-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Oqs4Fc6SbdDHya9yReT9PCeO+Rg88yq7HdGT8PdvvPRvzofYjXtXG05hWm9vzBSw uhqXmK0I1pm/VTtR0EAhaQ== 0000893220-01-500542.txt : 20010810 0000893220-01-500542.hdr.sgml : 20010810 ACCESSION NUMBER: 0000893220-01-500542 CONFORMED SUBMISSION TYPE: SC TO-I PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20010809 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ADVANTA CORP CENTRAL INDEX KEY: 0000096638 STANDARD INDUSTRIAL CLASSIFICATION: PERSONAL CREDIT INSTITUTIONS [6141] IRS NUMBER: 231462070 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-I SEC ACT: 1934 Act SEC FILE NUMBER: 005-38014 FILM NUMBER: 1702543 BUSINESS ADDRESS: STREET 1: P.O. BOX 844 STREET 2: WELSH & MCKEAN ROADS CITY: SPRING HOUSE STATE: PA ZIP: 19477 BUSINESS PHONE: 2154445051 MAIL ADDRESS: STREET 1: C/O WELSH & MCKEAN ROADS STREET 2: P.O. BOX 844 CITY: SPRING HOUSE STATE: PA ZIP: 19477-0844 FORMER COMPANY: FORMER CONFORMED NAME: TEACHERS SERVICE ORGANIZATION INC DATE OF NAME CHANGE: 19850812 FORMER COMPANY: FORMER CONFORMED NAME: TSO FINANCIAL CORP DATE OF NAME CHANGE: 19880306 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ADVANTA CORP CENTRAL INDEX KEY: 0000096638 STANDARD INDUSTRIAL CLASSIFICATION: PERSONAL CREDIT INSTITUTIONS [6141] IRS NUMBER: 231462070 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-I BUSINESS ADDRESS: STREET 1: P.O. BOX 844 STREET 2: WELSH & MCKEAN ROADS CITY: SPRING HOUSE STATE: PA ZIP: 19477 BUSINESS PHONE: 2154445051 MAIL ADDRESS: STREET 1: C/O WELSH & MCKEAN ROADS STREET 2: P.O. BOX 844 CITY: SPRING HOUSE STATE: PA ZIP: 19477-0844 FORMER COMPANY: FORMER CONFORMED NAME: TEACHERS SERVICE ORGANIZATION INC DATE OF NAME CHANGE: 19850812 FORMER COMPANY: FORMER CONFORMED NAME: TSO FINANCIAL CORP DATE OF NAME CHANGE: 19880306 SC TO-I 1 w52124scto-i.txt ADVANTA CORP. 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE TO (RULE 14d-100) TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 ADVANTA CORP. (NAME OF SUBJECT COMPANY) ADVANTA CORP. (NAME OF FILING PERSON (THE ISSUER)) CLASS B COMMON STOCK (TITLE OF CLASS OF SECURITIES) 001-210-00794220 (CUSIP NUMBER OF CLASS OF SECURITIES) ELIZABETH H. MAI, ESQUIRE SENIOR VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL ADVANTA CORP. WELSH AND MCKEAN ROADS SPRING HOUSE, PENNSYLVANIA 19477 (215) 657-4000 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF THE FILING PERSON) COPY TO: JAY A. DUBOW, ESQ. WOLF, BLOCK, SCHORR AND SOLIS-COHEN LLP 1650 ARCH STREET, 22ND FLOOR PHILADELPHIA, PENNSYLVANIA 19103 (215) 977-2000 (NAME, ADDRESS AND TELEPHONE NUMBERS OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF FILING PERSON) CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE $6,171,056 $1,234.21
*Calculated solely for purposes of determining the filing fee. This amount assumes that (i) $3,237,789 in cash will be paid pursuant to this offer, and (ii) options to purchase 238,671 shares of Class B Common Stock of the Company will be issued pursuant to this offer. The aggregate value of the options to purchase Class B Common Stock was based on the average of the high and low prices of the Company's Class B Common Stock on August 6, 2001. The amount of the filing fee, calculated in accordance with Rule 0-11 of the Securities Exchange Act of 1934, as amended, equals 1/50 of one percent of the value of the transaction. [ ] Check the 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. Amount Previously Paid: Not applicable Filing Party: Not applicable Form or Registration No.: Not applicable Date Filed: Not applicable
[ ] Check the box if the filing relates solely to preliminary communications made before commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which this statement relates: [ ] Third party tender offer subject to Rule 14d-1 [X] Issuer tender offer subject to Rule 13e-4 [ ] Going private transaction subject to Rule 13e-3 [ ] Amendment to Schedule 13D under Rule 13d-2 Check the following box if the filing is a final amendment reporting the results of the tender offer: [ ] 2 The filing of this Schedule TO shall not be construed as an admission by Advanta Corp. that the Offer (as defined below) constitutes an issuer tender offer for purposes of the Securities Act of 1934, as amended, and the rules promulgated thereunder. ITEM 1. SUMMARY TERM SHEET. The information set forth under "Summary Term Sheet" in the Offer to Repurchase, dated August 9, 2001 (the "Offer to Repurchase") and attached hereto as Exhibit (a)(1), is incorporated herein by reference. ITEM 2. SUBJECT COMPANY INFORMATION. (a) The name of the issuer is Advanta Corp., a Delaware corporation (the "Company") and the address of its principal executive offices is Welsh and McKean Roads, Spring House, Pennsylvania 19477. The Company's telephone number is (215) 657-4000. The information in the Offer to Repurchase under Section 11 ("Information Concerning Advanta Corp.") and Schedule A ("Information Concerning the Directors and Executive Officers of Advanta Corp.") is incorporated herein by reference. (b) This Tender Offer Statement on Schedule TO relates to an offer by the Company to repurchase "Eligible AMIP Shares" from "eligible employees." "Eligible AMIP Shares" are shares of restricted stock granted under the Advanta Management Incentive Program (the "AMIP Program") that: - are attributable to an eligible employee's 2001 target bonus (the "2001 target bonus"); and - have a weighted average value, as calculated for purposes of determining the original number of shares granted (the "weighted average value"), that is greater than $10.625 per share. An "eligible employee" refers to any person: (1) who holds Eligible AMIP Shares, at least some of which shares were granted before February 28, 2001; and (2) who, as of the expiration of this offer, is employed by us and has not received a notice of termination that is effective prior to the expiration of this offer. The Company is making this offer upon the terms and subject to the conditions described in the Offer to Repurchase and the related Letter of Transmittal (which together, as they may be amended or supplemented from time to time, constitute the "offer"). The information in the Offer to Repurchase under "Summary Term Sheet," Section 1 ("Introduction"), Section 3 ("Expiration Date"), Section 7 ("Acceptance of Eligible AMIP Shares; Cash Payment and Issuance of New Options"), Section 9 ("Price Range of Common Stock Underlying the New Options") and Section 10 ("Source and Amount of Consideration; Terms of New Options") is incorporated herein by reference. (c) The information set forth in the Offer to Repurchase under Section 9 ("Price Range of Common Stock Underlying the Options") is incorporated herein by reference. 2 3 ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON. (a) The information set forth under Item 2(a) above is incorporated herein by reference. The information set forth in Schedule A to the Offer to Repurchase is included herein by reference. The filing person is the subject company. ITEM 4. TERMS OF THE TRANSACTION. (a) The information set forth in the Offer to Repurchase under "Summary Term Sheet," Section 1 ("Introduction"), Section 3 ("Expiration Date"), Section 5 ("Procedures for Tendering Eligible AMIP Shares"), Section 6 ("Withdrawal Rights"), Section 7 ("Acceptance of Eligible AMIP Shares; Cash Payment and Issuance of New Options"), Section 8 ("Conditions of the Offer"), Section 10 ("Source and Amount of Consideration; Terms of New Options"), Section 13 ("Status of Eligible AMIP Shares Acquired by Us in the Offer; Accounting Consequences of the Offer"), Section 14 ("Legal Matters; Regulatory Approvals"), Section 15 ("Material Federal Income Tax Consequences"), Section 16 ("Extension of Offer; Termination; Amendment") and Section 18 ("Additional Information") is incorporated herein by reference. (b) The information set forth in the Offer to Repurchase under "Summary Term Sheet," Section 12 ("Interests of Directors and Officers; Transactions and Arrangements Concerning the Eligible AMIP Shares") and Schedule A ("Information Concerning the Directors and Executive Officers of Advanta Corp.") is incorporated herein by reference. ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AMENDMENTS. (e) The information set forth in the Offer to Repurchase under Section 12 ("Interests of Directors and Officers; Transactions and Arrangements Concerning the Eligible AMIP Shares") and Schedule A ("Information Concerning the Directors and Executive Officers of Advanta Corp.") is incorporated herein by reference. ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS. (a) The information set forth in the Offer to Repurchase under Section 4 ("Purpose of the Offer") is incorporated herein by reference. (b) The information set forth in the Offer to Repurchase under Section 13 ("Status of Eligible AMIP Shares Acquired by Us in the Offer; Accounting Consequences of the Offer") is incorporated herein by reference. (c) The information set forth in the Offer to Repurchase under Section 4 ("Purpose of the Offer") is incorporated herein by reference. 3 4 ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a) The information set forth in the Offer to Repurchase under Section 10 ("Source and Amount of Consideration; Terms of New Options") and Section 17 ("Fees and Expenses") is incorporated herein by reference. (b) The information set forth in the Offer to Repurchase under Section 8 ("Conditions of the Offer") is incorporated herein by reference. (d) Not applicable. ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a) The information set forth in the Offer to Repurchase under Section 12 ("Interests of Directors and Officers; Transactions and Arrangements Concerning the Eligible AMIP Shares") and Schedule A ("Information Concerning the Directors and Executive Officers of Advanta Corp.") is incorporated herein by reference. (b) The information set forth in the Offer to Repurchase under Section 12 ("Interests of Directors and Officers; Transactions and Arrangements Concerning the Eligible AMIP Shares") is incorporated herein by reference. ITEM 9. PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED. (a) Not applicable. ITEM 10. FINANCIAL STATEMENTS. (a) The following information is incorporated herein by reference: (i) the information set forth in the Offer to Repurchase under Section 11 ("Information Concerning Advanta Corp."), Section 16 ("Additional Information"), and Schedule A ("Information Concerning the Directors and Executive Officers of Advanta Corp."), (ii) the information set forth on pages 37 through 79 of the Company's Annual Report on Form 10-K for its fiscal year ended December 31, 2000, and (iii) the information set forth on pages 3 through 20 of the Company's Quarterly Report on Form 10-Q for the period ended March 31, 2001. (b) Not applicable. ITEM 11. ADDITIONAL INFORMATION. (a) The information set forth in the Offer to Repurchase under Section 12 ("Interests of Directors and Officers; Transactions and Arrangements Concerning the Eligible AMIP Shares") and Section 14 ("Legal Matters; Regulatory Approvals") is incorporated herein by reference. (b) Not applicable. 4 5 ITEM 12. EXHIBITS (a)(1) Offer to Repurchase, dated August 9, 2001. (a)(2) Form of Letter of Transmittal. (a)(3) Form of Letter to Eligible Employees Regarding the Offer. (a)(4) Form of AMIP Personalized Decision Aid. (a)(5) Form of AMIP Program Summary Guidelines. (a)(6) Prospectus for Use with the Advanta Corp. 2000 Omnibus Stock Incentive Plan. (a)(7) Advanta Corp. Annual Report on Form 10-K for its fiscal year ended December 31, 2000 filed with the Securities and Exchange Commission on March 30, 2001 and incorporated herein by reference. (a)(8) Advanta Corp. Quarterly Report on Form 10-Q for its quarterly period ended March 31, 2001 filed with the Securities and Exchange Commission on May 15, 2001 and incorporated herein by reference. (b) Not Applicable. (d)(1) Advanta Corp. 2000 Omnibus Stock Incentive Plan, filed as Exhibit 4(f) to the Company's Post-Effective Amendment to its Registration Statement on Form S-8 (File No. 333-04469) filed with the Securities and Exchange Commission on November 11, 2000 and incorporated herein by reference. (d)(2) Form of Option Agreement under the Advanta Corp. 2000 Omnibus Stock Incentive Plan. (g) Not Applicable.
ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3. Not applicable. 5 6 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Schedule TO is true, complete and correct. Advanta Corp. August 9, 2001 By: /s/ William A. Rosoff ----------------------------------------- Name: William A. Rosoff Title: President and Vice Chairman of the Board 6 7 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - -------------- ----------- (a)(1) Offer to Repurchase, dated August 9, 2001. (a)(2) Form of Letter of Transmittal. (a)(3) Form of Letter to Eligible Employees Regarding the Offer. (a)(4) Form of AMIP Personalized Decision Aid. (a)(5) Form of AMIP Program Summary Guidelines. (a)(6) Prospectus for use with the Advanta Corp. 2000 Omnibus Stock Incentive Plan. (a)(7) Advanta Corp. Annual Report on Form 10-K for its fiscal year ended December 31, 2000 filed with the Securities and Exchange Commission on March 30, 2001 and incorporated herein by reference. (a)(8) Advanta Corp. Quarterly Report on Form 10-Q for its quarterly period ended March 31, 2001 filed with the Securities and Exchange Commission on May 15, 2001 and incorporated herein by reference. (b) Not Applicable. (d)(1) Advanta Corp. 2000 Omnibus Stock Incentive Plan, filed as Exhibit 4(f) to the Company's Post-Effective Amendment to its Registration Statement on Form S-8 (File No. 333-04469) filed with the Securities and Exchange Commission on November 11, 2000 and incorporated herein by reference. (d)(2) Form of Option Agreement under the Advanta Corp. 2000 Omnibus Stock Incentive Plan. (g) Not Applicable.
7 EX-99.(A)(1) 3 w52124ex99-a1.txt OFFER TO PURCHASE, DATED AUGUST 9, 2001 1 EXHIBIT (a)(1) ADVANTA CORP. OFFER TO REPURCHASE ELIGIBLE SHARES OF RESTRICTED STOCK ISSUED UNDER THE ADVANTA CORP. 2000 OMNIBUS STOCK INCENTIVE PLAN THIS OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, EASTERN TIME, ON THURSDAY, SEPTEMBER 6, 2001, UNLESS ADVANTA EXTENDS THE OFFER Advanta Corp. is offering to repurchase "Eligible AMIP Shares" from "eligible employees." "Eligible AMIP Shares" are shares of restricted stock granted under the Advanta Management Incentive Program (the "AMIP Program") that: - are attributable to an eligible employee's 2001 target bonus (the "2001 target bonus"); and - have a weighted average value, as calculated for purposes of determining the original number of shares granted (the "weighted average value") that is greater than $10.625 per share. An "eligible employee" refers to any person: (1) who holds Eligible AMIP Shares, at least some of which shares were granted prior to February 28, 2001; and (2) who, as of the expiration of this offer, is employed by us and has not received a notice of termination that is effective on or prior to the expiration of this offer. If you are an eligible employee and you tender your Eligible AMIP Shares, in consideration we will: (1) in the event you earn a percentage of your 2001 target bonus, pay to you in cash the portion of your 2001 target bonus that otherwise would have been payable in AMIP shares, and (2) grant to you options to purchase a number of shares of our Class B Common Stock, at an exercise price of $10.625 per share, that is equal to (A) the number of Eligible AMIP Shares tendered by you and accepted by us for repurchase multiplied by their weighted average value per share, (B) divided by $10.625. If you earn a percentage of your 2001 target bonus, a percentage of the options equal to the percentage of the 2001 target bonus awarded to you will vest on April 11, 2002, up to a maximum of 100% of the options. Any options that do not vest on that date will vest on the tenth anniversary of the date on which the related tendered Eligible AMIP Shares were granted. The options will be exercisable for two years after the date on which they vest. You must remain employed by us in order for the options to vest and in order for you to be able to exercise the options after they vest. The cash payment and the options are described fully in Section 10 of this offer to repurchase. We will document the options by means of an option agreement between us and you, a form of which is attached. The options will be issued under the Advanta Corp. 2000 Omnibus Stock Incentive Plan (the "Omnibus Plan"). The AMIP Program is administered under the Omnibus Plan. Any portion of your 2001 target bonus that you previously elected to receive in cash will not be affected in any way by whether you accept this offer. We are making this offer upon the terms and subject to the conditions set forth in this offer to repurchase and in the related Letter of Transmittal (which together, as they may be amended or supplemented from time to time, constitute the "offer"). You may only tender either all or none of your Eligible AMIP Shares. We will cancel all tendered Eligible AMIP Shares that we accept pursuant to this offer. This offer is not conditioned upon a minimum number of Eligible AMIP Shares being tendered. This offer is subject to conditions that we describe in Section 8 of this offer to repurchase. ALTHOUGH OUR BOARD OF DIRECTORS HAS APPROVED THIS OFFER, NEITHER WE NOR OUR BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS TO WHETHER OR NOT YOU SHOULD TENDER YOUR ELIGIBLE AMIP SHARES. YOU MUST MAKE YOUR OWN DECISION WHETHER TO TENDER YOUR ELIGIBLE AMIP SHARES. Shares of our Class B Common Stock are quoted on the Nasdaq National Market under the symbol "ADVNB." On August 3, 2001, the last reported sale price of the Class B Common Stock on the Nasdaq National Market was $12.21 per share. WE RECOMMEND THAT YOU OBTAIN CURRENT MARKET QUOTATIONS FOR OUR CLASS B COMMON STOCK BEFORE DECIDING WHETHER TO TENDER YOUR ELIGIBLE AMIP SHARES. You should direct questions about this offer or requests for assistance or for additional copies of the offer to repurchase or the Letter of Transmittal to the EXCHANGE PROGRAM INFORMATION LINE AT (215) 444-5205. 2 SUMMARY TERM SHEET The following are answers to some of the questions that you may have about this offer. We urge you to read carefully the remainder of this offer to repurchase and the accompanying letter of transmittal because the information in this summary is not complete and additional important information is contained in the remainder of this offer to repurchase and the letter of transmittal. We have included page references to the remainder of this offer to repurchase to let you know where you can find a more complete description of the topics covered in this summary. - - WHAT SECURITIES IS ADVANTA OFFERING TO REPURCHASE AND WHAT WILL I RECEIVE IN EXCHANGE? We are offering to repurchase all eligible AMIP shares from eligible employees. If you are an eligible employee, in consideration for the repurchase of your eligible AMIP shares, we will: (1) in the event you earn a percentage of your 2001 target bonus, pay to you in cash the portion of your 2001 target bonus that otherwise would have been payable in AMIP shares, and (2) grant to you new options to purchase shares of our Class B Common Stock at an exercise price of $10.625 per share. Page 9. - - IF I TENDER MY ELIGIBLE AMIP SHARES, WHAT HAPPENS TO THE PORTION OF MY 2001 TARGET BONUS THAT I ELECTED TO RECEIVE IN CASH? Nothing. This offer relates only to the tender of your eligible AMIP shares. Any portion of your 2001 target bonus that you previously elected to receive in cash is not affected in any way by whether you accept this offer. So, if you earn a percentage of your 2001 target bonus, you still will receive the part of the 2001 target bonus that you elected to receive in cash. For example, if your 2001 target bonus is $20,000 and you elected to receive 50%, or $10,000, of your 2001 target bonus in cash, assuming you earn 100% of your 2001 target bonus, you will receive the $10,000 relating to that 50% cash election even if you tender your eligible AMIP shares in the offer. Page 10. - - WHO QUALIFIES AS AN ELIGIBLE EMPLOYEE? An "eligible employee" is any person who holds eligible AMIP shares, at least some of which shares were granted before February 28, 2001, and who, as of the date of expiration of the offer, is employed by us and has not received a notice a termination that is effective on or before the expiration of this offer. Page 9. - - WHAT ARE ELIGIBLE AMIP SHARES? Eligible AMIP shares are AMIP shares attributable to an eligible employee's 2001 target bonus that have a weighted average value, as calculated for purposes of determining the original number of shares granted, that is greater than $10.625 per share. Page 9. 3 - - HOW IS THE WEIGHTED AVERAGE VALUE OF MY ELIGIBLE AMIP SHARES DETERMINED? When you entered the applicable plan for 2001 under the AMIP Program, we granted to you restricted shares of Class B Common Stock in an amount that represented a value at the time of the grant equal to your 2001 target bonus based on your then current base salary multiplied by the percentage of your then current 2001 target bonus you elected to receive in AMIP shares. We valued the shares granted to you at the 90-day trailing average stock price, as determined in accordance with the provisions of the AMIP Program. If we later increased your 2001 target bonus as a percentage of your base salary, you received an additional grant of restricted shares in an amount representing the value of the change in your 2001 target bonus. If you received additional shares of restricted stock as a result of an increase in your 2001 target bonus, we granted additional shares at the 90-day trailing average stock price in effect at the time of the later grant, as determined in accordance with the provisions of the AMIP Program. This could have been a different stock price than the one that applied to your initial grant of restricted shares for your original 2001 target bonus. We will calculate the weighted average value of your eligible AMIP shares as follows: for each grant of restricted shares applicable to your 2001 target bonus, (1) we will multiply (X) the number of shares granted, by (Y) the 90-day trailing average stock price as determined in accordance with the AMIP Program to obtain the value (V) for that particular grant; (2) we will add together all of the values for all of the grants; then (3) we will divide the sum of all values by the total number of shares in all grants. Page 10. For example, assume that upon entering the AMIP Program in 1999 your base salary was $80,000, your 2001 target bonus was 25% of your salary and the 90-day trailing average stock price was $20.00 per share. If at that time you elected to receive 100% of your 2001 bonus in AMIP shares, you would have been granted 1,000 AMIP shares, calculated as follows: (1) $80,000 salary multiplied by 25% target multiplied by 100% stock election, (2) divided by $20.00 share price. If one year later your 2001 target bonus was increased to 40% of your salary and the 90-day trailing average was $12.00, you would have been granted an additional 1,000 AMIP shares as a result of the target bonus increase, calculated as follows: (1) $80,000 salary multiplied by the 15% target increase multiplied by 100% stock election, (2) divided by $12.00 share price. The weighted average value of your shares would be $16.00 per share, calculated as follows: 1,000 x $20.00 = $20,000(V1) 1,000 x $12.00 = $12,000(V2) $20,000(V1) + $12,000(V2) = $32,000 $32,000 (sum of V1+V2) = $16.00 (weighted average value per share) ---------------------- 2,000 (total # of shares) 2 4 - - WHAT IS THE AMOUNT OF THE CASH PAYMENT THAT I WILL RECEIVE FOR MY TENDERED ELIGIBLE AMIP SHARES? Your actual bonus may range from 0% to 200% of your target bonus. To the extent your 2001 target bonus is earned, we will pay your bonus entirely in cash, including the portion of your 2001 target bonus related to your eligible AMIP shares. For example, if your 2001 target bonus is $10,000, 50% of which you elected to receive in AMIP Shares, and the Plan Administrative Committee of our board of directors and management determine that under our annual bonus program you have earned 100% of your 2001 target bonus, then, instead of the AMIP shares you would have received, we will pay you $5,000 in cash. Any portion of your 2001 target bonus that you previously elected to receive in cash is not affected in any way by whether you accept this offer. Therefore, assuming the above facts, we would also pay to you the 50% of your 2001 target bonus, or $5,000, that you previously elected to receive in cash. If the Plan Administrative Committee and management determine that you have earned some other percentage of your 2001 target bonus, we will pay you entirely in cash the percentage of your 2001 target bonus that you earn, including the portion that otherwise would have been paid to you in AMIP shares. Page 17. - - AM I GUARANTEED TO RECEIVE A CASH PAYMENT? No. The cash payment will be made if, when and to the extent that we would have granted accelerated vesting of your eligible AMIP shares in accordance with the administrative guidelines for the AMIP Program. You will not receive any cash for eligible AMIP shares that the Plan Administrative Committee and management determine would not have been accelerated had you retained the eligible AMIP shares. In other words, you will not receive any cash payment for AMIP shares that would have been "frozen" and would have vested ten years after the date of grant even if they had not been accelerated as a bonus payment. Pages 17-18. - - IF I RECEIVE LESS THAN 100% OF MY 2001 TARGET BONUS AND I HAVE TENDERED MY ELIGIBLE AMIP SHARES, WILL THE REMAINDER OF THE CASH BE "FROZEN" AND PAID OUT TO ME ON THE 10TH ANNIVERSARY OF MY ENTERING THE AMIP PROGRAM? No. If you tender your eligible AMIP shares and for your 2001 performance you receive no bonus payment or a bonus payment that is less than 100% of your 2001 target bonus, we will not pay to you the unearned portion of your 2001 target bonus. See below for a discussion about when the new options will vest if you earn less than 100% of your 2001 target bonus. - - WHEN WILL I RECEIVE MY CASH? If you earn a percentage of your 2001 target bonus as described above, we will pay to you an amount equal to that percentage of your 2001 target bonus in cash, including the portion of your earned 2001 target bonus related to your eligible AMIP shares, at the same time as other 2001 AMIP awards are paid under our 2000 Omnibus Stock Incentive Plan. Page 17. 3 5 - - HOW MANY OPTIONS WILL I RECEIVE FOR MY TENDERED ELIGIBLE AMIP SHARES? We will grant you new options to purchase a number of shares of our Class B Common Stock equal to (i) the number of eligible AMIP shares tendered by you and accepted by us for repurchase multiplied by their weighted average value per share, (ii) divided by $10.625. This means that for every $1,062.50 of weighted average value of eligible AMIP shares that you tender and we accept for repurchase, you will receive 100 options. For example, if you tender and we accept for repurchase 425 eligible AMIP shares with a weighted average value per share of $15.00, we will grant you new options to purchase 600 shares of our Class B Common Stock. However, we will not issue any options exercisable for fractional shares. Instead, we will round down to the nearest whole number. For example, if you tender 50 eligible AMIP shares with a weighted average value per share of $20.00, a $1,000 value, that we accept for repurchase, you will receive options exercisable for 94 shares. We will grant all of the new options under our Omnibus Plan. The new options will be governed by the terms and conditions of the Omnibus Plan and the terms and conditions contained in an option agreement between you and us. Page 18. - - WHAT WILL THE EXERCISE PRICE OF THE NEW OPTIONS BE? The exercise price of each of the new options will be $10.625 per share of Class B Common Stock. Page 18. - - WHEN WILL THE NEW OPTIONS VEST? If you earn a percentage of your 2001 target bonus, a percentage of the new options equal to the percentage of the 2001 target bonus awarded to you will vest on April 11, 2002, up to a maximum of 100% of the new options. Any new options that do not vest on that date will vest on the tenth anniversary of the date on which the related tendered eligible AMIP shares were granted. For example, assume that you receive 200 new options in exchange for your eligible AMIP shares and that all of your eligible AMIP shares were originally granted to you on January 1, 1998. If the Plan Administrative Committee and management determine that you earn 75% of your 2001 target bonus, then 150 new options, or 75% of the 200 options, will be accelerated to vest on April 11, 2002 and the remaining 50 options will vest on January 1, 2008. Even though the Plan Administrative Committee and management may award you up to 200% of your 2001 target bonus, you will not receive additional options if you earn more than 100% of your 2001 target bonus. No portion of the new options we grant will be immediately exercisable. Page 18. - - IF I EARN LESS THAN 100% OF MY 2001 TARGET BONUS AND IF I HAVE HAD MULTIPLE GRANTS OF ELIGIBLE AMIP SHARES, HOW WILL ADVANTA DETERMINE WHICH OF MY NEW OPTIONS WILL BE ACCELERATED TO VEST ON APRIL 11, 2002 AND WHEN THE REMAINDER OF THE NEW OPTIONS VEST? If you have had multiple grants of eligible AMIP shares and if you earn less than 100% of your 2001 target bonus, we will use a first in, first out calculation to determine which of your new options will be accelerated to vest on April 11, 2002. This means that the new options that are related to your oldest grants of eligible AMIP shares will be accelerated to vest first. For 4 6 example, if you receive 200 new options and if the Plan Administrative Committee and management determine that you earn 75% of your 2001 target bonus, 150 options will be accelerated to vest on April 11, 2002. Assuming that one-fourth of your eligible AMIP shares were issued on each of January 1, 1994, 1995, 1996 and 1999, the 150 options related to the eligible AMIP shares granted in 1994, 1995 and 1996 will be accelerated to vest on April 11, 2002. Subject to the conditions contained in the Omnibus Plan and the option agreement, the 50 options related to the eligible AMIP shares granted in 1999 will not be accelerated and will vest on January 1, 2009, 10 years following the grant of the related eligible AMIP shares. Pages 18-19. - - AFTER THE NEW OPTIONS VEST, HOW LONG DO I HAVE TO EXERCISE THEM? The new options will expire two years after the date on which they vest. This means that you will have two years from the date on which the new options vest in which to exercise them. For example, new options that are accelerated to vest on April 11, 2002 will expire on April 11, 2004. If you do not remain employed by Advanta Corp. or one of our subsidiaries, your options may expire earlier than two years after they vest. Page 19. - - WHEN WILL I RECEIVE MY NEW OPTIONS? We will grant the new options as soon as practicable after the date we cancel the eligible AMIP shares that we accept for repurchase. Page 18. - - WHY ARE WE MAKING THE OFFER? This offer to repurchase eligible AMIP shares in exchange for a potential cash payment and new options is designed to restore the potential value of your 2001 target bonus and reinforce our commitment to competitive bonus opportunities. Without this offer to repurchase eligible AMIP shares from eligible employees, our AMIP stock bonus program for the year 2001 would not provide the full intended benefits because the program was designed before our recent restructuring. By making this offer to repurchase eligible AMIP shares from eligible employees for the potential cash payment and new options, we believe your 2001 target bonus will have a greater potential value. Page 11. - - ARE THERE CONDITIONS TO THE OFFER? The offer is not conditioned upon a minimum number of eligible AMIP shares being tendered. However, a number of other events could occur which may cause us to delay or terminate the offer. These events are described in Section 8. Pages 15-17. - - ARE THERE ANY ELIGIBILITY REQUIREMENTS I MUST SATISFY TO RECEIVE THE CASH AND THE NEW OPTIONS? You must be an employee of Advanta Corp. or one of our subsidiaries from the date of this offer through the date we grant the new options in order to receive new options as part of the consideration for the tender of your eligible AMIP shares. You must be an employee of Advanta 5 7 Corp. or one of our subsidiaries in order for the new options to vest and in order for you to have the right to exercise them. You must be an employee of Advanta Corp. or one of our subsidiaries on the date that bonuses for the 2001 performance year are paid and have earned a percentage of your 2001 target bonus in order to receive any earned portion of your 2001 target bonus, including the cash payment in lieu of eligible AMIP shares described in this offer. Pages 9 & 20. Your participation in the offer does not give you the right to remain in the employ of Advanta Corp. or any of our subsidiaries nor does it guarantee that any portion of your 2001 target bonus will be earned or paid in cash otherwise than as described in this offer to repurchase. - - IF I CHOOSE TO TENDER ELIGIBLE AMIP SHARES, DO I HAVE TO TENDER ALL OF MY ELIGIBLE AMIP SHARES? Yes. You must tender either all or none of your eligible AMIP shares. We will not accept partial tenders of eligible AMIP shares. Page 10. - - WILL I HAVE TO PAY TAXES IF I TENDER MY ELIGIBLE AMIP SHARES IN THE OFFER? If you tender your eligible AMIP shares in the offer, we believe you will not be required under current law to recognize income for federal income tax purposes at the time of the issuance of the new options. However, if you earn any portion of your 2001 target bonus, then our payment to you in cash as described above will be fully taxable as ordinary income in the year it is paid. Upon the exercise of all or any portion of your new options, you will have to take into account as ordinary income for federal income tax purposes the excess of the value of the stock acquired over the purchase price paid for the stock in the year in which the exercise occurs. We recommend that you consult with your own tax advisor to determine the tax consequences of tendering eligible AMIP shares pursuant to the offer. Page 24. - - WHAT HAPPENS TO ELIGIBLE AMIP SHARES THAT I CHOOSE NOT TO TENDER OR THAT ARE NOT ACCEPTED FOR REPURCHASE? Nothing. Eligible AMIP shares that you choose not to tender or that we do not accept for repurchase remain outstanding and remain subject to the terms of the existing AMIP Program, including terms and conditions governing your right to accelerated vesting. - - HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER ELIGIBLE AMIP SHARES IN THE OFFER? You have until 12:00 midnight, Eastern time, on Thursday, September 6, 2001 to tender your eligible AMIP shares in the offer. Page 11. - - CAN THE OFFER BE EXTENDED, AND IF SO, HOW WILL I BE NOTIFIED? We may, in our discretion, extend the offer at any time, but we cannot assure you that we will extend the offer or, if we extend it, for how long. If we extend the offer, we will make an announcement of the extension to all eligible employees no later than 9:00 a.m. on the first 6 8 business day following the previously scheduled expiration date. If we extend the offer, we may delay the acceptance of any eligible AMIP shares that have been tendered. Pages 24-25. - - HOW DO I TENDER MY ELIGIBLE AMIP SHARES? If you decide to tender your eligible AMIP shares, you must deliver, before the offer expires, a properly completed and executed letter of transmittal and any other documents required by the letter of transmittal to Advanta Corp., Welsh and McKean Roads, Spring House, Pennsylvania 19477 Attention: Maryann Buchholz (facsimile number: (215) 444-6120). Pages 12-13. - - DURING WHAT PERIOD OF TIME MAY I WITHDRAW PREVIOUSLY TENDERED ELIGIBLE AMIP SHARES? You may withdraw your tendered eligible AMIP shares at any time before 12:00 midnight, Eastern time, on September 6, 2001; provided, however, that if the offer is extended by us beyond that time, you may withdraw your tendered options at any time until the extended expiration date. In addition, unless we terminate the offer or accept your tendered eligible AMIP shares for repurchase before 12:00 midnight, Eastern time, on October 4, 2001, you may withdraw your tendered eligible AMIP shares at any time after 12:00 midnight, Eastern time, on October 4, 2001. Because we are not accepting partial tenders of eligible AMIP shares, you may only withdraw all of the eligible AMIP shares you previously tendered. To withdraw tendered eligible AMIP shares, you must deliver to us at the address or facsimile number listed above a written notice of withdrawal stating your name, the number of previously tendered eligible AMIP shares and your desire to withdraw the tender of your eligible AMIP shares while you still have the right to withdraw the tendered eligible AMIP shares. Once you have withdrawn eligible AMIP shares, you may re-tender them only by again following the delivery procedures described above. Pages 13-14. - - WHAT DO WE AND OUR BOARD OF DIRECTORS THINK OF THE OFFER? Although our board of directors has approved this offer, neither we nor our board of directors makes any recommendation as to whether or not you should tender your eligible AMIP shares. You must make your own decision whether to tender your eligible AMIP shares. For questions about tax implications or other investment-related questions, you should talk to your own legal counsel, accountant and/or financial advisor. Page 12. - - WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE OFFER? For additional information or assistance, please call the Exchange Program Information Line at (215) 444-5205. 7 9 TABLE OF CONTENTS
Page ---- SUMMARY TERM SHEET 1 THE OFFER 1. Introduction 9 2. Determining the Weighted Average Value of Eligible AMIP Shares 10 3. Expiration Date 11 4. Purpose of the Offer 11 5. Procedures for Tendering Eligible AMIP Shares 12 6. Withdrawal Rights 13 7. Acceptance of Eligible AMIP Shares; Cash Payment and Issuance of New Options 14 8. Conditions of the Offer 15 9. Price Range of Common Stock Underlying the New Options 17 10. Source and Amount of Consideration; Terms of New Options 17 11. Information Concerning Advanta Corp. 21 12. Interests of Directors and Officers; Transactions and Arrangements Concerning the Eligible AMIP Shares 22 13. Status of Eligible AMIP Shares Acquired by Us in the Offer; Accounting Consequences of the Offer 23 14. Legal Matters; Regulatory Approvals 23 15. Material Federal Income Tax Consequences 24 16. Extension of Offer; Termination; Amendment 24 17. Fees and Expenses 25 18. Additional Information 25 19. Miscellaneous 26
SCHEDULE A Information Concerning the Directors and Executive Officers of Advanta Corp. 8 10 THE OFFER 1. INTRODUCTION Advanta Corp. is offering to repurchase "Eligible AMIP Shares" from "eligible employees." "Eligible AMIP Shares" are shares of restricted stock granted under the Advanta Management Incentive Program (the "AMIP Program") that: - are attributable to an eligible employee's 2001 target bonus (the "2001 target bonus"); and - have a weighted average value, as calculated for purposes of determining the original number of shares granted (the "weighted average value") that is greater than $10.625 per share. An "eligible employee" refers to any person: (1) who holds Eligible AMIP Shares, at least some of which shares were granted prior to February 28, 2001; and (2) who, as of the expiration of this offer, is employed by us and has not received a notice of termination that is effective on or prior to the expiration of this offer. If you are an eligible employee and you tender your Eligible AMIP Shares, in consideration we will: (1) in the event you earn a percentage of your 2001 target bonus, pay to you in cash the portion of your 2001 target bonus that otherwise would have been payable in AMIP shares (the "Cash Payment"), and (2) grant to you options to purchase a number of shares of our Class B Common Stock (the "New Options"), at an exercise price of $10.625 per share, that is equal to (A) the number of Eligible AMIP Shares tendered by you and accepted by us for repurchase multiplied by their weighted average value per share, (B) divided by $10.625. If you earn a percentage of your 2001 target bonus, a percentage of the New Options equal to the percentage of the 2001 target bonus awarded to you will vest on April 11, 2002, up to a maximum of 100% of the New Options. Any New Options that do not vest on that date will vest on the tenth anniversary of the date on which the related tendered Eligible AMIP Shares were granted. The New Options will be exercisable for two years after the date on which they vest. The Cash Payment and the New Options are described fully in Section 10 of this offer to repurchase. We will document the New Options by means of an option agreement between us and you, a form of which is attached. The New Options will be issued under the Advanta Corp. 2000 Omnibus Stock Incentive Plan (the "Omnibus Plan"). The AMIP Program is administered under the Omnibus Plan. You must be an employee of Advanta Corp. or one of our subsidiaries from the date of this offer through the date we grant the New Options in order to receive New Options as part of the consideration for the tender of your Eligible AMIP Shares. You must be an employee of Advanta Corp. or one of our subsidiaries in order for the New Options to vest and in order for you to have the right to exercise them. You must be an employee of Advanta Corp. or one of our subsidiaries on the date that bonuses for the 2001 performance year are paid and have earned a percentage of your 2001 target bonus in order to receive the earned portion of your 2001 target bonus, including the Cash Payment. Your participation in the offer does not give you the right to remain in the employ of Advanta Corp. or any of our subsidiaries nor does it guarantee that any portion of your 2001 target bonus will be paid in cash or otherwise or that any of the New Options will be accelerated to vest on April 11, 2002, except as described in this offer to repurchase. 9 11 We are making this offer upon the terms and subject to the conditions set forth in this offer to repurchase and in the related Letter of Transmittal (which together, as they may be amended or supplemented from time to time, constitute the "offer"). You may only tender either all or none of your Eligible AMIP Shares. All tendered Eligible AMIP Shares that we accept pursuant to this offer will be cancelled. Any portion of your 2001 target bonus that you previously elected to receive in cash will not be affected in any way by whether you accept this offer. This offer is not conditioned upon a minimum number of Eligible AMIP Shares being tendered. This offer is subject to conditions that we describe in Section 8 of this offer to repurchase. As of August 3, 2001, 17,359,944 shares of our Class B Common Stock were issued and outstanding, of which 120,080 were Eligible AMIP Shares held by eligible employees. 2. DETERMINING THE WEIGHTED AVERAGE VALUE OF ELIGIBLE AMIP SHARES When you entered the applicable plan for 2001 under the AMIP Program, we granted to you restricted shares of Class B Common Stock in an amount that represented a value at the time of the grant equal to your 2001 target bonus based on your then current base salary, multiplied by the percentage of your then current 2001 target bonus you elected to receive in AMIP shares. We valued the shares granted to you at the 90-day trailing average stock price, as determined in accordance with the provisions of the AMIP Program. If we later increased your target bonus as a percentage of your base salary, you received an additional grant of restricted shares in an amount representing the value of the change in your 2001 target bonus. If you received additional shares of restricted stock as a result of an increase in your 2001 target bonus, we granted additional shares at the 90-day trailing average stock price in effect at the time of the later grant, as determined in accordance with the provisions of the AMIP Program. This could have been a different stock price than the one that applied to your initial grant of restricted shares for your original 2001 target bonus. We will calculate the weighted average value of your eligible AMIP shares as follows: for each grant of restricted shares applicable to your 2001 target bonus, (1) we will multiply (X) the number of shares granted, by (Y) the 90-day trailing average stock price as determined in accordance with the AMIP Program to obtain the value (V) for that particular grant; (2) we will add together all of the values for all of the grants; then (3) we will divide the sum of all values by the total number of shares in all grants. For example, assume that upon entering the AMIP Program in 1999 your base salary was $80,000, your 2001 target bonus was 25% of your salary and the 90-day trailing average stock price was $20.00 per share. If at that time you elected to receive 100% of your 2001 bonus in AMIP Shares, you would have been granted 1,000 AMIP shares, calculated as follows: (1) 10 12 $80,000 salary multiplied by 25% target multiplied by 100% stock election, (2) divided by $20.00 share price. If one year later your 2001 target bonus was increased to 40% of your salary and the 90-day trailing average was $12.00, you would have been granted an additional 1,000 AMIP shares as a result of the target bonus increase, calculated as follows: (1) $80,000 salary multiplied by the 15% target increase multiplied by 100% stock election, (2) divided by $12.00 share price. The weighted average value of your shares would be $16.00 per share, calculated as follows: 1,000 x $20.00 = $20,000(V1) 1,000 x $12.00 = $12,000(V2) $20,000(V1) + $12,000(V2) = $32,000 $32,000 (sum of V1+V2) = $16.00 (weighted average value per share) ---------------------- 2,000 (total # of shares) 3. EXPIRATION DATE Upon the terms and subject to the conditions of the offer, we will repurchase all outstanding Eligible AMIP Shares under the Omnibus Plan held by eligible employees that are properly tendered and not validly withdrawn in accordance with Section 6 before the "expiration date," as defined below. We will not accept partial tenders of Eligible AMIP Shares. Therefore, you may only tender either all or none of your Eligible AMIP Shares. If you are an eligible employee and you properly tender all of your Eligible AMIP Shares and if we accept your Eligible AMIP Shares for repurchase, then, unless we terminate this offer pursuant to the terms and conditions of this offer, you will be entitled to receive the consideration described in Section 10 of this offer. The term "expiration date" means 12:00 midnight, Eastern time, on Thursday, September 6, 2001, unless and until we, in our discretion, have extended the period of time during which the offer will remain open, in which event the term "expiration date" refers to the latest time and date at which the offer, as so extended, expires. See Section 16 for a description of our rights to extend, delay, terminate and amend the offer. 4. PURPOSE OF THE OFFER This offer to repurchase Eligible AMIP Shares in exchange for the Cash Payment and New Options is designed to restore the potential value of your 2001 target bonus and reinforce our commitment to competitive bonus opportunities. Without this offer to repurchase Eligible AMIP Shares from eligible employees, our AMIP stock bonus program for the year 2001 would not provide the full intended benefits because the program was designed before our recent restructuring. By making this offer to repurchase Eligible AMIP Shares from eligible employees for the Cash Payment and New Options, we believe your 2001 target bonus will have a greater potential value. 11 13 Subject to the foregoing, and except as otherwise disclosed in this offer or in our filings with the Securities and Exchange Commission, we presently have no plans or proposals that relate to or would result in: (a) any extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving us or any of our subsidiaries; (b) any purchase, sale or transfer of a material amount of our assets or the assets of any of our subsidiaries; (c) any material change in our present dividend rate or policy, or our indebtedness or capitalization; (d) any change in our present board of directors or management, including a change in the number or term of directors, or to fill any existing board vacancies or to change any executive officer's material terms of employment; (e) any other material change in our corporate structure or business; (f) our common stock being delisted from or not being authorized for quotation in an automated quotation system operated by a national securities association; (g) our common stock becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); (h) the suspension of our obligation to file reports pursuant to Section 15(d) of the Exchange Act; (i) the acquisition by any person of any material amount of our securities or the disposition of any material amount of our securities; or (j) any change in our certificate of incorporation or bylaws, or any actions which may impede the acquisition of control of us by any person. Neither we nor our board of directors makes any recommendation as to whether you should tender your Eligible AMIP Shares, nor have we authorized any person to make any such recommendation. You are urged to evaluate carefully all of the information in this offer to repurchase and to consult your own legal, investment and/or tax advisors. You must make your own decision whether to tender your Eligible AMIP Shares for repurchase. 5. PROCEDURES FOR TENDERING ELIGIBLE AMIP SHARES PROPER TENDER OF ELIGIBLE AMIP SHARES. To validly tender your Eligible AMIP Shares pursuant to the offer, you must, in accordance with the terms of the Letter of Transmittal, properly complete, duly execute and deliver to us the Letter of Transmittal, or a facsimile of the 12 14 Letter of Transmittal, along with any other required documents. Before the expiration date, we must receive the Letter of Transmittal at the following address or facsimile number: Advanta Corp. Welsh and McKean Roads Spring House, Pennsylvania 19477 Attention: Maryann Buchholz Facsimile No.: (215) 444-6120 THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING LETTERS OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT YOUR ELECTION AND RISK. IF YOU DELIVER BY MAIL, WE RECOMMEND THAT YOU USE REGISTERED MAIL WITH RETURN RECEIPT REQUESTED AND PROPERLY INSURE THE MATERIALS. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ENSURE TIMELY DELIVERY. DETERMINATION OF VALIDITY; REJECTION OF TENDERS; WAIVER OF DEFECTS; NO OBLIGATION TO GIVE NOTICE OF DEFECTS. We will determine, in our sole discretion, all questions as to form of documents and the validity, form, eligibility, including time of receipt, and acceptance of any tender of Eligible AMIP Shares. Our determination of these matters will be final and binding on all parties. We reserve the right to reject any or all tenders of Eligible AMIP Shares that we determine are not in appropriate form or that we determine are unlawful to accept. Otherwise, we will accept properly and timely tendered Eligible AMIP Shares that are not validly withdrawn. We also reserve the right to waive any of the conditions of the offer or any defect or irregularity in any tender with respect to any particular Eligible AMIP Shares or any particular holder of Eligible AMIP Shares. No tender of Eligible AMIP Shares will be deemed to have been properly made until all defects or irregularities have been cured by the tendering holder of Eligible AMIP Shares or waived by us. Neither we nor any other person is obligated to give you notice of any defects or irregularities in your tender, nor will anyone incur any liability for failure to give you any such notice. OUR ACCEPTANCE CONSTITUTES AN AGREEMENT. Your tender of Eligible AMIP Shares pursuant to the procedures described above constitutes your acceptance of the terms and conditions of the offer. OUR ACCEPTANCE FOR REPURCHASE OF THE ELIGIBLE AMIP SHARES TENDERED BY YOU PURSUANT TO THE OFFER WILL CONSTITUTE A BINDING AGREEMENT BETWEEN US AND YOU UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF THE OFFER. Subject to our rights to extend, terminate and amend the offer, we currently expect that we will accept promptly after the expiration date all properly tendered Eligible AMIP Shares that have not been validly withdrawn. 6. WITHDRAWAL RIGHTS You may only withdraw your tendered Eligible AMIP Shares in accordance with the provisions of this Section 6. You may withdraw your tendered Eligible AMIP Shares at any time before 12:00 midnight, Eastern time, on September 6, 2001; provided, however, that if the offer is extended by 13 15 us beyond that time, you may withdraw your tendered Eligible AMIP Shares at any time until the extended expiration date. In addition, unless we terminate the offer or accept your tendered Eligible AMIP Shares for repurchase before 12:00 midnight, Eastern time, on October 4, 2001, you may withdraw your tendered Eligible AMIP Shares at any time after 12:00 midnight, Eastern time, on October 4, 2001. To validly withdraw tendered Eligible AMIP Shares, a holder of Eligible AMIP Shares must deliver to us at the address set forth in Section 5 of this offer to repurchase a written notice of withdrawal, or a facsimile thereof, stating the holder's name, the number of previously tendered Eligible AMIP Shares and the holder's desire to withdraw the tender of Eligible AMIP Shares, while the holder of Eligible AMIP Shares still has the right to withdraw the tendered Eligible AMIP Shares. The notice of withdrawal must specify the name of the holder of Eligible AMIP Shares who tendered the Eligible AMIP Shares to be withdrawn and the number of Eligible AMIP Shares to be withdrawn. Because we are not accepting partial tenders of Eligible AMIP Shares, you may only withdraw all of the Eligible AMIP Shares held by you. Except as described in the following sentence, the notice of withdrawal must be executed by the holder of Eligible AMIP Shares who tendered the Eligible AMIP Shares to be withdrawn exactly as such holder's name appears on the documents evidencing such Eligible AMIP Shares. If the signature is by a trustee, executor, administrator, guardian, attorney-in-fact or another person acting in a fiduciary or representative capacity, the signer's full title and proper evidence of the authority of such person to act in such capacity must be identified on the notice of withdrawal. You may not rescind any withdrawal. Any Eligible AMIP Shares you withdraw will thereafter be deemed not properly tendered for purposes of the offer, unless you properly re-tender those Eligible AMIP Shares before the expiration date by following the procedures described in Section 5 of this offer to repurchase. Neither we nor any other person is obligated to give you notice of any defects or irregularities in any notice of withdrawal that you may submit, nor will anyone incur any liability for failure to give you any such notice. We will determine, in our discretion, all questions as to the form and validity, including time of receipt, of notices of withdrawal. Our determination of these matters will be final and binding. 7. ACCEPTANCE OF ELIGIBLE AMIP SHARES; CASH PAYMENT AND ISSUANCE OF NEW OPTIONS Upon the terms and subject to the conditions of this offer and as promptly as reasonably practicable following the expiration date, we will accept for repurchase and cancel Eligible AMIP Shares properly tendered and not validly withdrawn before the expiration date. If your properly tendered Eligible AMIP Shares are accepted for repurchase, you will receive the consideration set forth in Section 10 of this offer. For purposes of the offer, we will be deemed to have accepted for repurchase Eligible AMIP Shares that are validly tendered and not properly withdrawn as, if and when we give oral or written notice to the holders of our acceptance for repurchase of such Eligible AMIP Shares, which may be given by e-mail. Subject to our rights to extend, terminate and amend the offer, we 14 16 currently expect that we will accept promptly after the expiration date all properly tendered Eligible AMIP Shares that are not validly withdrawn. Promptly after we accept tendered Eligible AMIP Shares for repurchase, we will send each tendering holder a letter indicating: (1) the amount of the Cash Payment that would be paid if the eligible employee were to be awarded a bonus for 2001 equal to 100% of the 2001 target bonus; and (2) the number of New Options that we have awarded. Under the current AMIP Program, your Eligible AMIP Shares will vest automatically 10 years after you entered the AMIP Program, assuming you continue to be employed by Advanta Corp. or one of its subsidiaries, even if we do not accelerate vesting in accordance with the guidelines of the AMIP Program. If you tender your Eligible AMIP Shares, your Eligible AMIP Shares will not be available for vesting at any time. In addition, if you tender your Eligible AMIP Shares, you will no longer have the rights of a shareholder of our Class B Common Stock as to those Eligible AMIP Shares, including the right to receive dividends. If you tender your eligible AMIP shares and for the 2001 performance year you receive no bonus payment or a bonus payment that is less than 100% of your 2001 target bonus, we will not pay you in cash or otherwise the unearned portion of your 2001 target bonus at any time in the future. 8. CONDITIONS OF THE OFFER Notwithstanding any other provision of the offer, and in addition to, and not in limitation of, our right to extend or amend the offer at any time in our sole discretion, we will not be required to accept for payment, or pay for, any Eligible AMIP Shares tendered, and we may terminate or amend the offer or may postpone, subject to the requirements of the Exchange Act for prompt payment for or return of the Eligible AMIP Shares, the acceptance for payment of, and payment for, Eligible AMIP Shares tendered if at any time on or after the date of this offer and before acceptance for payment of, or payment for, any Eligible AMIP Shares, any of the following shall have occurred or shall have been determined in our judgment to have occurred and, in our sole judgment, in any such case and regardless of the circumstances (including any action or omission to act by us) giving rise to those circumstances, the event makes it inadvisable to proceed with the offer or with the acceptance for payment or payment: - 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: (a) challenges the making of the offer, the acquisition of some or all of the Eligible AMIP Shares pursuant to the offer or otherwise relates in any manner to the offer; or (b) in our sole judgment, could materially and adversely affect our business, financial or other condition, income, operations or prospects, or otherwise materially impair in any way the contemplated future conduct of our business or any of our affiliates or materially impair the contemplated benefits of the offer to us; or 15 17 - 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 us or any of our subsidiaries, by any court or any government or governmental, regulatory or administrative authority, agency or tribunal, domestic or foreign, which, in our sole judgment, would or might directly or indirectly: (a) make the acceptance for payment of, or payment for, some or all of the Eligible AMIP Shares illegal or otherwise restrict or prohibit consummation of the offer; (b) delay or restrict our ability, or render us unable, to accept for payment or pay for some or all of the Eligible AMIP Shares; (c) materially impair the contemplated benefits of the offer to us; or (d) materially affect our business, financial or other condition, income, operations or prospects, or otherwise materially impair in any way the contemplated future conduct of our business or any of our affiliates; or - there shall have occurred: (a) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States; (b) 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; (c) the commencement of a war, armed hostilities or any other national or international crisis directly or indirectly involving the United States; (d) any limitation, whether or not mandatory, by any governmental, regulatory or administrative agency or authority on, or any event which, in our sole judgment, might affect, the extension of credit by banks or other lending institutions in the United States; (e) any change in the general political, market, economic or financial conditions in the United States or abroad that could, in our sole judgment, have a material adverse effect on our business, financial or other condition, income, operations or prospects; or (f) in the case of any of the foregoing existing at the time of the commencement of the offer, in our sole judgment, a material acceleration or worsening thereof; or - any change shall have occurred or shall have been threatened in our business, financial or other condition, income, operations, or prospects, which, in our sole judgment, is or may be materially adverse to us or any of our affiliates, or any other event shall have occurred which, in our sole judgment, materially impairs the contemplated benefits of the offer to us; or - any tender or exchange offer with respect to some or all of our capital stock, other than this 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 us or any of our affiliates, other than the offer, shall have been proposed, announced or made by any person or entity. The foregoing conditions are for our sole benefit and may be asserted by us regardless of the circumstances (including any action or inaction by us) giving rise to any such condition. Any such condition may be waived by us, in whole or in part, at any time and from time to time in our sole discretion. Our 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 us concerning the events described in this Section 8 16 18 and any related judgment by us regarding the inadvisability of proceeding with the acceptance for payment or payment for any tendered Eligible AMIP Shares shall be final and shall be binding on all parties. 9. PRICE RANGE OF COMMON STOCK UNDERLYING THE NEW OPTIONS Our Class B Common Stock is traded on the Nasdaq National Market under the symbol "ADVNB." The following table shows, for the periods indicated, the high, low and closing sales prices for the last two years of our Class B Common Stock as reported by the Nasdaq National Market.
Quarter Ended: High Low Close -------------- ---- --- ----- September 1999 $19.13 $11.38 $11.75 December 1999 $15.88 $10.44 $14.06 March 2000 $15.50 $11.50 $14.48 June 2000 $15.13 $ 7.75 $ 8.50 September 2000 $10.19 $ 7.50 $ 8.14 December 2000 $ 8.38 $ 4.13 $ 7.19 March 2001 $14.00 $ 7.16 $13.69 June 2001 $14.00 $11.90 $13.97
As of August 3, 2001, the last reported sale price of our Class B Common Stock, as reported by the Nasdaq National Market, was $12.21 per share, and there were 17,359,944 shares outstanding. WE RECOMMEND THAT YOU OBTAIN CURRENT MARKET QUOTATIONS FOR OUR CLASS B COMMON STOCK BEFORE DECIDING WHETHER TO TENDER YOUR ELIGIBLE AMIP SHARES. 10. SOURCE AND AMOUNT OF CONSIDERATION; TERMS OF NEW OPTIONS CONSIDERATION CASH. As part of the consideration for Eligible AMIP Shares validly tendered and accepted by us pursuant to this offer, if you earn a percentage of your 2001 target bonus, we will make a Cash Payment to you in an amount equal to the earned portion of the 2001 target bonus that otherwise would have been paid in AMIP shares. The Plan Administrative Committee of the board of directors (the "Plan Administrative Committee") and management may determine that an eligible employee has earned between 0% and 200% of his or her 2001 target bonus. We will pay to you in cash such portion of the 2001 target bonus that is related to your Eligible AMIP Shares as the Plan Administrative Committee and management have determined that you have earned. We will pay the Cash Payment out of our general funds. To the extent you earn a percentage of your 2001 target bonus, as described above, we will make the Cash Payment at the same time as other 2001 AMIP awards are paid under our Omnibus Plan. The Cash Payment will be made only to the extent that the Plan Administrative Committee and management would have granted accelerated vesting of your Eligible AMIP Shares in accordance with the administrative guidelines for the AMIP Program. You will not receive cash pursuant to this offer 17 19 to the extent the Plan Administrative Committee and management determine that vesting of some or all of your Eligible AMIP Shares would not have been accelerated had you retained the Eligible AMIP Shares. In other words, you will not receive a Cash Payment to the extent the Plan Administrative Committee and management determine that some or all of your Eligible AMIP Shares would have been "frozen" and would not have vested until ten years after the date of grant. Any portion of your 2001 target bonus that you previously elected to receive in cash will not be affected in any way by whether you accept this offer. If we receive and accept tenders of all outstanding Eligible AMIP Shares held by eligible employees and if 100% of the eligible employees earn their 2001 target bonuses at a payout rate of 100% of the 2001 target bonuses, we will make Cash Payments in the aggregate amount of $3,237,789. OPTIONS. As part of the consideration for Eligible AMIP Shares validly tendered and accepted by us pursuant to this offer, we will issue New Options to purchase shares of our Class B Common Stock under the Omnibus Plan. We will grant the New Options as soon as practicable following the date we cancel the Eligible AMIP Shares that we accept for repurchase in the offer. If you tender your Eligible AMIP Shares pursuant to this offer, you will receive a number of New Options that is equal to (1) the number of Eligible AMIP Shares tendered by you and accepted by us for repurchase multiplied by the weighted average value per share (as calculated for purposes of determining the original number of shares granted - see Section 2 of this offer to repurchase), (2) divided by $10.625. However, we will not issue any options exercisable for fractional shares. Instead, we will round down to the nearest whole number. Even though the Plan Administrative Committee and management may award you up to 200% of your 2001 target bonus, you will not receive additional options if you earn more than 100% of your 2001 target bonus. If we receive and accept tenders of all outstanding Eligible AMIP Shares, we will grant New Options to purchase a total of approximately 238,671 shares of our Class B Common Stock and the Class B Common Stock issuable upon exercise of the New Options will equal approximately 1.37% of the total shares of our Class B Common Stock outstanding as of August 3, 2001. TERMS OF NEW OPTIONS The New Options will be issued under the Omnibus Plan. A new option agreement will be entered into between us and each eligible employee who is employed by Advanta Corp. or one of its subsidiaries on the date the New Options are granted and whose tendered Eligible AMIP Shares are accepted for repurchase by us in the offer. The exercise price of the New Options to be granted pursuant to the offer will be $10.625 per share of Class B Common Stock. WE RECOMMEND THAT YOU OBTAIN CURRENT MARKET QUOTATIONS FOR OUR CLASS B COMMON STOCK BEFORE DECIDING WHETHER TO TENDER YOUR ELIGIBLE AMIP SHARES. If you earn a percentage of your 2001 target bonus, a percentage of the New Options equal to the percentage of the 2001 target bonus awarded to you will vest on April 11, 2002, up to a maximum of 100% of the New Options. Any New Options that do not vest on that date will vest on the tenth anniversary of the date on which the related tendered Eligible AMIP Shares were granted. If you have had multiple 18 20 grants of Eligible AMIP Shares and if the Plan Administrative Committee and management determine that you earn less than 100% of your 2001 target bonus, we will use a first in, first out calculation to determine when your New Options will vest other than on April 11, 2002. Using a first in, first out calculation means that the New Options that are related to your oldest grants of Eligible AMIP Shares will be accelerated to vest first. No portion of the New Options we grant will be immediately exercisable. Subject to the provisions of the Omnibus Plan and your option agreement, the New Options will expire two years after the date on which they vest. TERMS OF THE OMNIBUS PLAN. The following description summarizes the material terms of the Omnibus Plan and the options granted under the Omnibus Plan. General. The maximum number of shares of our Class B Common Stock available for issuance pursuant to the exercise of options granted under the Omnibus Plan is currently 20,000,000. The Omnibus Plan permits the granting of non-qualified stock options (i.e., stock options that are not incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")). All options subject to this offer are non-qualified stock options. Administration. The Omnibus Plan is administered by the Plan Administrative Committee of our board of directors and provides the committee with broad discretion to fashion the terms of grants of options, including type of option, number of shares subject to the option and exercise price, as it deems appropriate. The committee also selects the persons to whom options are granted. Exercise Price. The exercise price of each non-qualified stock option is generally the fair market value of the underlying stock on the date of grant, unless otherwise provided in the document evidencing the grant. As noted above, the exercise price of the New Options will be $10.625 per share. Vesting and Exercise. The Plan Administrative Committee may determine at what time or times each option may be exercised and the period of time, if any, after retirement, death, disability or termination of employment during which options may be exercised. The exercisability of options may be accelerated by the Plan Administrative Committee in accordance with the terms of the Omnibus Plan. Term. The Plan Administrative Committee may determine at what time or times each non-qualified stock option expires. Method of Exercising Options. After options have vested, the option holder may exercise the options in accordance with the terms of the Omnibus Plan and the option holder's option agreement by providing to us (1) a written notice identifying the option and stating the number of shares of Class B Common Stock that the option holder desires to purchase and containing the acknowledgements set forth in the Omnibus Plan and (2) payment in full of the option price per share for the shares of Class B Common Stock then being acquired by certified or cashier's check payable to the order of Advanta Corp. in full payment for the shares of Class B Common Stock being purchased. We may also 19 21 in our discretion require full payment for taxes associated with the exercise of options and provide for alternate means of exercise of the options and of payment upon exercise. Prohibition Against Transfer, Pledge and Attachment. The options, and the rights and privileges conferred by them, are personal to the option holder and may not be transferred, assigned, pledged or hypothecated in any way, whether by operation of law or otherwise, and during the option holder's lifetime shall be exercisable only by the option holder. The option holder may transfer the options, and the rights and privileges conferred by them, upon the option holder's death, either by will or under the laws of descent and distribution. Notwithstanding the foregoing, the option holder may transfer all or part of the options to the option holder's immediate family members, to trusts for the benefit of the option holder and/or such immediate family members and to partnerships or other entities in which the option holder and/or such immediate family members own all the equity interests; provided, however, the option holder may not make such a transfer to any such person without our prior written consent, which consent may be granted or denied in our sole discretion. All such transferees shall be subject to all of the terms and conditions of the options to the same extent as the option holder. TERMINATION OF EMPLOYMENT. You must be an employee of Advanta Corp. or one of our subsidiaries from the date of this offer through the date we grant the New Options in order to receive New Options as part of the consideration for the tender of your Eligible AMIP Shares. You must be an employee of Advanta Corp. or one of our subsidiaries in order for the New Options to vest and in order for you to have the right to exercise them. This means that if you die, quit or we terminate your employment prior to the date we grant the New Options, you will not receive any New Options for your cancelled Eligible AMIP Shares that you tendered. Subject to the option agreement between you and us, after the grant date of the New Options, if you cease to be an employee of Advanta for any reason other than retirement, disability or death, then you shall have until the earlier of (1) the expiration date of the New Options or (2) the date of termination of your employment to exercise the New Options to the extent to which you would otherwise have been entitled to exercise the New Options on or prior to the date of termination. To the extent you are not entitled to exercise the New Options before the date of your termination, such outstanding and unexercised New Options shall immediately lapse and you shall have no further rights with respect to them, effective as of the date of termination of your employment. After the date of grant of the New Options, if your employment with Advanta Corp. is terminated due to your retirement, the New Options shall be exercisable until the earlier of (1) the expiration date of the New Options, or (2) two years from the date of your retirement to the extent to which you would otherwise be entitled to exercise the New Options on or before the date of your termination. After the date of grant of the New Options, if your employment with Advanta Corp. is terminated due to disability or death, the options shall be exercisable until the earlier of (1) the expiration date of the New Options, or (2) 180 days from the date of disability or death to the extent to which you would otherwise be entitled to exercise the New Options on or before the date of your termination. To the extent your are not entitled to exercise any portion of the New Options prior to the date of your termination due to retirement, disability or death, 20 22 the unexercised portion of the New Options shall immediately lapse, effective as of the date of termination of your employment on account of retirement, disability or death. REGISTRATION OF NEW OPTION SHARES. All shares of our Class B Common Stock issuable upon exercise of options under the Omnibus Plan, including the shares that will be issuable upon exercise of New Options to be granted pursuant to the offer, have been registered under the Securities Act of 1933, as amended, on a registration statement on Form S-8 filed with the Securities and Exchange Commission. EFFECT OF CHANGE OF CONTROL. If we merge or are consolidated with, or sell substantially all of our assets or stock to, another entity after the Eligible AMIP Shares are accepted pursuant to this offer and before the expiration date of the New Options, all of the New Options will become immediately exercisable in full for those eligible employees who are employed by us on the date of the change of control. Upon a change of control as defined in the Omnibus Plan, we may take whatever action we deem necessary with respect to outstanding New Options, including accelerating the expiration or termination date to a date no earlier than 30 days after notice of such acceleration is given to option holders, provided, however, that such accelerated expiration date may not be earlier than the date as of which the New Options have become fully vested and exercisable. Our statements in this offer concerning the Omnibus Plan and the New Options are merely summaries and are not complete. The statements are subject to, and are qualified in their entirety by reference to, all provisions of the Omnibus Plan and the form of option agreement under the Omnibus Plan, each of which is filed as an exhibit to the Tender Offer Statement on Schedule TO, of which this offer to repurchase is a part. See Section 18 for a discussion of how to obtain copies of the Omnibus Plan and form of Option Agreement. 11. INFORMATION CONCERNING ADVANTA CORP. Advanta Corp. is a Delaware corporation. We are a highly focused financial services company which has been providing innovative financial solutions since 1951. We leverage our direct marketing and information based expertise to develop state-of-the-art data warehousing and statistical modeling tools that identify potential customers and new target markets. Over the past five years, we have used these distinctive capabilities to become one of the nation's largest issuers of MasterCard(R)(1) business credit cards to small businesses. In addition to our business credit card business, we make venture capital investments through our affiliates, including Advanta Partners LP. We own two depository institutions, or banks, Advanta National Bank and Advanta Bank Corp. We fund and operate our business credit card business primarily through Advanta Bank Corp. Prior to January 23, 2001, we offered small ticket equipment leases to small businesses. After a thorough review of strategic alternatives available to the leasing business, our - ---------- (1) MasterCard(R)is a federally registered servicemark of MasterCard International, Inc. 21 23 management determined that it was in the best interests of our stockholders to cease originating leases and to continue to service the existing lease portfolio, rather than sell the business or the portfolio. The financial statements set forth in pages 37 through 79 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2001 and pages 3 through 20 of our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2001, are incorporated herein by reference. See Section 18 for a discussion of how to obtain copies of these documents. Our ratio of earnings to fixed charges as of December 31, 1999 was not meaningful.(2) Our ratio of earnings to fixed charges as of December 31, 2000 was 1.11. Our book value per share was $16.05 as of March 31, 2001. Our principal executive offices are located at Welsh and McKean Roads, Spring House, Pennsylvania 19477. The telephone number at our executive offices is (215) 657-4000. 12. INTERESTS OF DIRECTORS AND OFFICERS; TRANSACTIONS AND ARRANGEMENTS CONCERNING THE ELIGIBLE AMIP SHARES A list of our directors and executive officers is attached to this offer to repurchase as Schedule A. As of August 3, 2001, our executive officers as a group beneficially owned 35,168 Eligible AMIP Shares outstanding under the Omnibus Plan, which represented approximately 29.3% of the Eligible AMIP Shares outstanding under the Omnibus Plan as of that date. Our non-employee directors own no Eligible AMIP Shares. As of August 3, 2001, our executive officers and non-employee directors as a group beneficially owned 2,668,702 shares of Class B Common Stock, which represented 15.37% of the Class B Common Stock outstanding as of that date. Our executive officers have indicated that they intend to tender their Eligible AMIP Shares. Under the terms of the Omnibus Plan, from time to time we grant to our employees, including our executive officers, and our non-employee directors the following awards: (1) options to purchase shares of our Class B Common Stock, (2) restricted shares of our Class B Common Stock, (3) stock appreciation rights, and (4) other performance-based awards. In addition to this offer to repurchase Eligible AMIP Shares, we currently expect that we will adjust other awards previously made under the Omnibus Plan to some of our employees, including our executive officers, and our non-employee directors, to the extent the awards were based on Class B Common Stock prices that were higher at the time of grant than current prices, in order to recognize the contributions made by those employees and directors and to provide them with continued incentives to devote themselves to our success. We have also, from time to time, granted restricted shares of Class B Common Stock to executives under the terms of their employment agreements. Except as set forth above or elsewhere in this offer to repurchase, neither Advanta Corp. nor, to our knowledge, any of Advanta Corp.'s 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 of the securities of Advanta - -------- (2) The ratio calculated in the year ended December 31, 1999 is less than 1.00 and therefore not meaningful. In order to achieve a ratio of 1.00, earnings before income taxes and fixed charges would need to increase by $14,451,000 for the year ended December 31, 1999. 22 24 Corp. (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, guarantees of loans, guarantees against loss or the giving or withholding of proxies, consents or authorizations). On July 31, 2001, Arthur Bellis, one of our directors, purchased 10,600 shares of our Class B Common Stock on the open market at a price of $11.95 per share. Except as otherwise described above, there have been no transactions with respect to our Eligible AMIP Shares or in our Class B Common Stock which were effected during the past 60 days by Advanta Corp., or to our knowledge, by any executive officer, director, affiliate or subsidiary of Advanta Corp. or an associate of the any of the foregoing. 13. STATUS OF ELIGIBLE AMIP SHARES ACQUIRED BY US IN THE OFFER; ACCOUNTING CONSEQUENCES OF THE OFFER Eligible AMIP Shares we acquire pursuant to the offer will be cancelled and returned to the pool of shares available for grants of shares under the Omnibus Plan. To the extent such shares are not fully reserved for issuance upon exercise of the New Options, the shares will be available for future awards to employees and other eligible plan participants without further stockholder action, except as required by applicable law or the rules of the Nasdaq National Market or any other securities quotation system or any stock exchange on which our common stock is then quoted or listed. We believe that, as a result of the transactions contemplated by the offer, compensation expense in 2001 with respect to Eligible Employees whose Eligible AMIP Shares are repurchased pursuant to the offer will not materially change. 14. LEGAL MATTERS; REGULATORY APPROVALS We are not aware of any license or regulatory permit that appears to be material to our business that might be adversely affected by our repurchase of Eligible AMIP Shares or the distribution of the Cash Payments and issuance of New Options as contemplated by 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 repurchase of the Eligible AMIP Shares as contemplated by this offer. Should any such approval or other action be required, we presently contemplate that we will seek such approval or take such other action. We are unable to predict whether we may determine that we are required to delay the acceptance of Eligible AMIP Shares for repurchase pending the outcome of any such matter. We cannot assure you 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 our business. Our obligation under the offer to accept tendered Eligible AMIP Shares, to make the Cash Payments and to issue New Options is subject to conditions, including the conditions described in Section 8. 23 25 15. MATERIAL FEDERAL INCOME TAX CONSEQUENCES The following is a general summary of the material federal income tax consequences of the repurchase of Eligible AMIP Shares pursuant to the offer. This discussion is based on the Code, its legislative history, treasury regulations thereunder and administrative and judicial interpretations thereof as of the date of the offer, all of which are subject to change, possibly on a retroactive basis. This summary does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respects to all categories of persons to whom this offer is made. If you tender your Eligible AMIP Shares in the offer, we believe you will not be required under current law to recognize income for federal income tax purposes at the time of the issuance of the New Options. However, the Cash Payment will be fully taxable as ordinary income in the year it is paid. Upon the exercise of all or any portion of your New Options, you will have to take into account as ordinary income for federal income tax purposes the excess of the value of the stock acquired over the purchase price paid for the stock in the year in which the exercise occurs. WE RECOMMEND THAT YOU CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATING IN THE OFFER. 16. EXTENSION OF OFFER; TERMINATION; AMENDMENT We expressly reserve the right, in our discretion, at any time and from time to time, and regardless of whether or not any event set forth in Section 8 has occurred or is deemed by us to have occurred, to extend the period of time during which the offer is open and thereby delay the acceptance for repurchase of any Eligible AMIP Shares by giving oral or written notice of such extension to the eligible employees and making a public announcement thereof. We also expressly reserve the right, in our reasonable judgment, prior to the expiration date to terminate or amend the offer and to postpone our acceptance and cancellation of any options tendered for repurchase upon the occurrence of any of the conditions specified in Section 8, by giving oral or written notice of such termination or postponement to the eligible employees and making a public announcement thereof. Our right to delay our acceptance and cancellation of Eligible AMIP Shares tendered for repurchase is limited by Rule 13e-4(f)(5) promulgated under the Exchange Act, which requires that we must pay the consideration offered or return the Eligible AMIP Shares tendered promptly after termination or withdrawal of a tender offer. We may amend the offer at any time and from time to time by making a public announcement of the amendment. In the case of an extension, the amendment must be issued no later than 9:00 a.m., Eastern time, on the next business day after the last previously scheduled or announced expiration date. Any announcement made pursuant to the offer will be disseminated promptly to eligible employees in a manner reasonably designed to inform them of such change. Any such announcement most likely would be made by e-mail. 24 26 If we materially change the terms of the offer or the information concerning the offer, or if we waive a material condition of the offer, we will extend the offer to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(3) under the Exchange Act. These rules require 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 or a change in percentage of securities sought, will depend on the facts and circumstances, including the relative materiality of such terms or information. 17. FEES AND EXPENSES We will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of Eligible AMIP Shares pursuant to this offer. 18. ADDITIONAL INFORMATION We have filed with the Securities and Exchange Commission a Tender Offer Statement on Schedule TO, of which this offer is a part. This offer does not contain all of the information contained in the Schedule TO and the exhibits to the Schedule TO. We recommend that you review the Schedule TO, including its exhibits, before making a decision on whether to tender your Eligible AMIP Shares. We file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any document we file at the following public reference rooms maintained by the SEC at: Judiciary Plaza 7 World Trade Center 450 Fifth Street, N.W. 13th Floor Washington, D.C. 20549 New York, NY 10048 You may obtain information on the operation of the SEC's public reference rooms by calling the SEC at 1-800-SEC-0330. Our SEC filings also are available to the public from the SEC's Internet website at The SEC allows us to "incorporate by reference" into this offer the information we file with the SEC. This means that we are permitted to disclose information to you by referring you to other documents we have filed with the SEC. The information incorporated by reference is considered to be part of this offer, and information that we file with the SEC after the date of this offer will automatically update and supersede this information. We incorporate by reference in this offer all the documents listed below and any filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this offer and before the expiration date of the offer: - Our Annual Report on Form 10-K for the year ended December 31, 2000; - Our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2001; 25 27 and - Our Current Reports on Form 8-K filed with the SEC on: January 9, January 23, February 5, February 26, March 1, March 8, March 14, April 10, April 25, June 28, July 25 and July 30, 2001. We will deliver, without charge, to anyone receiving this offer, upon written or oral request, a copy of any document incorporated by reference in this offer but not delivered to you with this offer, excluding all exhibits to those documents except any exhibit that has been specifically incorporated by reference. Requests for these documents should be made to the following address and phone number: Investor Relations Department, Advanta Corp., Welsh & McKean Roads, P.O. Box 844, Spring House, Pennsylvania 19477, telephone (215) 657-4000. To ensure delivery before the expiration date, any request for documents should be made by Monday, August 27, 2001. 19. MISCELLANEOUS FORWARD-LOOKING STATEMENTS. This offer may contain forward-looking statements. These statements can be identified by the use of forward-looking phrases such as "will likely result," "may," "are expected to," "is anticipated," "estimate," "projected," "intends to," or other similar words. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Significant risks and uncertainties include those factors discussed in this offer with respect to the trading market for our Class B Common Stock and additional risks that may affect our future performance and that are included elsewhere in this offer and in our other filings with the Securities and Exchange Commission. When considering forward-looking statements, you should keep in mind these risk factors and other cautionary statements in this offer. You should not place undue reliance on any forward-looking statement that speaks only as of the date made. The cautionary statements provided above are being made according to the provisions of the Private Securities Litigation Reform Act of 1995 and with the intention of obtaining the benefits of the "safe harbor" provisions of that act for any such forward-looking information. COMPLIANCE WITH APPLICABLE LAW. We are not aware of any jurisdiction where the making of the offer is not in compliance with applicable law. If we become aware of any jurisdiction where the making of the offer is not in compliance with any valid applicable law, we will make a good faith effort to comply with such law. If, after such good faith effort, we cannot comply with such law, the offer will not be made to, nor will tenders be accepted from or on behalf of, the holders of Eligible AMIP Shares residing in that jurisdiction. Advanta Corp. August 9, 2001 26 28 SCHEDULE A INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF ADVANTA CORP. The directors and executive officers of Advanta Corp. and their positions and offices as of August 9, 2001 are set forth in the following table.
NAME POSITIONS AND OFFICES HELD - ---- -------------------------- Dennis Alter Chairman of the Board and Chief Executive Officer William A. Rosoff President and Vice Chairman of the Board Philip M. Browne Senior Vice President and Chief Financial Officer Jeffrey D. Beck Vice President and Treasurer; and President, Advanta Bank Corp. David B. Weinstock Vice President and Chief Accounting Officer Arthur P. Bellis Director Max Botel Director Dana Becker Dunn Director James E. Ksansnak Director Ronald Lubner Director Olaf Olafsson Director Michael Stolper Director
The address of each director and executive officer is: c/o Advanta Corp., Welsh and McKean Roads, Spring House, Pennsylvania 19477. 27 29 IMPORTANT If you wish to tender your Eligible AMIP Shares, you must complete and sign the Letter of Transmittal in accordance with its instructions, and mail, fax or hand deliver it and any other required documents to us at Advanta Corp., Welsh and McKean Roads, Spring House, Pennsylvania 19477, Attention: Maryann Buchholz (facsimile number: (215) 444-6120). We are not making this offer to, nor will we accept any tender of Eligible AMIP Shares from or on behalf of, holders of Eligible AMIP Shares in any jurisdiction in which the offer or the acceptance of any tender of the Eligible AMIP Shares would not be in compliance with the laws of that jurisdiction. However, we may, at our discretion, take any actions necessary for us to make this offer to holders of Eligible AMIP Shares in any such jurisdiction. WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF AS TO WHETHER OR NOT YOU SHOULD TENDER YOUR ELIGIBLE AMIP SHARES PURSUANT TO THE OFFER. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFER OTHER THAN THE INFORMATION AND REPRESENTATIONS CONTAINED IN THIS DOCUMENT OR IN THE RELATED LETTER OF TRANSMITTAL. IF ANYONE MAKES ANY RECOMMENDATION OR REPRESENTATION TO YOU OR GIVES YOU ANY INFORMATION, YOU MUST NOT RELY UPON THAT RECOMMENDATION, REPRESENTATION OR INFORMATION AS HAVING BEEN AUTHORIZED BY US. 28 30 OFFER TO REPURCHASE SHARES OF RESTRICTED STOCK ISSUED UNDER THE ADVANTA CORP. 2000 OMNIBUS STOCK INCENTIVE PLAN If you wish to tender your Eligible AMIP Shares, you must complete and sign the Letter of Transmittal in accordance with its instructions, and mail, fax or hand deliver it and any other required documents to us at Advanta Corp., Welsh and McKean Roads, Spring House, Pennsylvania 19477, Attn: Maryann Buchholz (facsimile number: (215) 444-6120). Any questions, requests for assistance or additional copies of any documents referred to in the offer to repurchase may be directed to the Exchange Program Information Line at (215) 444-5205. August 9, 2001 29 EX-99.(A)(2) 4 w52124ex99-a2.txt FORM OF LETTER OF TRANSMITTAL 1 Exhibit (a)(2) ADVANTA CORP. LETTER OF TRANSMITTAL TO TENDER ELIGIBLE AMIP SHARES FOR REPURCHASE BY ADVANTA CORP. PURSUANT TO THE OFFER TO REPURCHASE DATED AUGUST 9, 2001 THIS OFFER WILL EXPIRE AT 12:00 MIDNIGHT EASTERN TIME ON SEPTEMBER 6, 2001, UNLESS EXTENDED BY ADVANTA CORP. TENDERS MAY BE WITHDRAWN AT ANY TIME BEFORE THE EXPIRATION OF THE OFFER. DELIVER THIS LETTER OF TRANSMITTAL BY MAIL, FOR INFORMATION REGARDING THE FAX, OVERNIGHT OR HAND DELIVERY TO: OFFER, PLEASE CALL: ADVANTA CORP. THE EXCHANGE PROGRAM WELSH AND MCKEAN ROADS INFORMATION LINE SPRING HOUSE, PA 19477 TELEPHONE: (215) 444-5205 ATTENTION: MARYANN BUCHHOLZ FACSIMILE NUMBER (215) 444-6120 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OR FACSIMILE NUMBER OTHER THAN THE ADDRESS OR FACSIMILE NUMBER LISTED ABOVE WILL NOT CONSTITUTE VALID DELIVERY. YOU SHOULD READ CAREFULLY THE OFFER TO REPURCHASE AND THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL BEFORE YOU COMPLETE THIS LETTER OF TRANSMITTAL. By signing this Letter of Transmittal, you hereby acknowledge that you have received and reviewed the Offer to Repurchase Shares of Restricted Stock Issued under the Advanta Corp. 2000 Omnibus Stock Incentive Plan dated August 9, 2001 (the "Offer to Repurchase") and this Letter of Transmittal. The Offer to Repurchase, together with this Letter of Transmittal, constitutes our offer (the "Offer") to repurchase Eligible AMIP Shares (as that term is defined in the Offer to Repurchase). If you are an eligible employee and you tender your Eligible AMIP Shares, in consideration Advanta Corp. will: (1) in the event you earn a percentage of your 2001 target bonus, pay to you in cash the portion of your 2001 target bonus that otherwise would have been payable in AMIP shares; and (2) grant to you options to purchase a number of shares of Class B Common Stock, at an exercise price of $10.625 per share, all as described in and subject to the terms set forth in the Offer to Repurchase. If you decide to tender your Eligible AMIP Shares, this will constitute a binding agreement between you and us, subject to the terms and conditions set forth in the Offer. In order to properly complete this Letter of Transmittal, you must sign this Letter of Transmittal and submit it to us. By signing below, you will have tendered all of your Eligible AMIP Shares for exchange on the terms and conditions described in the Offer. You should read the detailed instructions below before completing this Letter of Transmittal. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. 2 TO: Advanta Corp. Welsh and McKean Roads Spring House, PA 19477 Ladies and Gentlemen: Upon the terms and subject to the conditions set forth in the Offer, I, the undersigned, hereby tender to Advanta Corp. all of my Eligible AMIP Shares, as that term is defined in the Offer to Repurchase. If Advanta Corp. accepts my tender, I understand that in consideration of my tender of Eligible AMIP Shares Advanta Corp. will: (1) in the event I earn a percentage of my 2001 target bonus, pay to me in cash that percentage of my 2001 target bonus, including the portion that otherwise would have been payable in AMIP shares; and (2) grant to me options to purchase a number of shares of Class B Common Stock, at an exercise price of $10.625 per share, all as described in the Offer to Repurchase. I acknowledge receipt of the Offer to Repurchase dated August 9, 2001 and this Letter of Transmittal and the instructions hereto, which together constitute Advanta Corp.'s Offer. Upon the terms of the Offer and upon acceptance by Advanta Corp. for repurchase of the Eligible AMIP Shares that I am tendering by this Letter of Transmittal, I hereby sell, assign and transfer to Advanta Corp., or upon the order of Advanta Corp., all right, title and interest in and to all the Eligible AMIP Shares that are being tendered by this Letter of Transmittal and irrevocably constitute and appoint Advanta Corp. as my true and lawful agent and attorney-in-fact, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to the full extent of my rights with respect to my Eligible AMIP Shares, (a) to transfer ownership of my Eligible AMIP Shares on the stock transfer books of Advanta Corp. together, in any such case, with all accompanying evidences of transfer and authenticity and (b) to receive all benefits and otherwise exercise all rights of beneficial ownership of my Eligible AMIP Shares, all in accordance with the terms of the Offer. I hereby represent and warrant that I have full power and authority to tender, sell, assign and transfer the tendered Eligible AMIP Shares and, when the same are accepted for repurchase by Advanta Corp., Advanta Corp. will acquire good title thereto, free and clear of all liens, restrictions, claims and encumbrances, and the same will not be subject to any adverse claim. I will, upon request, execute any additional documents deemed by Advanta Corp. to be necessary or desirable to complete the sale, assignment and transfer of the tendered Eligible AMIP Shares. I acknowledge that Advanta Corp. has advised me to consult with my own tax, financial, legal and other advisors as to the consequences of participating or not participating in the Offer. Furthermore, I understand that the valid tender of Eligible AMIP Shares according to the procedures described in the Offer to Repurchase and in the Instructions to this Letter of Transmittal will constitute a binding agreement between me and Advanta Corp. upon the terms and subject to the conditions of the Offer. I understand that the expiration date of the Offer is September 6, 2001. I understand that I may withdraw the tender of my Eligible AMIP Shares at any time before the expiration date, after which time tenders of Eligible AMIP Shares will become irrevocable except as described in the Offer to Repurchase. 2 3 All authority conferred or agreed to be conferred pursuant to this Letter of Transmittal shall be binding upon my successors, assigns, heirs, executors, administrators and legal representatives and shall not be affected by, and shall survive, my death or incapacity. Except in accordance with the terms and conditions set forth in the Offer of Repurchase, this tender is irrevocable. I understand that the Offer is not being made to (nor will Eligible AMIP Shares be accepted from or on behalf of) holders in any jurisdiction in which the making or acceptance of the Offer would not be in compliance with the laws of such jurisdiction. Print below the name and address of the registered holder exactly as they have been recorded on the Personalized Decision Aid that was mailed to you along with the Offer to Repurchase and this Letter of Transmittal. The number of Eligible AMIP Shares tendered is set forth on the Personalized Decision Aid. Signature: ___________________________________________________ (Sign Here) Please Print Name: ___________________________________________________ (Please Print) Address: ___________________________________________________ ___________________________________________________ (Include Zip Code) Dated: ______________________, 2001 Must be signed by registered holder as name appears on the enclosed Personalized Decision Aid. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, please indicate the capacity in which you have signed: Capacity (full title): _______________________________________________ 3 4 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. DELIVERY OF LETTER OF TRANSMITTAL. To validly tender Eligible AMIP Shares pursuant to the Offer, a Letter of Transmittal, properly completed and duly executed, must be received by Advanta Corp. at its address set forth in this Letter of Transmittal before the expiration date. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING THE LETTER OF TRANSMITTAL, IS AT YOUR ELECTION AND RISK. IF YOU DELIVER BY MAIL, WE RECOMMEND THAT YOU USE REGISTERED MAIL WITH RETURN RECEIPT REQUESTED AND PROPERLY INSURE THE MATERIALS. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ENSURE TIMELY DELIVERY. 2. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder of the Eligible AMIP Shares tendered hereby, the signature must correspond with the name as it appears on the enclosed Personalized Decision Aid without any change whatsoever. 3. WAIVER OF CONDITIONS. We reserve the absolute right in our sole discretion to waive any of the specified conditions of the Offer, in whole or in part, in the case of any Eligible AMIP Shares tendered. 4. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance or additional copies of the Offer to Repurchase or this Letter of Transmittal may be directed to the Exchange Program Information Line at (215) 444-5205. IMPORTANT: THIS LETTER OF TRANSMITTAL MUST BE RECEIVED BY ADVANTA CORP. BEFORE THE EXPIRATION DATE. 4 EX-99.(A)(3) 5 w52124ex99-a3.txt FORM OF LETTER TO ELIGIBLE EMPLOYEES... 1 Exhibit (a)(3) [ADVANTA LOGO] August 9, 2001 Recipient Name Recipient Address Dear [Name], We are pleased to announce the implementation of a compensation opportunity - the AMIP Shares Exchange Program. This voluntary program is designed to restore the potential value of your 2001 AMIP Bonus and reinforce our commitment to competitive bonus opportunities. In this packet, you will find: - Summary Guidelines for participation in the AMIP Shares Exchange - A personalized Decision Aid outlining the program as it applies to your 2001 Bonus - A Detailed "Offer to Repurchase Eligible Shares of Restricted Stock" - A Letter of Transmittal (printed on green paper--this is your election form) - A Sample Stock Option Agreement - An Advanta Corp. 2000 Omnibus Stock Incentive Plan Prospectus Please take the time to review the enclosed materials carefully and discuss it with your legal counsel, accountant or financial planner and your family. The completed form will need to be returned and your Eligible AMIP Shares tendered by September 6, 2001 in order to take advantage of this program. If you have any questions on this package or the details of the program please call the Exchange Program Information Line at 215-444-5205. Best regards, /s/ Dennis Alter /s/ William A. Rosoff - ------------------- ------------------------ Dennis Bill EX-99.(A)(4) 6 w52124ex99-a4.txt FORM OF AMIP PERSONALIZED DECISION AID 1 Exhibit (a)(4) [ADVANTA LOGO] AMIP SHARES EXCHANGE - PERSONALIZED DECISION AID Personalized for: JOE EMPLOYEE Your 2001 target bonus is $24,000, of which amount you elected to receive 100% in AMIP Shares. Your 2001 target bonus AMIP shares were granted based on a weighted average value per share of $28.2336. If you DO NOT participate in the Exchange Program YOUR 2001 TARGET BONUS, IF 100% EARNED, WOULD BE COMPRISED OF: Eligible AMIP Shares: 708 AMIP Shares(1)(2) Cash: $ 4,010.64(1) Class B Stock Options: None
OR If you DO participate in the Exchange Program YOUR 2001 TARGET BONUS, IF 100% EARNED, WOULD BE COMPRISED OF: Eligible AMIP Shares: None Cash: $24,000(1)(3) Class B Stock Options: 1,881(4) Exercise price per share $10.625
(1) NOTE: YOU ARE NOT GUARANTEED TO RECEIVE THIS AMOUNT. The above is merely an illustration of what may occur if bonuses are paid and if the Plan Administration Committee of our board of directors and management determine that you have earned 100% of your 2001 target bonus. You may earn, and the Plan Administration Committee and management may award you, between 0% and 200% of your 2001 target bonus. Thus, YOU MAY RECEIVE LESS OR MORE THAN THIS AMOUNT. (2) Your AMIP Shares are subject to accelerated vesting in accordance with the provisions of the AMIP Program. Subject to the provisions of the AMIP Program, including your continued employment with Advanta, if you do not participate in the offer and your AMIP Shares are not granted accelerated vesting by Advanta, they will vest fully 10 years after your AMIP shares were granted. (3) This amount represents 100% of your 2001 target bonus. (4) Subject to the Advanta Corp. 2000 Omnibus Stock Incentive Plan and your option agreement (including certain provisions regarding early expiration if your employment terminates): (a) a percentage of the New Options granted as part of this offer equal to the percentage of the 2001 target bonus awarded to you will vest on April 11, 2002, up to a maximum of 100% of the New Options; (b) any New Options that do not vest on April 11, 2002 will vest on the tenth anniversary of the date on which the related exchanged Eligible AMIP Shares were granted to you; and (c) once vested, all options granted as a part of this exchange are exercisable for two years. 2 [ADVANTA LOGO] AMIP Shares Exchange Program INSTRUCTIONS: This is NOT your election form. You must complete the tender offer Letter of Transmittal and return that as indicated below. 1. Determine if you will participate in the AMIP Exchange Program 2. Complete the tender offer "Letter of Transmittal" if you wish to participate 3. Retain a copy of the Letter of Transmittal for your records 4. Return the Letter of Transmittal by SEPTEMBER 6, 2001 to: Maryann Buchholz Advanta Corporation Welsh & McKean Roads Spring House, PA 19477 Fax Number: 215-444-6120 QUESTIONS For questions about tax implications or investment-related issues, you should consult with your legal counsel, accountant or financial planner. If you have any questions regarding this program, please contact the specially designated Exchange Information Line at 215-444-5205. Page 2 EX-99.(A)(5) 7 w52124ex99-a5.txt FORM OF AMIP PROGRAM SUMMARY GUIDELINES 1 [ADVANTA LOGO] Exhibit (a)(5) 2001 AMIP SHARES EXCHANGE PROGRAM - SUMMARY GUIDELINES ABOUT THIS PROGRAM The purpose of the AMIP Shares Exchange program is to offer you the opportunity to restore the potential value of your 2001 bonus and to maintain and reinforce our commitment to competitive bonus opportunities. You are eligible to participate in this program because you previously received shares of restricted stock granted under the AMIP program that are attributable to your 2001 target bonus, at least some of which shares were granted on or before February 28, 2001, and the weighted average value of that stock was greater than $10.625 per share (together, those shares are referred to as the "Eligible AMIP Shares"). AMIP EXCHANGE SUMMARY Advanta is giving you the right to exchange your Eligible AMIP Shares for an alternative benefit. Subject to the terms and conditions described in the enclosed "Offer to Repurchase Eligible Shares of Restricted Stock," in exchange for tendering your Eligible AMIP Shares, you would receive: Cash Bonus Payment - Cash in the amount of the portion of your 2001 target bonus that otherwise would have been payable in AMIP shares. Option Grant - Stock options for shares of Advanta Class B Common Stock at an exercise price of $10.625 per share. The number of options we grant will be equal to: (1) the number of Eligible AMIP Shares held by you multiplied by their weighted average value per share (as determined in accordance with the Offer to Repurchase), (2) divided by $10.625. - Subject to the Advanta Corp. 2000 Omnibus Stock Incentive Plan and your option agreement (including certain provisions regarding early expiration if your employment terminates): (1) A percentage of the options equal to the percentage of the 2001 target bonus awarded to you will vest on April 11, 2002 up to 100% of the awarded options. If the options have not otherwise vested they will vest on the tenth anniversary of the date on which the related exchanged Eligible AMIP Shares were granted. (2) All options will be exercisable for two years after they vest. For example, options that vest on April 11, 2002 will be exercisable until April 11, 2004. 2 [ADVANTA LOGO] AMIP Shares Exchange Program Any portion of your 2001 target bonus that you previously elected to receive in cash will not be affected in any way by whether you tender your Eligible AMIP Shares. YOU SHOULD READ THE OFFER TO REPURCHASE ELIGIBLE SHARES OF RESTRICTED STOCK ENCLOSED IN THIS PACKAGE CAREFULLY BEFORE DECIDING WHETHER TO TENDER YOUR ELIGIBLE AMIP SHARES. The AMIP Shares that you tender as part of this program will be forfeited. You will not receive dividends from them, nor will they eventually vest in any future year. PAYMENT OF 2001 BONUS Your AMIP bonus is just one component of your total compensation package as a member of the senior management team at Advanta. Advanta pays bonuses at its discretion based on targeted levels of individual and company performance for the year. At this time, no decision has been made about 2001 bonuses. Participation in the Program does not imply or guarantee a bonus will be paid to you for 2001 or that any New Options will be accelerated to vest on April 11, 2002. YOUR DECISION TO PARTICIPATE You must make your own decision regarding your participation in this program based upon your individual circumstances. Neither the board of directors nor any representative of Advanta makes any recommendation regarding your participation or the future performance of the stock. You may elect to keep your original AMIP election and not participate in this exchange. Your 2001 AMIP bonus, if payable, would be distributed to you according to the terms of your original participation in the AMIP program. If you do not participate in this exchange, you will not receive the stock option grant associated with this exchange, but you will maintain the opportunity to share in Advanta's growth and success through your continued holding of the Eligible AMIP Shares. In reaching your decision concerning your Eligible AMIP Shares, you should review carefully the Letter of Transmittal and the Offer to Repurchase Eligible Shares of Restricted Stock, which constitute the formal legal documents that govern the terms of this program. NEXT STEPS... 1. Determine if you will participate in the Exchange Program 2. Complete the tender offer "Letter of Transmittal" if you wish to participate 3. Retain a copy of the Letter of Transmittal for your records 4. Return the Letter of Transmittal by September 6, 2001 to: Maryann Buchholz Advanta Corporation Welsh & McKean Roads Spring House, PA 19477 Fax Number: 215-444-6120 Page 2 3 [ADVANTA LOGO] AMIP Shares Exchange Program If you do not return your Letter of Transmittal by September 6, 2001, you will not be eligible to participate in the exchange, but you will retain your original AMIP election. QUESTIONS For questions about tax implications or investment-related issues, you should consult with your legal counsel, accountant or financial planner. If you have any questions regarding this program, you may contact the Exchange Information Line at 215-444-5205. NOTE: The information provided in this document provides general information about the AMIP Shares Exchange program. Please read the Offer to Repurchase in its entirety. Advanta reserves the right to amend or terminate the program. Our statements concerning the terms of the options are not complete and are subject to and qualified by all provisions of the Advanta Corp. 2000 Omnibus Stock Incentive Plan and the option agreement between us and you. Page 3 EX-99.(A)(6) 8 w52124ex99-a6.txt PROSPECTUS...2000 OMNIBUS STOCK INCENTIVE PLAN 1 Exhibit (a)(6) Advanta Corp. Notice to Participants in the ADVANTA CORP. 2000 OMNIBUS STOCK INCENTIVE PLAN THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. August 9, 2001 Advanta Corp. ("we", "us", "our" or "Advanta") has filed with the Securities and Exchange Commission (the "SEC") a Registration Statement on Form S-8 (together with all amendments and exhibits, the "Registration Statement") with respect to its shares of Class B Common Stock, $0.01 par value, which may be acquired under the terms of the Advanta Corp. 2000 Omnibus Stock Incentive Plan. You may obtain without charge, upon oral or written request, the following: - - The Memorandum for Participants, dated November 1, 2000, relating to the plan (the "Memorandum"); - - This notice; - - Our Annual Report to Stockholders and any other reports, proxy statements and other shareholder communications that are required to be distributed, under Rule 428(b) under the Securities Act of 1933, to participants in the plan; and - The following documents which are incorporated by reference in the Registration Statement and which are incorporated by reference in this notice and the Memorandum: - Our Annual Report on Form 10-K for the year ended December 31, 2000. - Our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2001. 2 - Our Current Reports on Form 8-K filed with the SEC on: January 9, January 23, February 5, February 26, March 1, March 8, March 14, April 10, April 25, June 28, July 25 and July 30, 2001. - The description of our Class B Common Stock contained in the Registration Statement on Form 8-A dated April 22, 1992 filed by the Company to register such securities under Section 12 of the Exchange Act (File No. 0-14120), including any amendment or report filed for the purpose of updating such description. - The description of our Class B Purchase Rights contained in the Registration Statement on Form 8-A dated March 17, 1997 filed by the Company to register such securities under Section 12 of the Exchange Act (File No. 0-14120), including any amendment or report filed for the purpose of updating such description. - All documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this notice and before the filing of post-effective amendments to the Registration Statements which indicate that all securities offered by this notice and the Memorandum have been sold or which deregister all securities then remaining unsold shall be deemed to be incorporated by reference in this notice and the Memorandum and to be a part hereof and thereof from the date of filing of such documents. Any statement contained in a document incorporated by reference herein and in the Memorandum shall be deemed to be modified or superseded for the purposes hereof and thereof to the extent that a statement contained in this notice or in the Memorandum (or in any other subsequently filed document which also is incorporated by reference in this notice or in the Memorandum) modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed to constitute a part of this notice or the Memorandum, except as so modified or superseded. All requests for the documents described above should be directed to us at Investor Relations, Advanta Corp., P.O. Box 844, McKean and Welsh Roads, Spring House, Pennsylvania 19477 (telephone number: 215-657-4000). You should rely only on the information contained or incorporated by reference in this prospectus and any applicable prospectus supplement. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. You should not assume that the information in this prospectus or any prospectus supplement is accurate as of any date other than the date on the front of the document. Our business, financial condition, results of operations and prospects may have changed since the date. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. 3 PROSPECTUS - ---------- ADVANTA CORP. 20,000,000 SHARES OF CLASS B COMMON STOCK, PAR VALUE $0.01 ADVANTA CORP. 2000 OMNIBUS STOCK INCENTIVE PLAN THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. Advanta Corp., a Delaware corporation ("we", "us", "our" or "Advanta"), has adopted the Advanta Corp. 2000 Omnibus Stock Incentive Plan which functions as an amendment and restatement of all our other stock option and awards plans. The plan is intended to recognize the contributions made to Advanta by employees (including employees who are members of our Board of Directors and our affiliates), to provide employees with additional incentive to devote themselves to our future success and to improve our ability to attract, retain and motivate individuals upon whom our sustained growth and financial success depend. 20,000,000 shares of our Class B Common Stock, par value $0.01, are available for grants under the plan, consisting of options for the purchase of shares, awards of shares of Class B Common Stock and/or awards of stock appreciation rights. The closing price of a share of the Class B Common Stock as reported on the NASDAQ National Market was $7.25 on October 30, 2000. The Employee Retirement Income Security Act of 1974, as amended, does not apply to the plan. The plan is not qualified or intended to be qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended. This prospectus relates to Class B Common Stock which may be issued under the plan. We suggest that you retain this prospectus for future reference. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED ON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this prospectus is November 1, 2000 4 THE PLAN The following is a summary of the terms and conditions of the plan. PURPOSE. The plan is intended to recognize the contributions made to Advanta by employees, including employees who are members of the Board of Directors, of Advanta and its Affiliates (collectively, "Employees"), to provide Employees with additional incentive to devote themselves to the future success of Advanta and its Affiliates, and to improve the ability of Advanta and its Affiliates to attract, retain, and motivate individuals upon whom our sustained growth and financial success depend by awarding them grants under the plan consisting of: - options ("Options") for the purchase of shares of our Class B Common Stock, par value $0.01 ("Common Stock"); - awards of Common Stock ("Awards"); and/or - awards of stock appreciation rights ("SARs", and grants of Options, Awards and SARs are each referred to individually as a "Grant" and collectively as "Grants"). "Affiliate" means a corporation which is a parent corporation or a subsidiary corporation with respect to Advanta within the meaning of Section 424(e) or (f) of the Internal Revenue Code of 1986, as amended (the "Code") or any successor provision, and, for purposes of Grants other than ISOs, as defined below, any corporation, partnership, joint venture or other entity in which Advanta, directly or indirectly, has an equity interest of at least 20% or a significant financial interest, as determined by the Plan Administration Committee, as defined below. The plan also is intended to provide an incentive to directors of Advanta who are not Employees to serve on the Board of Directors or the board(s) of directors, or similar governing bodies, of an Affiliate and to devote themselves to our future success through grants of Options. In addition, the plan may be used to encourage consultants and advisors of Advanta to further our success. The plan also is intended to permit Awards that constitute "performance-based compensation" as that term is used for purposes of Section 162(m) of the Code, at the discretion of the Non-Employee Director Committee, as defined below. Section 162 (m) of the Code denies a tax deduction to a publicly held corporation for compensation in excess of $1,000,000 paid to the Chief Executive Officer and to any of the four most highly compensated officers, in addition to the Chief Executive Officer, whose compensation is required to be disclosed to stockholders under the Securities Exchange Act of 1934, as amended (the "1934 Act"), unless the compensation is "performance-based." ADMINISTRATION OF THE PLAN. The Board of Directors may administer the plan and/or it may designate a committee or committees composed of two or more directors to operate and administer the plan with respect to all or a designated portion of the participants. To the extent that the Plan Administration Committee, as defined below, is empowered to grant Options to Section 16 Officers, as defined below, or persons whose compensation might have limits on deductibility under Section 162(m) of the Code, the Board of Directors may, at its discretion, appoint a separate committee, consisting of non-employee directors only (a "Non-Employee 2 5 Director Committee"), to administer the plan with respect to those persons. Any committee designated by the Board of Directors to administer the plan, and the Board of Directors itself in its administrative capacity with respect to the plan, is referred to as the "Plan Administration Committee." "Section 16 Officer" means any person who is an "officer" within the meaning of Rule 16a-1(f) promulgated under the 1934 Act or any successor rule, and who is subject to the reporting requirements under Section 16 of the 1934 Act with respect to the Common Stock. The Plan Administration Committee has the power and authority to: - interpret the plan; - adopt, amend and revoke policies, rules and/or regulations for administration of the plan that are not inconsistent with its express terms; and - waive requirements relating to formalities or other matters that do not either modify the substance of the rights intended to be granted by Grants or constitute a material amendment for any purpose under the Code. In addition, the Plan Administration Committee has the authority, subject to any specific provisions or limitations applicable under the plan, to make adjustments to the terms and conditions of any Grants in order to take into account any facts and circumstances that influence the effectiveness of the plan as a method of providing appropriate current performance incentives for recipients of Grants, including, but not limited to, any facts and circumstances related to levels of compensation and bonuses paid by other similarly situated employers, and our current needs to encourage the retention of valued Employees and to reward high levels of performance by those Employees. The Plan Administration Committee holds meetings at such times and places as it determines and may take action only upon the agreement of a majority of the whole committee. The plan provides that no member of the Board of Directors will be personally liable for monetary damages for any action taken or any failure to take any action in connection with the administration of the plan or the making of any Grants under the plan, except in the case of: - any breach of the member's duty of loyalty to Advanta or our stockholders; - acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law; - acts or omissions that would result in liability under Section 174 of the General Corporation Law of the State of Delaware, as amended, concerning unlawful payment of dividends and unlawful stock purchases and redemptions; and - any transaction from which the member derived an improper personal benefit. 3 6 In addition, the plan provides that service on the Plan Administration Committee constitutes service as a member of the Board of Directors and that each member of the Plan Administration Committee is entitled, without further act on the member's part, to indemnity from Advanta and limitation of liability to the fullest extent provided by applicable law and by Advanta's Articles of Incorporation and/or By-laws in connection with or arising out of any action, suit or proceeding with respect to the administration of the plan or the making of any Grants under the plan in which the member may be involved by reason of the member being or having been a member of the Plan Administration Committee, whether or not the member continues to be a member of the Plan Administration Committee at the time of the action, suit or proceeding. SHARES SUBJECT TO PLANS. The aggregate maximum number of Shares of Common Stock for which Grants may be issued under the plan is 20,000,000, subject to a permitted Capitalization Adjustment, as described below. "Shares" means the shares of Common Stock, including hypothetical shares of Common Stock referenced under the terms of a Grant Document applicable to an SAR which are subject to any Grant made under the plan. "Grant Document" means the document that we provide to a grantee describing and establishing the terms of any Grant made under the plan. The Shares will be issued from authorized and unissued Common Stock or Common Stock held in or hereafter acquired for the treasury of Advanta. If an Option or SAR terminates or expires without having been fully exercised for any reason or if Shares subject to an Award have been conveyed back to Advanta under the terms of a Grant Document, the Shares for which the Option or SAR was not exercised or the Shares that were conveyed back to Advanta will again be available for issuance under the plan. ELIGIBILITY TO RECEIVE GRANTS. All Employees, members of the Board of Directors, members of the boards of directors, or similar governing bodies, of our Affiliates and consultants and advisors to Advanta or any Affiliate who render bona fide services to us unrelated to the offer or sale of securities will be eligible to receive Grants under the plan. The Plan Administration Committee will determine whether an individual qualifies as an Employee. As of November 1, 2000, approximately 920 Employees and 16 non-employee members of the Board of Directors and the boards of directors, or similar governing bodies, of our Affiliates were eligible to participate in the plan. EFFECTIVE DATE AND TERM. The plan became effective as of April 5, 2000, the date on which it was adopted by the Board of Directors, subject to the approval of the plan within one year after that date by the stockholders. The plan was approved by the stockholders at the annual meeting of stockholders held on June 7, 2000. No Grants may be made under the plan on or after April 5, 2010. FISCAL YEAR GRANT LIMITATION. No grantee will be issued Grants during any one fiscal year for more than 900,000 shares of Common Stock, subject to a permitted Capitalization Adjustment, as described below. OPTIONS. The plan authorizes grants of Options, including Options that are intended to qualify as "incentive stock options," as defined under Section 422 of the Code ("ISOs") and Options that are not intended to so qualify ("Non-qualified Stock Options"). Each Option 4 7 granted under the plan will be a Non-qualified Stock Option unless the Option is specifically designated at the time of grant as an ISO. If any Option designated as an ISO is determined for any reason not to qualify as an ISO, the Option will be treated as a Non-qualified Stock Option for all purposes under the plan. Options granted under the plan will be evidenced by Grant Documents in whatever form the Plan Administration Committee approves from time to time, consistent with the terms of the plan. Each Grant Document will state the number of Shares to which it pertains. A grantee may receive more than one Option, which may include Options which are intended to be ISOs and Options which are not intended to be ISOs, but only on the terms and subject to the conditions and restrictions of the plan. Option Price. The price at which Shares may be purchased upon exercise of an Option (the "Option Price") will be set forth in the applicable Grant Document. The Option Price of each ISO will be at least 100% of the fair market value ("Fair Market Value") of the Shares on the date the Option is granted. If an ISO is granted to a grantee who then owns, directly or by attribution under Section 424(d) of the Code, shares possessing more than ten percent of the total combined voting power of all classes of stock of Advanta or an Affiliate, then to the extent required by Section 424(d) of the Code, the Option Price will be at least 110% of the Fair Market Value of the Shares on the date the Option is granted. The Option Price of a Non-qualified Stock Option will, unless otherwise specified in the Grant Document, be the Fair Market Value of the Shares on the date the Option is granted. Under the plan, Fair Market Value generally is the closing price on the relevant date of a share of Common Stock if the Common Stock is listed on a national securities exchange or included in the NASDAQ National Market System. If the Common Stock is not so listed, Fair Market Value will be the mean between the last reported "bid" and "asked" prices on the relevant date, as reported on NASDAQ or, if not so reported, as reported by the National Daily Quotation Bureau, Inc. or as otherwise reported in a customary financial reporting service, as applicable and as the Plan Administration Committee determines. If the Common Stock is not traded in a public market, Fair Market Value will be determined in good faith by the Plan Administration Committee. Exercise. No Option will be deemed to have been exercised before the receipt by Advanta of written notice, that complies with the requirements set forth in the plan, of the exercise and payment in full of the Option Price, unless arrangements satisfactory to Advanta have been made for payment through a broker. Subject to the terms of the Grant Document, and unless the Plan Administration Committee approves otherwise, payment of the Option Price may be made in cash, by certified check or by such other mode of payment as the Plan Administration Committee may approve, including payment through a broker in accordance with procedures permitted by rules or regulations of the Federal Reserve Board. In addition, the Plan Administration Committee may provide in a Grant Document that payment may be made in whole or in part in shares of Common Stock held by the grantee, although the Plan Administration Committee may impose from time to time limitations and prohibitions on the use of shares of Common Stock to exercise an Option. Each notice of exercise must specify the number of Shares to be purchased and, unless the Shares are covered by a then current registration statement or a Notification under Regulation 5 8 A under the Securities Act of 1933, as amended (the "1933 Act"), must contain the grantee's acknowledgment, in form and substance satisfactory to Advanta, that: - the Shares are being purchased for investment and not for distribution or resale, other than a distribution or resale which, in the opinion of counsel satisfactory to Advanta, may be made without violating the registration provisions of the 1933 Act; - the grantee has been advised and understands that - the Shares have not been registered under the 1933 Act and are "restricted securities" within the meaning of Rule 144 under the 1933 Act and are subject to restrictions on transfer, and - we are under no obligation to register the Shares under the 1933 Act or to take any action which would make available to the grantee any exemption from registration; - the Shares may not be transferred without compliance with all applicable federal and state securities laws; and - an appropriate legend referring to the foregoing restrictions on transfer and any other restrictions imposed under the Grant Documents may be endorsed on the certificates. If we determine that issuance of shares should be delayed pending registration under federal or state securities laws, the receipt of an opinion of counsel satisfactory to us that an appropriate exemption from such registration is available, the listing or inclusion of the shares on any securities exchange or an automated quotation system, or the consent or approval of any governmental regulatory body whose consent or approval is necessary in connection with the issuance of such shares, we may defer exercise of any Option granted under the plan until any of the events described in this sentence has occurred. Expiration. In general, Options expire and are no longer exercisable after ten years from the date of grant, or five years in the case of an ISO if the grantee on the date of grant owns, directly or by attribution under Section 424(b) of the Code, shares possessing more than ten percent of the total combined voting power of all classes of stock of Advanta or an Affiliate. In addition, under the plan, each Option will expire earlier upon the first to occur of the following: - (a) immediately upon a finding by the Plan Administration Committee that the grantee engaged in disloyalty of any type to Advanta or an Affiliate or has disclosed trade secrets or confidential information of Advanta or an Affiliate; - (b) the date, if any, set by the Plan Administration Committee as an accelerated expiration date in the event of the liquidation or dissolution of Advanta; 6 9 - (c) the occurrence of any other event or events set forth in the plan or the Grant Document as causing an accelerated expiration of the Option; or - (d) the applicable date set forth below in connection with the grantee's termination of employment or service with Advanta or any Affiliate. For these purposes the applicable date referred to above in subparagraph (d) of this paragraph is: - where the grantee resigns from his or her employment or service with Advanta or any Affiliate without the resignation having been solicited by Advanta or the Affiliate, as the case may be, the date of resignation; - where the grantee's termination of employment or service with Advanta or any Affiliate is due to the grantee's death or disability, the date that is 180 days following termination; - where the grantee's termination of employment or service with Advanta or any Affiliate is due to the grantee's retirement, the second anniversary of termination; - where the grantee is a member of the Board of Directors or of any board of directors, or similar governing body, of an Affiliate and is not an Employee and such grantee's service is terminated for any reason other than disability or death, 90 days following the date of termination of service; and - in all other cases, 30 days after the grantee's termination of employment or service with Advanta or any Affiliate. The only Options that may be exercised subsequent to the grantee's termination of employment or service with Advanta or an Affiliate are those Options that were exercisable on the last date of employment or service and not Options which, if the grantee were still employed or rendering service during the post-termination period, would become exercisable, unless the Grant Document specifically provides to the contrary or the Plan Administration Committee otherwise approves. Transferability. Except as described below, no Option granted under the plan may be transferred, except by will or by the laws of descent and distribution, and, during the lifetime of the person to whom an Option is granted, the Option may be exercised only by the grantee. An Option, other than an ISO, also is transferable: - pursuant to a domestic relations order as defined in the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder; and - without payment of consideration, to: 7 10 - immediate family members of the holder, - trusts for the benefit of immediate family members, - partnerships whose only partners are such family members, and - any transferee permitted by a rule adopted by the Plan Administration Committee or approved by the Plan Administration Committee in an individual case. Any transferee will be subject to all of the conditions set forth in the Option before its transfer. Limitation on ISO Grants. To the extent that the aggregate Fair Market Value of the shares of Common Stock, determined at the time the ISO is granted, with respect to which ISOs under all incentive stock option plans of Advanta or its Affiliates are exercisable for the first time by a grantee during any calendar year exceeds $100,000, the ISOs shall, to the extent of such excess, be treated as Non-qualified Stock Options. Other Provisions. Subject to the provisions of the plan, the Grant Documents will contain such other provisions as the Plan Administration Committee deems advisable, including, without limitation, provisions authorizing the Plan Administration Committee to accelerate the exercisability of all or any portion of an Option granted under the plan, additional restrictions upon the exercise of the Option or additional limitations upon the term of the Option. STOCK APPRECIATION RIGHTS (SARs). The Plan Administration Committee may grant to optionees SARs, which may or may not be granted in conjunction with an Option, each of which SAR will entitle the Grantee to receive a payment upon exercise equal to the excess of the Fair Market Value of a specified number of Shares, determined as of the date the SAR is exercised, over the "purchase price" specified in the Grant Document applicable to the SAR. The SAR may be exercisable in whole or in part, and at such times and under such circumstances as are set forth in the Grant Document applicable to the SAR. In the event an SAR is granted in conjunction with an Option, the exercise of the SAR will result in a cancellation of the Option to the same extent as the SAR is exercised, and the exercise of the Option will result in a cancellation of the SAR to the same extent as the Option is exercised, and the terms and conditions, including the number of Shares subject to the SAR, the "purchase price," which will be equal to the Option Price, and the times and circumstances in which the SAR may be exercised, will be the same as are applicable to the Option. Except as may otherwise be provided in a Grant Document, payment may be made, as determined by the Plan Administration Committee in accordance with the plan and set forth in the applicable Grant Document, either in Shares or in cash or in any combination thereof. For purposes of the annual and aggregate limitations on Shares that may be subject to Grants under the plan, the grant of an SAR not in conjunction with an Option will be treated as though the SAR constituted an Option. Each SAR will relate either to a specific Option granted under the plan or to a hypothetical Option that could have been granted under the plan. Where an SAR is granted in conjunction with an Option granted under the plan, the Grant Document applicable to the Option 8 11 will include provisions indicating the SAR rights. Where an SAR is granted independent of an Option granted under the plan, the Grant Document applicable to the SAR will indicate the relevant terms and conditions applicable to the SAR, including, but not limited to, the number of hypothetical Shares subject to the terms of the SAR, the "purchase price" to be taken into account upon exercise of the SAR, and such other terms and conditions as would be permitted or as are required with respect to the grant of an Option under the plan. SARs will be exercisable at such times and under such terms and conditions as the Plan Administration Committee, in its sole and absolute discretion, determines; provided, however, that an SAR that is granted concurrent with an Option will be exercisable only at such times and by such individuals as the related Option may be exercised under the plan and applicable Grant Document. AWARDS. Awards granted under the plan will be evidenced by written Grant Documents in such form as the Plan Administration Committee from time to time approves. Each Grant Document will specify the purchase price, if any, that applies to the Award. If a purchase price is specified, the grantee will be required to make payment on or before the payment date provided in the Grant Document. Payment may be made in cash, by certified check payable to the order of Company or by such other mode of payment as the Plan Administration Committee may approve. In the case of an Award that provides for a grant of Shares without any payment by the grantee, the grant will take place on the date specified in the Grant Document. In the case of an Award that provides for payment of the purchase price by the grantee, the grant will take place on the date the initial payment is delivered to the Company, unless the Plan Administration Committee or the Grant Document specifies otherwise. As a precondition to a grant, we may require the same acknowledgments regarding unregistered shares as those required in the exercise notice for Options, as described above. The Plan Administration Committee may specify in a Grant Document any conditions under which the grantee will be required to convey to Advanta the Shares covered by the Award. In addition, the Plan Administration Committee, in its discretion, may provide that certificates for Shares transferred pursuant to an Award be held in your name by Advanta until all of the conditions have lapsed. If you receive such an Award we will provide you annually with a report concerning the number of Shares that are being held for you by Advanta pending their vesting. Unless otherwise provided in the Grant Document or determined by the Plan Administration Committee, dividends and other distributions made on Shares, certificates for which are held by Advanta, will be held by Advanta until such time as the certificates for the Shares are released to the grantee when all conditions for the release of such certificates are satisfied. Stock certificates evidencing Shares subject to conditions will bear a legend to the effect that the Shares are subject to repurchase by, or conveyance to, Advanta in accordance with the terms of the Grant Document and that the Shares may not be sold or otherwise transferred. All terms and conditions applicable to Shares covered by Awards granted under the Plan, whether or not any purchase price is paid for such Shares, will be established at the discretion of the Plan Administrative Committee and/or set out in the Grant Document applicable to the 9 12 Award, including the extent to which the grantee will have the right to receive dividends and other distributions and/or to vote the Shares. Performance-Based Awards. In addition to any other terms or conditions the Plan Administration Committee may establish for any Awards granted under the plan, the Non-Employee Director Committee will have the authority to make Awards that constitute performance-based compensation for purposes of Section 162(m) of the Code. In the event the Non-Employee Director Committee determines to grant performance-based Awards, the Non-Employee Director Committee will establish in writing one or more specific performance goals during the first 90 days of the performance period established for that Award (or within the first 25% of that performance period if that is less than 90 days) and an objective formula or method for implementing the Award for each grantee if the specified performance goals are attained. Performance goals will be based upon one or more of the following business criteria for Advanta as a whole or any of its subsidiaries, operating divisions or other operating units: stock price, market share, gross revenue, net revenue, pretax income, operating income, cash flow, earnings per share, return on equity, return on invested capital or assets, cost reductions and savings, return on revenues or productivity, or any variations of the preceding business criteria, which may be modified at the discretion of the Non-Employee Director Committee, to take into account extraordinary items or which may be adjusted to reflect such costs or expense as the Non-Employee Director Committee deems appropriate. In addition, to the extent consistent with the goal of providing for deductibility under Section 162(m) of the Code, performance goals may be based upon a grantee's attainment of personal objectives with respect to any of the foregoing performance goals or implementing policies and plans, negotiating transactions and sales, developing long-term business goals or exercising managerial responsibility. Measurements of Advanta's or a grantee's performance against the performance goals will be objectively determinable and will be determined according to generally accepted accounting principles as in existence on the date on which the performance goals are established. Performance-based Awards must meet the requirements described above and must either: (a) be granted only on the attainment by the close of the performance period of the performance goals established with respect to the Award; or (b) not become vested unless by the close of the performance period the performance goals established with respect to the Award have been achieved. ADJUSTMENTS ON CHANGES IN CAPITALIZATION. If the outstanding shares of Common Stock are changed by reason of a reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, combination or exchange of shares and the like (not including the issuance of Common Stock on the conversion of other securities of Advanta which are convertible into Common Stock) or dividends payable in shares of Common Stock, a Capitalization Adjustment may be made by the Plan Administration Committee as it deems appropriate in the aggregate number and/or class of shares available under the plan and in the number of shares, class of shares and price per share subject to outstanding Grants. Unless the Plan Administration Committee makes other provisions for the equitable settlement of outstanding Grants, if Advanta is reorganized, consolidated, or merged with another corporation, 10 13 or if all or substantially all of the assets of Advanta are sold or exchanged, a grantee will at the time of issuance of the stock under such corporate event be entitled to receive, with respect to or upon the exercise of his or her Grant, as the case may be, the same number and kind of shares of stock or the same amount of property, cash or securities as the grantee would have been entitled to receive upon the occurrence of any such corporate event if the grantee had been, immediately prior to such event, the holder of the number of Shares covered by his or her Grant; provided, however, that with respect to an SAR, the grantee will only be entitled to receive payment in the form of property other than cash to the extent such settlement of the SAR is provided for in the applicable Grant Document. Any adjustment under the provisions described in this paragraph will apply proportionately to only the unexercised portion of any Options or SARs. The Plan Administration Committee has authority to determine the Capitalization Adjustments to be made under the plan, which adjustments may include both adjustments to the number of shares and class of Company stock to be issued in connection with or on the exercise of Grants and that are available generally for Grants under the plan. Any such determination by the Plan Administration Committee will be final, binding and conclusive. "Capitalization Adjustment" means the adjustment to the number or class of shares subject to any Grant and the Option Price, exercise price, purchase price or other payment or deemed payment required in connection with any Grant, as permitted to be made pursuant to the provisions described above in this paragraph. CHANGE OF CONTROL. Except to the extent there is a contrary provision set forth in an applicable Grant Document, in the event of a Change of Control, Options and SARs granted pursuant to the plan will become immediately exercisable in full, and all Awards will become fully vested. In addition, the Plan Administration Committee may take whatever action it deems necessary or desirable on outstanding Grants, including, without limitation, in the case of Options and SARs, accelerating the expiration or termination date in the applicable Grant Document to a date no earlier than 30 days after notice of acceleration is given to the grantees. However, the accelerated expiration or termination date may not be earlier than the date as of which the Grant has become fully vested and exercisable. Under the plan, a "Change of Control" will be deemed to have occurred upon the earliest to occur of the following dates: - the date a plan or other arrangement pursuant to which Advanta will be dissolved or liquidated or a definitive agreement to sell or otherwise dispose of substantially all of the assets of Advanta is approved by the stockholders of Advanta, or the Board of Directors if stockholder action is not required; - the date a definitive agreement to merge or consolidate Advanta with or into another corporation is approved by the stockholders of Advanta, or the Board of Directors if stockholder action is not required, and the stockholders of the other constituent corporation, or its board of directors if stockholder action is not required, other than, in either case, a merger or consolidation of Advanta in which holders of shares of Advanta's Class A Common Stock immediately before the merger or consolidation will have at least a majority of the voting power of the surviving corporation's voting 11 14 securities immediately after the merger or consolidation, which voting securities are to be held in the same proportion as such holders' ownership of Class A Common Stock of Advanta immediately before the merger or consolidation; - the date any entity, person or group, within the meaning of Section 13(d)(3) or Section 14(d)(2) of the 1934 Act becomes the beneficial owner of, or shall have obtained voting control over, more than 25% of the outstanding shares of Advanta's Class A Common Stock, other than: - Advanta or any of its subsidiaries or any employee benefit plan or related trust sponsored or maintained by Advanta or any of its subsidiaries; or - any person who, on the date the plan is effective, was the beneficial owner of or had voting control over shares of common stock of Advanta possessing more than 25% of the aggregate voting power of Advanta's Class A Common Stock; or - the first day after the date the plan is effective when directors are elected such that a majority of the Board of Directors shall have been members of the Board of Directors for less than two years, unless the nomination for election of each new director who was not a director at the beginning of the two-year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period. AMENDMENTS. The Board of Directors may amend the plan as it deems advisable from time to time. However, the Board of Directors may not change the class of persons eligible to receive an ISO or increase the maximum number of Shares as to which Grants may be granted under the plan, or to any individual under the plan in any year, without obtaining stockholder approval within twelve months before or after the action. No amendment to the plan may adversely affect any outstanding Grants without the consent of the affected grantee(s). The Plan Administration Committee has the right to amend any Grant Document issued to a grantee, subject to the grantee's consent if the amendment is not favorable to the grantee or if the amendment has the effect of changing an ISO to a Non-qualified Stock Option; provided, however, that the consent of the grantee will not be required for any amendment made in connection with a Change of Control (as discussed above) or any amendment to accelerate the expiration of an Option or SAR in the event of liquidation or dissolution of Advanta. ACQUISITION OF SHARES BY THE PLAN. Shares issued under the plan will be issued from shares of Common Stock we acquire on the market, shares held in treasury or authorized but previously unissued shares. WITHHOLDING OF TAXES. In connection with any event relating to a Grant under the plan, we will have the right to (a) require the recipient to remit or otherwise make available to Advanta an amount sufficient to satisfy any federal, state and/or local withholding tax requirements before the delivery or transfer of any certificates for such Shares, or (b) take whatever other action we 12 15 deem necessary to protect our interests with respect to tax liabilities, including, without limitation, withholding any Shares, funds or other property otherwise due to the grantee(s). Our obligations under the plan will be conditioned on the grantee's or grantees' compliance with any withholding requirement. REPORTS. Other than annual reports stating the number of Shares being held by Advanta for participants who have received Awards subject to vesting conditions, we do not intend to deliver to any participant any reports as to the status of Grants made to them. NO COMMITMENT TO RETAIN. The making of a Grant pursuant to the plan may not be construed to imply or constitute evidence of any agreement, express or implied, on the part of Advanta to retain the grantee as an employee, director, consultant or advisor of Advanta or any Affiliate, or in any other capacity. CERTAIN FEDERAL INCOME TAX ASPECTS OF THE PLAN. The following discussion summarizes, as of the date of this prospectus, general principles of federal income tax law applicable to the plan and the Shares acquired under the plan. Participants should consult their own tax advisors concerning the tax consequences of participation in the plan and the disposition of Shares acquired under the plan, since the information provided below is current as of the date of this prospectus and federal tax laws are subject to change, individual tax situations differ and the effect of state and local taxation may be material. ISOs. An ISO, or incentive stock option, is an Option that meets certain requirements under the Code and which is subject to special tax treatment provided the recipient complies with certain holding requirements applicable to the Shares acquired on its exercise. In general, the grantee of an ISO will not recognize regular taxable income upon either the grant or the exercise of the Option. The grantee will recognize capital gain or loss on a disposition of the Shares acquired upon exercise of an ISO, provided the grantee does not dispose of those Shares within two years from the date the Option was granted or within one year from the date the Shares were transferred to the grantee. For regular federal income tax purposes, the maximum rate of tax applicable to capital gains is dependent on the length of time the Shares have been held at the time of sale. If the Shares have been held for more than one year, the maximum regular federal tax rate applicable to the gain on the sale will be 20%. If the Shares have been held for one year or less, the gain on the sale will be generally taxed at the recipient's marginal federal income tax rate (the highest marginal rate for federal income tax purposes being, nominally, 39.6%, subject, however, to the particular tax situation of each person). If the Option holder satisfies both of the holding periods referred to in the second sentence of this paragraph, then Advanta will not be allowed a deduction by reason of the grant or exercise of an ISO. As a general rule, if the grantee disposes of Shares acquired through exercise of an ISO before satisfying both holding period requirements (a "disqualifying disposition"), the gain recognized by the grantee on the disposition will be taxed as ordinary income to the extent of the difference between the fair market value of the Shares on the date of exercise and the Option 13 16 Price of the Shares, and Advanta will be entitled to a deduction in that amount. The income recognized will not, however, exceed the difference between the amount actually realized on the disposition and the Option Price of the Shares (which would limit the amount of income recognized if, for example, the value of the Shares declined subsequent to the date the option was exercised). The gain (if any) in excess of the amount treated as ordinary income will be treated as a long or short term capital gain (based on the length of time the grantee held the Shares as of the date of the disposition). The amount by which the fair market value of a Share at the time of exercise exceeds the Option Price will be included in the computation of such Option holder's "alternative minimum taxable income" in the year the Option holder exercises the ISO. Currently, the maximum alternative minimum tax rate is 28%. If an Option holder pays alternative minimum tax with respect to the exercise of an ISO, then the amount of such tax paid will be allowed as a credit against regular tax liability in subsequent years. The Option holder's basis in the Shares for purposes of the alternative minimum tax will be adjusted when income from a disposition of the Shares is included in alternative minimum taxable income. NON-QUALIFIED STOCK OPTIONS. A grantee of a Non-qualified Stock Option will not recognize taxable income at the time of grant, and Advanta will not be allowed a deduction by reason of the grant. The grantee will generally recognize ordinary income in the taxable year in which he or she exercises the Options. The amount of income will be generally equal to the excess of the fair market value of the Shares received upon exercise (determined at the time of exercise) over the Option Price paid for the Shares. Advanta will, subject to various limitations, be allowed a deduction in the same amount. Upon disposition of these Shares, the grantee will recognize a long or short term capital gain or loss equal to the difference between the amount realized on disposition and the grantee's basis in the Shares (which ordinarily would be the Fair Market Value of the Shares on the date the Option was exercised). AWARDS. The recipient of an Award will become vested as provided for by the Plan Administration Committee when making the Award. Under applicable provisions of the Code, the recipient will, for federal income tax purposes, be required to include in his or her taxable income as ordinary compensation income the value of the Shares subject to the Award as of the time they become vested, reduced by the amount, if any, that was required to be paid for the Shares. The fair market value of the Shares as of the vesting date establishes the basis for determining capital gains or losses on a subsequent sale of the Shares, and the holding period for purposes of determining the long or short-term character of a capital gain starts on the vesting date, not on the date the Shares were granted. If a recipient of an Award makes a special election under Section 83(b) of the Code, however, he or she will recognize as ordinary compensation income the fair market value of the stock subject to the Award as of the date the Shares are granted, even though the Shares have not yet vested. An election under this Code provision must be made within 30 days of the date the Award is granted, and the fair market value of the Shares must be determined without regard to the vesting restrictions that otherwise could cause the Shares to be forfeited. In addition, if the 14 17 Shares are forfeited, the Award recipient will not be able to claim a tax loss for the forfeiture except to the extent he or she was required to pay a purchase price for the Shares. As a consequence of making a Section 83(b) election, however, the Award recipient will have no income as a result of the later vesting of the Shares, and when the Shares are sold, the difference between the amount realized from the sale and the fair market value on the date of grant (i.e., the value used in reporting income as a result of the Section 83(b) election), will be a capital gain or loss, and will be either long or short term by reference to the original grant date, rather than the vesting date. In order to make an election under Section 83(b) of the Code, the recipient of an Award must file the election no later than 30 days after the grant date in the form of a written statement sent to the IRS office where the individual files his or her returns, and provide a copy to Advanta. A copy of the filing must also be included in the individual's tax return for the year in which the grant occurs. The Section 83(b) election statement must contain the following information: the name, address and social security number of the taxpayer, a description of the Shares, the grant date of the Shares and the taxable year for which the election is made, the nature of the restrictions on the Shares, the fair market value of the Shares as of the grant date, the purchase price paid for the Shares, if any, and a statement indicating that copies of the election have been furnished to other persons as required. The statement must be signed and must indicate that it is made under Section 83(b) of the Code. SARS. An SAR permits the grantee to exercise that right (either by surrender of the Option associated with the SAR or, in the case of an SAR that is independent of any Option, by surrender of the SAR) and receive a payment equal to the excess of the Fair Market Value of the Shares underlying the Option (or hypothetically underlying an independent SAR) as of the date the grantee exercises the SAR over the Option Price of the underlying Option (or of the hypothetical option in the case of an independent SAR). This payment may be either in cash or in stock, or a combination of cash and stock, as determined by the Plan Administration Committee, unless there are specific provisions in the Grant Document that address the form of payment. The amount of the payment made to the grantee will constitute taxable compensation income to the grantee, subject to payroll withholding requirements and ordinary income taxation in the year in which the payment with respect to the SAR is made. The amount of income recognized by the grantee will also constitute a compensation expense for federal income tax purposes, deductible by Advanta, subject to various limitations on the deductibility of such compensation expense. DEDUCTIBILITY OF EXECUTIVE COMPENSATION UNDER CODE SECTION 162(m). Section 162(m) of the Code sets limits on the deductibility of compensation in excess of $1,000,000 paid by publicly held companies to certain employees (the "million dollar cap"). The IRS has also issued Treasury Regulations which provide rules for the application of the "million dollar cap" deduction limitations. Income which is treated as "performance-based compensation" under these rules will not be subject to the limitation on deductibility imposed by Code Section 162(m). 15 18 The plan has been designed to permit grants of Options and SARs issued under the plan to qualify under the performance-based compensation rules so that income attributable to the exercise of a Non-qualified Stock Option or an SAR may be exempt from the million dollar cap limits on deduction. The plan's provisions are consistent in form with the performance-based compensation rules, so that if the Committee that grants Options or SARs consists exclusively of members of the Board of Directors who qualify as "outside directors," the compensation income arising on exercise of those Options or SARs should qualify as performance-based compensation which is deductible even if that income would be in excess of the otherwise applicable limits on deductible compensation income under Code Section 162(m). In addition, if the Plan Administration Committee determines to make performance-based Awards, as described above, the income attributable to those Awards should also be treated as performance-based compensation that is exempt from the limitations of Code Section 162(m). RESALE BY AFFILIATES Optionees who are "affiliates" of Advanta will be subject to limitations on their ability to reoffer or resell shares of Common Stock acquired pursuant to the plan. For this purpose, "affiliate" is defined by Rule 405 under the Securities Act of 1933, as amended (the "1933 Act") as a person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, Advanta. "Control" for this purpose means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of Advanta. Generally, affiliates may not offer or sell our Common Stock unless such offers and sales are made pursuant to an effective Registration Statement under the 1933 Act or pursuant to an exemption from the 1933 Act. Affiliates may sell the Common Stock without registration under the 1933 Act pursuant to the exemption afforded by Rule 144 under that act, provided that the terms and conditions of Rule 144 are met. Section 16 of the 1934 Act contains provisions to the effect that, among other things, any person who is an officer or director of Advanta or a beneficial owner of more than 10% of a class of equity securities of Advanta registered under the 1934 Act may be liable to Advanta for profits realized from any purchase and sale, or any sale and purchase, of equity securities of Advanta, whether or not they are the same shares, within a period of less than six months, irrespective of the intention on the part of such person in entering into the transaction. Substantial liabilities may be incurred by persons subject to Section 16 of the 1934 Act in connection with transactions in equity securities of Advanta. Prior to the acquisition or disposition of any equity security of Advanta, persons should consult with counsel as to their status as affiliates of Advanta and as to the applicability of Section 16. ADDITIONAL INFORMATION Additional information regarding the plan, the Board of Directors and the Plan Administration Committee may be obtained from Investor Relations, Advanta Corp., P.O. Box 844, McKean and Welsh Roads, Spring House, Pennsylvania 19477 (telephone number: 215-657-4000). 16 EX-99.(D)(2) 9 w52124ex99-d2.txt FORM OF OPINION AGREEMENT FOR INCENTIVE PLAN... 1 Exhibit (d)(2) ADVANTA CORP. NON-QUALIFIED STOCK OPTION THIS NON-QUALIFIED STOCK OPTION (the "Option") is granted as of <> by Advanta Corp., a Delaware corporation (the "Company"), to <> (the "Optionee"), pursuant to the Advanta Corp. 2000 Omnibus Stock Incentive Plan (the "Plan") and the Company's Offer to Repurchase Eligible Shares of Restricted Stock, dated August 9, 2001 (the "Offer to Repurchase"). All capitalized terms contained in this Option shall have the meaning set forth in the Plan unless otherwise required by the context. W I T N E S S E T H: 1. Grant. The Company hereby grants to the Optionee an Option to purchase, subject to the terms and conditions hereinafter set forth, all or any part of an aggregate <> Shares of the Company's Class B Common Stock, par value $0.01 per share (the "Option Shares"), at the purchase price of $10.625 per share (the "Option Price"). This Option is not intended to be an "incentive stock option" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"). 2. Term. The Option granted hereunder shall expire at 5:00 p.m. (local Philadelphia, Pennsylvania time) on the earliest to occur of the following: (a) With respect to any portion of the Option which becomes vested and exercisable, the date that is two years following the date on which the Option (or portion 2 thereof) becomes vested and exercisable in accordance with Section 3 hereof (the "Expiration Date"); (b) The last day of the Optionee's employment or service with the Company or its Affiliates, where such employment or service is terminated by the Optionee's resignation and such resignation has not been solicited by the Company; (c) Expiration of thirty (30) days from the date the Optionee's employment or service with the Company or its Affiliates terminates for any reason other than retirement, disability (within the meaning of section 22(e)(3) of the Code), death or as specified in subparagraph 2(b) above or subparagraphs 2(e) or 2(f), below; (d) Expiration of two (2) years from the date the Optionee's employment or service with the Company or its Affiliates terminates due to the Optionee's retirement, or expiration of one hundred eighty (180) days from the date such employment or service with the Company or its Affiliates terminates due to the Optionee's disability (within the meaning of section 22(e)(3) of the Code) or death; (e) A finding by the Committee, after full consideration of the facts presented on behalf of both the Company and the Optionee, that the Optionee has breached his employment or service contract with the Company or an Affiliate, or has been engaged in any sort of disloyalty to the Company or an Affiliate, including, without limitation, fraud, embezzlement, theft, commission of a felony or proven dishonesty in the course of his employment or service, or has disclosed trade secrets or confidential information of the Company or an Affiliate. In such event, in addition to immediate termination of the Option, the Optionee shall automatically forfeit all Option shares for which the Company has not yet delivered the share certificates upon refund by the Company of the Option Price. -2- 3 Notwithstanding anything herein to the contrary, the Company may withhold delivery of share certificates pending the resolution of any inquiry that could lead to a finding resulting in a forfeiture; or (f) The date, if any, set by the Board of Directors as an accelerated expiration date in the event of a "Change of Control." As of the termination of employment of the Optionee for any reason, no portion of the Option that was not vested and exercisable immediately prior to the date of such termination shall become vested on or after the date of such termination, and such unvested portion of the Option shall lapse and be forfeited effective as of such date. 3. Vesting. If the Optionee earns a percentage of his or her 2001 target bonus, the Option shall become vested and exercisable, in whole or in part, as of April 11, 2002. The extent to which the Option becomes vested and exercisable as of such date shall be determined by applying the percentage of the Optionee's 2001 target bonus earned (up to a maximum of 100%) to the number of Option Shares that are subject to the Option. If all or any portion of the Option does not become vested and exercisable on April 11, 2002, the remaining portion, if any, of the Option shall become vested and exercisable on ___________, 20___ (being the tenth anniversary of the date of grant of the Eligible AMIP Shares to which this Option relates). This Option may be exercised only to the extent that it has vested. Notwithstanding the foregoing, in the event of a Change of Control, the Option shall be 100% vested. As used in this Section 3, the terms "2001 target bonus" and "Eligible AMIP Shares" shall have the meanings set forth in the Offer to Repurchase. 4. General Rules. To the extent otherwise exercisable, this Option may be exercised in whole or in part except that this Option may in no event be exercised (a) with -3- 4 respect to fractional shares or (b) after the expiration of the Option term set forth under paragraph 2 hereof. 5. Transfers. No Option granted under the Plan may be transferred, except by will or by the laws of descent and distribution, and during the lifetime of the person to whom an Option is granted, such Option may be exercised only by the Optionee. Any attempt at assignment, transfer, pledge or disposition of the Option contrary to the provisions hereof or the levy of any execution, attachment or similar process upon the Option shall be null and void and without effect. Notwithstanding the foregoing, (i) an Option, other than an ISO, may be transferred pursuant to the terms of a "qualified domestic relations order," within the meaning of Sections 401(a)(13) and 414(p) of the Code or within the meaning of Title I of the Employee Retirement Income Security Act of 1974, as amended, and (ii) the Optionee may transfer the Option to his or her immediate family members (i.e., spouse or former spouse, parents, issue, including adopted and "step" issue, or siblings), trusts for the benefit of family members, or partnerships whose only partners are such family members (a "Family Transfer"), provided that the Optionee receives no consideration for a Family Transfer. Any exercise of the Option by a person other than the Optionee shall be accompanied by appropriate proofs of the right of such person to exercise the Option. 6. Method of Exercise and Payment. (a) When exercisable under Paragraphs 2, 3 and 4, the Option may be exercised by written notice, pursuant to Paragraph 10, to the Company's Secretary specifying the number of Option Shares to be purchased and, unless the Option Shares are covered by a then current registration statement or a Notification under Regulation A under the Securities Act of 1933 (the "Act"), containing the Optionee's acknowledgment, in form and substance -4- 5 satisfactory to the Company, that (i) such Option Shares are being purchased for investment and not for distribution or resale (other than a distribution or resale which, in the opinion of counsel satisfactory to the Company, may be made without violating the registration provisions of the Act), (ii) the Optionee has been advised and understands that (A) the Option Shares have not been registered under the Act and are "restricted securities" within the meaning of Rule 144 under the Act and are subject to restrictions on transfer and (B) the Company is under no obligation to register the Option Shares under the Act or to take any action which would make available to the Optionee any exemption from such registration, (iii) such Option Shares may not be transferred without compliance with all applicable federal and state securities laws, and (iv) an appropriate legend referring to the foregoing restrictions on transfer and any other restrictions imposed under the Option may be endorsed on the certificates. Notwithstanding the foregoing, if the Company determines that issuance of the Option Shares should be delayed pending (A) registration under federal or state securities laws, (B) the receipt of an opinion that an appropriate exemption from such registration is available, (C) the listing or inclusion of the Option Shares on any securities exchange or an automated quotation system or (D) the consent or approval of any governmental regulatory body whose consent or approval is necessary in connection with the issuance of such Shares, the Company may defer exercise of any Option granted hereunder until any of the events described in this Subsection 6(a) has occurred. (b) The notice shall be accompanied by payment of the aggregate Option Price of the Option Shares being purchased (i) in cash, (ii) by certified or cashier's check payable to the order of the Company, or (iii) by such other mode of payment as the -5- 6 Committee may approve. Such exercise shall be effective upon the actual receipt by the Company's Secretary of such written notice and payment. (c) The Company shall have the right to require the Optionee to remit or otherwise make available to the Company an amount sufficient to satisfy any federal, state and/or local withholding tax requirements prior to the delivery or transfer of any certificate or certificates for Option Shares. The Company's obligation to make any delivery or transfer of Option Shares shall be conditioned on the Optionee's compliance with any withholding requirement to the Company's satisfaction. 7. Adjustments Upon Changes in Common Stock. In the event that, prior to the delivery by the Company of all of the Option Shares in respect of which the Option is granted, there shall be a stock dividend, stock split, recapitalization or other change in the number or class of issued and outstanding equity securities of the Company resulting from a subdivision or consolidation of the Common Stock and/or, if appropriate, other outstanding equity securities or a recapitalization or other capital adjustment affecting the Common Stock which is effected without receipt of consideration by the Company, the Committee designated under the Plan shall make appropriate adjustments with respect to the aggregate number of shares and class or classes of shares issuable upon exercise of the Option in lieu of the remaining number of Option Shares and with respect to the Option Price hereunder. The Committee shall have the authority to determine the adjustments to be made pursuant to this Section, and any such determination by the Committee shall be final, binding and conclusive. 8. Change of Control. In the event of a Change of Control, the Committee may take whatever action it deems necessary or desirable with respect to the Option, -6- 7 including, without limitation, accelerating the expiration or termination date of the Option to a date no earlier than 30 days after notice of acceleration is given to the Optionee. A "Change of Control" shall be deemed to have occurred upon the earliest to occur of the following events: (i) the date the stockholders of the Company (or the Board of Directors, if stockholder action is not required) approve a plan or other arrangement pursuant to which the Company will be dissolved or liquidated, or (ii) the date the stockholders of the Company (or the Board of Directors, if stockholder action is not required) approve a definitive agreement to sell or otherwise dispose of substantially all of the assets of the Company, or (iii) the date the stockholders of the Company (or the Board of Directors, if stockholder action is not required) and the stockholders of the other constituent corporation (or its Board of Directors, if stockholder action is not required) have approved a definitive agreement to merge or consolidate the Company with or into such other corporation, other than, in either case, a merger or consolidation of the Company in which holders of shares of the Company's Class A Common Stock immediately prior to the merger or consolidation will have at least a majority of the voting power of the surviving corporation's voting securities immediately after the merger or consolidation, which voting securities are to be held in the same proportion as such holders' ownership of Class A Common Stock of the Company immediately before the merger or consolidation, or (iv) the date any entity, person or group, within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended, (other than (A) the Company or any of its subsidiaries or any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries or (B) any person who, on the date the Plan is effective, shall have been the beneficial owner of or have voting control over shares of Common Stock of the Company -7- 8 possessing more than twenty-five percent (25%) of the aggregate voting power of the Company's Common Stock) shall have become the beneficial owner of, or shall have obtained voting control over, more than twenty five percent (25%) of the outstanding shares of the Company's Class A Common Stock, or (v) the first day after the date this Plan is effective when directors are elected such that a majority of the Board of Directors shall have been members of the Board of Directors for less than two (2) years, unless the nomination for election of each new director who was not a director at the beginning of such two (2) year period was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period. 9. Administration. This Option has been granted pursuant to the Company's 2000 Omnibus Stock Incentive Plan, and is subject to the terms and provisions thereof. Capitalized terms herein which are not otherwise defined have the meaning specified in the Plan. All questions of interpretation and application of the Plan and this Option shall be determined by the Committee designated under the Plan, and such determination shall be final, binding and conclusive. 10. Notices. Any notice to be given to the Company shall be addressed to the Secretary of the Company at its principal operating office, and any notice to be given to the Optionee shall be addressed to the Optionee at the address then appearing on the records of the Company, or at such other address as either party hereafter may designate in writing to the other. Any such notice shall be deemed to have been duly given only when actually received by the Company. 11. Continued Service. Nothing herein contained shall affect the right of the Company to terminate the Optionee's employment or the Optionee's services, responsibilities, -8- 9 duties, Optionee's services to the Company in any capacity at any time for any reason whatsoever. IN WITNESS WHEREOF, the Company has granted this Option as of the day and year first above written. ADVANTA CORP. By: ______________________________ Dennis Alter, Chairman Attest: ____________________________ Elizabeth H. Mai, Secretary -9- -----END PRIVACY-ENHANCED MESSAGE-----