS A COMMON STOCK
(INCLUDING THE ASSOCIATED CLASS A PURCHASE RIGHTS)
AT $40 PER SHARE NET
AND
UP TO 12,482,850 SHARES OF ITS CLASS B COMMON STOCK
(INCLUDING THE ASSOCIATED CLASS B PURCHASE RIGHTS)
AT $40 PER SHARE NET
AND
UP TO 1,078,930 OF ITS DEPOSITARY SHARES EACH REPRESENTING ONE ONE-HUNDREDTH
INTEREST
IN A SHARE OF 6 3/4% CONVERTIBLE CLASS B PREFERRED STOCK, SERIES 1995
(STOCK APPRECIATION INCOME LINKED SECURITIES (SAILS))
AT $32.80 PER SHARE NET
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY,
FEBRUARY 20, 1998, UNLESS THE OFFER IS EXTENDED.
January 20, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Advanta Corp., a Delaware corporation (the "Company"), has appointed us to
act as Dealer Manager in connection with its offer to purchase for cash up to
7,882,750 shares of its Class A Common Stock, par value $.01 per share ("Class A
Common Stock"), including the associated Class A Purchase Rights (the "Class A
Rights" and together with the Class A Common Stock, the "Class A Shares"), and
up to 12,482,850 shares of its Class B Common Stock, par value $.01 per share
("Class B Common Stock"), including the associated Class B Purchase Rights (the
"Class B Rights" and together with the Class B Common Stock, the "Class B
Shares") (the Class A Shares and the Class B Shares are herein referred to as
the "Common Shares"), at a purchase price net to the seller in cash of $40 per
Common Share (the "Common Stock Purchase Price"), and up to 1,078,930 depositary
shares each representing one one-hundredth interest in a share of 6 3/4%
Convertible Class B Preferred Stock, Series 1995 (Stock Appreciation Income
Linked Securities (SAILS)) (the "SAILS Depositary Shares"), at a purchase price,
net to the seller in cash of $32.80 per SAILS Depositary Share (the "SAILS
Purchase Price") (the Class A Shares, Class B Shares and SAILS Depositary Shares
are hereinafter referred to as the "Shares"), upon the terms and subject to the
conditions set forth in its Offer to Purchase, dated January 20, 1998, and in
the related Letters of Transmittal (which together constitute the "Offer"). The
Company will, upon the terms and subject to the conditions of the Offer,
purchase 7,882,750 Class A Shares (or such lesser number of Class A Shares as
are properly tendered and not withdrawn), 12,482,850 Class B Shares (or such
lesser number of Class B Shares as are properly tendered and not withdrawn), and
1,078,930 SAILS Depositary Shares (or such lesser number of SAILS Depositary
Shares as are properly tendered and not withdrawn) pursuant to the Offer. The
Company will purchase, at the applicable Purchase Price, all Shares properly
tendered and not withdrawn on or prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase), upon the terms and subject to the
conditions of the Offer,
<PAGE> 2
including the provisions relating to proration, conditional tenders and odd lot
tenders described in the Offer to Purchase. Unless the Rights are redeemed by
the Company, a tender of Common Shares will also constitute a tender of the
associated Rights. Unless the context requires otherwise, all references herein
to the Shares shall include the associated Rights.
The applicable Purchase Price will be paid in cash, net to the seller,
without interest thereon, with respect to all Shares purchased. No separate
consideration will be paid for the Rights. All Shares not purchased because of
proration and Shares that were conditionally tendered and not accepted for
purchase will be returned. The Company reserves the right, in its sole
discretion, to purchase more than 7,882,750 Class A Shares, more than 12,482,850
Class B Shares or more than 1,078,930 SAILS Depositary Shares pursuant to the
Offer, but has no current intention to do so.
The Offer is not conditioned on any minimum number of Shares being
tendered. The Offer is, however, subject to certain other conditions set forth
in the Offer, including the closing of the transactions contemplated by the
Contribution Agreement, dated as of October 28, 1997, between the Company and
Fleet Financial Group, Inc. See Section 6 of the Offer to Purchase.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, we are enclosing
the following documents:
1. Offer to Purchase dated January 20, 1998;
2. Letter to Clients which may be sent to your clients for whose accounts
you hold Shares registered in your name or in the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Offer;
3. Letter, dated January 20, 1998, from Dennis Alter, Chairman of the
Board and Chief Executive Officer of the Company, to stockholders of the
Company;
4. Letters of Transmittal for each class of stock to which the Offer
applies for your use and for the information of your clients (together with
Substitute Form W-9 and guidelines);
5. Notice of Guaranteed Delivery to be used to accept the Offer if Share
certificates and all other required documents cannot be delivered to the
Depositary by the Expiration Date or if the procedure for book-entry transfer
cannot be completed on a timely basis;
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number or Substitute Form W-9 providing information
relating to backup federal income tax withholding; and
7. Return envelope addressed to First City Transfer Company, the
Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER,
PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON FRIDAY, FEBRUARY 20, 1998, UNLESS THE OFFER IS EXTENDED.
No fees or commissions will be payable to brokers, dealers, commercial
banks, trust companies or any other persons for soliciting tenders of Shares
pursuant to the Offer (other than the Dealer Manager, the Information Agent, the
Escrow Agent and the Depositary as described in the Offer to Purchase). The
Company will, however, upon request through the Information Agent, reimburse you
for customary mailing and handling expenses incurred by you in forwarding any of
the enclosed materials to the beneficial owners of Shares held by you as a
nominee or in a fiduciary capacity. The Company will pay or cause to be paid any
stock transfer taxes applicable to its purchase of Shares, except as otherwise
provided in Instruction 6 of the applicable Letter of Transmittal.
In order for Shares to be properly tendered pursuant to the Offer, (i) a
duly executed and properly completed Letter of Transmittal (or a facsimile
thereof) together with any required signature guarantees, or an Agent's Message
(as defined in the Offer to Purchase) in connection with a book-entry delivery
of Shares, and any other documents required by the applicable Letter of
Transmittal, must be received by the Depositary at its address set forth on the
back cover of the Offer to Purchase on or prior to the Expiration Date, and
<PAGE> 3
(ii) either Share certificates representing tendered Shares must be
transmitted to and received by the Depositary at such address or such Shares
must be tendered by book-entry transfer into the Depositary's account maintained
at The Depository Trust Company (as described in the Offer to Purchase), and
confirmation of the book-entry transfer must be received by the Depositary, all
in accordance with the instructions set forth in the applicable Letter of
Transmittal and the Offer to Purchase.
If a stockholder desires to tender Shares pursuant to the Offer and such
stockholder's Share certificates are not immediately available or such
stockholder cannot deliver the Share certificates and all other required
documents to the Depositary on or prior to the Expiration Date, or such
stockholder cannot complete the procedure for delivery by book-entry transfer on
a timely basis, such Shares may nevertheless be tendered by following the
procedures for guaranteed delivery specified in Section 3 of the Offer to
Purchase.
As described in the Offer to Purchase, if more than 7,882,750 Class A
Shares (or such greater number of Class A Shares as the Company elects to
purchase), more than 12,482,850 Class B Shares (or such greater number of Class
B Shares as the Company elects to purchase) or more than 1,078,930 SAILS
Depositary Shares (or such greater number of SAILS Depositary Shares as the
Company elects to purchase) have been properly tendered and not withdrawn on or
prior to the Expiration Date, the Company will purchase Shares of the applicable
class in the following order of priority: (i) first, all Shares of such class
properly tendered and not withdrawn on or prior to the Expiration Date by or on
behalf of any stockholder who owned beneficially or of record, as of the close
of business on January 19, 1998, and continues to own beneficially or of record
as of the Expiration Date, an aggregate of fewer than 100 Shares of such class,
and who properly tenders all of such Shares (partial and conditional tenders
will not qualify for this preference) and completes the box captioned "Odd Lots"
on the applicable Letter of Transmittal and, if applicable, on the Notice of
Guaranteed Delivery; and (ii) then, after purchase of all the foregoing Shares
of such class, subject to the conditional tender provisions described in Section
3 of the Offer to Purchase, all other Shares of such class properly tendered and
not withdrawn on or prior to the Expiration Date on a pro rata basis, if
necessary (with appropriate adjustments to avoid purchases of fractional
Shares).
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE MAKING OF THE OFFER.
HOWEVER, NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION
TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES.
STOCKHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO,
HOW MANY SHARES TO TENDER. THE COMPANY HAS BEEN ADVISED THAT EACH OF ITS
DIRECTORS AND EXECUTIVE OFFICERS WHO OWNS SHARES, INCLUDING DENNIS ALTER,
CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF THE COMPANY, WILL TENDER SHARES PURSUANT
TO THE OFFER BUT HAS NOT DETERMINED HOW MANY SHARES TO TENDER.
Any inquiries you may have with respect to the Offer should be addressed to
the Dealer Manager or to the Information Agent at their respective addresses and
telephone numbers set forth on the back cover page of the Offer to Purchase.
Additional copies of the enclosed material may be obtained from the
Information Agent, D.F. King & Co., Inc., telephone: (800) 431-9633 or the
undersigned, telephone: (800) 638-2596.
Very truly yours,
BT Alex. Brown Incorporated
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON AS THE AGENT OF THE COMPANY, THE DEALER MANAGER, THE
INFORMATION AGENT, THE ESCROW AGENT OR THE DEPOSITARY, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM
IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE
STATEMENTS CONTAINED THEREIN.
<PAGE> 1
OFFER BY
ADVANTA CORP.
TO PURCHASE FOR CASH
UP TO 7,882,750 SHARES OF ITS CLASS A COMMON STOCK
(INCLUDING THE ASSOCIATED CLASS A PURCHASE RIGHTS)
AT $40 PER SHARE NET
AND
UP TO 12,482,850 SHARES OF ITS CLASS B COMMON STOCK
(INCLUDING THE ASSOCIATED CLASS B PURCHASE RIGHTS)
AT $40 PER SHARE NET
AND
UP TO 1,078,930 OF ITS DEPOSITARY SHARES EACH REPRESENTING ONE ONE-HUNDREDTH
INTEREST
IN A SHARE OF 6 3/4% CONVERTIBLE CLASS B PREFERRED STOCK, SERIES 1995 (STOCK
APPRECIATION
INCOME LINKED SECURITIES (SAILS))
AT $32.80 PER SHARE NET
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY,
FEBRUARY 20, 1998, UNLESS THE OFFER IS EXTENDED.
January 20, 1998
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated January
20, 1998 and the related Letters of Transmittal (which together constitute the
"Offer"), in connection with the offer by Advanta Corp., a Delaware corporation
(the "Company"), to purchase for cash up to 7,882,750 shares of its Class A
Common Stock, par value $ .01 per share ("Class A Common Stock"), including the
associated Class A Purchase Rights (the "Class A Rights" and together with the
Class A Common Stock, the "Class A Shares"), and up to 12,482,850 shares of its
Class B Common Stock, par value $ .01 per share ("Class B Common Stock"),
including the associated Class B Purchase Rights (the "Class B Rights" and
together with the Class B Common Stock, the "Class B Shares") (the Class A
Shares and the Class B Shares are hereinafter referred to as the "Common
Shares"), at a purchase price net to the seller in cash of $40 per Common Share
(the "Common Stock Purchase Price"), and up to 1,078,930 depositary shares each
representing one one-hundredth interest in a share of 6 3/4% Convertible Class B
Preferred Stock, Series 1995 (Stock Appreciation Income Linked Securities
(SAILS)) (the "SAILS Depositary Shares"), at a purchase price, net to the seller
in cash of $32.80 per SAILS Depositary Share (the "SAILS Purchase Price") (the
Class A Shares, Class B Shares and SAILS Depositary Shares are hereinafter
referred to as the "Shares"), upon the terms and subject to the conditions set
forth in its Offer to Purchase, dated January 20, 1998, and in the related
Letters of Transmittal. The Company will, upon the terms and subject to the
conditions of the Offer, purchase 7,882,750 Class A Shares (or such lesser
number of Class A Shares as are properly tendered and not withdrawn), 12,482,850
Class B Shares (or such lesser number of Class B Shares as are properly tendered
and not withdrawn), and 1,078,930 SAILS Depositary Shares (or such lesser number
of SAILS Depositary Shares as are properly tendered and not withdrawn) pursuant
to the Offer. The Company will purchase, at the applicable Purchase Price, all
Shares properly tendered and not withdrawn on or prior to the Expiration Date
(as defined in Section 1 of the Offer to Purchase), upon the terms and subject
to the conditions of the Offer, including the provisions relating to proration,
conditional tenders and "odd lot" tenders described in the Offer to Purchase.
Unless the Rights are redeemed by the Company, a tender of Common Shares will
also constitute a tender of the associated Rights. Unless the context requires
otherwise, all references herein to the Common Shares or the Shares shall
include the associated Rights.
<PAGE> 2
The applicable Purchase Price will be paid in cash, net to the seller,
without interest thereon, with respect to all Shares purchased. No separate
consideration will be paid for the Rights. All Shares not purchased because of
proration and Shares that were conditionally tendered and not accepted will be
returned. The Company reserves the right, in its sole discretion, to purchase
more than 7,882,750 Class A Shares, more than 12,482,850 Class B Shares or more
than 1,078,930 SAILS Depositary Shares pursuant to the Offer, but has no current
intention to do so.
We are the holder of record of Shares held for your account. As such, we
are the only ones who can tender your Shares, and then only pursuant to your
instructions. WE ARE SENDING YOU THE LETTERS OF TRANSMITTAL FOR THE CLASS A
SHARES, THE CLASS B SHARES AND THE SAILS DEPOSITARY SHARES FOR YOUR INFORMATION
ONLY; YOU CANNOT USE THEM TO TENDER SHARES WE HOLD FOR YOUR ACCOUNT.
Please instruct us as to whether you wish us to tender any or all of the
Shares we hold for your account on the terms and subject to the conditions of
the Offer.
We call your attention to the following:
1. The Offer is not conditioned on any minimum number of Shares being
tendered. The Offer is, however, subject to certain other conditions set forth
in the Offer to Purchase.
2. The Offer, proration period and withdrawal rights will expire at 12:00
Midnight, New York City time, on Friday, February 20, 1998, unless the Company
extends the Offer.
3. The Offer is for (i) 7,882,750 Class A Shares (constituting
approximately 43% of the Class A Shares issued and outstanding as of January 8,
1998, or approximately 43% of the Class A Shares outstanding on a fully diluted
basis) or such lesser number of Class A Shares as are properly tendered and not
withdrawn; (ii) 12,482,850 Class B Shares (constituting approximately 48% of the
Class B Shares issued and outstanding as of January 8, 1998, or approximately
39% of the Class B Shares outstanding on a fully diluted basis, assuming the
exercise of all outstanding options and the conversion of all outstanding SAILS
Depositary Shares as of January 8, 1998) or such lesser number of Class B Shares
as are properly tendered and not withdrawn; (iii) 1,078,930 SAILS Depositary
Shares (constituting approximately 43% of the SAILS Depositary Shares
outstanding as of January 8, 1998) or such lesser number of SAILS Depositary
Shares as are properly tendered and not withdrawn. Although it has no present
intention to do so, the Company reserves the right to purchase more than
7,882,750 Class A Shares, more than 12,482,850 Class B Shares or more than
1,078,930 SAILS Depositary Shares pursuant to the Offer.
4. Tendering stockholders will not be obligated to pay any brokerage
commissions, solicitation fees or, subject to Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the Company's purchase of Shares pursuant
to the Offer.
5. If you owned beneficially or of record, as of the close of business on
January 19, 1998, and continue to own beneficially or of record, as of the
Expiration Date, an aggregate of fewer than 100 Class A Shares, Class B Shares
or SAILS Depositary Shares, as the case may be, and you instruct us to tender on
your behalf all Class A Shares, Class B Shares or SAILS Depositary Shares, as
the case may be, before the expiration of the Offer and check the appropriate
box captioned "Odd Lots" in the attached Instruction Form, the Company, upon the
terms and subject to the conditions of the Offer, will accept all Class A
Shares, Class B Shares or SAILS Depositary Shares, as the case may be, for
purchase before proration, if any, of the purchase of other Shares properly
tendered.
As described in Section 1 of the Offer to Purchase, if more than 7,882,750
Class A Shares (or such greater number of Class A Shares as the Company elects
to purchase), more than 12,482,850 Class B Shares (or such greater number of
Class B Shares as the Company elects to purchase) or more than 1,078,930 SAILS
Depositary Shares (or such greater number of SAILS Depositary Shares as the
Company elects to purchase) have been properly tendered and not withdrawn on or
prior to the Expiration Date, the Company will purchase Shares of the applicable
class in the following order of priority: (i) first, all Shares of such class
properly tendered and not withdrawn on or prior to the Expiration Date by or on
behalf of any
<PAGE> 3
stockholder who owned beneficially or of record, as of the close of business on
January 19, 1998, and continues to own beneficially or of record, as of the
Expiration Date, an aggregate of fewer than 100 Shares of such class, and who
properly tenders all of such Shares (partial and conditional tenders will not
qualify for this preference) and completes the box captioned "Odd Lots" on the
applicable Letter of Transmittal and, if applicable, on the Notice of Guaranteed
Delivery; and (ii) then, after purchase of all the foregoing Shares of such
class, subject to the conditional tender provisions described in Section 3 of
the Offer to Purchase, all other Shares of such class properly tendered and not
withdrawn on or prior to the Expiration Date on a pro rata basis, if necessary
(with appropriate adjustments to avoid purchases of fractional Shares).
A tendering stockholder may condition the tender of Shares of a particular
class upon the purchase by the Company of a specified minimum number of such
Shares tendered by such stockholder, all as described in Section 3 of the Offer
to Purchase. Unless such specified minimum is purchased by the Company pursuant
to the terms of the Offer to Purchase and the related Letter of Transmittal,
none of the Shares tendered by the stockholder will be purchased. If you wish us
to condition your tender upon the purchase of a specified minimum number of your
Shares, please complete the box entitled "Conditional Tender" with respect to
the appropriate class of stock on the Instruction Form. In order to make a
conditional tender with respect to a particular class of Shares, a stockholder
must properly tender all Class A Shares, all Class B Shares or all SAILS
Depositary Shares, as the case may be, that such stockholder beneficially owns;
partial tenders will not qualify for this option. It is the tendering
stockholder's responsibility to calculate such minimum number of Shares, and you
are urged to consult your own tax advisor.
The Offer is not being made to, nor will the Company accept tenders from,
holders of Shares in any jurisdiction in which the Offer or its acceptance would
not comply with the securities or Blue Sky laws of such jurisdiction. The
Company is not aware of any jurisdiction in which the making of the Offer or the
tender of Shares would not be in compliance with the laws of such jurisdictions.
However, the Company reserves the right to exclude holders in any jurisdiction
in which it is asserted that the Offer cannot lawfully be made. So long as the
Company makes a good faith effort to comply with any state law deemed applicable
to the Offer, if it cannot do so, the Company believes that the exclusion of
holders residing in such jurisdiction is permitted under Rule 13e-4(f)(9)
promulgated under the Securities Exchange Act of 1934, as amended. In any
jurisdiction the securities or Blue Sky laws of which require the Offer to be
made by a licensed broker or dealer, the Offer shall be deemed to be made on the
Company's behalf by BT Alex. Brown Incorporated as Dealer Manager or one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
If you wish to have us tender any or all of your Class A Shares, Class B
Shares or SAILS Depositary Shares please so instruct us by completing,
executing, detaching and returning to us the attached Instruction Form. An
envelope to return your Instruction Form to us is enclosed. If you authorize us
to tender your Class A Shares, Class B Shares or SAILS Depositary Shares we will
tender all such Shares unless you specify otherwise on the attached Instruction
Form.
YOUR INSTRUCTION FORM SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US
TO SUBMIT A TENDER ON YOUR BEHALF ON OR BEFORE THE EXPIRATION DATE OF THE OFFER.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON FRIDAY, FEBRUARY 20, 1998, UNLESS THE COMPANY EXTENDS THE
OFFER.
<PAGE> 4
INSTRUCTION FORM
WITH RESPECT TO THE OFFER OF ADVANTA CORP. TO PURCHASE FOR CASH UP TO 7,882,750
SHARES OF ITS CLASS A COMMON STOCK (INCLUDING THE ASSOCIATED CLASS A PURCHASE
RIGHTS) AT $40 PER SHARE NET AND UP TO 12,482,850 SHARES OF ITS CLASS B COMMON
STOCK (INCLUDING THE ASSOCIATED CLASS B PURCHASE RIGHTS) AT $40 PER SHARE NET
AND UP TO 1,078,930 OF ITS SAILS DEPOSITARY SHARES EACH REPRESENTING ONE
ONE-HUNDREDTH INTEREST IN A SHARE OF 6 3/4% CONVERTIBLE CLASS B PREFERRED STOCK,
SERIES 1995 (STOCK APPRECIATION INCOME LINKED SECURITIES (SAILS)) AT $32.80 PER
SHARE NET:
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated January 20, 1998, and the related Letters of
Transmittal (which together constitute the "Offer"), in connection with the
offer by Advanta Corp., a Delaware corporation (the "Company"), to purchase for
cash up to 7,882,750 shares of its Class A Common Stock ("Class A Common
Stock"), including the associated Class A Purchase Rights (the "Class A Rights"
and together with the Class A Common Stock, the "Class A Shares") and up to
12,482,850 shares of its Class B Common Stock ("Class B Common Stock"),
including the associated Class B Purchase Rights (the "Class B Rights" and
together with the Class B Common Stock, the "Class B Shares") (the Class A
Shares and the Class B Shares are hereinafter referred to as the "Common
Shares") at a purchase price, net to the undersigned in cash of $40 per Common
Share (the "Common Stock Purchase Price"), and up to 1,078,930 shares of its
depositary shares each representing one one-hundredth interest in a share of
6 3/4% Convertible Class B Preferred Stock, Series 1995 (Stock Appreciation
Income Linked Securities (SAILS)) (the "SAILS Depositary Shares"), at a purchase
price, net to the undersigned in cash of $32.80 per SAILS Depositary Share (the
"SAILS Purchase Price") (the Class A Shares, Class B Shares and SAILS Depositary
Shares are hereinafter referred to as the "Shares"), without interest thereon,
upon the terms and subject to the conditions of the Offer.
All Shares properly tendered will be purchased at the applicable Purchase
Price, net to the seller in cash, without interest thereon, upon the terms and
subject to the conditions of the Offer, including the provisions relating to
proration and conditional tenders. The Company will return all other Shares,
including Shares tendered not purchased because of proration or because they
were conditionally tendered and not accepted for purchase. See Section 1 of the
Offer to Purchase. Unless the Rights are redeemed by the Company, a tender of
Common Shares will also constitute a tender of the associated Rights. Unless the
context requires otherwise, all references herein to the Common Shares or the
Shares shall include the associated Rights.
The undersigned hereby instruct(s) you to tender to the Company the number
of Shares indicated below or, if no number is indicated with respect to any
class of Shares, all Shares of that class you hold for the account of the
undersigned pursuant to the terms and subject to the conditions of the Offer.
Aggregate number of Shares to be tendered by you for the undersigned:
__________ Class A Shares*
__________ Class B Shares*
__________ SAILS Depositary Shares*
- ---------------
* Unless otherwise indicated, all of the Shares of such class held for the
account of the undersigned will be tendered.
<PAGE> 5
CONDITIONAL TENDER
[ ] By completing this box, the undersigned conditions the tender authorized
hereby on the following minimum number of Class A Shares being purchased if
any are purchased:
____________ Class A Shares.
[ ] By completing this box, the undersigned conditions the tender authorized
hereby on the following minimum number of Class B Shares being purchased if
any are purchased:
____________ Class B Shares.
[ ] By completing this box, the undersigned conditions the tender authorized
hereby on the following minimum number of SAILS Depositary Shares being
purchased if any are purchased:
____________ SAILS Depositary Shares.
Unless this box is completed, the tender authorized hereby will be made
unconditionally.
ODD LOTS
[ ] By checking this box, the undersigned represents that the undersigned
owned beneficially or of record, as of the close of business on January 19,
1998, and will continue to own beneficially or of record, as of the
Expiration Date, an aggregate of fewer than 100 Class A Shares and is
instructing the holder to tender all such Class A Shares.
[ ] By checking this box, the undersigned represents that the undersigned
owned beneficially or of record, as of the close of business on January 19,
1998, and will continue to own beneficially or of record, as of the
Expiration Date, an aggregate of fewer than 100 Class B Shares and is
instructing the holder to tender all such Class B Shares.
[ ] By checking this box, the undersigned represents that the undersigned
owned beneficially, or of record, as of the close of business on January
19, 1998, and will continue to own beneficially or of record, as of the
Expiration Date, an aggregate of fewer than 100 SAILS Depositary Shares and
is instructing the holder to tender all such SAILS Depositary Shares.
SIGNATURE BOX
-
- --------------------------------------------------------------------------------
Signature(s)
- --------------------------------------------------------------------------------
Date
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Name(s) and Address(es) (Please Print)
- --------------------------------------------------------------------------------
Area Code and Telephone Number
- --------------------------------------------------------------------------------
Taxpayer Identification or Social Security Number
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the number
to give the payer.
- ------------------------------------------------------------------
<TABLE>
<CAPTION>
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
<C> <S> <C>
- ------------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of the
account) account or, if combined
funds, the first individual
on the account (1)
3. Custodian account of a minor The minor (2)
(Uniform Gift to Minors Act)
4. a. The usual revocable savings The grantor-trustee (1)
trust account (grantor is also
trustee)
b. So-called trust account that is The actual owner (1)
not a legal or valid trust under
State law
- ------------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYER
IDENTIFICATION
NUMBER OF --
- ------------------------------------------------------------------
5. Sole proprietorship account The Owner (3)
6. A valid trust, estate, or pension Legal entity (Do not
trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated in
the account title.) (4)
7. Corporate account The Corporation
8. Religious, charitable, or The organization
educational organization account
9. Partnership account The partnership
10. Association, club, or other tax- The organization
exempt organization
11. A broker or registered nominee The broker or nominee
12. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a State or local
government, school district, or
prison) that receives agricultural
program payments
</TABLE>
- ------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has an SSN, that person's number must be
furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner, but you may also enter your business or "doing
business as" name. You may use either your SSN or EIN (if you have one).
(4) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Card, or Form SS-4,
Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- - An organization exempt from tax under section 501(a), or an individual
retirement plan or a custodial account under section 403(b)(7), if the account
satisfies the requirements of section 401(f)(2).
- - The United States or any agency or instrumentality thereof.
- - A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- - A foreign government, a political subdivision of a foreign government, or
agency or instrumentality thereof.
- - An international organization or any agency, or instrumentality thereof.
Other Payees that may be Exempt from Backup Withholding include:
- - A corporation.
- - A financial institution.
- - A registered dealer in securities or commodities registered in the U.S., the
District of Columbia, or a possession of the U.S.
- - A real estate investment trust.
- - A common trust fund operated by a bank under section 584(a).
- - An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- - An entity registered at all times under the Investment Company Act of 1940.
- - A foreign central bank of issue.
- - A futures commission merchant registered with the Commodity Futures Trade
Commission.
- - A middleman known in the investment community as a nominee.
Payments of dividends and patronage dividends not generally subject to
backup withholding include the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident alien partner.
- - Payments of patronage dividends where the amount received is not paid in
money.
- - Payments made by certain foreign organizations.
- - Section 404(k) payments made by an ESOP.
Payments of interest not generally subject to backup withholding include the
following:
- - Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600 or more
and is paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- - Payments of tax-exempt interest (including exempt interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to nonresident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Mortgage interest paid to you.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER IN PART I, WRITE "EXEMPT" IN PART II, AND RETURN IT TO THE
PAYER. SIGN AND DATE THE FORM IN PART II.
Certain payments other than interest, dividends, and patronage dividends
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A (a),
6045, and 6050A.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
(4) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. -- If you fail to
include any portion of an includible payment for interest, dividends or
patronage dividends in gross income and such failure is due to negligence, a
penalty of 20% is imposed on any portion of any underpayment attributable to the
failure.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE
<PAGE> 1
NEWS RELEASE
Advanta
Corporation
[ADVANTA LOGO] Welsh & McKean Roads
P.O. Box 844
Spring House, PA 19477-0844
For further information please contact:
98/02
Janet Point
Vice President, Investor Relations
(215) 444-5335
D.F. King & Co
Information Agent
(800) 431-9633
FOR IMMEDIATE RELEASE
ADVANTA COMMENCES TENDER OFFER
SPRING HOUSE, PA, JANUARY 20, 1998 - Advanta Corporation (NASDAQ: ADVNB; ADVNA;
ADVNZ) today announced that it has commenced a cash Tender Offer to purchase
approximately $850 million for up to 7,882,750 shares of its Class A Common
Stock at $40 per share net and up to 12,482,850 shares of its Class B Common
Stock at $40 per share net and up to 1,078,930 shares of its Stock Appreciation
Income Linked Securities (SAILS) Depositary Shares at $32.80 per share net. The
Offer is not conditioned upon any minimum number of shares being tendered. If
more shares are tendered than the amount sought in the Tender Offer, then the
shares will be purchased pro rata. The Offer is, however, subject to certain
other conditions, including the closing of the transaction between the Company
and Fleet Financial Group. This Tender Offer will expire at 12:00 midnight, New
York City time on February 20, 1998 unless the offer is otherwise extended.
In connection with the Offer, BT Alex. Brown Incorporated is acting as the
Dealer Manager, D.F. King & Co. is acting as the Information Agent, First City
Trust Company is acting as the Depositary and PNC Bank, N.A. is acting as
Escrow Agent. The Terms and Instructions to participate in the Tender Offer are
set forth in the Offer to Purchase. Questions and requests for assistance may
be directed to the Information Agent, D.F. King & Co at (800) 431-9633, 77
Water Street, New York, NY 10055.
<PAGE> 2
The Board of Directors of Advanta has approved the Offer. However, neither the
Company nor its Board of Directors makes any recommendation to any stockholder
as to whether to tender or refrain from tendering shares. Stockholders must
make their own decisions whether to tender shares and, if so, how many shares
to tender. The Company has been advised that each of its current Directors and
Executive Officers who owns shares, including Dennis Alter, Chairman and Chief
Executive Officer of Advanta, will tender shares pursuant to this Offer but
have not determined how many shares to tender.
On October 28, 1997, the Company announced that it had entered into an
agreement under which Fleet Financial Group will acquire Advanta's consumer
credit card business and will combine it with Fleet's consumer credit card
business. A Special Meeting of Stockholders to consider and vote on this
transaction has been set for February 20, 1998. The proxy material detailing
this transaction and requesting stockholder approval is being distributed to
holders of the Class A Common Stock. Class B Common Stock and Stock
Appreciation Income Linked Securities (SAILS) Depositary Shares. Only the
holders of record at the close of business on January 2, 1998 of Advanta's
Class A Common Stock and Class A Preferred Stock will be entitled to vote
either by Proxy or at the Special Meeting of the Stockholders to be held on
February 20, 1998 at 10:00 A.M., local time, at Advanta's Headquarters, Welsh
and McKean Roads, Spring House, Pennsylvania. The Company anticipates that the
transaction will close the same day as the Special Meeting or February 20, 1998.
With more than six million customers, nearly $21 billion in managed assets and
4,100 employees as of September 30, 1997, Advanta is a financial services
enterprise that serves consumers and small businesses through innovative
offerings of credit cards, mortgages, leases, insurance and deposit products.
# # # #
<PAGE> 1
January 20, 1998
To Our Stockholders:
Advanta Corp. (the "Company") is offering to purchase up to 7,882,750
shares of its Class A Common Stock ("Class A Common Stock"), including the
associated Class A Purchase Rights (the "Class A Rights" and together with the
Class A Common Stock, the "Class A Shares"), which constituted approximately 43%
of the Class A Shares outstanding as of January 8, 1998, and up to 12,482,850
shares of its Class B Common Stock ("Class B Common Stock"), including the
associated Class B Purchase Rights (the "Class B Rights" and together with the
Class B Common Stock, the "Class B Shares"), which constituted approximately 48%
of the Class B Shares outstanding as of January 8, 1998 (the Class A Shares and
the Class B Shares are hereinafter referred to as the "Common Shares"), at a
purchase price net to the seller in cash of $40 per Common Share (the "Common
Stock Purchase Price"), and up to 1,078,930 of its depositary shares
representing one-hundredth interest in a share of 6 3/4% Convertible Class B
Preferred Stock, Series 1995 (Stock Appreciation Income Linked Securities
(SAILS)) (the "SAILS Depositary Shares"), which constituted approximately 43% of
the SAILS Depositary Shares outstanding as of January 8, 1998, at a purchase
price, net to the seller in cash of $32.80 per SAILS Depositary Share (the
"SAILS Purchase Price" and together with the Common Stock Purchase Price, the
"Purchase Price") (the Class A Shares, Class B Shares and SAILS Depositary
Shares are hereinafter referred to as the "Shares"). All of the Shares that are
properly tendered (and are not withdrawn on or prior to the expiration date of
the offer) will, subject to possible proration, conditional tenders and
provisions relating to the tender of odd lots, be purchased for cash, at the
applicable Purchase Price, net to the selling stockholder, without interest
thereon. All other Shares that have been tendered and not purchased will be
returned to the stockholder. Enclosed for your consideration are an Offer to
Purchase, dated January 20, 1998, separate Letters of Transmittal for the Class
A Shares, the Class B Shares and the SAILS Depositary Shares and other important
documents containing detailed information concerning this offer.
WE URGE YOU TO READ ALL OF THE ENCLOSED INFORMATION CAREFULLY BEFORE
DECIDING WHETHER YOU WISH TO TENDER SHARES OR REFRAIN FROM TENDERING SHARES.
In reviewing the enclosed material, please bear in mind the following:
- The offer expires at 12:00 midnight, New York City time, on Friday,
February 20, 1998, unless extended.
- The offer is not conditioned upon any minimum number of Shares being
tendered to the Company. The offer is, however, subject to certain other
conditions, which are specified in the enclosed Offer to Purchase.
<PAGE> 2
- The procedures for effecting a valid tender are described in the
enclosed material. Strict compliance with those procedures is essential.
- Requests for assistance may be directed to the Dealer Manager or the
Information Agent, whose respective addresses are set forth on the back
cover of the enclosed Offer to Purchase. Requests for additional copies
of the enclosed materials may be directed to the Dealer Manager or the
Information Agent. You may also contact your broker, dealer, commercial
bank or trust company for assistance in connection with the offer.
- Tenders of Common Shares constitute a tender of the associated Rights;
no separate consideration will be paid for the Rights.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE MAKING OF THE OFFER.
HOWEVER, NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION
TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES. YOU
SHOULD MAKE YOUR OWN DECISION AS TO WHETHER TO TENDER SHARES AND, IF SO, HOW
MANY SHARES TO TENDER. THE COMPANY HAS BEEN ADVISED THAT EACH OF ITS DIRECTORS
AND EXECUTIVE OFFICERS WHO OWNS SHARES WILL TENDER SHARES PURSUANT TO THE OFFER
BUT HAS NOT DETERMINED HOW MANY SHARES TO TENDER.
We encourage you to give the enclosed material your careful and prompt
consideration.
If you have any questions regarding the offer or need assistance in
tendering your Shares, please call D.F. King & Co., Inc., Information Agent for
the offer, at (800) 431-9633, or BT Alex. Brown Incorporated, the Dealer
Manager, at (800) 638-2596.
Very truly yours,
/s/ Dennis Alter
Dennis Alter
Chairman of the Board and
Chief Executive Officer
<PAGE> 1
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase, dated January
20, 1998, and the related Letters of Transmittal. Capitalized terms not defined
in this notice are defined in the Offer to Purchase. The Offer is not being made
to, nor will the Company accept tenders from, holders of Shares in any
jurisdiction in which the Offer or its acceptance would not comply with the
securities or Blue Sky laws of such jurisdiction. The Company is not aware of
any jurisdiction in which the making of the Offer or the tender of Shares would
not be in compliance with the laws of such jurisdiction. In any jurisdiction the
securities or Blue Sky laws of which require the Offer be made by a licensed
broker or dealer, the Offer shall be deemed to be made on the Company's behalf
by BT Alex. Brown Incorporated or one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
BY
ADVANTA CORP.
UP TO 7,882,750 SHARES OF ITS CLASS A COMMON STOCK
(INCLUDING THE ASSOCIATED CLASS A PURCHASE RIGHTS)
AT $40 PER SHARE NET
AND
UP TO 12,482,850 SHARES OF ITS CLASS B COMMON STOCK
(INCLUDING THE ASSOCIATED CLASS B PURCHASE RIGHTS)
AT $40 PER SHARE NET
AND
UP TO 1,078,930 OF ITS DEPOSITARY SHARES EACH REPRESENTING ONE
ONE-HUNDREDTH INTEREST IN A SHARE OF 6 3/4% CONVERTIBLE CLASS B
PREFERRED STOCK, SERIES 1995 (STOCK APPRECIATION
INCOME LINKED SECURITIES (SAILS))
AT $ 32.80 PER SHARE NET
Advanta Corp., a Delaware corporation (the "Company"), invites
its stockholders to tender up to 7,882,750 shares of its Class A Common Stock,
par value $ .01 per share ("Class A Common Stock"), including the associated
Class A Purchase Rights (the "Class A Rights" and together with the Class A
Common Stock, the "Class A Shares"), and up to 12,482,850 shares of its Class B
Common Stock, par value $ .01 per share ("Class B Common Stock"), including the
associated Class B Purchase Rights (the "Class B Rights" and together with the
Class B Common Stock, the "Class B Shares") (the Class A Shares and the Class B
Shares are hereinafter referred to as the "Common Shares"), at a purchase price
net to the seller in cash of $ 40 per Common Share (the "Common Stock Purchase
Price"), and up to 1,078,930 depositary shares each representing one
one-hundredth interest in a share of 6 3/4% Convertible Class B Preferred Stock,
Series 1995 (Stock
<PAGE> 2
Appreciation Income Linked Securities (SAILS)) (the "SAILS Depositary Shares"),
at a purchase price, net to the seller in cash of $32.80 per SAILS Depositary
Share (the "SAILS Purchase Price" and together with the Common Stock Purchase
Price, the "Purchase Price") (the Class A Shares, Class B Shares and SAILS
Depositary Shares are hereinafter referred to as the "Shares"), upon the terms
and subject to the conditions set forth in its Offer to Purchase, dated January
20, 1998, and in the related Letters of Transmittal (which together constitute
the "Offer"). Unless the Rights are redeemed by the Company, a tender of Common
Shares will also constitute a tender of the associated Rights. Unless the
context requires otherwise, all references herein to the Common Shares or Shares
shall include the associated Rights.
The Offer is not conditioned upon any minimum number of Shares
being tendered. The Offer is, however, subject to certain other conditions set
forth in the Offer to Purchase, including the closing of the transactions
contemplated by the Contribution Agreement, dated as of October 28, 1997,
between the Company and Fleet Financial Group, Inc.
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, FEBRUARY 20, 1998, UNLESS THE
OFFER IS EXTENDED.
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED THE OFFER.
HOWEVER, NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION
TO ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES.
STOCKHOLDERS MUST MAKE THEIR OWN DECISIONS WHETHER TO TENDER SHARES AND, IF SO,
HOW MANY SHARES TO TENDER. THE COMPANY HAS BEEN ADVISED THAT EACH OF ITS
DIRECTORS AND EXECUTIVE OFFICERS WHO OWNS SHARES, INCLUDING DENNIS ALTER,
CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF THE COMPANY, WILL TENDER SHARES PURSUANT
TO THE OFFER BUT HAS NOT DETERMINED HOW MANY SHARES TO TENDER.
The Company will, upon the terms and subject to the conditions
of the Offer, purchase 7,882,750 Class A Shares (or such lesser number of Class
A Shares as are properly tendered and not withdrawn), 12,482,850 Class B Shares
(or such lesser number of Class B Shares as are properly tendered and not
withdrawn), and 1,078,930 SAILS Depositary Shares (or such lesser number of
SAILS Depositary Shares as are properly tendered and not withdrawn) pursuant to
the Offer. The Company will purchase, at the applicable Purchase Price, all
Shares properly tendered and not withdrawn on or prior to the Expiration Date,
upon the terms and subject to the conditions of the Offer, including provisions
relating to proration, conditional tenders and "odd lot" tenders described
below. The term "Expiration Date" means 12:00 Midnight, New York City time, on
February 20, 1998, unless the Company, in its sole discretion, shall have
extended the period of time during which the Offer is open, in which event the
term "Expiration Date" shall refer to the latest time and date at which the
Offer, as so extended by the Company, shall expire. No separate consideration
will be paid for the Rights. The Company reserves the right, in its sole
discretion, to purchase more than 7,882,750 Class A Shares, more than 12,482,850
Class B Shares or more than
<PAGE> 3
1,078,930 SAILS Depositary Shares pursuant to the Offer but has no current
intention to do so. For purposes of the Offer, the Company will be deemed to
have accepted for payment (and thereby purchased), subject to the proration and
conditional tender provisions of the Offer, Shares which are properly tendered
and not withdrawn when, as and if the Company gives oral or written notice to
the Depositary of its acceptance of such Shares for payment pursuant to the
Offer. In all cases, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of certificates for such Shares (or a timely confirmation by The Depository
Trust Company ("DTC") of book-entry transfer of such Shares to the Depositary),
a properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) and any other documents required by the applicable Letter of
Transmittal.
Upon the terms and subject to the conditions of the Offer, if
prior to the Expiration Date, more than 7,882,750 Class A Shares (or such
greater number of Class A Shares as the Company may elect to purchase pursuant
to the Offer), more than 12,482,850 Class B Shares (or such greater number of
Class B Shares as the Company may elect to purchase pursuant to the Offer), or
more than 1,078,930 SAILS Depositary Shares (or such greater number of SAILS
Depositary Shares as the Company may elect to purchase pursuant to the Offer)
are properly tendered and not withdrawn, the Company will accept such Shares for
purchase in the following order of priority: (a) first, all such Shares properly
tendered and not withdrawn on or prior to the Expiration Date by or on behalf of
any stockholder who owned beneficially or of record, as of the close of business
on January 19, 1998, and continues to own beneficially or of record as of the
Expiration Date, an aggregate of fewer than 100 Shares of such class and who
properly tenders all of such Shares (partial and conditional tenders will not
qualify for this preference) and completes the box captioned "Odd Lots" on the
applicable Letter of Transmittal and, if applicable, on the Notice of Guaranteed
Delivery; and (b) then, after purchase of all the foregoing Shares of the
applicable class, subject to the conditional tender provisions described in
Section 3 of the Offer to Purchase, all other Shares of the applicable class
properly tendered and not withdrawn on or prior to the Expiration Date on a pro
rata basis, if necessary (with appropriate adjustments to avoid purchases of
fractional Shares). See Section 1 of the Offer to Purchase for a discussion of
proration.
The Company is making the Offer at this time because the Board
of Directors of the Company believes that, given the current market price of the
Shares and the Company's business, assets and prospects, the purchase of Shares
pursuant to the Offer is in the best interests of the Company and its
stockholders and that it will enhance stockholder value both in the short term
and long term. The Board of Directors also believes that the Company's financial
condition and its borrowing capacity afford the Company the opportunity to allow
those stockholders desiring to receive cash for a portion of their Shares an
opportunity to do so at a price in excess of the recent trading prices for the
Shares. After considering other alternatives, such as paying a cash dividend,
the Board of Directors concluded that the Offer was the preferable alternative
for enhancing stockholder value.
The Company reserves the right, at any time or from time to
time, in its sole discretion, to extend the period of time during which the
Offer is open by giving oral or written
<PAGE> 4
notice of such extension to the Depositary or to amend the Offer is any respect
by making a public announcement thereof. Subject to certain conditions, the
Company also expressly reserves the right in its sole discretion, to terminate
the Offer and not accept for payment or pay for any Shares not theretofore
accepted for payment or paid for. See Section 15 of the Offer to Purchase.
Shares tendered pursuant to the Offer may be withdrawn at any
time on or prior to the Expiration Date and, unless theretofore accepted for
payment by the Company, may also be withdrawn after 12:00 Midnight, New York
City time, on March 17, 1998. For a withdrawal to be effective, the Depositary
must timely receive a written or facsimile transmission notice of withdrawal.
Any such notice of withdrawal must specify the name of the person who tendered
the Shares to be withdrawn, the number and class of Shares to be withdrawn and,
if different from that of the person who tendered such Shares, the name of the
registered holder of such Shares. If the certificates for Shares to be withdrawn
have been delivered or otherwise identified to the Depositary, then, prior to
the release of such certificates, the tendering stockholder must also submit the
serial numbers shown on the particular certificates evidencing the Shares to be
withdrawn and the signature on the notice of withdrawal must be guaranteed by an
Eligible Institution (as defined in the Offer to Purchase) (except in the case
of Shares tendered by an Eligible Institution). If Shares have been tendered
pursuant to the procedure for book-entry transfer set forth in the Offer to
Purchase, the notice of withdrawal must specify the name and number of the
account at DTC to be credited with the withdrawn Shares and otherwise comply
with the procedures of DTC.
THE OFFER TO PURCHASE AND THE LETTERS OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION, WHICH SHOULD BE READ BEFORE STOCKHOLDERS DECIDE WHETHER
TO ACCEPT OR REJECT THE OFFER. These materials are being mailed to record
holders of Shares and are being furnished to brokers, banks and similar persons
whose names, or the names of whose nominees, appear on the Company's stockholder
list (or, if applicable, who are listed as participants in a clearing agency's
security position listing) for transmittal to beneficial holders of Shares.
The information required to be disclosed by Rule 13e-4(d)(1)
under the Securities Exchange Act of 1934, as amended, is contained in the Offer
to Purchase and is incorporated herein by reference.
Copies of the Offer to Purchase and the Letters of Transmittal
may be obtained from the Information Agent or the Dealer Manager and will be
furnished at the Company's expense.
<PAGE> 5
Any questions or requests for assistance may be directed to
the Information Agent or the Dealer Manager as set forth below.
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
(800) 431-9633
The Dealer Manager for the Offer is:
BT Alex. Brown Incorporated
1 South Street
Baltimore, Maryland 21202
(800) 638-2596
January 20, 1998
<PAGE> 1
EXHIBIT A.(12)
[ADVANTA LOGO]
- --------------------------------------------------------------------------------
Welsh & McKean Roads
P.O. Box 844
Spring House, PA 19477-0844
January 20, 1998
Dear Plan Participant:
As a participant or beneficiary in the Advanta Corp. Employee Savings Plan
(the "401(k) Plan"), you have certain rights with respect to any shares of
Advanta Corp. Class A Common Stock (Class A Shares) or Advanta Corp. Class B
Common Stock (Class B Shares) which may be held for your benefit under the terms
of the 401(k) Plan, including the right to direct that any or all of such Class
A or Class B Shares be tendered for redemption in the event there is a tender or
exchange offer with respect to those Shares.
In connection with your rights with respect to Class A or Class B Shares
which may be held for your benefit, we have enclosed with this letter certain
materials which are being distributed to all holders of Class A and Class B
Shares in connection with an offer that is being made by Advanta Corp. to
purchase certain of its shares and associated rights (the "Tender Offer"), as
more fully described in the enclosed materials. WE URGE YOU TO READ ALL OF THE
ENCLOSED INFORMATION CAREFULLY BEFORE DECIDING WHETHER YOU WISH TO TENDER SHARES
OR REFRAIN FROM TENDERING SHARES.
PLEASE NOTE: IF YOU OWN SHARES OF COMPANY STOCK IN ADDITION TO THOSE HELD
FOR YOUR BENEFIT UNDER THE 401(K) PLAN, YOU SHOULD ALSO BE RECEIVING INFORMATION
AND INSTRUCTIONS, ALONG WITH SIMILAR OR IDENTICAL TRANSMITTAL LETTERS CONCERNING
THOSE SHARES. YOU MUST RESPOND SEPARATELY IN ACCORDANCE WITH THE INSTRUCTIONS
AND INFORMATION YOU RECEIVE WITH RESPECT TO THOSE OTHER SHARES OF COMPANY STOCK
IF YOU WANT TO TENDER THEM FOR REDEMPTION. FOR EXAMPLE, YOU MAY HAVE FORMS THAT
YOU MUST RETURN TO YOUR BROKER WITH RESPECT TO SOME OF THE SHARES YOU ARE
TENDERING AND OTHER FORMS (ENCLOSED WITH THIS LETTER) THAT YOU MUST SEND BACK TO
THE PLAN RECORDKEEPER WITH RESPECT TO YOUR SHARES IN THE 401(K) PLAN. YOU CANNOT
RELY ON ONLY ONE FORM TO INDICATE YOUR ELECTION TO TENDER SHARES THAT ARE HELD
SEPARATELY.
Once you have reviewed the enclosed materials, you may indicate your
election to tender all or any portion of the Class A and Class B Shares held for
your benefit under the terms of the 401(k) Plan. If you elect to tender any such
shares, you are to do this by completing the applicable Letter(s) of Transmittal
(also enclosed) and indicating thereon your election and any specific
instructions with respect to the redemption of your shares, as explained below.
Your election to tender shares is to be indicated in the portion of the
applicable Letter(s) of Transmittal labeled "Description of Shares Tendered" and
you should indicate your intention to tender shares held in the 401(k) Plan in
the area indicated for that purpose. If you wish to provide special instructions
for the order in which shares you are tendering are to be redeemed, you should
do so in the portion of the applicable Letter(s) of Transmittal labeled "Order
of Purchase of Shares." THE COMPANY WILL ENDEAVOR TO PURCHASE TENDERED SHARES IN
THE ORDER INDICATED TO THE EXTENT PRACTICABLE.
IF YOU ARE TENDERING SHARES OF COMPANY STOCK OTHER THAN OR IN ADDITION TO
THOSE HELD FOR YOUR BENEFIT IN THE 401(K) PLAN, YOU MUST COMPLETE THE APPLICABLE
LETTER(S) OF TRANSMITTAL WITH RESPECT TO THE SHARES YOU ARE TENDERING.
While the enclosed materials contain information relating to certain "SAILS
Depositary Shares," there are no SAILS Depositary Shares held under the 401(k)
Plan.
Any cash proceeds received as a result of the tender of Class A or Class B
Shares pursuant to your instructions will be invested upon receipt in accordance
with your specific instructions on the Investment Instruction Form (which is
also enclosed with this letter). IF YOU DO NOT PROVIDE THE PLAN RECORDKEEPER
WITH A
<PAGE> 2
COMPLETED INVESTMENT INSTRUCTION FORM, THE CASH PROCEEDS RECEIVED WILL BE
INVESTED PURSUANT TO THE INVESTMENT INSTRUCTIONS IN EFFECT WITH RESPECT TO NEW
CONTRIBUTIONS TO THE 401(K) PLAN. IF YOU WISH TO CHANGE YOUR INVESTMENT
ELECTIONS, YOU ARE ABLE TO DO SO THROUGH THE NORMAL PROCEDURES FOR CHANGING YOUR
INVESTMENTS IN THE 401(K) PLAN. You should note that certain actions you take
may have an impact on your ownership of shares of Company stock in the 401(k)
Plan. If you elect to tender shares, and subsequently take any action that
diminishes the number of shares of Company stock that are held for your benefit,
this will have the effect of revoking your election to tender some of your
shares (i.e., the shares which are no longer held for your benefit). As of the
date that shares can no longer be withdrawn from the Tender Offer (as explained
more fully in the enclosed documents), the shares which you have elected to
tender will not be available for any other transactions (i.e., transactions
which would require a sale or liquidation of your investment in such shares). As
a consequence, if you have applied for a loan under the terms of the 401(k) Plan
(which would require a reduction in your investment in shares of Company stock),
the processing of your loan may be delayed during the period after which shares
cannot be permitted to be withdrawn from the Tender Offer until the transactions
relating to the Tender Offer are completed.
Your decision to tender (or not tender) Class A or Class B Shares
constitutes an exercise of control over the investment of assets held for your
benefit under the terms of the 401(k) Plan, and by exercising such control, you
release and agree, on your own behalf and on behalf of your heirs and
beneficiaries, to indemnify and hold harmless the trustee for the 401(k) Plan,
Advanta Corp. and the administrative committee for the 401(k) Plan from and
against any claim, demand, loss, liability, cost or expense (including
reasonable attorney's fees) caused by or arising out of such exercise of
control, including without limitation any diminution in value or loss incurred
from such exercise of control.
IMPORTANT: IF YOU WANT TO HAVE ANY CLASS A OR CLASS B SHARES THAT ARE HELD
FOR YOUR BENEFIT UNDER THE 401(K) PLAN TENDERED IN CONNECTION WITH THE TENDER
OFFER, YOUR INSTRUCTIONS (AND LETTER(S) OF TRANSMITTAL, IF APPLICABLE) MUST BE
RECEIVED BY THE PLAN RECORDKEEPER IN SUFFICIENT TIME TO PERMIT THE SHARES TO BE
TENDERED IN THE TENDER OFFER. PLEASE NOTE THAT THE TENDER OFFER AND WITHDRAWAL
RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, FEBRUARY 20,
1998, UNLESS THE TENDER OFFER IS EXTENDED. A SELF ADDRESSED ENVELOPE HAS BEEN
PROVIDED FOR THIS PURPOSE. IF NO INSTRUCTIONS ARE RECEIVED BY THAT DATE, THE
CLASS A AND CLASS B SHARES HELD FOR YOUR BENEFIT UNDER THE 401(K) PLAN WILL
CONTINUE TO BE HELD FOR YOUR BENEFIT UNDER THE 401(K) PLAN.
<PAGE> 1
VOTING AGREEMENT
VOTING AGREEMENT, dated as of October 28, 1997, by and between Fleet
Financial Group, Inc., a Rhode Island corporation ("Fleet"), and Dennis Alter,
an individual who resides in the Commonwealth of Pennsylvania (the
"Stockholder").
W I T N E S S E T H :
WHEREAS, the Stockholder beneficially owns 3,400,570 shares of Class
A Common Stock, par value 0.01 per share (the "Voting Common Stock"), of Advanta
Corp., a Delaware corporation (the "Company") (the shares of Voting Common Stock
beneficially owned by the Stockholder together with any shares of Voting Common
Stock acquired by the Stockholder after the date hereof and prior to the record
date of the Special Meeting (as hereinafter defined) upon exercise of options or
otherwise are referred to herein as the "Shares"); and
WHEREAS, Fleet and the Company have entered into a Contribution
Agreement (the "Contribution Agreement") pursuant to which, among other things,
the Company will contribute substantially all of the assets and liabilities of
its consumer credit card business to a newly formed limited liability company of
which Fleet and its affiliates will have a controlling interest; and
WHEREAS, the Contribution Agreement provides that it is a condition
precedent to the consummation of the transactions contemplated thereby that the
Contribution Agreement be approved by the holders of shares of Voting Common
Stock and Class A Preferred Stock, par value $1,000 per share, of the Company
and the Board of Directors of the Company has agreed to convene a meeting of
stockholders (the "Special Meeting") to consider and vote upon a resolution to
approve and adopt the Contribution Agreement and the transactions contemplated
thereby (the "Proposal"); and
WHEREAS, as a condition to its willingness to enter into the
Contribution Agreement, Fleet has requested that the Stockholder agree, and the
Stockholder has agreed, to vote his Shares in favor of the Proposal at the
Special Meeting.
<PAGE> 2
NOW, THEREFORE, to induce Fleet to enter into the Contribution
Agreement and in consideration of the mutual covenants and agreements set forth
herein, and intending to be bound hereby, the parties agree as follows:
1. Voting of Shares; No Transfer of Shares; No Grant of Voting
Rights. The Stockholder agrees at the Special Meeting to vote or cause to be
voted in favor of the Proposal all of the Shares beneficially owned by the
Stockholder. The Stockholder agrees that as long as this Agreement is in effect,
he will not sell, assign or otherwise transfer or dispose of (by voting
agreement or otherwise) any of the Shares and will not grant any proxies with
respect to the voting of the Shares (except in furtherance of the provisions of
the Contribution Agreement) or enter into a voting trust or other agreement with
respect to the voting of any of such Shares. In addition, the Stockholder agrees
that from the date hereof until this Agreement is terminated in accordance with
its terms, he will not pledge or otherwise encumber the Shares in such a manner
as to terminate his voting rights with respect to the Shares; provided, however,
that it is agreed that the Stockholder has pledged and may continue to pledge
the Shares to secure indebtedness of the Stockholder to an institutional lender
under arrangements pursuant to which the pledgee does not have a right to vote
the Shares until the occurrence of an event of default under the applicable loan
documents.
2. Representations and Warranties of the Stockholder. The
Stockholder represents and warrants to Fleet as follows:
(a) The Stockholder has the unrestricted right to vote the
Shares in accordance with the terms of this Agreement.
(b) The Stockholder has full power and authority and legal
capacity to enter into this Agreement and consummate the
transactions contemplated hereby, and this Agreement constitutes the
legal, valid and binding agreement of the Stockholder enforceable in
accordance with its terms (except as enforceability may be limited
by bankruptcy, insolvency, moratorium or other similar laws
affecting creditors' rights generally or by the principles governing
the availability of equitable remedies).
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<PAGE> 3
(c) This Agreement covers all of the shares of Voting Common
Stock beneficially owned by the Stockholder except for options to
purchase shares of Voting Common Stock which were granted by the
Company to the Stockholder (provided, however, that any Shares
acquired by the Stockholder upon exercise of any such options after
the date hereof and prior to the record date of the Special Meeting
are covered by this Agreement).
(d) This Agreement and the execution and delivery hereof by
the Stockholder do not, and the consummation of the transactions
contemplated hereby will not, (i) conflict with or result in any
violation of any trust documents of the Stockholder, as applicable,
(ii) result in a violation of or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise
to any right of termination, cancellation or acceleration) under,
any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, agreement or other instruments or
obligations to which the Stockholder is a party or by which any of
his property or assets may be bound, or (iii) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to
the Stockholder or any of his properties or assets, excluding from
the foregoing clauses (ii) and (iii) violations, breaches, or
defaults which, either individually or in the aggregate, would not
have a materially adverse effect on the financial condition of the
Stockholder.
3. Termination. This Agreement shall terminate on the earlier of (i) the
closing of the transactions contemplated by the Contribution Agreement or (ii)
the termination of the Contribution Agreement in accordance with its terms.
4. Specific Performance. The parties hereto acknowledge and agree that if
any of the provisions of this Agreement were not performed by the Stockholder in
accordance with their specific terms or were otherwise breached, Fleet would not
have an adequate remedy at law and would be irreparably harmed and that the
damages therefor would be difficult to determine. It is accordingly agreed that
Fleet shall be entitled to injunctive relief to prevent
-3-
<PAGE> 4
breaches of this Agreement by the Stockholder and to specifically enforce the
terms and provisions hereof, in addition to any other remedy to which it may be
entitled at law or in equity.
5. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if hand delivered in person
or by next-day courier, transmitted by facsimile or mailed by registered or
certified mail, postage prepaid, return receipt requested, as follows:
(a) If to Fleet, to:
Fleet Financial Group, Inc.
One Federal Street, 37th Floor
Boston, Massachusetts 02116
Attention: Brian T. Moynihan
Managing Director,
Strategic Planning and Corporate
Development
Facsimile No.: (617) 346-0137
-4-
<PAGE> 5
with a copy to:
Fleet Financial Group, Inc.
One Federal Street, 37th Floor
Boston, Massachusetts 02116
Attention: Drew J. Pfirrman, Esq.
Associate General Counsel
Facsimile No.: (617) 346-4284
and a copy to:
Edwards & Angell
2700 Hospital Trust Tower, 28th Floor
Providence, Rhode Island 02903
Attention: V. Duncan Johnson, Esq.
Facsimile No.: (401) 276-6611
(b) If to the Stockholder, to:
Mr. Dennis Alter
c/o Advanta Corp.
Welsh and McKean Roads
Spring House, Pennsylvania 19477
Facsimile No.: (215) 444-6426
with a copy to:
Advanta Corp.
Welsh and McKean Roads
Spring House, Pennsylvania 19477
Attention: Elizabeth Mai, General Counsel
Facsimile No.: (215) 444-5915
and a copy to:
Wolf, Block, Schorr and Solis-Cohen LLP
111 South 15th Street
Philadelphia, Pennsylvania 19102
Attention: Herbert Henryson II, Esq.
Facsimile No: (215) 977-2334
or to such other address as the person to whom notice is given may have
previously furnished to the other parties in writing in accordance herewith,
except that notices of change of address shall be effective only upon receipt.
6. Assignment. This Agreement shall not be assigned by operation of law or
otherwise.
-5-
<PAGE> 6
7. Amendments. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
8. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the Commonwealth of Pennsylvania,
without regard to its conflicts of law rules.
9. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same agreement.
10. Effect of Headings. The headings herein are for reference purposes
only and shall not in any way affect the meaning or interpretation hereof.
11. Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto and supersedes all prior agreements and understandings,
oral or written, among the parties hereto with respect to the subject matter
hereof.
[INTENTIONALLY BLANK]
-6-
<PAGE> 7
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties hereto on the date first above written.
FLEET FINANCIAL GROUP, INC.
By: /s/ Brian T. Moynihan
----------------------------------
/s/ Dennis Alter
-------------------------------------
DENNIS ALTER
-7-
<PAGE> 1
CONTRIBUTION AGREEMENT
--------------------------------------
Agreement dated as of October 28, 1997 by and among Advanta Corp., a
Delaware corporation (the "Company") and Fleet Financial Group, Inc., a Rhode
Island corporation ("Fleet").
WHEREAS, the Boards of Directors of the parties hereto deem it advisable
that they and certain of their Affiliates contribute and transfer certain assets
and liabilities to a newly created limited liability company (the "LLC") on the
terms hereinafter stated.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements hereinafter contained, and
intending to be legally bound hereby, the parties hereto hereby agree as
follows:
ARTICLE I. THE CONTRIBUTION.
--------------------------------------------
SECTION 1.01 The Contribution.
(a) Upon the terms and subject to the conditions hereof, and in
consideration of the issuance of the membership interests to the Company and
Fleet (or Subsidiaries of either of them), pursuant to a Limited Liability
Company Agreement in substantially the form attached hereto as Exhibit A, at the
Closing hereunder the Company shall, and shall cause each of the Company
Contributors to, contribute and transfer to the LLC, and Fleet and the Company
shall cause the LLC to accept and assume, the assets and liabilities of the
Company and the Company Contributors set forth on Schedules 1 and 2 hereto,
respectively, and Fleet shall, and shall cause each of the Fleet Contributors
to, contribute and transfer to the LLC, and Fleet and the Company shall cause
the LLC to accept and assume, the assets and liabilities set forth on Schedules
3 and 4 hereto, respectively (all such contributions and transfers are
collectively referred to herein as the "Contribution").
(b) The assets and liabilities contributed and transferred by the Company
and the Company Contributors to the LLC (including, without limitation, the
Ordinary Course of Business Liabilities) are referred to herein collectively as
the "Company Contributed Assets" and the "Company Transferred Liabilities",
respectively. The assets and liabilities contributed and transferred by Fleet
and the Fleet Contributors to the LLC are referred to herein collectively as the
"Fleet Contributed Assets" and the "Fleet Transferred Liabilities",
respectively. The contracts listed on Schedule 1 hereto and those entered into
by the Company or any Company Contributor on or after the date hereof and prior
to the Closing Date in the ordinary course of business relating to the Business
are collectively referred to as the "Company Contributed Contracts" and the
contracts listed on Schedule 3 hereto and those entered into by Fleet or any
Fleet Contributor on or after the date hereof and prior to the Closing Date in
the ordinary course of business relating to the Fleet Business are collectively
referred to as the "Fleet Contributed Contracts."
(c) The parties hereto acknowledge that excluded from the assets listed on
Schedule 1 hereto are the assets listed on Schedule 4.13.
(d) Immediately prior to the Closing, Fleet shall cause the LLC to enter
into a Participation Agreement with Fleet Credit Card Bank (the "CCB
Participation Agreement") pursuant to which the LLC will receive all of the
economic benefit of, and retain all of the economic risk of, the assets set
forth on Schedules 1B and 3B hereto (the "CCB Assets") and the liabilities set
forth on Schedules 2B and 4B hereto (the "CCB Liabilities"). In connection
therewith, the LLC shall direct the Company and each of the Company Contributors
to transfer, at the Closing, the CCB Assets and the CCB Liabilities to Fleet
Credit Card Bank.
(e) Immediately prior to the Closing, Fleet shall cause the LLC to enter
into a Participation Agreement with Fleet National Bank (the "FNB Participation
Agreement") pursuant to which the LLC will receive all of the economic benefit
of, and retain all of the economic risk of, the assets set forth on Schedules 1C
and 3C hereto (the "FNB Assets") and the liabilities set forth on Schedules 2C
and 4C hereto (the "FNB Liabilities"). In connection therewith, the LLC shall
direct the Company and each of the Company Contributors to transfer, at the
Closing, the FNB Assets and the FNB Liabilities to Fleet National Bank.
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<PAGE> 2
(f) The Company and Fleet acknowledge and agree that the LLC shall remain
fully liable for all of the liabilities (including the principal, interest, fees
and other charges related to each such liability) assumed by it under this
Agreement, and as between the LLC and Fleet Credit Card Bank with respect to the
CCB Liabilities and as between the LLC and Fleet National Bank with respect to
the FNB Liabilities, the LLC shall be the party which is the ultimate obligor
with respect to such liabilities and shall bear the economic risk of loss with
respect to such liabilities and shall hold Fleet Credit Card Bank and Fleet
National Bank harmless with respect to any Losses arising from any such
liabilities.
(g) Other than the Company Transferred Liabilities and the Fleet
Transferred Liabilities or as otherwise set forth in this Agreement, the parties
hereto agree that the LLC is not agreeing to, and shall not, assume any other
liability, obligation, undertaking, expense or agreement of any kind, absolute
or contingent, known or unknown, of the Company or any of the Company
Contributors or of Fleet or any of the Fleet Contributors (the "Non-Assumed
Liabilities"), and the execution, delivery and performance of this Agreement by
the parties hereto shall not render the LLC liable for any such liability,
obligation, undertaking, expense or agreement. Without limiting the generality
of the foregoing, the parties hereto agree that the LLC shall not assume or be
liable for, and shall not undertake to attempt to assume or discharge (except
with respect to the Company Transferred Liabilities and the Fleet Transferred
Liabilities): (i) any liability or obligation of the Company or any of the
Company Contributors or of Fleet or any of the Fleet Contributors arising out of
or relating to any contract or agreement not specifically assumed by the LLC
pursuant to Section 1.01(b) hereof; (ii) subject to Section 6.17, any liability
or obligation of the Company or any Company Contributor relating to SmartMove
Repricing of the Retained SmartMove Accounts; (iii) other than as provided in
Section 6.08 hereof, any liability or obligation of the Company or any of the
Company Contributors or of Fleet or any of the Fleet Contributors arising out of
or relating to any pension, retirement, employee health or welfare or profit
sharing plan or trust of the Company or any Company Contributor; (iv) any
liability or obligation of the Company or any of the Company Contributors or
Fleet or any of the Fleet Contributors arising out of or relating to any oral or
written employment agreement not included in the Company Contributed Contracts
or the Fleet Contributed Contracts or contemplated by this Agreement; (v) any
liability or obligation of the Company or any of the Company Contributors or
Fleet or any of the Fleet Contributors arising out of or relating to any
litigation, proceeding, or claim by any person relating to the business or
operation of, or otherwise relating to, the Company or any of the Company
Contributors or Fleet or any of the Fleet Contributors or the Company
Contributed Assets or the Fleet Contributed Assets before the Closing Date,
whether or not such litigation, proceeding or claim is pending, threatened or
asserted before, on or after the Closing Date; (vi) any liabilities or
obligations of the Company or any of the Company Contributors for any Taxes,
whether or not such Taxes become due before, on or after the Closing Date; and
(vii) any and all other liabilities, obligations, debts or commitments of any of
the Company or any of the Company Contributors or Fleet or any of the Fleet
Contributors whatsoever whether accrued now or hereafter, whether fixed or
contingent, whether known or unknown, or any claims asserted against the Company
Contributed Assets or the Fleet Contributed Assets or other items transferred to
the LLC by the Company Contributors or the Fleet Contributors relating to any
event (whether act or omission) prior to the Closing Date.
(h) Except as otherwise set forth in this Agreement, the Company hereby
acknowledges and agrees that, other than the CCB Liabilities, Fleet Credit Card
Bank shall not assume any other liability, obligation, undertaking, expense or
agreement of any other kind, whether absolute or contingent, known or unknown,
of the Company or any of the Company Contributors.
(i) Except as otherwise set forth in this Agreement, the Company hereby
acknowledges and agrees that, other than the FNB Liabilities, Fleet National
Bank shall not assume any other liability, obligation, undertaking, expense or
agreement of any other kind, whether absolute or contingent, known or unknown,
of the Company or any of the Company Contributors.
SECTION 1.02 Consummation of the Contribution. The Contribution and the
other transactions contemplated by this Agreement shall be consummated and
closing thereof (the "Closing") shall occur on (a) the last Business Day of the
calendar quarter in which the last of the conditions set forth in Sections
8.01(a), 8.01(b), 8.02(c) and 8.03(f) hereof shall have been satisfied or waived
in accordance with the terms of this Agreement; provided, however, that at
Fleet's sole election, exercised by written notice
2
<PAGE> 3
thereof to the Company at any time after the satisfaction or waiver of such
conditions, the Closing shall occur within ten(10) Business Days after delivery
of such notice; provided, further, however, that if Fleet so elects, after
determination of a good faith estimate of the Managed Receivables and the Agreed
Deficit as of the proposed Closing Date and the last Business Day of the
preceding calendar quarter, Fleet shall have the right to withdraw the notice
referred to in the immediately preceding proviso promptly after determination of
such estimate and the Closing shall occur on the last Business Day of the
calendar quarter in which Fleet's original election notice was given, or (b)
such other date to which the parties may agree in writing. In no event may Fleet
give notice of a proposed mid quarter Closing Date more than once. The date on
which the Closing shall occur is referred to herein as the "Closing Date." The
exact date and time of closing of the transactions contemplated by this
Agreement shall be specified by the Company by notice to Fleet given at least
three Business Days prior thereto and the Closing shall be held at the offices
of Wolf, Block, Schorr and Solis-Cohen LLP, 111 South Fifteenth Street,
Philadelphia, Pennsylvania or such other place as the parties shall agree.
The parties acknowledge and agree that the foregoing provisions are
intended to provide that if Fleet elects to give notice that a closing of the
transactions contemplated by this Agreement shall occur at any time other than
at the end of a calendar quarter, and does not withdraw such notice in
accordance with the terms of this Agreement, then the calculation of the Managed
Receivables, the Agreed Deficit and the Gain Receivable shall be made as of the
Specified Date and shall be effective for all purposes of this Agreement,
including, without limitation, the Closing Balance Sheet.
SECTION 1.03 Deliveries at Closing. At the Closing,
(a) The Company or the Company Contributors, or any one or more of them, as
applicable, shall execute and deliver such conveyances, bills of sale, deeds,
assignments, assurances, certificates and other instruments as Fleet may
reasonably request in order to evidence the conveyance and transfer of the
Company Contributed Assets to the LLC, and, thereafter, the transfer of title
pursuant to the CCB Participation Agreement, the CCB Assets to Fleet Credit Card
Bank and pursuant to the FNB Participation Agreement, the FNB Assets to Fleet
National Bank.
(b) The Company and the Company Contributors or any one or more of them, as
applicable, shall cause to be delivered the items set forth in Sections 8.01 and
8.03 hereto.
(c) The Company and the Company Contributors or any one or more of them, as
applicable, shall have delivered executed copies of the Ancillary Agreements.
(d) Fleet shall cause to be executed and delivered such instruments of
assumption and such other instruments and documents as the Company may
reasonably request to evidence the assumption of (i) the Company Contributed
Liabilities by the LLC, (ii) the CCB Liabilities by Fleet Credit Card Bank and
(iii) the FNB Liabilities by Fleet National Bank.
(e) Fleet, the Fleet Contributors, the LLC, or any one or more of them, as
applicable, shall cause to be delivered the items set forth in Sections 8.01 and
8.02 hereto.
(f) Fleet, the Fleet Contributors, the LLC, or any one or more of them, as
applicable, shall have delivered executed copies of the Ancillary Agreements.
SECTION 1.04 Certain Consents. Notwithstanding anything to the contrary
contained in this Agreement, nothing in this Agreement shall be construed as an
attempt to assign any Company Contributed Contract or Fleet Contributed Contract
or any other agreement, franchise, or claim which is part of the Contribution
which is by its terms or at law nonassignable without the consent of the other
party or parties thereto, unless such consent shall have been given. In order,
however, to provide the LLC, Fleet Credit Card Bank and Fleet National Bank with
the full realization and value of every Company Contributed Contract or Fleet
Contributed Contract and any other agreement, franchise and claim which is part
of the Contribution and the other transactions contemplated by this Agreement,
except as provided in Sections 6.10 and 11.09 hereof and except with respect to
the Material Company Contributed Contracts, each party hereto agrees that on and
after the Closing, it will, at the request of the LLC, and under the reasonable
direction of LLC, in the
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<PAGE> 4
name of the LLC or otherwise as the LLC shall reasonably specify, take all
reasonable action (i) to attempt to assure that the rights of such party under
such contracts, agreements, franchises and claims shall be preserved for the
benefit of the LLC (or its assignee) and (ii) to facilitate receipt of the
consideration payable to such party in and under every such contract, agreement,
franchise and claim, which consideration shall be held for the benefit of, and
shall be delivered to, the LLC (or its assignee).
SECTION 1.05 Transfer of Company's Interest in RBS Advanta. Fleet and the
Company acknowledge and agree that the Company Contributed Assets include the
share capital (the "RBS Advanta Shares") of RBS Advanta (f/k/a Roboscot (15)),
an unlimited company organized under the Companies Act 1985, registered in
Scotland (No 157256) ("RBS Advanta"), which is held by Advanta UK, an unlimited
company organized under the Companies Act 1985, registered in Scotland (No
158226) ("Advanta UK"). Pursuant to the Articles of Association of RBS Advanta,
the consent of the other member of RBS Advanta is required to transfer the RBS
Advanta Shares to the LLC and upon notice of the proposed transfer, such member
may exercise its right to purchase such RBS Advanta Shares. Fleet and the
Company hereby agree that the Company shall cause Advanta UK to give the
applicable notice to RBS Advanta promptly after the date of this Agreement. If
consent to the transfer of the RBS Advanta Shares is obtained prior to the
Closing Date, the RBS Advanta Shares shall be so transferred to the LLC or such
other person as the parties shall mutually agree at the Closing. If such consent
is obtained after the Closing Date, such RBS Advanta Shares will be transferred
promptly after receipt of the consent. In either event, the Closing Balance
Sheet shall reflect the value of such RBS Advanta Shares as a Company
Contributed Asset at the value for such RBS Advanta Shares on the Closing Date
calculated in accordance with Schedule 1.06(g). If the RBS Advanta Shares are
acquired by another person pursuant to the provisions of the Articles of
Association of RBS Advanta or if any other payment is made subsequent to the
Closing Date to Advanta UK in respect of the RBS Advanta Shares, the Company
will cause such amounts, net of applicable Taxes of the Company or its
Affiliates in respect thereof, if any, to be paid to the LLC promptly after
receipt thereof. If RBS Advanta gives notice to the Company or any of the
Company's Affiliates of a need for additional capital subsequent to the Closing
Date, the Company shall promptly deliver such notice to the LLC and shall, at
the sole cost and expense of the LLC, take such actions in response to the
request for capital as the LLC shall direct. If the RBS Advanta Shares are not
transferred at the Closing, the Company shall cause the designees of Advanta UK
on the Board of Directors of RBS Advanta to resign effective as of the Closing
Date and shall use its best efforts to cause to be elected to the Board of
Directors of RBS Advanta the designees of the LLC effective as of the Closing
Date or as promptly as practicable thereafter.
SECTION 1.06 Closing Balance Sheet Confirmation.
(a) No later than five Business Days' prior to the Closing Date, the
Company shall deliver to Fleet its good faith estimate of the Closing Balance
Sheet ("Estimated Closing Balance Sheet"), which Estimated Closing Balance Sheet
shall demonstrate that the book value of the Company Transferred Liabilities
over the Company Contributed Assets equals the Agreed Deficit. In addition, the
Company shall cause to be delivered therewith a certificate of the Company
signed on its behalf by the chief financial officer of the Company, confirming
that the Estimated Closing Balance Sheet was prepared in accordance with the
provisions of Section 1.06(g). The interest bearing liabilities which are
included in the Company Transferred Liabilities at Closing shall be subject to
the conditions set forth on Schedule 1.06(a). The Estimated Closing Balance
Sheet submitted by the Company to Fleet shall include a schedule of the interest
bearing liabilities to be contributed by the Company in substantially the form
of Exhibit A attached to Schedule 1.06(a), which shall detail the outstanding
balances by liability type, rate and maturity and demonstrate that the
characteristics of the interest bearing liabilities to be contributed by the
Company are substantially no less favorable than the characteristics of the
liabilities set forth in Schedule 1.06(a). Notwithstanding the foregoing, the
Managed Receivables, the Agreed Deficit and the Gain Receivable on Secured
Credit Cards referred to in Exhibit B to Schedule 1.06(g) shall be computed as
of the Specified Date.
(b) The term "Agreed Deficit" shall mean five hundred ten million dollars
($510,000,000) minus the Agreed Adjustment, if any (the parties acknowledge and
agree that the Agreed Adjustment may be an amount which is less than zero, in
which event the Agreed Deficit would equal the sum of five hundred ten million
dollars ($510,000,000) plus the absolute value of the Agreed Adjustment).
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<PAGE> 5
(c) The "Agreed Adjustment" shall be that amount which is the sum of the
Volume Adjustment and the Yield Adjustment.
(d) The Volume Adjustment (which may be less than zero as noted in Section
1.06(b)) means that amount which is (i) ($12,100,000,000 minus the amount of
Managed Receivables as of the Specified Date) multiplied by (ii) 0.0438.
(e) The Yield Adjustment (which may be less than zero as noted in Section
1.06(b)) shall be equal to the product of (A)(i) the amount of the Managed
Receivables with Introductory Rate Balances as of the Specified Date minus (ii)
$2,192,520,000 multiplied by (B) 0.5 multiplied by (C) 0.0438. For example, if
on the Specified Date the percentage of Managed Receivables with introductory
rates equaled 15% and the amount of Managed Receivables was equal to
$12,100,000,000 then the Yield Adjustment would be equal to:
($12,100,000,000 x .15 = $2,192,520,000) x .5 x 0.0438 = $8,267,688 (Yield
Adjustment)
In such example, the Agreed Deficit would equal $518,267,688 (i.e.,
$510,000,000 plus the absolute value of the Yield Adjustment).
(f) As promptly as practicable, but in no event later than sixty (60) days
after the Closing Date, the Company shall prepare and deliver to the LLC and
Fleet the pro forma balance sheet of the Business as of the close of business on
the Closing Date, subject to the provisions of Section 1.02, but without giving
effect to the transactions occurring at the Closing (the "Closing Balance
Sheet"), together with the unqualified report of Arthur Andersen LLP ("Company's
Auditor") on the Closing Balance Sheet, and a calculation in reasonable detail
of the Volume Adjustment, the Yield Adjustment, the Agreed Adjustment and the
Agreed Deficit together with a certificate of the Company signed on its behalf
by the Chief Financial Officer of the Company, confirming that such calculations
were made in accordance with the terms of this Agreement. The report of the
Company's Auditor shall be made to the Company, Fleet and the LLC and shall be
to the effect that (i) the Closing Balance Sheet (A) has been prepared therein
in conformity with the terms of this Agreement, including the provisions of
Section 1.06(g) hereof; (B) was prepared in conformity with GAAP (except as set
forth in Schedule 1.06(g)), applied on a consistent basis with the Company's
past practice; and (C) presents fairly the financial position of the Business as
of the close of business at the Closing Date, subject to the provisions of
Section 1.02, and (ii) the audit by the Company's Auditor was conducted in
accordance with generally accepted auditing standards. In addition, the
Company's Auditor shall confirm whether or not the interest bearing liabilities
contributed by the Company have characteristics substantially no less favorable
than the characteristics as set forth on Schedule 1.06(a). In the event that the
Company's Auditor does not so confirm the characteristics of the interest
bearing liabilities, the LLC and the Company shall determine in good faith such
amount as is necessary, consistent with the provisions of Schedule 1.06(a), to
reimburse the LLC for any such failure to so conform to such characteristics. In
the event the LLC and the Company can not resolve any dispute as to the amount
of such reimbursement, such dispute will be resolved in accordance with the
procedures set forth below. The Company shall pay the amount of any required
reimbursement, if any, to the LLC promptly after determination thereof.
(g) The Closing Balance Sheet shall be prepared in accordance with the
books and records of the Company and the Company Contributors and in conformity
with the provisions of, and pursuant to the procedures described on, Schedule
1.06(g) hereto.
(h) After the Closing Date, the LLC shall permit the Company and the
Company's Auditor reasonable access upon reasonable notice and during normal
business hours to the deeds, documents and contracts and books of account,
records, files, invoices and other data associated with, necessary to or used in
the Business as conducted on or before the Closing Date. The Company and the LLC
shall direct the appropriate personnel, regardless of whether employed by the
Company or the LLC, to provide the necessary financial information regarding the
Business as promptly as practicable after the Closing Date to the Company and
the Company's Auditor. Fleet shall, within forty-five (45) days after its
receipt of the Closing Balance Sheet, advise the Company in writing (an
"Objection Notice") in reasonable detail of the amounts and descriptions of
adjustments, if any, which Fleet believes are necessary to be made to the
Closing Balance Sheet or the Agreed Deficit in order to comply with the
provisions of this Agreement and Section 1.06(g) hereof. In the event that
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Fleet fails to deliver an Objection Notice within the time period specified
herein, the pro forma Closing Balance Sheet and the calculation of the Agreed
Deficit delivered by the Company pursuant to Section 1.06(f) hereof shall be
deemed to be the Closing Balance Sheet and Agreed Deficit for all purposes of
this Agreement.
(i) In the event that Fleet shall deliver an Objection Notice pursuant to
Section 1.06(h) hereof, Fleet and the Company shall attempt, in good faith, to
resolve their differences within the thirty day period following the receipt by
the Company of the Objection Notice. In the event the Company and Fleet are not
able to resolve their good faith differences within such thirty day period with
respect to any line item of the Closing Balance Sheet, but the differences with
respect to any such line item are less than two hundred fifty thousand dollars
($250,000), then such line item shall be deemed to be the average of the amounts
specified by the Company and Fleet, respectively, and the differences on such
line item shall be deemed to be resolved. In the event that the Company and
Fleet are able to resolve their differences within such thirty day period
(including any resolution pursuant to the immediately preceding sentence), the
Closing Balance Sheet and Agreed Deficit agreed to by Fleet and the Company
pursuant to this Section 1.06(i) shall be deemed to be the Closing Balance Sheet
and Agreed Deficit for all purposes of this Agreement. In the event that all of
the differences are not resolved within such thirty day period, but the effect
of such differences on the Agreed Deficit is less than three million dollars
($3,000,000), in the aggregate, then all remaining differences shall be resolved
in the same manner set forth above with respect to differences of less than
$250,000 and the Closing Balance Sheet and the calculation of the Agreed
Deficit, as so adjusted, shall be deemed to be the Closing Balance Sheet and the
Agreed Deficit for all purposes of this Agreement.
(j) In the event that the Company and Fleet are unable to resolve all
differences with respect to the Closing Balance Sheet or Agreed Deficit in the
manner set forth in Section 1.06(i) hereof within the thirty (30) days referred
to in Section 1.06(i) hereof, then the issues remaining unresolved shall be
determined by Coopers & Lybrand L.L.P. (the "Independent Firm") as follows:
(1) Within fifteen (15) days following retention of the Independent
Firm, the Company and Fleet shall present or cause to be presented the
disputed issue or issues that must be resolved with respect to the Closing
Balance Sheet.
(2) The Company and Fleet shall use their commercially reasonable
efforts to cause the Independent Firm to render its decision as soon as is
reasonably practicable, including, without limitation, prompt compliance
with all reasonable requests by the Independent Firm for information,
papers, books, records and the like; provided that (i) the Company and
Fleet agree that the scope of the retention of the Independent Firm shall
be limited to resolving the disputed issues presented to it and matters
related thereto and (ii) in no event shall the resolution of any issue be
outside the parameters or amounts within which the issues were determined
by each of the Company and Fleet. All decisions of the Independent Firm
with respect to the Closing Balance Sheet and the Agreed Deficit shall be
final and binding upon Fleet, the Company and their respective Affiliates,
and the Closing Balance Sheet and the Agreed Deficit as determined in
accordance with the provisions of this Section 1.06(j) shall be deemed to
be the Closing Balance Sheet and the Agreed Deficit for all purposes of
this Agreement.
(k) With respect to the performance of their respective functions pursuant
to this Section 1.06, (i) the Company shall bear all of the fees, costs,
disbursements and other expenses of the Company's Auditor; (ii) Fleet shall bear
all of the fees, costs, disbursements and other expenses of its auditor; and
(iii) the Company, on the one hand, and Fleet, on the other hand, shall share
equally all fees, costs, disbursements and other expenses of the Independent
Firm.
(l) If the value of Company Transferred Liabilities over the Company
Contributed Assets as reflected on the Closing Balance Sheet (the "Net Deficit")
exceeds the Agreed Deficit, then the Company shall pay to the LLC in the manner
and with interest as provided in Section 1.06(n), the amount of such excess.
(m) If the Agreed Deficit exceeds the Net Deficit, then the LLC shall pay
to the Company in the manner and with interest as provided in Section 1.06(n),
the amount of such excess.
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(n) Any payment pursuant to Sections 1.06(l) or 1.06(m) hereof shall be
made at a mutually convenient time and place within ten (10) days after the
Closing Balance Sheet has been finally determined, by delivery to the Company or
the LLC, as the case may be, of a wire transfer of immediately available funds
from such party to a designated account of such other party. The amount of any
payment to be made pursuant to Sections 1.06(l) or 1.06(m) shall bear interest
from and including the Closing Date to but excluding the date of payment at a
rate per annum equal to LIBOR as of the Closing Date. Such interest shall be
payable at the same time as the payment to which it relates and shall be
calculated on the basis of a year of 360 days and the actual number of days
elapsed.
ARTICLE II. DEFINITIONS
SECTION 2.01 Definitions. As used in this Agreement the following terms
shall have the meanings set forth below:
(a) "Administration Agreement" shall mean that certain administration
agreement dated as of the Closing Date by and between the LLC or an Affiliate
thereof and the one or more of the Company Contributors and containing the
provisions set forth on Exhibit B hereto.
(b)"Advanta National Bank" shall mean Advanta National Bank, a bank
organized under the laws of the United States.
(c) "Advanta Service Mark License Agreement" shall mean that certain
license agreement dated as of the Closing Date by and between the Company and
the LLC containing the provisions set forth in Exhibit C hereto.
(d) "Affiliate" shall mean, with respect to any specified Person, a Person
that directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person specified. As used in
this definition, the term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, as trustee
or executor, by contract or credit arrangement or otherwise.
(e) "Agreed Adjustment" shall have the meaning set forth in Section 1.06(c)
of this Agreement.
(f) "Agreed Deficit" shall have the meaning set forth in Section 1.06(b) of
this Agreement.
(g) "Ancillary Agreements" means each of the LLC Agreement, the
Administration Agreement, the CCB Participation Agreement, the FNB Participation
Agreement, the Lease Agreements, the SmartMove Service Agreement, the Advanta
Service Mark License Agreement and the Interim Servicing Agreement.
(h) "Bank Acts" shall mean, collectively, the Bank Holding Company Act of
1956, the National Bank Act, the Federal Reserve Act, the Federal Deposit
Insurance Act and any other federal or state banking statutes which may govern
the transactions contemplated by this Agreement, as they may be amended from
time to time, and the rules and regulations promulgated thereunder.
(i) "Bank Authority" shall mean the Board of Governors of the Federal
Reserve System, the Office of the Comptroller of the Currency, the Federal
Deposit Insurance Corporation and the Office of Thrift Supervision, and any
state banking authority or non-U.S. governmental banking authority having
jurisdiction over the Company, Fleet or any Related Entities.
(j) "Board" shall have the meaning set forth in Section 3.01 of this
Agreement.
(k) "Business" shall mean the consumer credit card business of the Company
and the Company Contributors as of the Closing Date, including, without
limitation, the origination and servicing of consumer credit cards, the
determination of creditworthiness of consumer credit card account customers, the
extension of credit to consumer credit card account customers, and the
maintenance of consumer credit card accounts and collection of receivables with
respect thereto, anywhere in the world.
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(l) "Business Day" shall mean any day that is not a Saturday, a Sunday or a
day on which banks in the Commonwealth of Massachusetts and the Commonwealth of
Pennsylvania are generally closed for regular banking business.
(m) "CCB Assets" shall have the meaning set forth in Section 1.01(d) of
this Agreement.
(n) "CCB Liabilities" shall have the meaning set forth in Section 1.01(d)
of this Agreement.
(o) "CCB Participation Agreement" shall have the meaning set forth in
Section 1.01(d) of this Agreement.
(p) "Class A Preferred Shares" shall mean the shares of the Company's Class
A Preferred Stock, par value $1,000 per share.
(q) "Class A Shares" shall mean the shares of the Company's Class A Common
Stock, par value $.01 per share.
(r) "Closing" shall have the meaning set forth in Section 1.02 of the
Agreement.
(s) "Closing Balance Sheet" shall have the meaning set forth in Section
1.06(f) of this Agreement.
(t) "Company" shall have the meaning set forth in the preamble to this
Agreement.
(u) "Company's Auditor" shall have the meaning set forth in Section 1.06(f)
of this Agreement.
(v) "Company Contributed Assets" shall have the meaning set forth in
Section 1.01(b) of this Agreement.
(w) "Company Contributors" shall mean Advanta National Bank, an indirect
wholly owned subsidiary of the Company and any Affiliates thereof which
contribute Company Contributed Assets or transfer Company Transferred
Liabilities in accordance with the terms of this Agreement.
(x) "Company Credit Card Business Employees" shall mean each individual who
is employed on a full-time or part-time basis in connection with the Business on
the Closing Date, composed of those individuals and groups of individuals who
are listed on Schedule 2.01(x) hereto, together with all Potential Credit Card
Business Employees who are deemed to be Company Credit Card Business Employees
pursuant to Section 6.22 of this Agreement.
(y) "Company Intellectual Property" shall have the meaning set forth in
Section 4.10 of this Agreement.
(z) "Company Transferred Liabilities" shall have the meaning set forth in
Section 1.01 of this Agreement.
(aa) "Contribution" shall have the meaning set forth in Section 1.01 of
this Agreement.
(bb) "Credit Insurance Business" shall have the meaning set forth in
Section 7.01 of this Agreement.
(cc) "Estimated Closing Balance Sheet" shall have the meaning set forth in
Section 1.06(a) of this Agreement.
(dd) "Exchange Act" shall have the meaning set forth in Section 4.04 of
this Agreement.
(ee) "Fleet" shall have the meaning set forth in the preamble to this
Agreement.
(ff) "Fleet Business" shall mean the consumer credit card business of Fleet
and the Fleet Contributors, including, without limitation, the origination and
servicing of consumer credit cards as of the Closing Date, the determination of
creditworthiness of consumer credit card account customers, the extension of
credit to consumer credit card account customers and the maintenance of consumer
credit card accounts and collection of receivables with respect thereto,
anywhere in the world.
(gg) "Fleet Contributed Assets" shall have the meaning set forth in Section
1.01(b) of this Agreement.
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(hh) "Fleet Contributors" shall mean Fleet Credit Card Bank, Fleet National
Bank and any Affiliates thereof which contribute Fleet Contributed Assets or
transfer Fleet Transferred Liabilities in accordance with the terms of this
Agreement.
(ii) "Fleet Credit Card Bank" shall mean Fleet Bank, National Association
(DE), a credit card bank organized under the laws of the United States, and any
successor thereto.
(jj) "Fleet Material Adverse Effect" shall mean any effect that (1) is
material and adverse to the assets, liabilities, financial position, business or
results of operations of the Fleet Business, taken as a whole, or (2) would
materially impair the ability of Fleet and the Fleet Contributors, taken as a
whole, to perform their obligations under this Agreement or otherwise materially
impede the consummation of the transactions contemplated by this Agreement
(excluding any such impairment arising from any action taken by, or omission of
the Company, and any Company Contributor or any Affiliate thereof), excluding,
in (1) and (2) above, any effects relating to or arising from (A) the
transactions contemplated by this Agreement and any actions or omissions to act
required by this Agreement (including, without limitation, actions or inactions
of employees, customers or vendors) or (B) past, existing or prospective general
economic or regulatory conditions affecting the consumer revolving lending
business or the consumer credit card business in general. Notwithstanding the
foregoing, Fleet may, at its option, include in the Disclosure Schedules items
which would not have a Fleet Material Adverse Effect within the meaning of the
previous sentence or are not necessarily material, and such inclusion shall not
be deemed to be an acknowledgment by Fleet that such items would have a Fleet
Material Adverse Effect or further define the meaning of either such term for
purposes of this Agreement.
(kk) "Fleet National Bank" shall mean Fleet National Bank, a bank organized
under the laws of the United States.
(ll) "Fleet Transferred Liabilities" shall have the meaning set forth in
Section 1.01 of this Agreement.
(mm) "FNB Assets" shall have the meaning set forth in Section 1.01(e) of
this Agreement.
(nn) "FNB Liabilities" shall have the meaning set forth in Section 1.01(e)
of this Agreement.
(oo) "FNB Participation Agreement" shall have the meaning set forth in
Section 1.01(e) of this Agreement.
(pp) "GAAP" shall mean generally accepted accounting principles.
(qq) "HSR Act" shall have the meaning set forth in Section 4.06 of this
Agreement.
(rr) "Household Receivables" shall mean all consumer credit card
receivables owned, managed, or serviced by the Company or the Company
Contributors acquired by the Company or any of the Company Contributors pursuant
to that certain Credit Card Portfolio Purchase and Sale Agreement, dated as of
September 30, 1997, between Advanta National Bank and Household Bank (Nevada),
N.A. and that certain Line of Credit Portfolio Purchase and Sale Agreement,
dated as of September 30, 1997, between Household Bank, F.S.B. and Advanta
National Bank.
(ss) "Interim Servicing Agreement" shall mean that certain Interim
Servicing Agreement dated as of the Closing Date between the LLC and the
Company, substantially in the form attached hereto as Exhibit D.
(tt) "Introductory Rate Balances" shall mean consumer credit card
receivables accruing finance charges at a special introductory annual percentage
rate offered to new credit card customers only at the time of the opening of a
credit card account for a limited period, referred to as an "introductory rate;"
it is understood that the term Introductory Rate Balances does not include any
portion of a credit card holder's balances (i) resulting from a cash advance and
accruing interest at a cash advance rate; (ii) that no longer carry a special
introductory rate as a result of a delinquency; or (iii) resulting from any
other promotional campaign or relationship management activities.
(uu) "Knowledge" of the Company or Fleet, as applicable, shall be deemed to
include only the actual knowledge of the executive officers of the Company or
Fleet, respectively, provided, however, that for the
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purposes of the indemnification provisions of Article X hereof only (and for no
other provision of this Agreement) "Knowledge" of the Company or Fleet, as
applicable, shall mean the knowledge of all of the officers of the Company and
its Subsidiaries engaged in the Business or Fleet and its Subsidiaries engaged
in the Fleet Business, respectively.
(vv) "Lease Agreements" shall mean those certain lease agreements dated as
of the Closing Date between the LLC and certain of the Company Contributors
relating to shared facilities and containing the provisions set forth on Exhibit
E hereof.
(ww) "LIBOR" shall mean, as of any date, the London Interbank Offered Rate
for three-month deposits as shown at 11:00 a.m. London time on such date on the
display screen designated "Page 3570" by Dow Jones Markets, or such other page
as may replace such page on that service or such other services as may be
nominated by the British Bankers' Association for the purpose of displaying
London Interbank offered rates for U.S. Dollar Deposits.
(xx) "Lien" shall have the meaning set forth in Section 4.08 hereof.
(yy) "LLC" shall mean a limited liability company formed by the parties
hereto or their Affiliates prior to the Closing Date and pursuant to the terms
of the LLC Agreement.
(zz) "LLC Agreement" shall mean the Limited Liability Company Agreement of
the LLC, substantially in the form of Exhibit A attached hereto.
(aaa) "Losses" shall mean any and all claims, losses, liabilities, costs,
penalties, fines, expenses (including reasonable expenses for attorneys,
accountants, consultants and experts), damages, obligations to third parties,
expenditures, proceedings, judgments, awards, settlements or demands (including,
without limitation, Taxes) that are imposed upon or otherwise incurred, suffered
or sustained by the relevant party.
(bbb) "Managed Receivables" shall mean all consumer credit card receivables
owned, managed or serviced by the Company or the Company Contributors under
Master Trust I or Master Trust II or under other agreements relating to the
securitization of such receivables by the Company or the Company Contributors,
or included as part of the Company Contributed Assets, except any receivables
relating to Retained SmartMove Accounts (other than Qualified SmartMove
Accounts), Household Receivables and Rewards Accelerator Receivables.
(ccc) "Master Trust I" and "Master Trust II" shall mean, respectively, that
certain Amended and Restated Master Pooling and Servicing Agreement, dated as of
April 1, 1992, between Colonial National Bank USA and Chemical Bank, and all
supplements and amendments thereto, and that certain Amended and Restated
Pooling and Servicing Agreement, dated as of December 1, 1993, as amended and
restated on May 23, 1994, between Colonial National Bank USA and Bankers Trust
Company and all supplements and amendments thereto.
(ddd) "Material Adverse Effect" shall mean any effect that (1) is material
and adverse to the assets, liabilities, financial position, business or results
of operations of the Business, taken as a whole, or (2) would materially impair
the ability of the Company and the Company Contributors, taken as a whole, to
perform their obligations under this Agreement or otherwise materially threaten
or materially impede the consummation of the transactions contemplated by this
Agreement (excluding any such impairment arising from any action taken by, or
omission of, Fleet, any Fleet Contributor or any Affiliate thereof) excluding,
in (1) and (2) above, any effects relating to (A) the announcement made by the
Company relating to a possible reorganization or sale of significant assets
involving the Company and its Affiliates, (B) the transactions contemplated by
this Agreement and any actions or omissions to act required by this Agreement
(including, without limitation, actions or inactions of employees, customers or
vendors) or (C) past, existing or prospective general economic or regulatory
conditions affecting the consumer revolving lending business or the consumer
credit card business in general. Notwithstanding the foregoing, the Company may,
at its option, include in the Disclosure Schedules items which would not have a
Material Adverse Effect within the meaning of the previous sentence or are not
necessarily material, and such inclusion shall not be deemed to be
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an acknowledgment by the Company that such items would have a Material Adverse
Effect or further define the meaning of either such term for purposes of this
Agreement.
(eee) "Material Company Contributed Contracts" shall mean those Company
Contributed Contracts listed on Schedule 1A(i) hereto.
(fff) "Non-Assumed Liabilities" shall have the meaning set forth in Section
1.01(g) of this Agreement.
(ggg) "Ordinary Course of Business Liabilities" shall mean liabilities
relating to consumer credit matters arising from the operations of the Business
in the ordinary course in a manner substantially similar to the operation of a
credit card business by one or more of the 20 largest credit card issuers in the
United States.
(hhh) "Outside Termination Date" shall have the meaning set forth in
Section 9.01(b) of this Agreement.
(iii) "person" shall mean any individual, corporation, partnership,
association, joint stock company, business, trust, other entity or group.
(jjj) "Proxy Statement" shall have the meaning set forth in Section 3.02 of
this Agreement.
(kkk) "Related Entities" shall mean any company, partnership, trust or
limited liability company of which the Company or Fleet, as the case may be,
directly or indirectly, owns 25% or more of the equity or can elect a majority
of the directors or partners or which the Company or Fleet is otherwise deemed
to control under any of the Bank Acts.
(lll) "Retained SmartMove Accounts" shall mean the credit card accounts and
all accounts receivable thereon for any credit card account holder who either
(i) received a notice of the SmartMove Repricing and, at the time of the receipt
of such notice, maintained a SmartMove Balance subject to the SmartMove
Repricing or (ii) maintained a SmartMove Balance which became subject to the
SmartMove Repricing.
(mmm) "Rewards Accelerator Accounts" shall mean the credit card accounts
and all accounts receivable thereon which are subject to the Rewards Accelerator
Program and as to which the Company does not have the right to solicit the
account holders for a replacement credit card which is not subject to the
program.
(nnn) "Rewards Accelerator Receivables" are receivables under the Rewards
Accelerator Accounts.
(ooo) "SEC" shall have the meaning set forth in Section 3.02 of this
Agreement.
(ppp) "Securities Act" shall have the meaning set forth in Section 4.04 of
this Agreement.
(qqq) "Shares" shall mean any Class A Share or Class A Preferred Share.
(rrr) "SmartMove Balances" shall mean all credit card accounts receivable
generated by the SmartMove Campaign.
(sss) "SmartMove Campaign" shall mean the marketing campaigns of any of the
Company Contributors, referred to as "SmartMove," offering existing credit card
account holders a lower annual percentage rate on credit card balances
transferred to such card holders' accounts with any Company Contributor from
such card holders' credit card accounts with any other credit card issuer.
(ttt) "SmartMove Repricing" shall mean all initiatives under which the
Company Contributors notified credit card account holders who maintained
SmartMove Balances that the annual percentage rate on such SmartMove Balances
would be increased.
(uuu) "SmartMove Service Agreement" shall mean that certain service
agreement dated as of the Closing Date between the LLC and Advanta National Bank
and containing the provisions set forth on Exhibit F hereto.
(vvv) "Special Meeting" shall have the meaning set forth in Section 3.01 of
this Agreement.
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(www) "Specified Date" shall mean the Closing Date; provided, however, that
if the Closing Date is a date other than the last Business Day of a calendar
quarter, Specified Date shall mean, at the sole discretion of the Company, the
last Business Day of the immediately preceding calendar quarter.
(xxx) "Subsidiary" shall mean, when used with reference to an entity, any
corporation or other entity, a majority of the outstanding voting securities of
which are owned directly or indirectly by such entity.
(yyy) "Tax Return" shall mean any return, report, information statement,
schedule or other document (including any related or supporting information and
including any Form 1099 or other document or report required to be provided by
any of the parties to third parties) with respect to Taxes, including any
document required to be retained or provided to any governmental authority
pursuant to 31 U.S.C. Sections 5311-5328 and regulations promulgated hereunder,
relating to the parties or any consolidated group of which any such entity was a
member at the applicable time, and any amended Tax Returns.
(zzz) "Taxes" shall mean all federal, provincial, territorial, state,
municipal, local, foreign or other taxes, imposts, rates, levies, assessments
and other charges (and all interest and penalties thereon), including, without
limitation, all income, excise, franchise, gains, capital, real property, goods
and services, transfer, value added, gross receipts, windfall profits,
severance, ad valorem, personal property, mortgage recording, employment,
payroll, social security, unemployment, disability, estimated or withholding
taxes, and all customs and import duties, and all interest, penalties and losses
thereon or associated therewith or associated with any Tax Return.
(aaaa) "Volume Adjustment" shall have the meaning set forth in Section
1.06(d) of this Agreement.
(bbbb) "Yield Adjustment" shall have the meaning set forth in Section
1.06(e) of this Agreement.
(cccc) "1996 Bonus Protection Payment" shall mean a payment to a
Transferred Employee pursuant to the terms of the Advanta Corp. Management
Incentive Plan with Stock Election II, Advanta Corp. Management Incentive Plan
with Stock Election III and Advanta Corp. Management Incentive Plan with Stock
Election IV, as applicable, for the year ended December 31, 1996.
(dddd) "1997 Bonus Payment" shall mean a payment or issuance or vesting of
stock to a Transferred Employee pursuant to the terms of the Advanta Corp.
Senior Management Incentive Plan with Stock Election II, Advanta Corp.
Management Incentive Plan with Stock Election III and Advanta Corp. Management
Incentive Plan with Stock Election IV, as applicable, for the year ended
December 31, 1997.
(eeee) "1997 Bonus Protection Payment" shall mean a payment from the
Company to a Transferred Employee pursuant to the terms of the Advanta Corp.
Management Incentive Plan with Stock Election II, Advanta Corp. Management
Incentive Plan with Stock Election III and Advanta Corp. Management Incentive
Plan with Stock Election IV, as applicable, for the year ended December 31,
1997.
ARTICLE III. STOCKHOLDERS' MEETING AND PROXY STATEMENT
SECTION 3.01 Stockholders' Meeting. The Company, acting through its Board
of Directors (the "Board"), will, in accordance with applicable law and the
Company's charter and bylaws, duly call, give notice of, convene and hold a
special meeting (including any adjournment or postponement thereof, the "Special
Meeting") of its stockholders as soon as practicable following the date of this
Agreement, but in any event no later than 20 Business Days after the mailing of
the Company's Proxy Statement for the purpose of considering and taking action
upon the approval of the Contribution and any other related matters required
under applicable law to be approved by such stockholders (it being agreed that
the parties hereto do not acknowledge that such approval is required under
applicable law). The Board shall recommend such approval by the stockholders and
shall take all reasonable, lawful action to solicit such approval by its
stockholders.
SECTION 3.02 Proxy Statement. The Company will (i) as promptly as
practicable following the date of this Agreement, prepare and file with the
Securities and Exchange Commission ("SEC"), and use its best efforts to have
cleared by the SEC and thereafter mail to its stockholders as promptly as
practicable, a proxy statement and a form of proxy, in connection with the vote
of the Company's stockholders with respect
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to this Agreement and the transactions contemplated hereby (such proxy
statement, together with any amendments thereof or supplements thereto, in each
case in the form or forms mailed to the Company's stockholders, is herein called
the "Proxy Statement"), (ii) use its best efforts to obtain the necessary
approvals by its stockholders of this Agreement and the transactions
contemplated hereby and (iii) otherwise comply with all legal requirements
applicable to the Special Meeting. The Company agrees to promptly provide Fleet
with all comments or correspondence received from the SEC with respect to the
Proxy Statement. The Company will include in the Proxy Statement the
recommendation of its Board that stockholders of the Company vote in favor of
the approval of this Agreement and the transactions contemplated hereby.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company's Disclosure Schedule delivered to Fleet
by the Company prior to the execution of this Agreement, the Company represents
and warrants to Fleet, on behalf of itself and each of the Company Contributors,
as follows:
SECTION 4.01 Organization. Each of the Company and the Company
Contributors is a corporation or limited liability company duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
formation or a banking organization duly chartered by its chartering authority.
Each of the Company and the Company Contributors is duly qualified to conduct
the Business in the states of the United States and any foreign jurisdictions
where its ownership or leasing of properties or assets used in the conduct of
the Business or the assets of the Business requires it to be so qualified and
where the failure to be so qualified would have a Material Adverse Effect.
SECTION 4.02 Corporate Power, Authority Relative to this Agreement. Each
of the Company and the Company Contributors has the corporate power and
corporate authority to carry on its business as it is now being conducted and to
own or lease all of the properties and assets used in the conduct of the
Business and to conduct the Business in the manner currently conducted by it.
The Company has full corporate power and authority to execute and deliver this
Agreement and, upon approval of this Agreement by the holders of Shares
representing a majority of the votes entitled to be cast by holders of the Class
A Shares and Class A Preferred Shares, voting together as a single class, as
required to satisfy the condition set forth in Section 8.01(a), to consummate
the transactions contemplated hereby and to perform its obligations hereunder,
including, without limitation, causing the Company Contributors (after approval
by their respective Boards of Directors) to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of the Company and no other corporate
proceedings on the part of the Company or any Company Contributor (other than
approval by the respective Boards of Directors of the Company Contributors other
than the Company) are necessary to authorize the execution, delivery or
performance of this Agreement or to consummate the transactions contemplated
hereby other than (subject to the last parenthetical clause in the penultimate
sentence of Section 3.01) the approval of this Agreement and the transactions
contemplated hereby by the holders of Shares representing a majority of the
votes entitled to be cast by holders of Class A Shares and Class A Preferred
Shares, voting together as a single class. This Agreement has been duly and
validly executed and delivered by the Company and, assuming this Agreement has
been duly authorized, executed and delivered by Fleet, this Agreement
constitutes a valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms (but subject to obtaining the approvals
set forth in Section 4.06 hereof), except that (i) enforcement may be subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws, now or hereafter in effect, affecting creditors' rights generally and (ii)
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
SECTION 4.03 Absence of Certain Changes. Except as disclosed in the
Company Filings, since June 30, 1997, (a) the Company and each of the Company
Contributors have conducted the Business in the ordinary and usual course,
consistent with past practice and (b) no event has occurred or fact or
circumstance
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arisen that, individually or taken together with all other facts, circumstances
and events, has had, or is reasonably likely to have a Material Adverse Effect.
Since June 30, 1997, there has not been (a) any entry into any agreement,
commitment or transaction by the Company or any Company Contributor relating to
the Business, which is material to the Business taken as a whole (except
agreements, commitments or transactions in the ordinary course of business,
consistent with past practice and described on the Company's Disclosure
Schedule); or (b) any change by the Company or any of the Company Contributors
in accounting methods, principles or practices relating to the Business, except
as required by GAAP.
SECTION 4.04 Reports and Financial Statements.
(a) The Company and each of its Subsidiaries and Master Trust I and Master
Trust II and, to the Knowledge of the Company, the trustees of Master Trust I
and Master Trust II, have filed all forms, reports, definitive proxy statements,
information statements and other documents (including all prospectuses and all
registration statements) with the SEC required to be filed by it with respect to
all periods commencing on or after January 1, 1994 pursuant to the federal
securities laws and the rules and regulations promulgated thereunder, all of
which have complied in all material respects with all applicable requirements of
the Securities Act of 1933 (the "Securities Act") and the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations
promulgated thereunder (the "Company Filings"). None of the Company Filings
(excluding the financial statements included therein), at the time filed or
mailed, contained, with respect to the Business, any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein in light of the
circumstances under which they were made, not misleading.
(b) The pro forma balance sheet of the Business as of September 30, 1997
(the "Pro Forma Balance Sheet") attached hereto as Schedule 4.04(b) has been
prepared in accordance with GAAP applied on a consistent basis with the
Company's past practice and the procedures set forth on Schedule 1.06(g) hereto,
and presents fairly in all material respects the assets and liabilities of the
Business at September 30, 1997. Notwithstanding the foregoing, it is
acknowledged and agreed that the information technology assets and fixed assets
set forth on the Pro Forma Balance Sheet are subject to change, as mutually
determined by the Company and Fleet, in each case based on a physical inventory
of information technology assets and fixed assets, having an agreed minimum book
value for any one item and an agreed minimum book value for any single line
item, to be performed prior to the Closing. Such changes will be reflected in
the Closing Balance Sheet. The Pro Forma Statement of Operations (as defined in
Section 6.21) for the year ended December 31, 1996 and the nine months ended
September 30, 1997 have been prepared in accordance with GAAP applied on a
consistent basis with the Company's past practice and presents fairly in all
material respects the results of operations of the Business for the periods
covered by the statement of operations.
(c) The Company and each of its Subsidiaries have filed all reports,
registrations, applications and statements, together with any amendments
required to be made with respect thereto, relating to the Business that they
were required to file since January 1, 1995 with any governmental authority, and
all other reports and statements required to be filed by them since January 1,
1995, including, without limitation, any report or statement required to be
filed pursuant to the laws, rules or regulations of the United States, any state
thereof or any governmental authority, and have paid all fees and assessments
due and payable in connection therewith, except in any case where the failure to
file the same would not have a Material Adverse Effect. Each of such reports,
registrations, applications and statements complied (and with respect to such
reports, registrations, applications and statements filed after the date hereof
and prior to the Closing Date, will comply) at the date thereof in all material
respects with the rules and regulations of the governmental authority relating
thereto and fairly present in all material respects the information required to
be presented therein. Except for normal examinations conducted by a governmental
authority in the ordinary course of the business of the Company and its
Subsidiaries, no governmental authority has initiated any proceeding or, to the
Knowledge of the Company, investigation, into the Business since January 1,
1995. There is no unresolved material violation, or exception by any
governmental authority with respect to any report or statement relating to any
examinations of the Company or any of its Subsidiaries relating to the Business.
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(d) Neither the Company nor any of its Subsidiaries is subject to any
cease- and-desist or other order issued by, or is a party to any consent
agreement or memorandum of understanding with, or is a party to any commitment
letter or similar undertaking to, or is subject to any order or directive by, or
is a recipient of any supervisory letter from or has adopted any board
resolutions at the request of any governmental authority, in any such case, that
restricts the conduct of the Business or that, in any manner, relates to the
Business or the Company Credit Card Business Employees (each, whether or not set
forth in the Company's Disclosure Schedule, a "Company Regulatory Agreement"),
nor has the Company or any of its Subsidiaries (A) been advised since January 1,
1995 by any governmental authority that it is considering issuing or requesting
any such Company Regulatory Agreement or (B) have Knowledge of any pending or
threatened regulatory investigation relating to the Business.
(e) Each of the balance sheets contained or incorporated by reference into
any of the Company Filings since January 1, 1997 (including the related notes
and schedules thereto) fairly presents or will fairly present in all material
respects, the financial position of the Company and of its Subsidiaries, or
Master Trust I or Master Trust II, as applicable, as of its date, and each of
the statements of income and changes in stockholders' equity and cash flows or
equivalent statements in the Company Filings since January 1, 1997 fairly
presents, or will fairly present, in all material respects, the results of
operations, changes in stockholders' equity and changes in cash flows, as the
case may be, of the Company and its Subsidiaries, for the periods to which they
relate, and in each case, in compliance in all material respects with the
applicable accounting requirements and with the published rules of the SEC with
respect thereto and in accordance with GAAP, except, in each case, as may be
noted therein, subject to normal year-end audit adjustments in the case of
unaudited statements.
SECTION 4.05 Proxy Statement. None of the information in the Proxy
Statement and any amendment or supplement thereto or any other documents to be
filed by the Company with the SEC or any other governmental entity in connection
with the transactions contemplated by this Agreement will at the time of the
mailing of the Proxy Statement and at the time of the Special Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein not misleading. If at any time prior to the Closing Date, any event with
respect to the Company, its officers and directors or any of the Company
Contributors should occur which is required to be described in an amendment of,
or a supplement to, the Proxy Statement, such event shall be so described, and
such amendment or supplement to the Proxy Statement shall be promptly filed with
the SEC and, as required by law, disseminated to the stockholders of the
Company. The Proxy Statement will (with respect to information relating to the
Company and the Company Contributors) at all times comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder. Each of the Company Contributors agrees
that, if it should become aware prior to the Closing Date of any information
furnished by it that would cause any of the statements in the Proxy Statement to
be false or misleading as of the time of the Special Meeting with respect to a
material fact, or to omit to state any material fact necessary to make the
statements therein not false or misleading as of the time of the Special
Meeting, to promptly inform Fleet thereof and to take the necessary steps to
correct the Proxy Statement.
SECTION 4.06 Consents and Approvals; No Violation. Neither the execution,
delivery and performance of this Agreement by the Company nor the consummation
of the transactions contemplated hereby by the Company or any Company
Contributor will (i) conflict with or result in any breach or violation of any
provision of the respective Restated Certificate of Incorporation or By-Laws (or
other similar governing documents) of the Company or any of the Company
Contributors, (ii) require the Company or any Company Contributor to obtain any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority or body, except (A) in connection
with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), if applicable, (B) pursuant to the Exchange Act and the rules and
requirements of the National Association of Securities Dealers, Inc., (C)
approval of Bank Authorities, (D) approval of state insurance departments, if
applicable, and (E) filings in connection with the formation of the LLC and
maintaining the good standing and qualification of the LLC following the
Closing; (iii) result in a breach or violation of or a default under (or give
rise to any Lien, right of termination, unilateral modification or amendment,
cancellation or acceleration) under any of the terms, conditions or
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provisions of any material note, license, agreement, Company Contributed
Contract (other than any Material Company Contributed Contract or any Company
Contributed Contract relating to Information Technology) or other instrument or
obligation relating to the Business to which the Company or any of the Company
Contributors is a party or by which the Company, any of the Company Contributors
or any of their respective assets may be bound, except for such breaches,
violations or defaults (or Liens or rights of termination, unilateral
modifications or amendments, cancellations or accelerations) as to which
requisite waivers or consents have been obtained prior to the Closing or which
individually or in the aggregate would not have a Material Adverse Effect, (iv)
result in a material breach or a violation or a default under (or give rise to
any Lien, right of termination, unilateral modification or amendment,
cancellation or acceleration) under any Material Company Contributed Contract
except for the breaches, violations or defaults (or Liens or rights of
termination, unilateral modifications or amendments, cancellations or
accelerations) as to which requisite waivers or consents have been obtained
prior to the Closing; or (v) violate any order, writ, injunction, decree,
judgment, ordinance, statute, rule, law or regulation, permit or agreement
applicable to the Business, except for violations (other than of orders, writs,
injunctions or decrees issued against the Company or any of the Company
Contributors or naming the Company or any of the Company Contributors as a
party) which would not individually or in the aggregate have a Material Adverse
Effect.
SECTION 4.07 Litigation. There is no litigation, claim, action,
arbitration, investigation or other proceeding pending or, to the Knowledge of
the Company, threatened against the Company or any of the Company Contributors
and relating to the Business before any court or governmental or regulatory
authority or body acting in an adjudicative capacity, with respect to which
there is a reasonable likelihood of an adverse determination, which (i) would
have a Material Adverse Effect or (ii) challenges the validity or propriety of
the transactions contemplated by this Agreement. Neither the Company nor any of
the Company Contributors is subject to any outstanding order, writ, judgment,
stipulation, award, injunction or decree of any court issued against the Company
or any of the Company Contributors or naming the Company or any of the Company
Contributors as a party relating to the Business which has or is reasonably
likely to have a Material Adverse Effect.
SECTION 4.08 Title to Properties; Encumbrances. The Company and each of
the Company Contributors has good title to or a valid leasehold interest in, or
is licensed or otherwise entitled to use, all of the Company Contributed Assets
(other than the Business real property and the Business leased properties as to
which Section 4.14 is applicable and other than the Company Intellectual
Property as to which Section 4.10 is applicable), free and clear of all security
interests, mortgages, pledges, monetary liens, conditional sales agreements,
leases, monetary liens, endorsements or charges of any kind or character claims
of third parties of any nature whatsoever (each a "Lien"), except for Permitted
Liens.
SECTION 4.09 Licenses. The Company and each of the Company Contributors
has all permits, licenses, authorizations, orders and approvals of, and has made
all filings, applications and registrations with, all governmental authorities
that are required to permit them to own and lease their properties and to
conduct the Business as presently conducted; all such permits, licenses,
certificates of authority, orders and approvals are in full force and effect
and, to the Company Knowledge, no suspension or cancellation of any of them is
threatened which, in any such case, would have a Material Adverse Effect.
SECTION 4.10 Patents, Trademarks, Trade Names, and Information Technology.
A. Patents, Trademarks and Trade Names.
(a) For purposes of this Section 4.10, "Company Intellectual Property"
means any patent, patent application, copyright registration, trade secret or
similar proprietary information, trademark or service mark, trademark or service
mark registration or application or trade name.
(b) All rights of ownership of, or material licenses to use, the Company
Intellectual Property held by the Company and the Company Contributors relating
to the Business are listed on Schedule 4.10A. There are no material intellectual
property rights, other than those set forth on such schedule, reasonably
necessary to and regularly used in, the conduct of the Business as presently
conducted.
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(c) All rights to the Company Intellectual Property reasonably necessary to
and regularly used in the conduct of the Business as presently conducted:
(i) have been duly registered in, filed in, or issued by the United
States Patent and Trademark Office, or the corresponding offices of other
countries identified on said schedule, or applications to register such
Company Intellectual Property have been filed and are pending;
(ii) have been properly maintained and renewed in accordance with
applicable laws and regulations in the United States and such foreign
countries;
(iii) in the case of registered copyrights were developed and authored
as original works of authorship either by full-time employees of the
Company or any of the Company Contributors within the normal scope of their
duties as works for hire, or by third persons as works for hire under an
express written agreement so stating or under a written agreement expressly
transferring and assigning all rights to the Company, the Company
Contributors or any one or more of them;
(iv) in the case of patents or patent applications, have been duly
assigned to the Company, the Company Contributors or any one or more of
them, and such assignment(s) have been recorded in the appropriate
government offices;
(v) are owned by the Company, the Company Contributors, or any one or
more of them, free and clear of any Liens such that no other person has any
right or interest in or license to use or right to license others to use
any of the Company Intellectual Property to the exclusion of the Company;
(vi) are freely transferable (except as otherwise required by law);
and
(vii) are not subject to any outstanding order, decree, judgment or
stipulation,
except, in the case of each of the foregoing clauses (i) through (vii), to the
extent where the failure to comply to the statements made therein would not have
a Material Adverse Effect.
(d) To the Company's Knowledge, no proceedings to which the Company or any
Company Contributor is a party have been commenced which (i) challenge the
rights of the Company or any Company Contributor to use Company Intellectual
Property, or (ii) charge the Company or any Company Contributor with
infringement of any other person's rights in Company Intellectual Property; and
to the Knowledge of the Company, no such proceeding to which the Company is not
a party has been filed, nor are any such proceedings threatened to be filed, in
either case which, if adversely determined, is reasonably likely to have a
Material Adverse Effect.
(e) To the Company's Knowledge (i) none of the rights in the material
Company Intellectual Property is being infringed in any material manner by any
other person, and (ii) neither the Company nor any Company Contributor is
infringing in any material manner upon any material intellectual property rights
of any person.
(f) No director, officer or employee of the Company or any Company
Contributor owns, directly or indirectly, in whole or in part, any material
Company Intellectual Property right.
(g) In addition to the Company Intellectual Property described above, the
Company and the Company Contributors have the right to use, free and clear of
any claims or rights of others except claims or rights described in the
Company's Disclosure Schedule, all material trade secrets and Company owned
customer lists (collectively "Trade Secrets") required for and used in the
Business.
B. Information Technology. For purposes of this Section 4.10B. and
attached hereto as Schedule 4.10B(i) is a listing of all of the functions
reasonably necessary in any material respect to and regularly used in the
Business as presently conducted, including all of the material hardware,
software, networks and telecommunication (collectively the "Company Information
Technology"). The Company or one or more of the Company Contributors owns (free
and clear of all Liens, except Permitted Liens), or is licensed or otherwise
entitled to use the Company Information Technology which is included within the
Company Contributed Assets relating to the operation of the Business. There is
no material information technology,
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other than those set forth in the Schedule 4.10B(i), reasonably necessary and
regularly used in, the conduct of the Business as presently conducted. Schedule
4.10B(ii) identifies the material contracts included in the Company Information
Technology which the Company and Fleet have jointly and mutually identified
(collectively, the "Material Information Technology Contracts"). The Company or
one of the Company Contributors has or can obtain the right to assign the
Material Information Technology Contracts to the LLC, except as otherwise stated
in the Material Information Technology Contracts.
C. Information Technology Consents and Approvals; No Violation. Schedule
4.10C identifies those Information Technology Contracts requiring consents of
any third party in connection with the consummation of the transactions
contemplated by this Agreement. Neither the execution, delivery and performance
of this Agreement by the Company nor the consummation of the transactions
contemplated hereby by the Company or any Company Contributor will (i) require
the Company or any Company Contributor to obtain any other consent or approval
of or by any Company Information Technology contracting party; or (ii) result in
a material breach or violation of or a material default (or give rise to any
right of termination or claim for injunctive relief) under any of the terms,
conditions or provisions of any material contract relating to Company
Information Technology.
SECTION 4.11 Company Contributed Contracts.
(a) Each of the Company and the Company Contributors has complied in all
material respects with all of the respective provisions of the Material Company
Contributed Contracts and the Material Information Technology Contracts required
to be complied with by it and neither the Company nor any of the Company
Contributors, nor, to the Knowledge of the Company, any other party thereto is
in material default in any respect thereunder, and no event has occurred which
but for the passage of time or giving of notice or both would constitute such a
material default thereunder by the Company or any of the Company Contributors,
and there is no outstanding notice of default or termination under any Material
Company Contributed Contract or Material Information Technology Contract. The
Material Company Contributed Contracts and the Material Information Technology
Contracts are each valid, binding and enforceable in all material respects in
accordance with their respective terms, and the Contribution and the other
transactions contemplated by this Agreement will not affect the validity,
enforceability and continuity of any such Material Company Contributed Contract
or Material Information Technology Contract, if assignable and if properly
assigned.
(b) With respect to the Company Contributed Contracts which are not
Material Company Contributed Contracts or Material Information Technology
Contracts each of the Company and the Company Contributors has complied with all
respective provisions of the Company Contributed Contacts required to be
complied with by it and none of the Company or any Company Contributor is in
default in any respect thereunder, and no event has occurred, but for the
passage of time or giving of notice or both, would constitute such a default
thereunder by the Company or any of the Company Contributors, except where such
noncompliance or defaults would, individually or in the aggregate, not have a
Material Adverse Effect and there is no outstanding notice of default or
termination under any Company Contributed Contract which would have a Material
Adverse Effect.
SECTION 4.12 Environmental Matters.
(a) For purposes of this Agreement, the following terms shall have the
following meanings: (i) the term "Hazardous Material" shall mean any material,
waste or substance including, without limitation, petroleum or petroleum
products that, whether by their nature or use, are subject to control or
regulation under any Environmental Requirement; (ii) the term "Environmental
Requirement" shall collectively mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C. Section 9601, et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. Section 1801, et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901, et seq.), the
Toxic Substances Control Act (15 U.S.C. Section 2601, et seq.), the Clean Air
Act (42 U.S.C. Section 7401, et seq.) and the Federal Water Pollution Control
Act (33 U.S.C. Section 1251, et seq.), all as presently in effect, any
regulation pursuant thereto, or any other law addressing environmental, health
or safety issues of or by any governmental authority; and (iii) the term
"governmental authority" shall mean the Federal government, or any state or
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other political subdivision thereof, or any agency, court or body of the Federal
government, any state or other political subdivision thereof, exercising
executive, legislative judicial, regulatory or administrative functions.
(b) To the Company's Knowledge: (i) no Hazardous Material has been or is
currently located at, in, on, under or about any real estate used, owned,
operated or leased by the Company or any of the Company Contributors and
included in the Company Contributed Assets in a manner which (x) violates in any
material respect any Environmental Requirement or (y) which requires cleanup or
remedial action of any kind requiring the expenditure of more than $150,000 in
the aggregate under any Environmental Requirement; (ii) none of the Company or
any Company Contributor is required to obtain or maintain any federal, state and
local environmental permits, certifications, licenses or approvals with respect
to any of the Company Contributed Assets, the failure to obtain or hold which
would have a Material Adverse Effect; (iii) neither the Company nor any Company
Contributor has received notice of any material violation, lien, complaint,
suit, order or other obligation with respect to any past, present or future
event concerning the environmental condition of any real estate included in the
Company Contributed Assets; and (iv) there has been no investigation,
litigation, directive or administrative enforcement proceeding against the
Company or any Company Contributor, nor have any settlements been reached by the
Company or any Company Contributor with any governmental authority or public or
private party alleging the release, threatened release, disposal, storage or use
of any Hazardous Material at, in, on, under or adjacent to any real estate
included in the Company Contributed Assets, and with respect to which any of
such items (i) through (iv) would result in a Material Adverse Effect.
SECTION 4.13 Condition of the Company Contributed Assets. The Company
Contributed Assets (including, without limitation, all leasehold interests
included therein), constitute all of the assets reasonably necessary or required
to conduct the Business as presently conducted; provided, however, that this
representation shall not relate to any capital or capital adequacy requirements
of any Bank Authority. To the Company's Knowledge, all tangible assets with a
depreciated book value as of September 30, 1997 in excess of one million dollars
($1,000,000) included in the Company Contributed Assets are in good operating
condition and repair, normal wear and tear excepted.
SECTION 4.14 Real Property.
(a) Schedule 4.14(a) of the Company's Disclosure Schedule lists all real
property owned by the Company or any of the Company Contributors and included in
the Company Contributed Assets. With respect to each such parcel of owned real
property:
(i) the identified owner has good and valid title to the parcel of
real property, free and clear of any Lien except for installments of
special assessments not yet delinquent, liens for Taxes not yet due and
payable, easements, covenants, and other restrictions, and utility
easements, building restrictions, zoning restrictions, and other easements
and restrictions existing generally with respect to properties of a similar
character or which do not materially reduce the value or usefulness of such
property ("Permitted Liens");
(ii) there are no leases, subleases, licenses, concessions, or other
agreements granting to any party or parties the right of use or occupancy
of any portion of the parcel of real property; and
(iii) there are no outstanding options or rights of first refusal to
purchase the parcel of real property, or any portion thereof or interest
therein.
(b) Schedule 4.14(b) of the Company's Disclosure Schedule lists all real
property currently leased or subleased to the Company or any of the Company
Contributors and included in the Company Contributed Contracts. Each lease and
sublease listed in Schedule 4.14(b) of the Company's Disclosure Schedule hereto
is in all material respects legal, valid, binding, enforceable against Company
and the Company Contributors which are parties thereto, and to the Knowledge of
the Company, against the other parties thereto and is in full force and effect,
subject to bankruptcy, reorganization and similar laws and general equitable
principles.
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SECTION 4.15 Compliance with Laws. Except for the Environmental
Requirements (compliance with which is covered by Section 4.12, as applicable)
the Company and each of the Company Contributors:
(i) is in compliance with all applicable United States federal, state
and local and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders or decrees applicable to the Business or to the Company
Credit Card Business Employees;
(ii) holds all permits, licenses, authorizations, orders and approvals
of, and has made all filings, applications and registrations with, all
governmental agencies that are required in order to permit them to own or
lease their properties and to conduct the Business as presently conducted;
and all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect; and
(iii) has not since June 30, 1996 received any written notice from any
governmental agency (A) asserting that the Company or any of the Company
Contributors is not in material compliance with any statutes, regulations,
ordinances or rules in connection with the operation of the Business or (B)
threatening to revoke any material license, franchise, permit, membership
privilege or governmental authorization necessary for the operation of the
Business which, in either (A) or (B) above, is reasonably likely to have a
material adverse effect on the ability of the Company and the Company
Contributors to consummate the transactions contemplated by this Agreement
or the ability of the LLC to conduct the Business following the Closing
Date in substantially the same manner as it is presently conducted,
except in the case of any matter referred to in clauses (i), (ii) and (iii)
above where such non-compliance or failure to hold any such items or make such
filings, applications and registrations or failure to be in full force and
effect would not have a Material Adverse Effect.
SECTION 4.16 Benefit Plans.
(a) With respect to the Company Credit Card Business Employees identified
as of the date of this Agreement, no amount paid or payable by the Company or
any of the Company Contributors or the LLC in connection with the transactions
contemplated hereby (either solely as a result thereof or as a result of such
transactions in conjunction with any other event) will be an "excess parachute
payment" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended.
(b) Neither the LLC nor Fleet have any liability with respect to the
payment of any benefits or otherwise arising in connection with any "employee
benefit plan" or "plan" (as those terms are defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) of the
Company or any Company Contributor, except those payments of benefits or other
liabilities that may arise in connection with those plans or other obligations
with respect to Transferred Employees or Company Credit Card Business Employees
that are expressly assumed or otherwise agreed to by the LLC or Fleet under the
terms of this Agreement.
SECTION 4.17 Unions. The Company represents that with respect to the
Company Credit Card Business Employees: There is no pending or, to the best of
the Company's Knowledge, threatened employee strike, work stoppage or labor
dispute which would have a Material Adverse Effect. To the Knowledge of the
Company no union representation question exists, no collective bargaining
agreement exists or is currently being negotiated by the Company or any Company
Contributor, no demand has been made for recognition by a labor organization, no
union organizing activities is taking place, and none of the Company Credit Card
Business Employees is represented by any labor union or organization. There is
no unfair labor practice claim against the Company or any Company Contributor
pending before the National Labor Relations Board, or any strike, dispute,
slow-down, or stoppage pending or to the Knowledge of the Company, threatened
against or involving the Company or any Company Contributor and none has
occurred.
SECTION 4.18 Retained SmartMove Accounts. As of September 30, 1997, the
total amount of SmartMove Balances outstanding equaled approximately
$667,000,000; the total amount of outstanding SmartMove Balances included in the
Retained SmartMove Accounts equaled approximately $54,000,000; and the weighted
average per annum interest rate of the SmartMove Balances included in the
Retained SmartMove Accounts equaled approximately 9.9%. The initiatives in May
1997, February 1997 and
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September 1996 are the only initiatives under which the Company Contributors
notified credit card account holders who maintained SmartMove balances that the
annual percentage rate on such SmartMove Balances would be increased, although
the Company Contributors have otherwise increased annual percentage rates on
SmartMove Balances as a result of delinquency or other breaches by card holders
of the credit card account agreement with the Company Contributors.
SECTION 4.19 Other Matters. There is (i) no litigation, claim, action,
arbitration, investigation or examination by any governmental authority, other
action or other proceeding, with respect to which there is a reasonable
likelihood of an adverse determination and (ii) no material default by the
Company or any Company Contributor under any material agreement, relating in any
case to the business (including, without limitation, the Business) of the
Company, which, in the case of either (i) or (ii), would materially delay or
materially impair the ability of the Company to consummate the transactions
contemplated by this Agreement.
SECTION 4.20 AS IS Condition. Except as otherwise set forth in this
Agreement, the Company Contributed Assets to be contributed and transferred
hereunder are to be contributed and transferred and are to be accepted by the
LLC in an "AS IS" condition, without any representation or warranty whatsoever.
EXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT, THE COMPANY MAKES NO
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, AS TO THE COMPANY
CONTRIBUTED ASSETS, INCLUDING, BUT NOT LIMITED TO, ANY REPRESENTATION OR
WARRANTY AS TO THE MERCHANTABILITY OR THE TRANSFERABILITY OF THE COMPANY
CONTRIBUTED ASSETS OR AS TO THE FITNESS OF THE COMPANY CONTRIBUTED ASSETS FOR
ANY PARTICULAR PURPOSE OR AS TO ANY INFRINGEMENT OR VIOLATION OF ANY
INTELLECTUAL PROPERTY RIGHTS BY ANY COMPANY CONTRIBUTED ASSET OR ANY USE
THEREOF.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF FLEET
Except as set forth in the Disclosure Schedule delivered to the Company by
Fleet prior to the execution of this Agreement, Fleet represents and warrants to
the Company as follows:
SECTION 5.01 Organization. Each of Fleet and the Fleet Contributors is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation or a banking organization duly
chartered by its chartering authority.
SECTION 5.02 Corporate Power, Authority Relative to this Agreement. Each
of Fleet and the Fleet Contributors has the corporate power and authority to
carry on its business as it is now being conducted and to own or lease all of
its properties and assets and to conduct the Fleet Business in the manner
currently conducted by it. Fleet has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby and to perform its obligations hereunder, including without
limitation causing the Fleet Contributors (after approval by their respective
Boards of Directors). The execution and delivery of this Agreement and the
consummation of the transactions hereby have been duly and validly authorized by
the Board of Directors of Fleet and no other corporate proceedings on the part
of Fleet or any Fleet Contributor (other than approval by the respective Boards
of Directors of the Fleet Contributors other than Fleet) are necessary to
authorize the execution, delivery or performance of this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Fleet and assuming that this Agreement has
been duly authorized, executed and delivered by the Company, this Agreement
constitutes a valid and binding agreement of Fleet, enforceable against it in
accordance with its terms (but subject to obtaining the approvals set forth in
Section 5.05 hereof), except that (i) enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or
hereafter in effect, affecting creditors' rights generally and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
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SECTION 5.03 Absence of Certain Changes. Except as disclosed in the Fleet
Filings, since June 30, 1997 (a) Fleet and each of the Fleet Contributors have
conducted their respective businesses in the ordinary and usual course,
consistent with past practice and (b) no event has occurred or fact or
circumstance arisen that, individually or taken together with all other facts,
circumstances and events, has had, or is reasonably likely to have a Fleet
Material Adverse Effect.
SECTION 5.04 Reports. Fleet and each of its Subsidiaries have filed all
required forms, reports, definitive proxy statements, information statements,
and documents (including all prospectuses and all registration statements) with
the SEC required to be filed by it with respect to all periods commencing on or
after January 1, 1994 pursuant to the federal securities laws and the SEC rules
and regulations thereunder, all of which have complied in all material respects
with all applicable requirements of the Securities Act and the Exchange Act and
the rules and regulations promulgated thereunder (the "Fleet Filings"). None of
the Fleet Filings (excluding the financial statements included therein), at the
time filed or mailed, contained, with respect to the Fleet Business, any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements, in light of the
circumstances under which they were made, not misleading.
SECTION 5.05 Consents and Approvals; No Violation. Neither the execution
and delivery and performance of this Agreement by Fleet nor the consummation of
the transactions contemplated hereby by Fleet or any Fleet Contributor will (i)
conflict with or result in any breach or violation of any provision of the
respective Certificate of Incorporation or ByLaws (or other similar governing
documents) of Fleet or any of the Fleet Contributors, (ii) require Fleet or any
Fleet Contributor to obtain any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority or
body, except (A) in connection with the HSR Act, if applicable, (B) pursuant to
the Exchange Act or the rules and requirements of the New York Stock Exchange,
Inc., (C) approval of state insurance departments, if applicable, or (D)
approval of Bank Authorities; (iii) result in a breach or violation of or
default (or give rise to any Lien, right of termination, unilateral modification
or amendment, cancellation or acceleration) under any of the terms, conditions
or provisions of any material note, license, Fleet Contributed Contract,
agreement or other instrument or obligation relating to the Fleet Business to
which Fleet or any of the Fleet Contributors is a party or by which Fleet, any
of the Fleet Contributors or any of their respective assets may be bound, except
for such breaches, violations or defaults (or Liens or rights of termination,
unilateral modifications or amendments, cancellations or accelerations) as to
which requisite waivers or consents have been obtained prior to the Closing or
which in the aggregate would not have a Fleet Material Adverse Effect; or (iv)
violate any order, writ, injunction, decree, judgment, ordinance, statute, rule,
law or regulation applicable to Fleet, any of the Fleet Contributors or any of
their respective properties or businesses, except for violations (other than of
orders, writs, injunctions or decrees issued against Fleet or any of the Fleet
Contributors or naming Fleet or any of the Fleet Contributors as a party) which
would not, individually or in the aggregate, have a Fleet Material Adverse
Effect.
SECTION 5.06 Litigation. There is no claim, action, arbitration,
investigation or proceeding pending or, to the Knowledge of Fleet, threatened
against Fleet or any of the Fleet Contributors and relating to the Fleet
Business, before any court or governmental or regulatory authority or body
acting in an adjudicative capacity, with respect to which there is a reasonable
likelihood of an adverse determination which (i) would have a Fleet Material
Adverse Effect, or (ii) challenges the validity or property or the transactions
contemplated in the Agreement. Neither Fleet nor any of the Fleet Contributors
is subject to any outstanding order, writ, judgment, stipulation, award,
injunction or decree of any court issued against Fleet or any of the Fleet
Contributors or naming Fleet or any of the Fleet Contributors as a party
relating to the Fleet Business which has or is reasonably likely to have a Fleet
Material Adverse Effect.
SECTION 5.07 Title to Properties; Encumbrances. Fleet and each of the
Fleet Contributors has good title to all of the Fleet Contributed Assets, free
and clear of all Liens, except for Permitted Liens.
SECTION 5.08 Licenses. Fleet and each of the Fleet Contributors has all
permits, licenses, authorizations, orders and approvals of, and has made all
filings, applications and registrations with, all governmental authorities that
are required to permit them to own and lease their properties and to conduct the
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Fleet Business as presently conducted; all such permits, licenses, certificates
of authority, orders and approvals are in full force and effect and, to Fleet's
Knowledge, no suspension or cancellation of any of them is threatened, which, in
any such case, would have a Fleet Material Adverse Effect
SECTION 5.09 Fleet Contributed Contracts. Fleet and each of the Fleet
Contributors has complied with all respective provisions of the Fleet
Contributed Contracts required to be complied with by it and neither Fleet nor
any of the Fleet Contributors nor to the Knowledge of Fleet any other party is
in default in any respect thereunder, and no event has occurred which but for
the passage of time or giving of notice of both would nor might constitute such
a default thereunder by Fleet or any of the Fleet Contributors except where such
noncompliance or defaults would, individually or in the aggregate, not have a
Fleet Material Adverse Effect, and there is no outstanding notice of default or
termination under any Fleet Contributed Contract. The Fleet Contributed
Contracts are valid, binding and enforceable in accordance with their respective
terms and the Contribution and the other transactions contemplated by this
Agreement will not affect the validity, enforceability and continuity of any
such Fleet Contributed Contract, if assignable and if properly assigned.
ARTICLE VI. COVENANTS
SECTION 6.01 Conduct of Business of the Company and Fleet.
(a) Except as contemplated by this Agreement, during the period from the
date of this Agreement until the Closing Date, the Company and the Company
Contributors will each conduct its operations relating to the Business according
to its ordinary and usual course of business, consistent with past practice.
(b) From the date hereof until the Closing Date, except as expressly
contemplated by this Agreement, without the prior written consent of Fleet, the
Company will not, and will cause each of the Company Contributors not to:
(i) Ordinary Course. Conduct the Business other than in the ordinary
and usual course or fail to use commercially reasonable efforts to preserve
the Business and the Company Contributed Assets and maintain their rights,
franchises and existing relations with customers, suppliers, employees,
including Company Credit Card Business Employees, and business associates,
or take any action reasonably likely to have a material adverse effect upon
the Company's or any of the Company Contributors' ability to perform any of
their respective obligations under this Agreement or to materially
adversely affect or delay the ability of any of the Company or the Company
Contributors to obtain any necessary approvals of any regulatory agency or
governmental body required for the transactions contemplated hereby.
(ii) Compensation; Employment Agreements; Etc. Enter into or amend or
renew any employment, consulting, severance or similar agreements or
arrangements (other than benefit plans) with any Company Credit Card
Business Employee, or grant any salary or wage increase or increase any
employee benefit (including incentive or bonus payments to any Company
Credit Card Business Employee) except (1) for normal individual increases
in compensation to employees in the ordinary course of business consistent
with past practice, base compensation increases not to exceed 6% per annum,
(2) for other changes that are required by applicable law, (3) to satisfy
contractual obligations existing as of the date hereof and disclosed on the
Company's Disclosure Schedule, (4) for employment arrangements for, or
grants of awards to, newly hired employees of the Business consistent with
past practice (which in no event shall include the execution of any
employment agreements with such employees); provided, however, that no such
agreement or arrangement shall cause the Company's representation in
Section 4.16(a) to fail to be true as of the Closing Date or (5) bonus
payments in the ordinary course of business consistent with past practice
and in accordance with bonus plans existing on the date of this Agreement.
For purposes of this paragraph 6.01(b)(ii), the limitations applicable to
Company Credit Card Business Employees who are Potential Company Credit
Card Business Employees (as identified as such as individuals or by
category or job description) shall cease to be applicable with respect to
any individuals designated by the Company 24 hours after notice of such
designation is provided by the Company to Fleet unless Fleet notifies the
Company of Fleet's determination to treat such individuals as
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Company Credit Card Business Employees with respect to whom Fleet is
required to offer employment on behalf of the LLC.
(iii) Benefit Plans. (A) Except as set forth on Schedule 6.01(b)(iii)
of the Company Disclosure Schedule, enter into, establish, adopt or amend
(except as may be required by applicable law) any pension, retirement,
stock option, stock purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
(or similar arrangement) related thereto, in respect of the Company Credit
Card Business Employees, or (B) except as provided in Section 6.08(b)
hereof, take any action with respect to Company Credit Card Business
Employees to accelerate the vesting or exercisability of stock options,
restricted stock or other compensation or benefits under the Advanta Corp.
1992 Stock Option Plan (as amended and restated), or increase the
compensation or benefits, payable thereunder. For purposes of this
paragraph 6.01(b)(iii), the limitations applicable to Company Credit Card
Business Employees who are Potential Company Credit Card Business Employees
(as identified as such as individuals or by category or job description)
shall cease to be applicable with respect to any individuals designated by
the Company 24 hours after notice of such designation is provided by the
Company to Fleet unless Fleet notifies the Company of Fleet's determination
to treat such individuals as Company Credit Card Business Employees with
respect to whom Fleet is required to offer employment on behalf of the LLC.
(iv) Dispositions. Sell, transfer, mortgage, encumber or otherwise
dispose of or discontinue any of the Company Contributed Assets, except in
the ordinary course of business consistent with past practice and in a
transaction that individually or in the aggregate with all such other
disposition or discontinuances is not material to the Company Contributed
Assets taken as a whole, or in connection with securitizations of Managed
Receivables (provided that the benefits thereof are transferable to the LLC
at the Closing without further consents of any third parties) or Household
Receivables or in connection with the monthly sale of charged-off
receivables to an Affiliate of Commercial Financial Services, Inc. pursuant
to contractual obligations existing on the date of this Agreement or the
sale of receivables of bankrupt account holders consistent with past
practice.
(v) Acquisitions. Acquire all or any portion of, the assets, business,
or properties of any other entity which would be part of the Business and
included in the Company Contributed Assets, except in the ordinary course
of business consistent with past practice and in a transaction that
individually or in the aggregate with all such other acquisitions is not
material to the Business or the Company Contributed Assets.
(vi) Accounting Methods. Implement or adopt any material change in its
accounting principles, practices or methods as they apply to the Business
and are reflected in the Company Accounting Policy Manual identified in
Schedule 1.06(g), other than as may be required by GAAP or governmental
regulatory authorities as concurred in by the Company's Auditor, or change
any of its methods of reporting income and deductions for Federal income
tax purposes from those employed in the preparation of the Federal income
tax returns of the Company and the Company Contributors for the taxable
years ending December 31, 1997 and December 31, 1996 and, if applicable,
December 31, 1998, except as required by changes in law or regulation or
except to the extent such changes do not materially adversely effect the
federal income tax treatment of the Company Contributed Assets while owned
by the LLC.
(vii) Reconciliations. Fail to reconcile all general ledger accounts
consistent with past practice but in no event later than forty-five days
after the month end other than those accounts which are reconciled
quarterly (i.e., general ledger accounts 124007, 152619 and 157001).
(viii) Contracts. Except in the ordinary course of business consistent
with past practice, enter into or terminate any Material Company
Contributed Contract or amend or modify any Material Company Contributed
Contract or Material Information Technology Contract (other than renewals
of such contracts without material changes of terms), or amend any Company
Contributed Contract (other than a Material Company Contributed Contract or
a Material Information Technology Contract) in such a
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manner as to cause such Company Contributed Contract to become a "Material
Company Contributed Contract".
(ix) Indebtedness. As soon as practicable after appropriate SEC and
other regulatory approvals have been obtained, issue any notes in
connection with the Advanta National Bank note program unless such notes
may be transferred in accordance with the terms of this Agreement at the
Closing without any additional consent of the holder thereof.
(x) Credit Policies. Amend or revise in any material respect its
credit policies relating to the Business, including, without limitation;
underwriting, delinquency and charge-off policies.
(xi) Deferred Acquisition Costs. Amortize the DAC account other than
in a manner consistent with past practice or, except in the ordinary course
of business consistent with past practice, change in any material respect
its policies with respect to the transfer of prepaid advertising expenses
to the DAC account.
(xii) Solicitation Campaigns. Conduct solicitation campaigns other
than in the ordinary course of business consistent with past practice and
in substantial accordance with its current marketing plans (e.g., if the
current marketing plans call for four campaigns, then five campaigns would
not be a breach of this covenant but ten campaigns would be a breach) and
in a manner that such campaigns would not have a material adverse effect on
the LLC's ability to operate the Business after the Closing Date in
substantially the same manner as the Business is presently operated.
(xiii) Commitments. Agree or commit to do any of the foregoing.
(c) Except as contemplated by this Agreement, from the date of this
Agreement until the Closing, Fleet and the Fleet Contributors will each conduct
its operations relating primarily or solely to the Fleet Business according to
its ordinary and usual course of business, consistent with past practice.
SECTION 6.02 No Solicitation.
(a) From the date of this Agreement until the earlier of the Closing or the
termination of this Agreement, the Company and each of the other Company
Contributors and their respective executive officers shall not (and will use
their respective commercially reasonable efforts not to permit any of its other
officers, directors, agents or affiliates to) directly or indirectly (i)
solicit, encourage inquiries or proposals with respect to, engage in discussions
or negotiate with any person (whether such discussions or negotiations are
initiated by the Company or otherwise) or take any other action intended or
designed to facilitate the efforts of any person (other than Fleet) relating to
the possible acquisition of the Business (whether by way of contribution,
purchase of capital stock, purchase of assets or otherwise) (with any such
efforts by any such person, including a firm proposal to make such an
acquisition, to be referred to as an "Alternative Acquisition"), (ii) provide
information with respect to the Business to any person, other than Fleet,
relating to a possible Alternative Acquisition by any person, other than Fleet,
(iii) enter into an agreement with any person, other than Fleet, providing for a
possible Alternative Acquisition, or (iv) make or authorize any statement,
recommendation or solicitation in support of any possible Alternative
Acquisition by any person, other than by Fleet.
(b) The Company shall immediately cease any of its activities, discussions
or negotiations conducted prior to the date of this Agreement with any parties
other than Fleet with respect to any of the foregoing, and shall use its
commercially reasonable efforts to enforce any confidentiality or similar
agreement relating to an Alternative Acquisition. In the event the Company shall
receive a proposal for an Alternative Acquisition, it shall promptly inform
Fleet as to the Alternative Acquisition and the substance thereof (including the
identity of the person making such Alternative Acquisition), and advise Fleet of
any developments with respect to such Alternative Acquisition promptly after the
occurrence thereof.
(c) From the date of this Agreement until the earlier of the Closing or the
termination of this Agreement, Fleet and each of the other Fleet Contributors
and their respective executive officers shall not (and will use their respective
commercially reasonable efforts not to permit any of its other officers,
directors, agents or affiliates to) directly or indirectly (i) solicit,
encourage inquiries or proposals with respect to, engage in discussions or
negotiate with any person (whether such discussions or negotiations are
initiated by Fleet or
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otherwise) or take any other action intended or designed to facilitate the
efforts of any person (other than the Company) relating to the possible
acquisition of the Fleet Business (whether by way of contribution, purchase of
capital stock, purchase of assets or otherwise) (with any such efforts by any
such person, including a firm proposal to make such an acquisition, to be
referred to as an "Fleet Alternative Acquisition"), (ii) provide information
with respect to the Fleet Business to any person, other than the Company,
relating to a possible Fleet Alternative Acquisition by any person, (iii) enter
into an agreement with any person, other than the Company, providing for a
possible Fleet Alternative Acquisition, or (iv) make or authorize any statement,
recommendation or solicitation in support of any possible Fleet Alternative
Acquisition by any person, other than by the Company. Notwithstanding the
foregoing, Fleet may furnish information concerning the Fleet Business to a
person (other than the Company) and may negotiate and execute an agreement with
such person if counsel to Fleet advises the Board of Directors of Fleet, or a
committee thereof, that the failure to furnish such information or negotiate
with such person could subject the Fleet's directors to liability for breach of
their fiduciary duties. In the event Fleet shall receive a proposal for a Fleet
Alternative Acquisition, it shall promptly inform the Company as to any such
proposal. In addition, notwithstanding any other provisions of this paragraph
(c), the term Fleet Alternative Acquisition shall not include, and there shall
be no limitations whatsoever imposed upon Fleet, its officers, directors, agents
or affiliates with respect to, any proposal relating to the acquisition of Fleet
whether by merger, consolidation, purchase of assets or otherwise.
SECTION 6.03 Access to Information.
(a) Between the date of this Agreement and the Closing, upon reasonable
prior notice to the Company and subject to applicable laws relating to the
exchange of information, the Company will give Fleet and its authorized
representatives reasonable access during normal business hours to the offices
and other facilities and to the books and records of the Company and the Company
Contributors relating to the Business, and to the Company Credit Card Business
Employees and will permit Fleet to make such reasonable inspections during
normal business hours as it may reasonably request and will cause its officers
and those of the Company Contributors to furnish Fleet with such financial and
operating data and other information relating to the Business as Fleet may from
time to time reasonably request; provided, however, that all such access and
inspections shall be coordinated by Fleet with a designee of the Company (who
shall be identified to Fleet promptly following the date hereof) and shall be
conducted in such manner so as not to unduly interfere with the normal business
operations of the Company or any of the Company Contributors. Notwithstanding
the foregoing, neither the Company nor any of the Company Contributors shall be
required to provide access to or to disclose information where such access or
disclosure would jeopardize the attorney-client privilege of the institution in
possession or control of such information or contravene any law, rule,
regulation, order, judgment, decree or binding agreement entered into prior to
the date of this Agreement. The parties hereto will make appropriate substitute
disclosure arrangements to the extent practicable under circumstances in which
the restrictions of the immediately preceding sentence apply.
(b) All information received by Fleet and its representatives pursuant to
this Section 6.03 will be subject to the Letter Agreement dated May 12, 1997
between Fleet and the Company.
SECTION 6.04 Commercially Reasonable Efforts.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to promptly effect all necessary filings under the Bank
Acts and, to the extent applicable, the HSR Act (which the parties shall file
with the United States Federal Trade Commission and the Antitrust Division of
the United States Department of Justice on or prior to November 20, 1997 if they
determine a filing is so required) and use its commercially reasonable efforts
to secure all government clearances (including by taking all reasonable steps to
avoid or set aside any preliminary or permanent injunction or other order of any
federal or state court of competent jurisdiction or other governmental
authority) to consummate and make effective the transactions contemplated by
this Agreement. Each of the parties shall have the right to review in advance,
and, to the extent practicable, each will consult with the other, in each case
subject to applicable laws relating to the exchange of information, with respect
to (i) all material written information submitted to the SEC or (ii)
descriptions of this Agreement and the transactions contemplated hereby
submitted to any rating agency or any other third party, in connection with the
transactions contemplated by this Agreement.
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(b) In exercising the foregoing right, each of the parties hereto agrees to
act reasonably and as promptly as practicable. Each of the parties hereto
further agrees to use its reasonable efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all other things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement. In particular, subject to the
provisions of Section 11.09 of this Agreement, Fleet and the Company will use
their respective commercially reasonable efforts to obtain all other consents,
authorizations, orders and approvals required in connection with, and waivers of
any material violations, breaches and defaults that may be caused by, the
consummation of the Contribution or the other transactions contemplated by this
Agreement. For those of the Material Information Technology Contracts set forth
on the Company's Disclosure Schedule which require consent (or any other form of
conditional approval) from any third party prior to or after any assignment by
the Company, the Company and Fleet will each diligently and in good faith
exercise reasonable commercial efforts towards obtaining such consents or
satisfying any conditions imposed by any third party. Each party hereto further
agrees that it will consult with the other party hereto with respect to the
obtaining of all permits, consents, approvals, and authorizations of third
parties and governmental authorities necessary or advisable to consummate the
transactions contemplated by this Agreement, and each party will keep the other
party appraised of the status of material matters relating to the completion of
the transactions contemplated hereby.
SECTION 6.05 Public Announcements. Fleet and the Company will consult
with each other before issuing any press release or otherwise making any public
statements with respect to the Contribution, the transactions contemplated
hereby or this Agreement and shall not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
law, regulation or the rules of any national securities exchange or The Nasdaq
Stock Market.
SECTION 6.06 Purchase of Shares. From the date hereof until the Closing
or the termination of this Agreement in accordance with its terms, and for a
period of twelve months thereafter, neither Fleet nor any Subsidiary or
Affiliate of Fleet shall acquire beneficial ownership (within the meaning of
Rule 13d-3 under the Exchange Act), except in a fiduciary capacity in cases
where the person for which it is acquiring beneficial ownership is not Fleet or
any such Subsidiary or Affiliate, of any shares of capital stock of the Company
without the prior written consent of the Company.
SECTION 6.07 Notification of Certain Matters.
(a) The Company shall give prompt notice to Fleet, and Fleet shall give
prompt notice to the Company, of (i) the occurrence or nonoccurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at or prior to the Closing, (ii) any failure
of the Company or Fleet, as the case may be, to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it hereunder, (iii) any notice or other communication from any
third party alleging that the consent of such third party is required in
connection with the transactions contemplated by this Agreement, (iv) the
receipt of written notice from any governmental agency (A) asserting that the
Company or any of the Company Contributors is not in material compliance with
any statutes, regulations, ordinances or rules in connection with the operation
of the Business or (B) threatening to revoke any material license, franchise,
permit, membership privilege or governmental authorization necessary for the
operation of the Business or (v) any Material Adverse Effect or Fleet Material
Adverse Effect, as applicable.
(b) The Company and Fleet shall confer on a regular and frequent basis with
each other with respect to the Business, the Fleet Business and other matters
relevant to the Contribution, and the other transactions contemplated by this
Agreement, and Fleet and the Company shall promptly advise the other, orally and
in writing, of any change or event, including, without limitation, any
complaint, investigation or hearing by any governmental entity (or communication
indicating the same may be contemplated) or the institution or threat of
litigation, having, or which, insofar as can be reasonably foreseen, would have,
a Material Adverse Effect or a Fleet Material Adverse Effect.
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SECTION 6.08 Employment Matters.
(a) Employment Matters
(1) Between the date hereof and the Closing Date, Fleet shall offer,
on behalf of the LLC, employment effective as of the close of business on
the Closing Date to all Company Credit Card Business Employees. Company
Credit Card Business Employees who accept such offer of employment shall
hereinafter be referred to as the "Transferred Employees."
(2) If any Company Credit Card Business Employee who is, on the
Closing Date, absent on an authorized leave in accordance with Company
policies, seeks to return to active employment, within the period that such
Company Business Card Employee's reemployment rights are protected by law,
Fleet, on behalf of the LLC, shall offer immediate employment to such
Company Credit Card Business Employee; provided that Fleet's obligation to
offer employment on behalf of the LLC to any Company Credit Card Business
Employee whose authorized leave was based upon a medical condition of such
Company Credit Card Business Employee shall be subject to the Company
Credit Card Business Employee being medically capable to perform the
essential functions of the position occupied immediately before such leave.
For purposes of this Section 6.08(a)(2), an authorized leave shall mean
short-term disability, maternity, military, family and medical leaves and
such other leaves of absence where the opportunity to return to active
employment is subject to statutory requirements. Any Company Credit Card
Business Employee who accepts the LLC's offer of employment pursuant to
this Section 6.08(a)(2) shall thereafter be considered a Transferred
Employee for all purposes of this Agreement.
(3) Fleet shall not be required to offer employment on behalf of the
LLC to any Credit Card Business Employee who is (i) on short-term
disability on the date hereof and who thereafter becomes eligible for long
term disability benefits without returning to active employment, (ii) on
long term disability from Company or any of its Affiliates on the date of
this Agreement or (iii) eligible to receive long term disability benefits
on or before the Closing Date.
(4) Nothing in this Agreement shall be deemed to require or guaranty
the employment of any Company Credit Card Business Employee to be continued
by the LLC for any particular period of time after the Closing Date.
Employment of the Transferred Employees by the LLC shall be employment "at
will" and nothing herein shall be construed to be an employment agreement
for the benefit of any Company Credit Card Business Employee, or to
interfere with the right of Fleet or the LLC to terminate the employment of
any Company Credit Card Business Employee.
(5) The LLC will reimburse the Company and the Company Contributors in
connection with any severance costs incurred by any of them with respect to
Company Credit Card Business Employees who (i) are not offered employment
pursuant to this Section 6.08(a) on terms consistent with the Change of
Control Plans and (ii) do not accept employment with the LLC.
(b) Company Benefits. Between the date hereof and the Closing Date, the
Company shall take reasonable actions necessary to provide that:
(1) Effective on the Closing Date, the Advanta Corporation Employee
Savings Plan account balances of all Company Credit Card Business Employees
shall become fully vested.
(2) The Company, or its Affiliates, pay, or cause to be paid,
consistent with past practice, all claims by Transferred Employees and
their dependents for medical and dental benefits covered by any of the
Company's medical or dental plans which relate to services rendered on or
before the Closing Date to the extent such plans would honor such claims in
accordance with their terms.
(3) The Advanta Management Incentive Plans with Stock Election (II,
III and IV) ("AMIP") are amended as provided in Schedule 6.01(b)(iii).
(4) The Advanta Corp. 1992 Stock Option Plan (as amended and restated)
is amended, as necessary, to provide for the benefits described in Schedule
6.08(b)(4).
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(5) The Company makes its election to distribute funds held by it
pursuant to its Executive Deferral Plan to Company Credit Card Business
Employees by lump sum or over three years, as determined by the Company.
(6) The Change of Control Plans assumed by the LLC pursuant to Section
6.08(c)(2)(i) are amended as provided in Schedule 6.01(b)(iii).
(7) On the Closing Date, the Company shall pay 50% of the aggregate
benefits payable to those persons listed on Schedule 6.08(c) hereof
pursuant to the terms of those letter agreements dated as of April 28, 1997
between each such person and the Company (the "Company Letter Agreement
Payments").
(c) LLC Benefits. After the Closing Date, Fleet will ensure that:
(1) the LLC will maintain employee benefit plans, programs, policies
and arrangements for the Transferred Employees on terms and conditions
generally applicable to similarly situated employees of Fleet ("FFG
Benefits").
(2) notwithstanding Section 6.08(c)(1):
(i) with respect to the Transferred Employees, the LLC shall assume
the Advanta Employees Change of Control Severance Plan and the Advanta
Senior Management Change of Control Severance Plan (the "Change of
Control Plans") and will pay benefits to the Transferred Employees in
accordance with such Change of Control Plans;
(ii) the LLC shall pay 50% of the aggregate of all Company Letter
Agreement Payments; and
(iii) the LLC and the Company shall cooperate in order to cause, as
soon as practicable following the Closing Date, a trustee to trustee
transfer of the account balances of all Transferred Employees held under
the Advanta Corp. Employee Savings Plan to a defined contribution plan
meeting the requirements of Section 401(a) of the Internal Revenue Code
of 1986, as amended (the "Code"), maintained for the benefit of
employees of the LLC (the "LLC Plan"), such transfer to consist of the
cash or other investments held in such accounts; provided, however, that
no such transfer shall be made with respect to any Transferred Employee
who is not, as of the date of such transfer, an employee of the LLC. The
Company and the LLC shall cooperate in all matters related to such
transfer, including making appropriate amendments to the plans involved
and in timely filing with the Internal Revenue Service or other
governmental or regulatory agencies such returns or other documentation
as may be required. All liabilities associated with the accounts of
Transferred Employees that are actually transferred to the LLC Plan
shall be assumed by the LLC Plan;
(3) Transferred Employees (to the extent otherwise eligible) shall be
given credit for all service with the Company and its Affiliates (and
predecessors) to the same extent as such service was credited for such
purpose by the Company and its Affiliates, under all FFG Benefits for
purposes of eligibility and vesting but not for benefit accrual purposes;
provided, however, that for all purposes under the Fleet Financial Group,
Inc. Pension Plan, including, but not limited to, eligibility, vesting and
benefit accrual, each Transferred Employee shall be considered a new
employee of Fleet as of the close of business on the Closing Date;
(4) each Transferred Employee's current level of vacation or paid time
off entitlement will be grandfathered, so that vacation or paid time off
entitlement under the LLC's vacation policy will never be less than what
such Transferred Employee is entitled to on the date hereof; and
(5) the LLC shall waive any limitations for preexisting conditions
under its medical, dental and disability plans with respect to any
Transferred Employee provided such Transferred Employee was participating
in a comparable benefit plan of the Company or any of its Affiliate on the
Closing Date. In addition, the LLC shall waive any service-based
eligibility requirement for its employee benefit plans with respect to any
Transferred Employee who is otherwise eligible for such plan and was
participating in a comparable benefit plan of Company or any of its
Affiliates on the Closing Date.
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(d) Company Obligations. The Company shall pay (including, without
limitation, by issuance or vesting of stock) to the Transferred Employees or
reimburse the LLC (if the Company and Fleet agree to cause the LLC to pay) all
amounts due under AMIP with respect to the 1996 Bonus Protection Payment, the
1997 Bonus Protection Payment and the 1997 Bonus Payment no later than such time
as the Company otherwise makes payments under such plans.
(e) Employee Records. After Closing, the parties hereto will cooperate
with each other in the administration of all applicable employee compensation
and benefit plans including providing reasonable access to any and all records
necessary to administer all employee compensation and benefit plans.
(f) No Third Party Beneficiaries; No LLC Limitations. Nothing expressed or
implied in this Section 6.08 shall create any third party beneficiary or other
rights in any Company Credit Card Business Employee in respect of continued
employment with Company, the LLC or any of their respective Affiliates or with
respect to any benefits that may be provided, directly or indirectly, from the
Company or under any FFG Benefits. Additionally, notwithstanding anything
contained herein to the contrary, no provision of this Agreement shall
constitute a limitation on rights to amend, modify or terminate, after the
Closing Date, any specific plan or arrangement of Company, the LLC or any of
their respective Affiliates, except to the extent that comparability
requirements as to a type of plan, program, policy or arrangement may create
such a limitation or such limitation is imposed under the terms of any plan
expressly assumed by the LLC.
SECTION 6.09 Tax Reporting. The Company and the Company Contributors and
Fleet and the Fleet Contributors agree that they shall treat the Contribution as
an exchange for membership interests in the LLC that will qualify for
nonrecognition of gain or loss to each contributor and the LLC pursuant to the
provisions of Subchapter K of the Code and, accordingly, the parties hereto
further agree that each of them and the LLC will report the income tax
consequences of the Contribution in a manner fully consistent with viewing the
Contribution as resulting in the nonrecognition of gain or loss and further
agree that they will not take any income tax position inconsistent with viewing
the Contribution as resulting in the nonrecognition of gain or loss unless such
position would subject the reporting person to a penalty.
SECTION 6.10 Real Estate Matters. Title to owned real estate which is
part of the Company Contributed Assets and Fleet Contributed Assets will be
conveyed by special warranty deed, free and clear of all Liens, except Permitted
Liens to the extent valid and enforceable. Real estate taxes on the real estate
which is part of the Company Contributed Assets or Fleet Contributed Assets,
minimum water and sewer rents, rents under any leases in which the applicable
contributor is the landlord and other items customarily apportioned in the
jurisdiction in which the real estate is situate, shall be apportioned pro rata
between the contributor and the LLC on a per diem basis as of the close of
business on the Closing Date.
SECTION 6.11 Cooperation in Obtaining Approval and Consents.
(a) The LLC and Fleet agree, and Fleet shall cause Fleet's Affiliates to
agree, to cause Fleet National Bank, at the option of the Company, to assume or
to join as joint and several indemnitors, and irrevocable and unconditional
guarantor and surety of the obligations of the LLC and Fleet Credit Card Bank
(i) to the extent requested by the applicable trustees or rating agencies and
any other party whose consent, approval or action is required in connection with
transfer of the assets and liabilities of the Company and the Company
Contributors relating to Master Trust I and Master Trust II; and (ii) with
respect to any obligations of Advanta National Bank which are part of the
Company Transferred Liabilities, including, without limitation, those arising
under promissory notes and certificates of deposit.
(b) Upon the terms and subject to the conditions herein provided, each of
the parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all action, to do, or cause to be done, and to assist and cooperate with
the other party hereto in doing, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement,
including, but not limited to, the obtaining of all necessary consents,
approvals or waivers from holders of notes of Advanta National Bank. In
connection therewith, the Company will prepare and file with the applicable Bank
Authorities a solicitation statement with respect to the notes, if necessary.
Fleet will furnish the Company with such information, including, but not limited
to,
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financial information regarding Fleet and its Subsidiaries, as the Company may
reasonably request for incorporation into such solicitation materials, and shall
take all such other actions as the Company may reasonably request in connection
with any such action.
(c) The Company and Fleet agree to cooperate in good faith to determine
which contracts relating to Information Technology should be assigned to the
LLC, retained by the Company, split to the extent possible between the Company
and the LLC and/or shared by the Company and the LLC.
SECTION 6.12 Good Faith Negotiation. The parties shall use their best
efforts to negotiate the form of the agreements and documents referred to in
Section 1.03 which are to be executed concurrently with or prior to the Closing.
SECTION 6.13 Actions of Company Contributors, Fleet Contributors and
Others. The Company hereby agrees that it will use its best efforts to cause
the Company Contributors and Fleet hereby agrees that it will use its best
efforts to cause the Fleet Contributors, to take any and all such actions (as
sole shareholder or otherwise) as they are required to take pursuant to this
Agreement.
SECTION 6.14 Supplements to Schedules.
(a) Prior to the Closing Date, each of the Company and Fleet shall promptly
supplement or amend their applicable Disclosure Schedule with respect to any
matter hereafter arising which, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in the
schedules and shall supplement or delete from the lists of Company Contributed
Assets, Fleet Contributed Assets, Company Transferred Liabilities and Fleet
Transferred Liabilities any assets or liabilities which should be so added or
deleted in accordance with the terms of this Agreement. Solely for purposes of
determining the accuracy of representations and warranties of the Company and
Fleet contained in this Agreement for the purpose of determining the fulfillment
of the conditions set forth in Sections 8.02(b) and 8.03(b), the Disclosure
Schedules delivered by the Company and Fleet, as applicable, shall be deemed to
include only that information contained therein on the date of this Agreement
and shall be deemed to exclude any information contained in any subsequent
supplement or amendment thereto.
(b) For purposes of determining satisfaction of the closing condition set
forth in Section 8.03(f), Fleet shall have the exclusive right to review any
supplements to the list of Company Contributed Contracts and to determine, in
its reasonable discretion (applying substantially the same standards of
materiality used to establish the list of Material Company Contributed Contracts
as of the date of this Agreement), whether any additional Company Contributed
Contracts should be deemed Material Company Contributed Contracts; provided,
however, that in no event shall any such additional Company Contributed Contract
be deemed to be a Material Company Contributed Contract unless Fleet gives the
Company written notice thereof within five Business Days after a copy of such
contract is submitted to Fleet.
SECTION 6.15 Non-Competition and Non-Solicitation.
(a) During the period beginning on the Closing Date and ending on the fifth
anniversary thereof (the "Non-Competition Period"), except as required in
connection with the Retained SmartMove Accounts and the Rewards Accelerator
Accounts, neither the Company nor any of its Subsidiaries or any entity which is
an Affiliate of the Company (individually and collectively, the "Company
Parties") shall directly or indirectly engage in any consumer credit card
business or activity which is in competition with the Business or the Fleet
Business in the United States; provided, however, that ownership of less than 2%
of the outstanding capital stock of any publicly traded corporation which is in
direct competition with the Business or the Fleet Business in the United States
shall not violate the foregoing agreement not to compete.
(b) During the period beginning on the Closing Date and ending on the fifth
anniversary thereof, neither the Company nor any of its Subsidiaries shall,
directly or indirectly use any past or present customer list of the Business or
any list of prospective customers generated by use of the know-how, trade
secrets or other intellectual property of the Business (whether in hard copy or
data file or otherwise) to solicit, directly or indirectly, any customer of the
Business or the Fleet Business for any consumer debt product or in its business
credit card operations; provided, however that nothing in this Section 6.15
shall require the Company or any of
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its Affiliates to destroy any customer lists relating to the Business that it
may have in its possession (whether in hard copy, data file or otherwise) or to
sort or cull any customer list used by the other businesses of the Company or
its Affiliates and nothing in this Section 6.15(b) shall restrict the general
use of know-how by the Company in the conduct of its business.
(c) For the period beginning as of the close of business on the Closing
Date and ending on the third anniversary thereof, neither the Company nor any of
its Subsidiaries shall, directly or indirectly, solicit for employment, retain
as an independent contractor or consultant, induce to terminate employment with
Fleet, any of its Subsidiaries or the LLC or otherwise interfere with any
employee of Fleet, any of its Subsidiaries or the LLC, in all such cases,
engaged in the Business or the Fleet Business; provided, however, that persons
solicited by the Company and its Subsidiaries pursuant to the use of any general
advertisements or general solicitations not specifically directed to employees
of Fleet, any of its Subsidiaries or the LLC shall not violate the terms of this
covenant.
(d) For the period beginning as of the close of business on the Closing
Date and ending on the third anniversary thereof, neither Fleet nor any of its
Subsidiaries shall, directly or indirectly, solicit for employment, retain as an
independent contractor or consultant, induce to terminate employment with the
Company or any of its Subsidiaries or otherwise interfere with any employee of
the Company or any of its Subsidiaries; provided, however, that persons
solicited by Fleet and its Subsidiaries pursuant to the use of any general
advertisements or general solicitations not specifically directed to employees
of the Company or any of its Subsidiaries shall not violate the terms of this
covenant.
SECTION 6.16 Access. From and after the Closing Date, the LLC, Fleet and
the Fleet Contributors shall give the Company and the Company Contributors,
without charge, reasonable, prompt and timely access to the Company Contributed
Assets, books and records relating thereto, the Company Credit Card Business
Employees and First Data Resources, Inc., all as may be reasonably requested by
the Company, in order to enable the Company and the Company Contributors to (i)
administer and otherwise deal with the Retained SmartMove Accounts and the
Credit Insurance Business; (ii) participate in the preparation of the Closing
Balance Sheet and the resolution of any disputes relating thereto; (iii) permit
the performance of any covenants required to be performed under this Agreement
after the Closing Date by the Company or any Company Contributor; (iv) permit
the preparation of any Tax Return or other document required to be filed with
any governmental authority; (v) respond to any necessary proceeding or claim
made, or request for information, by any governmental authority or any third
party; and (vi) permit the processing or responding to any claim made under this
Agreement, and the LLC, Fleet and the Fleet Contributors shall reasonably
cooperate with the Company and the Company Contributors, if requested, in
connection with the foregoing. Notwithstanding the foregoing, neither the LLC,
Fleet nor any of the Fleet Contributors shall be required to provide access to
or to disclose information where such access or disclosure would jeopardize the
attorney-client privilege of the institution in possession or control of such
information or contravene any law, rule, regulation, order, judgment, decree or
binding agreement entered into prior to the date of this Agreement.
SECTION 6.17 SmartMove and Rewards Contribution.
(a) At any time, and from time to time, on or after the Closing Date, the
Company and the Company Contributors may tender to the LLC, and the LLC will
accept and assume, within 15 days after such tender, pursuant to documents
relating thereto in form reasonably satisfactory to the LLC and the other
parties thereto, Qualified SmartMove Accounts subject to certain liabilities.
For purposes of this Section 6.17, "Qualified SmartMove Accounts" are Retained
SmartMove Accounts as to which (i) a release of all claims in respect of
SmartMove Promotions has been obtained, (ii) a final judgment from which any
right to appeal has lapsed has been rendered in connection with litigation
relating to such Retained SmartMove Account or (iii) full restitution has been
made in respect of the repricing of such Retained SmartMove Accounts or some
other event (including, without limitation, the passage of time) shall have
occurred relating to such Retained SmartMove Accounts and, in either such case
in the reasonable judgment of the LLC, no further liability to the LLC exists in
respect of such Retained SmartMove Accounts or an indemnity therefor from the
Company in form and substance reasonably acceptable to the LLC is satisfactory
to satisfy any such remaining liability. The book value of the liabilities
assigned by the Company and the Company Contributors and assumed by the
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LLC with respect to such Qualified SmartMove Accounts shall equal the product of
the amount of credit card receivables relating to such Qualified SmartMove
Accounts multiplied by 1.0438. Such liabilities will be composed of interest
bearing liabilities with characteristics consistent with Section 1.06(a).
(b) At any time after the Closing Date, the Company and the Company
Contributors may tender to the LLC, and the LLC will accept and assume, within
fifteen (5) days of such tender, pursuant to documents relating thereto in form
reasonably satisfactory to the LLC and the other parties thereto, Qualified
Rewards Accelerator Accounts subject to certain liabilities. For purposes of
this Section 6.17, "Qualified Rewards Accelerator Accounts" are credit card
accounts which were Rewards Accelerator Accounts on the Closing Date but
subsequently ceased to be Rewards Accelerator Accounts. The book value of the
liabilities assigned by the Company and the Company Contributors and assumed by
the LLC with respect to such Qualified Rewards Accelerator Accounts shall equal
the product of the amount of credit card receivables relating to such Qualified
Rewards Accelerator Accounts multiplied by 1.0438. Such liabilities will be
composed of interest bearing liabilities with characteristics consistent with
Section 1.06(a).
SECTION 6.18 Cooperation in Litigation.
(a) Fleet agrees to take commercially reasonable actions necessary to make
Transferred Employees who are knowledgeable with respect to the matter in
question available to the Company after the Closing Date with respect to any
action, suit, proceeding or investigation ("Actions") to which the Company is a
party or is otherwise involved with regard to the Business, whether commenced
before or after the Closing Date, including, without limitation, Actions
relating to Retained SmartMove Accounts. Fleet agrees to use its reasonable
efforts to provide that any such employees who terminate their employment with
the LLC or any of its Affiliates and enter into termination agreements or
similar agreements, arrangements or understandings, will be obligated to
continue to assist the Company in the defense of any such matters, whether as
consultants, expert witnesses, or otherwise. Fleet further agrees to use its
commercially reasonable efforts to ensure that all decisions as to the legal
representation of any such Transferred Employees in connection with any such
Actions shall be made by the Company, exclusive of joint representation. The
Company agrees to reimburse the LLC for reasonable out-of-pocket expenses
incurred by the LLC in connection with requests by the Company pursuant to this
Section 6.18(a) (excluding salary and fringe benefits paid to such employees).
(b) Fleet and its Affiliates will not provide information relating to the
Business or its operations prior to the Closing Date to any person if Fleet has
Knowledge that such information is being requested in connection with any
litigation, arbitration or other proceeding in which the Company or any of the
Company's Affiliates is a party. If Fleet or any of its Affiliates becomes
legally compelled (by deposition, interrogatory, request for documents,
subpoena, civil investigative demand or otherwise) to disclose such material,
Fleet will provide the Company with prompt prior written notice of such
requirement so that the Company may seek a protective order or other appropriate
remedy to prevent the dissemination of such information. In the event that such
protective order or other remedy is not obtained, or that the Company waives
compliance with the terms hereof, Fleet agrees to furnish only such information
which it reasonably believes is legally required.
(c) The Company and Fleet shall cooperate, to the extent reasonably
requested by either of them, in the handling and disposition of any Actions,
whether or not listed on the Company Disclosure Schedule and whether or not
pending or threatened prior to the Closing, that arise out of or are related to
any event or occurrence with respect to the Business prior to the Closing;
provided, however, that the party ultimately responsible for discharging such
Action shall have the authority to take such actions as it deems necessary or
advisable, in its sole discretion, to discharge such Action subject, however, to
the provisions of this Agreement.
SECTION 6.19 Preservation of and Access to Books and Records. Fleet shall
cause the LLC to preserve and keep all books and records of the Business and all
information relating to the accounting, business, financial and Tax affairs of
the Business in existence on the Closing Date or which come into existence after
the Closing Date but relate to the Business prior to the Closing Date for a
period of seven (7) years thereafter, or for any longer period (i) as may be
required by any federal, state, local or foreign governmental body or agency,
(ii) as may be reasonably necessary with respect to the prosecution or defense
of any audit, suit, action, litigation or administrative arbitration or other
proceeding or investigation that is then pending or threatened, or (iii) that is
equivalent to the period established by any applicable statute of
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limitations (or any extension or waiver thereof) with respect to matters
pertaining to Taxes. For a period of four (4) years following the seven (7) year
period specified above, if the LLC wishes to destroy such records, the LLC shall
first provide the Company the opportunity to take possession of same.
SECTION 6.20 Guarantees. Fleet shall take such commercially reasonable
actions as necessary to cause Fleet National Bank to replace the Company under
the Guarantees listed in Schedule 6.20 and to ensure that the Company has no
remaining obligation under such guarantees after the Closing Date.
SECTION 6.21 Pro Forma Statements of Operation. The Company shall deliver
to Fleet prior to the date of mailing of the Proxy Statement to stockholders of
the Company, a pro-forma statement of operations of the Business for the year
ended December 31, 1996 and the nine months ended September 30, 1997 (the "Pro
Forma Statement of Operations"). The Pro Forma Statement of Operations will
reflect pretax earnings for the nine month period ended September 30, 1997 of no
less than $30 million.
SECTION 6.22 Employee Designations. It is acknowledged that Schedule
2.01(x) does not, in certain instances, give specific names of employees, but
rather the number of employees who will be part of the Company Credit Card
Business Employees to fill positions in particular departments (the "Potential
Company Credit Card Business Employees"). Fleet shall use its best efforts to
provide the Company with the names of specific employees to fill such positions
within fifteen days after the date of this Agreement, and in any event shall
give all of such names to the Company within 30 days after the date of this
Agreement (it being agreed that all such selections shall be subject to the
reasonable approval of the Company). If all of such names are not given to the
Company within 30 days after the date of this Agreement, then the Company shall
be permitted to designate those employees from such departments who will fill
the positions for which names of specific employees were not given by Fleet
within such 30 day period. Upon the identification and approval of Potential
Company Credit Card Business Employees, such employees shall be deemed to be
Company Credit Card Business Employees.
SECTION 6.23 VISA and MasterCard. The Company shall take such
commercially reasonable actions as reasonably requested by the LLC and as
necessary to obtain any required consent of VISA USA Inc. ("VISA") and
MasterCard International Inc. to the use of the bin numbers of Advanta National
Bank in respect of the Company Contributed Assets; provided, however, that the
Company shall not be required to take any actions which would reasonably be
expected to affect adversely the ability of the Company to obtain a refund of
its sixteen million dollar ($16,000,000) deposit with VISA or to materially and
adversely effect the Company's ability to hold the Retained SmartMove Accounts
and the Rewards Accelerator Accounts.
SECTION 6.24 Strategic Business Assets. From and after the Closing Date,
the parties agree that the strategic business assets identified on Annex A-8 to
Schedule 1 as shared assets (the "Shared Strategic Assets") may be used by each
of the LLC and the Company in their respective businesses; provided, however,
that, except in connection with a sale, transfer or other disposition of a
substantial portion of the assets of a business unit or the Company as a whole,
the Company shall not sell, transfer or otherwise dispose of such Shared
Strategic Assets in any manner which would permit any person not Affiliated with
the Company to the use of such assets in any manner which would compete with the
consumer credit card business of the LLC.
ARTICLE VII. INSURANCE
SECTION 7.01 Liabilities to be Retained. The parties hereto acknowledge
that the Non-Assumed Liabilities include any and all obligations of the Company
and the Company Contributors to pay claims which were (for any particular claim)
incurred on or prior to the Closing Date under the credit insurance policies and
debt cancellation contracts sold by or on behalf of the Company to certain of
its customers on or before the Closing Date (the "Credit Insurance Business").
Notwithstanding the fact that the accounts receivable from certain of these
customers and the credit cards issued to such customers (including all
contractual rights
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relating thereto) and the deferred acquisition costs associated with the
Business (including the Credit Insurance Business) are included as part of the
Contributed Assets, the parties hereto agree as follows:
(a) The LLC, or an Affiliate thereof, pursuant to the terms of the
Administration Agreement shall administer all claims made with respect to the
Credit Insurance Business.
(b) Within 5 Business Days' notice of receipt of notice thereof, together
with appropriate backup documentation, the Company shall pay, or cause one of
its Affiliates to pay, any and all proper Credit Insurance Business claims which
were (for any particular claim) incurred on or prior to the Closing Date,
whether or not the claim is made on or after the Closing, and shall promptly
reimburse Fleet and its Affiliate if any one of them shall pay any such claim on
behalf of the Company.
SECTION 7.02 Assets to be Retained. The parties hereto acknowledge that
the assets retained by the Company and the Company Contributors include all
reserves relating to the Credit Insurance Business and the Company Contributed
Assets include all deferred acquisition costs related to the Credit Insurance
Business.
SECTION 7.03 Insurance Proceeds. The parties agree that in the event
insurance proceeds in respect of policies with American Bankers Life, or other
insurance companies, are paid to such party or any of its Affiliates in respect
of liabilities of the other party or its Affiliates, such proceeds will be
promptly paid, without setoff, to the other party.
ARTICLE VIII. CONDITIONS TO CLOSING
SECTION 8.01 Conditions to Each Party's Obligation to Effect the
Contribution. The respective obligations of each party to effect the
Contribution and the other transactions contemplated by this Agreement are
subject to the satisfaction or waiver, where permissible, prior to or
concurrently with the Closing, of each of the following conditions:
(a) This Agreement shall have been adopted by the affirmative vote of a
majority of the votes entitled to be cast by the holders of the Class A Shares
and the Class A Preferred Shares, voting together as a single class;
(b) All regulatory approvals required to be obtained by such party to
consummate the transactions contemplated hereby, including, without limitation,
any required approvals of the Bank Authorities, shall have been obtained and
shall remain in full force and effect and all statutory waiting periods in
respect thereof shall have expired; and no such approvals shall contain any
conditions or restrictions which the Board of Directors of either Fleet or the
Company reasonably determines in good faith will have a Material Adverse Effect
or a Fleet Material Adverse Effect or a material limitation on the ability of
Fleet to operate the LLC or the Company to redeem shares of its capital stock
following consummation of the transactions contemplated by this Agreement;
(c) No statute, rule or regulation shall have been enacted or promulgated
by any governmental authority of competent jurisdiction which prohibits the
consummation of the Contribution and the other transactions contemplated by this
Agreement;
(d) There shall be no order, judgment, decree or injunction (whether
temporary, preliminary or permanent) of a United States Federal or state court
of competent jurisdiction in effect precluding or materially restricting or
making illegal consummation of the Contribution and the other transactions
contemplated by this Agreement;
(e) The Ancillary Agreements (other than the Lease Agreements) shall have
been executed, provided that this paragraph (e) shall not be a condition to the
obligations of any party to effect the Contribution and the other transactions
contemplated by this Agreement if such party has not negotiated in good faith
and used its best efforts to negotiate and execute such agreements.
SECTION 8.02 Conditions to the Company's Obligation to Effect the
Contribution. The obligations of the Company and the Company Contributors to
effect the Contribution and the other transactions
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contemplated by the Agreement are also subject to the satisfaction or waiver,
where permissible, prior to or concurrently with the Closing of each of the
following conditions:
(a) Fleet and the Fleet Contributors shall have performed in all material
respects their agreements and covenants contained in or contemplated by this
Agreement which are required to be performed by them at or prior to the Closing;
(b) The representations and warranties of Fleet set forth in this Agreement
(without regard to any Fleet Material Adverse Effect qualification in such
representation or warranty) shall be true and correct (i) on and as of the date
hereof and (ii) on and as of the Closing Date, with the same effect as though
such representations and warranties had been made on and as of the Closing Date,
except for representations and warranties that expressly speak only as of a
specific date or time which need only be true and correct as of such date and
time, and except for such failures to be true and correct as individually or in
the aggregate will not have a Fleet Material Adverse Effect;
(c) The Company and the Company Contributors shall have sufficient
liabilities as provided in Schedule 1.06(a) which may be transferred to the LLC
in accordance with the terms of this Agreement to permit the Closing Balance
Sheet to reflect the Agreed Deficit; provided, however, that in the event the
Company is unable to satisfy this condition and all other conditions to Closing
have been satisfied or waived, then the Closing shall be delayed until a date
which is within 20 Business Days after the Company is first able to satisfy this
condition, with the exact date and time of Closing to be specified by the
Company by notice to Fleet given at least three Business Days prior thereto;
(d) The Company shall have received a certificate signed on behalf of Fleet
by an executive officer of Fleet, dated as of the Closing Date, to the effect
that the conditions set forth in Sections 8.02(a) and 8.02(b) hereof have been
satisfied;
(e) The Company shall have received the opinion of Edwards & Angell,
counsel to Fleet, relying on Pennsylvania counsel as necessary, in form and
substance reasonably satisfactory to the Company.
SECTION 8.03 Conditions to Fleet's Obligation to Effect the
Contribution. The obligations of Fleet and the Fleet Contributors to effect the
Contribution and the other transactions contemplated by this Agreement are
subject to the satisfaction or waiver, where permissible, prior to or
concurrently with the Closing of each of the following conditions:
(a) The Company and the Company Contributors shall have performed in all
material respects their agreements and covenants contained in or contemplated by
this Agreement which are required to be performed by them at or prior to the
Closing;
(b) The representations and warranties of the Company set forth in this
Agreement (without regard to any Material Adverse Effect qualification in such
representation or warranty) shall be true and correct (i) on and as of the date
hereof and (ii) on and as of the Closing Date, with the same effect as though
such representations and warranties had been made on and as of the Closing Date,
except for representations and warranties that expressly speak only as of a
specific date or time which need only be true and correct as of such date and
time, and except for such failures to be true and correct as will individually
or in the aggregate not have a Material Adverse Effect; provided, however, that
for purposes of this paragraph (b), any change in the financial condition or
results of operations of the Business shall be deemed not to result in a breach
of any of the representations and warranties of the Company set forth in this
Agreement;
(c) Fleet shall have received a certificate signed on the Company's behalf
by an executive officer of the Company, dated the Closing Date, to the effect
that the conditions set forth in Sections 8.03(a) and 8.03(b) hereof have been
satisfied;
(d) Fleet shall have received the opinion of Wolf, Block, Schorr and
Solis-Cohen LLP, counsel to the Company, in form and substance reasonably
satisfactory to Fleet, including an opinion regarding the valid transfer of
Master Trust I and Master Trust II;
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(e) Since the date of this Agreement, no bona fide claim which challenges
the consummation of the transactions contemplated by this Agreement shall have
been filed which is reasonably likely to materially and adversely affect the
ability of the LLC to operate the Business in substantially the same manner as
it is presently operated; and
(f) All consents and approvals of any persons required in connection with
the assignment of the Material Company Contributed Contracts shall have been
obtained (including, without limitation, the consent of the trustees to the
amendment of Master Trust I and Master Trust II).
ARTICLE IX. TERMINATION; AMENDMENTS; WAIVER
SECTION 9.01 Termination. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned, notwithstanding approval
thereof by the stockholders of the Company, at any time prior to the Closing:
(a) by mutual written consent of Fleet and the Company;
(b) by either Fleet or the Company if the transactions contemplated by this
Agreement have not been consummated by March 31, 1998 (as such date may be
extended by mutual agreement or pursuant to the proviso to this sentence, the
"Outside Termination Date"); provided, however, that the right to terminate this
Agreement under this Section 9.01(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure to consummate the transactions contemplated by this
Agreement by the Outside Termination Date; provided, further, however, that if
the failure to consummate the transactions contemplated by this Agreement by the
Outside Termination Date result from the failure to satisfy the condition set
forth in Section 8.02(c), then the Outside Termination Date shall be extended to
June 30, 1998;
(c) by either Fleet or the Company if any court of competent jurisdiction
or other governmental body within the United States shall have issued an order,
decree or ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the Contribution and such order, decree, ruling or other
action shall have become final and nonappealable;
(d) by Fleet, if (i) Fleet shall discover that any representation or
warranty made by the Company in this Agreement (without regard to any Material
Adverse Effect qualification in such representation or warranty) is untrue at
the time such representation or warranty was made or (except for those
representations and warranties made as of a particular date which need only be
true and correct as of such date) shall not be true and correct as of the
Closing Date, except where the failure to be so true and correct individually or
in the aggregate would not have a Material Adverse Effect, provided that if any
such failure to be so true and correct is capable of being cured prior to the
Outside Termination Date, then Fleet may not terminate this Agreement under this
paragraph (d) until the Outside Termination Date, unless Fleet provides notice
to the Company, at or prior to the date originally scheduled for Closing by the
Company specifying in reasonable detail the untruthfulness in the
representations or warranties claimed by Fleet, and in no event may Fleet
terminate this Agreement under this paragraph (d) if such failure is corrected
prior to the Outside Termination Date, (ii) there shall have been a breach of
any covenant or agreement on the part of the Company or any Company Contributor
under this Agreement resulting in a Material Adverse Effect which shall not be
capable of being cured prior to the Outside Termination Date, (iii) the
stockholders of the Company fail at the Special Meeting to approve the
Contribution and the other transactions contemplated by this Agreement; or (iv)
the Company's Board (x) fails to recommend approval and adoption of this
Contribution and the other transactions contemplated by this Agreement by the
stockholders of the Company or withdraws or amends or modifies in a manner
adverse to Fleet its recommendation or approval in respect of this Agreement and
the Contribution, (y) makes any recommendation with respect to an Alternative
Acquisition other than a recommendation to reject such Alternative Acquisition
or (z) fails to convene the Special Meeting on or prior to the Outside
Termination Date (other than as a result of any restraining order or injunction
or court order or failure of the SEC to clear the Proxy Statement for mailing to
the Company's stockholders on or before that date which is 35 days prior to the
Outside Termination Date); or
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(e) by the Company, if (i) the Company shall discover that any
representation or warranty made by Fleet in this Agreement (without regard to
any Fleet Material Adverse Effect qualification in such representation or
warranty) is untrue at the time such representation or warranty was made or
(except for those representations and warranties made as of a particular date
which need only be true and correct as of such date) shall not be true and
correct as of the Closing Date, except where the failure to be so true and
correct would not have a Fleet Material Adverse Effect or materially adversely
affect (or materially delay) the consummation of the Contribution and the other
transactions contemplated by this Agreement, provided that if any such failure
to be so true and correct is capable of being cured prior to the Outside
Termination Date, then the Company may not terminate this Agreement under this
paragraph (e) until the Outside Termination Date, unless the Company provides
notice to Fleet, at or prior to the date originally scheduled for closing by the
Company specifying in reasonable detail the untruthfulness in the
representations and warranties claimed) by the Company, and in no event may the
Company terminate this Agreement under this paragraph (e) if such failure is
corrected prior to the Outside Termination Date or (ii) there shall have been a
material breach of any covenant or agreement in this Agreement on the part of
Fleet which shall not be capable of being cured prior to the Outside Termination
Date.
SECTION 9.02 Effect of Termination.
(a) In the event of the termination and abandonment of this Agreement
pursuant to Section 9.01 hereof, this Agreement shall forthwith become void,
without liability on the part of any party hereto except as provided in this
Section 9.02 and Sections 6.03(b) and 11.09; provided, however, that, other than
in the case of a termination pursuant to Section 9.01(d)(iii), termination will
not relieve a party in breach of this Agreement from liability for any willful
breach of this Agreement giving rise to such termination. Notwithstanding the
foregoing, neither Fleet, on the one hand, nor the Company, on the other hand,
shall have any rights against each other with respect to the recovery of
expenses, except as provided for in Section 9.02(b)(i) and except to the extent
that the non-breaching party may recover such expenses pursuant to the proviso
contained in the immediately preceding sentence.
(b)(i) If Fleet shall have terminated this Agreement pursuant to Sections
9.01(d)(iii) or 9.01(d)(iv)(z) and an Alternative Acquisition is approved by the
Board of Directors of the Company prior to the first anniversary of the
termination of this Agreement, then in such case the Company shall promptly, but
in no event later than two Business Days after approval by the Board of
Directors of an Alternative Acquisition, pay Fleet a termination fee equal to
$50 million, by wire transfer of immediately available funds to an account
previously designated by Fleet and shall have no obligation to pay any other
amounts or have any other liability on account of damages, expenses or
otherwise.
(ii) Notwithstanding any other provision hereof, no fee or any other
amount shall be paid pursuant to this Section 9.02(b) or otherwise to Fleet if
it or any Fleet Contributor shall be in material breach of its material
obligations hereunder.
SECTION 9.03 Amendment. Prior to the Closing Date, this Agreement may be
amended by action taken by or on behalf of the Boards of Directors of the
Company and Fleet at any time before or after adoption of this Agreement by the
stockholders of the Company, but no amendment shall be made if it would violate
applicable law or, after the approval of this Agreement and the transactions
contemplated hereby at the Special Meeting, which materially adversely affects
such stockholders, without further approval of the stockholders of the Company.
This Agreement may not be amended except by an instrument in writing signed on
behalf of all the parties.
SECTION 9.04 Extension; Waiver. At any time prior to the Closing, the
parties hereto, by action taken by or on behalf of the respective Boards of
Directors of the Company and Fleet, may (i) extend the time for the performance
of any of the obligations or other acts of any other applicable party hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein by any other applicable party or in any document, certificate or writing
delivered pursuant hereto by any other applicable party or (iii) waive
compliance with any of the agreements of any other applicable party or with any
conditions to its own obligations. Any agreement on the part of any other
applicable party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. Such extension
or waiver or
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failure to insist on strict compliance with an obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
ARTICLE X. INDEMNIFICATION
SECTION 10.01 Indemnification by the Company and Company Contributors.
(a) Following Closing, Company and the Company Contributors shall jointly
and severally indemnify and hold the LLC, Fleet and the Fleet Contributors
harmless from and against any Losses sustained by the LLC, Fleet or any of the
Fleet Contributors:
(i) arising from any breach of any representation or warranty on the
part of the Company or any Company Contributor (and for this purpose the
representations and warranties of the Company, except for those contained
in Section 4.07, shall not be deemed to include qualifications as to
materiality or Material Adverse Effect, and the Knowledge standard shall be
as set forth in the proviso to the definition thereof);
(ii) arising from any breach of any covenant on the part of the
Company or any Company Contributor;
(iii) arising from a challenge to the validity of the transfer of
Master Trust I or Master Trust II (other than arising out of actions or
failures to act of Fleet and its Affiliates);
(iv) related to any action taken by the Company or any of the Company
Contributors with respect to any of its employee benefit plans, including
any amendment thereto resulting from the transactions contemplated by this
Agreement; and
(v) related to any Non-Assumed Liability which is a liability of the
Company or any of the Company Contributors, including, but not limited to,
the Retained SmartMove Accounts and the Reward Accelerator Accounts.
(b) Any and all Losses referred to in this Section 10.01 shall be computed
on a net basis, after taking into account any amounts received or, in the
reasonable opinion of Fleet, receivable by Fleet or any Fleet Contributor under
any insurance policies.
SECTION 10.02 Indemnification by Fleet and Fleet Contributors.
(a) Following Closing, Fleet and the Fleet Contributors shall jointly and
severally indemnify and hold the LLC, the Company and the Company Contributors
harmless from and against any Losses sustained by the LLC, the Company or any
Company Contributor:
(i) arising from any breach of any representation or warranty on the
part of Fleet or any Fleet Contributor under this Agreement (and for this
purpose the representations and warranties of Fleet, except for those
contained in Section 5.06, shall not be deemed to include qualifications as
to materiality or Material Adverse Effect and the Knowledge standard shall
be as set forth in the proviso in the definition thereof;
(ii) arising from a breach of any covenant on the part of Fleet or any
Fleet Contributor;
(iii) arising from or resulting from any liability of Fleet or any of
the Fleet Contributors which are not included as part of the Fleet
Transferred Liabilities; and
(iv) arising from or resulting from any guaranty listed in Schedule
6.20 to the extent such Losses arise after the Closing Date.
(b) Any and all Losses referred to in this Section 10.02 shall be computed
on a net basis, after taking into account any amounts received or, in the
reasonable opinion of the Company, receivable by the Company or any Company
Contributor under any insurance policies.
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SECTION 10.03 Other Indemnification.
(a) Following Closing, Fleet shall, and shall cause the Fleet Contributors
and the LLC to, jointly and severally, indemnify and hold harmless the Company
and the Company Contributors from and against any and all Losses sustained by
the Company or any of the Company Contributors arising out of the Company
Transferred Liabilities, including, without limitation, Ordinary Course of
Business Liabilities, or the Fleet Transferred Liabilities.
(b) Any and all Losses referred to in this Section 10.03 shall be computed
on a net basis, after taking into account any amounts received or, in the
reasonable opinion of the Company, receivable by the Company or any Company
Contributor under any insurance policies.
SECTION 10.04 Requirement for Notice. In the event that any claim is
asserted or action, suit, or proceeding is commenced against a party hereto
("Indemnitee") which can reasonably be expected to result in any liability or
indemnity being imposed on another party hereto ("Indemnitor"), the Indemnitee
shall promptly give notice thereof to Indemnitor. Indemnitor then shall have the
opportunity to defend such claim, action, suit or proceeding with counsel
reasonably satisfactory to Indemnitee. Indemnitor shall have control of any
defense or settlement, and if Indemnitor accepts such defense and diligently
defends or pursues a settlement, then Indemnitor shall not be liable to the
Indemnitee for any of the Indemnitee's attorneys' fees or other costs and
expenses. If Indemnitor does not accept such defense (i) Indemnitor nevertheless
shall have the opportunity to participate in (but not to control) the defense
against such claim, action, suit or proceeding and to participate in any
negotiations with respect thereto and (ii) Indemnitee shall have control of any
defense. Notwithstanding the foregoing, no settlement of any claim as to which
indemnification is required or may be sought hereunder shall be made without the
consent of the Indemnitor, which consent shall not be unreasonably withheld.
SECTION 10.05 Limitation on Indemnification.
(a) Notwithstanding anything to the contrary contained herein, (i) neither
the Company nor the Company Contributors shall have any obligation with respect
to any indemnification payments pursuant to the provisions of Sections
10.01(a)(i) or 10.01(a)(iii) except to the extent that the aggregate
indemnification obligations of the Company and the Company Contributors exceed
$15,000,000 in the aggregate, and the Company and the Company Contributors shall
have no obligation with respect to such initial $15,000,000 amount, (ii) the
indemnification provided for herein shall not cover, and in no event shall any
party hereto be liable for, any consequential, incidental or special damages,
and (iii) in no event may any claim for indemnification be made in an amount
which is less than $50,000.
(b) Notwithstanding anything to the contrary contained herein, (i) neither
Fleet nor any of the Fleet Contributors shall have any obligation with respect
to any indemnification payments pursuant to the provisions of Section
10.02(a)(i) except to the extent that the aggregate indemnification payments of
Fleet and the Fleet Contributors exceed $15,000,000 in the aggregate and Fleet
and the Fleet Contributors shall have no obligation with respect to such initial
$15,000,000, (ii) the indemnification provided herein shall not cover, and in no
event shall any party hereto be liable for, any consequential, incidental or
special damages, and (iii) in no event may any claim for indemnification be made
in an amount less than $50,000.
ARTICLE XI. MISCELLANEOUS
SECTION 11.01 Survival of Representations and Warranties. All covenants,
agreements, representations and warranties contained in this Agreement,
including the schedules hereto shall survive the Closing and the consummation of
the transactions contemplated by this Agreement, provided that the
representations and warranties survive only for a period of one year after
Closing, except for the representations set forth in Sections 4.02, 4.12 and
5.02 hereof, which shall survive the Closing for the applicable statute of
limitations period. Notwithstanding the foregoing, the parties hereto (including
their permitted assigns) shall be entitled to indemnity under Article X (subject
to the limitations on indemnity set forth therein) for any and all claims made
to the party breaching such representation or warranty within the periods
indicated above, as the case may be, based upon the breach or violation of such
covenants, agreements, representations and warranties.
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The termination of any covenant, agreement, representation or warranty shall not
affect any person's right to prosecute to conclusion any claim made in writing
as aforesaid (which describes such claim with reasonable specificity) prior to
the termination of such covenant, agreement, representation or warranty.
SECTION 11.02 Brokerage Fees and Commissions. Except for BT Wolfensohn,
the Company hereby represents and warrants to Fleet with respect to the Company
and its Affiliates, and except for Lehman Bros., Inc. and Merrill Lynch & Co.,
Fleet hereby represents and warrants to the Company with respect to Fleet and
its Affiliates, that no person is entitled to receive from the Company or Fleet,
respectively, or any of their respective Subsidiaries or Affiliates, any
investment banking, brokerage or finder's fee or fees for financial consulting
or advisory services in connection with this Agreement or the transactions
contemplated hereby.
SECTION 11.03 Entire Agreement; Assignment. This Agreement (including the
Disclosure Schedules and the other documents and instruments referred to herein)
(a) constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all other prior agreements and
understandings, both written and oral (other than the agreement referred to in
Section 6.03(b) hereof and this Section 11.03), among the parties or any of them
with respect to the subject matter hereof, (b) shall be binding upon the parties
hereto and their successors and permitted assigns and (c) shall not be assigned
without the prior written consent of the other parties hereto; provided,
however, that the Company hereby covenants and agrees that in the event that the
Company sells all or substantially all of its assets within six years after the
Closing Date, it will assign its obligations hereunder to the purchasers of such
assets (and may, at its option, assign all or any portion of its rights
hereunder to such parties), and the consent of Fleet shall not be required for
an assignment pursuant to this proviso; provided, further, however, that in no
event shall the sale or other disposition of the Company's interests in Advanta
Information Systems, Inc. Advanta Partners LP and/or Advanta Business Services
Corp. be a sale of all or substantially all of the assets of the Company for
purposes of this Agreement.
SECTION 11.04 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, each of which shall remain in full force
and effect.
SECTION 11.05 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person or by next business day courier to the
respective parties as follows:
If to Fleet or any Fleet Contributor:
Brian T. Moynihan
Managing Director, Strategic Planning
and Corporate Development
Fleet Financial Group, Inc.
One Federal Street
37th Floor
Boston, MA 02116
with copies to:
Drew J. Pfirrman, Esq.
Assistant General Counsel
Fleet Financial Group, Inc.
One Federal Street
9th Floor
Boston, MA 02110
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Edwards & Angell
2700 Hospital Trust Tower
28th Floor
Providence, RI 02903
Attention: V. Duncan Johnson, Esq.
If to the Company or any Company
Contributor:
Advanta Corp.
Welsh and McKean Roads
Spring House, PA 19477
Attention: William A. Rosoff
Vice Chairman of the Board
with a copy to:
Advanta Corp.
Welsh and McKean Roads
Spring House, PA 19477
Attention: Elizabeth Mai, Esquire
Senior Vice President and
General Counsel
with a copy to:
Wolf, Block, Schorr and Solis-Cohen
LLP
111 South 15th Street
Philadelphia, Pennsylvania 19102
Attention: Herbert Henryson II, Esq.
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof). Any such notice shall be effective upon receipt, if personally
delivered or sent by facsimile transmission, or one day after delivery to a
courier for next-day delivery. Nothing in this Section 11.05 shall be deemed to
constitute consent to the manner and address for service of process in
connection with any legal proceeding (including litigation arising out of or in
connection with this Agreement), which service shall be effected as required by
applicable law.
SECTION 11.06 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
SECTION 11.07 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning of interpretation of this Agreement.
SECTION 11.08 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same agreement.
SECTION 11.09 Expenses. Except as otherwise specifically provided herein,
all costs and expenses incurred in connection with the transactions contemplated
by this Agreement, shall be paid by the party incurring such expenses; provided,
however, that all costs and expenses (including transfer fees, consent fees and
penalty fees) incurred in connection with the assignments of the Material
Company Contributed Contracts (except one such agreement as to which the parties
have agreed that all costs and expenses shall be borne by the Company) and the
Material Information Technology Contracts, and all recording fees, transfer
fees, documentary stamps and sales taxes payable in connection with the
Contribution of the Company owned real property and personal property, shall be
paid 50% by the Company and 50% by Fleet, and the LLC shall bear all costs and
expenses (including transfer fees, consent fees and penalty fees) incurred
either before, or
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after the Closing, in connection with the Contribution of all other Company
Contributed Contracts and Fleet Contributed Contracts.
SECTION 11.10 Third Party Beneficiaries. Except for, from and after the
Closing hereunder, the rights of holders and obligees of interest bearing
liabilities included in the Company Transferred Liabilities to performance of
the obligations assumed by the LLC to pay such holders and obligees the amounts
owed to them, this Agreement is not intended to, and does not, create any rights
or benefits of any person other than the parties hereto.
SECTION 11.11 Construction; Interpretation. The parties hereby agree that
any rule of law or any legal decision that would require interpretation of any
claimed ambiguities in this Agreement against the party that drafted it has no
application and is expressly waived.
SECTION 11.12 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDINGS
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
SECTION 11.13 Effect of Investigation. Except to the extent provided in
this Agreement, no investigation by the parties hereto made before or after the
date of this Agreement or the provisions of any documents (other than the
Disclosure Schedules), whether available pursuant to this Agreement or
otherwise, shall affect the interpretation of the representations and warranties
of the parties which are contained herein.
SECTION 11.14 Joinder. The parties hereto shall cause the LLC to be
formed prior to the Closing Date and shall cause the LLC to enter into a joinder
to this Agreement pursuant to which the LLC agrees to be bound by all of the
terms and provisions of this Agreement applicable to the LLC.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed under seal on its behalf by its officers thereunto duly authorized, all
as of the day and year first above written.
FLEET FINANCIAL GROUP, INC.
By: /s/ BRIAN T. MOYNIHAN
------------------------------------
Name: Brian T. Moynihan
Title: Managing Director, Strategic
Planning and Corporate Development
ATTEST:
/s/ H. JAY SARLES
- --------------------------------------
Name: H. Jay Sarles
Title: Chief Administrative Officer
ADVANTA CORP.
By: /s/ DENNIS ALTER
------------------------------------
Name: Dennis Alter
Title: Chairman
ATTEST:
/s/ WILLIAM A. ROSOFF
- --------------------------------------
Name: William A. Rosoff
Title: Vice Chairman
44
