10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004 OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO

Commission File No. 0-14120

Advanta Corp.

(Exact name of Registrant as specified in its Charter)

Delaware (State or other jurisdiction of incorporation or organization)	23-1462070 (I.R.S. Employer Identification No.)
Welsh & McKean Roads, P. O. Box 844, Spring House, Pennsylvania (Address of principal executive offices)	19477 (Zip Code)

Registrant’s telephone number, including area code: (215) 657-4000

Securities registered pursuant to Section 12 (b) of the Act:

Title of each class	Name of each exchange on which registered
None	N/A

Securities registered pursuant to Section 12(g) of the Act:

Class A Common Stock, $.01 par value

Class B Common Stock, $.01 par value

Class A Right

Class B Right

(Title of each class)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K o.

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes x  No o

     State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.

     Note. If a determination as to whether a particular person or entity is an affiliate cannot be made without involving unreasonable effort and expense, the aggregate market value of the common stock held by non-affiliates may be calculated on the basis of assumptions reasonable under the circumstances, provided that the assumptions are set forth in this form.

     $519,529,222 as of June 30, 2004 which amount excludes the value of all shares beneficially owned (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) by officers and directors of the Company (however, this does not constitute a representation or acknowledgment that any of such individuals is an affiliate of the Registrant).

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

     Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

     As of March 1, 2005 there were 9,606,862 shares of the Registrant’s Class A Common Stock, $.01 par value, outstanding and 18,401,477 shares of the Registrant’s Class B Common Stock, $.01 par value, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

     List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).

Document	Form 10-K Reference
Definitive Proxy Statement relating to the Registrant’s 2005 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A not later than 120 days following the end of the Registrant’s last fiscal year	Part III, Items 10-14

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business		2
Item 2.	Properties		15
Item 3.	Legal Proceedings		15
Item 4.	Submission of Matters to a Vote of Security Holders		19
PART II
Item 5.	Market for the Registrant’s Common Stock and Related Stockholder Matters		20
Item 6.	Selected Financial Data		21
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		50
Item 8.	Financial Statements and Supplementary Data		51
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		101
Item 9A.	Controls and Procedures		101
Item 9B.	Other Information		101
PART III
Item 10.	Directors and Executive Officers of the Registrant		102
Item 11.	Executive Compensation		102
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		102
Item 13.	Certain Relationships and Related Transactions		103
Item 14.	Principal Accountant Fees and Services		103
PART IV
Item 15.	Exhibits, Financial Statement Schedules, and Reports on Form 8-K		104
FORM OF STOCK OPTION AGREEMENT
FORM OF RESTRICTED STOCK AWARD
ADVANTA CORP. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
SUMMARY OF LIFE INSURANCE BENEFITS FOR DIRECTORS AND EXECUTIVES
SIXTH AMENDMENT TO COMMERCIAL LEASE
SEVENTH AMENDMENT TO COMMERCIAL LEASE
LIMITED PARTNERSHIP AGREEMENT OF FLEET CREDIT CARD SERVICES,L.P. DATED MAY 26, 1998
ADVANTA CORP. OFFICE OF THE CHAIRMAN SUPPLEMENTAL COMPENSATION PLAN
ADVANTA SENIOR MANAGEMENT CHANGE OF CONTROL SEVERANCE PLAN RESTATED DECEMBER 21, 2000
ADVANTA SENIOR MANAGEMENT CHANGE OF CONTROL SEVERANCE PLAN
COMPUTATION OF RATIO EARNINGS TO FIXED CHARGES
SUBSIDIARIES OF THE REGISTRANT
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
CEO CERTIFICATION PURSUANT TO SECTION 302
CFO CERTIFICATION PURSUANT TO SECTION 302
CEO CERTIFICATION PURSUANT TO SECTION 1350
CFO CERTIFICATION PURSUANT TO SECTION 1350

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PART I

Item 1. Business

In this Form 10-K, “Advanta”, “we”, “us” and “our” refer to Advanta Corp. and its subsidiaries, unless the context otherwise requires.

OVERVIEW

Advanta focuses on the small business market and related community, providing funding and support to the nation’s small businesses and business professionals through innovative products and services. Using our direct marketing and information based expertise, we identify potential customers and provide a high level of service tailored to the unique needs of small businesses. Since 1951, Advanta has pioneered many of the marketing techniques common in the financial services industry today, including remote lending and direct mail, affinity and relationship marketing. Our primary business segment is Advanta Business Cards, which is one of the nation’s largest issuers (through Advanta Bank Corp.) of business purpose credit cards to small businesses and business professionals. Our business purpose credit card accounts provide approved customers with unsecured revolving business credit lines. In addition to our business credit card lending business, we have venture capital investments. We own two depository institutions, Advanta Bank Corp. and Advanta National Bank. We primarily fund and operate our business credit card business through Advanta Bank Corp., which offers a variety of deposit products that are insured by the Federal Deposit Insurance Corporation (the “FDIC”) in accordance with applicable FDIC regulations and limits. We also own two insurance companies, Advanta Life Insurance Company and Advanta Insurance Company, through which we offer specialty credit-related insurance products and services to our existing customers.

      At December 31, 2004, we had $730 million of owned business credit card receivables and $2.6 billion of securitized business credit card receivables.

      Through the first quarter of 2001, we had two additional lending businesses, Advanta Mortgage and Advanta Leasing Services. In the first quarter of 2001, we exited our mortgage business and ceased originating new leases in our small ticket equipment leasing business. We are continuing to service the existing leases in our small ticket equipment leasing portfolio.

      Pursuant to the terms of the purchase and sale agreement, dated January 8, 2001, as amended, by and between Advanta and Chase Manhattan Mortgage Corporation, a New Jersey corporation (“Chase” or “Buyer”), Advanta and certain of its subsidiaries transferred and assigned to Buyer and certain of its affiliates substantially all of the assets and operating liabilities associated with Advanta’s mortgage business. This transaction is referred to throughout this Form 10-K as the “Mortgage Transaction.” The Mortgage Transaction was consummated on March 1, 2001, effective as of February 28, 2001 (the “Closing Date”).

      The assets acquired by Buyer in the Mortgage Transaction consisted of loan receivables, retained interests in securitizations and other receivables, contractual mortgage servicing rights and other contractual rights, property and equipment, and prepaid assets. The liabilities assumed by Buyer in the Mortgage Transaction consist primarily of certain of our contractual obligations and other liabilities that appeared on our balance sheet, as well as specified contingent liabilities arising out of the operation of the mortgage business before closing that are identified in the purchase and sale agreement.

      Following the Mortgage Transaction, we no longer operate a mortgage business. However, we have retained contingent liabilities, primarily relating to litigation, arising from our operation of the mortgage business before the Closing Date that were not specifically assumed by Buyer in the Mortgage Transaction.

      Prior to February 20, 1998, we also issued consumer credit cards. Under the terms of a contribution agreement, dated October 27, 1997 and amended on February 20, 1998, we and Fleet Financial Group, Inc. (“Fleet”) each contributed substantially all of the assets of our respective consumer credit card businesses, subject to liabilities, to a newly formed entity controlled by Fleet that is now known as Fleet Credit Card Services, L.P. This transaction is referred to in this Form 10-K as the “Consumer Credit Card Transaction.” We acquired a 4.99% interest in the Fleet Credit Card Services, L.P. as of the date of closing of the transaction. At December 31, 2004, our ownership interest in this partnership was approximately 1.3%. As a result of our May 28, 2004 agreement with Bank of America Corporation (“Bank of America”) and the

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combination of Bank of America’s and Fleet Credit Card Services, L.P.’s consumer credit card businesses, our partnership interest in Fleet Credit Card Services, L.P. represents an interest in the combined business.

      Advanta Corp. was incorporated in Delaware in 1974 as Teachers Service Organization, Inc., the successor to a business originally founded in 1951. In January 1988, we changed our name from TSO Financial Corp. to Advanta Corp. Our principal executive office is located at Welsh & McKean Roads, P.O. Box 844, Spring House, Pennsylvania 19477-0844. Our telephone number at our principal executive office is (215) 657-4000.

CONTINUING OPERATIONS

Advanta Business Cards

Overview

Our primary business segment is Advanta Business Cards which, through our subsidiary Advanta Bank Corp., is one of the nation’s largest issuers of business purpose credit cards to small businesses and business professionals. The Advanta Business Card is issued and funded by Advanta Bank Corp. Our business purpose credit card accounts provide approved customers with unsecured revolving business credit lines. Our strategy in Advanta Business Cards is to maximize long-term growth and increase profitability by attracting and retaining high credit quality customers and deepening our customer relationships.

      Our principal objective is to use our information based strategy to continue to prudently grow our business and increase our profitability. Based on our experience and expertise in analyzing the credit behavior and characteristics of our customers, we have developed an extensive database of customer information and attributes. We use this information in conjunction with proprietary credit scoring, targeting and other sophisticated analytical models we have developed to market our products to prospective customers and to manage our relationships with our existing customers. We continually monitor our customer segments and validate our models based on actual results, and use this information to refine and improve our analytical assumptions. The information we gather and analyze allows us to market directly to specific customer segments and target prospects effectively. We also use this information proactively to anticipate customer needs and customize our products to meet those needs and to enhance and maintain our relationships with existing customers.

      Through our focus on the small business market, we have identified numerous market segments distinguishable by characteristics such as size of business and industry. We use a targeted approach to these market segments, aiming to anticipate the distinct needs of various small businesses and business professionals and to offer them products and services geared to their needs. Our strategy also involves strengthening and deepening our relationships with our existing customers by emphasizing access to products and services that meet the unique demands of small businesses and business professionals and provide exceptional value to our customers.

      We are licensed to issue both MasterCard®* and VISA®** business credit cards, although our primary product is a MasterCard® business credit card. MasterCard® and VISA® both license banks and other financial institutions, such as Advanta Bank Corp., to issue credit cards using their respective service marks and interchange networks. Our business purpose credit cards provide approved customers with access, through merchants, banks, checks and ATMs, to an unsecured revolving business credit line. Under the terms of our cardholder agreements, our business credit cards may be used for business purposes only.

      We offer a number of benefits that we believe are important to small businesses and business professionals, including:

•  competitively priced offerings and rewards programs;

•  additional cards for employees at no fee with the ability to set individual spending limits;

  *  MasterCard® is a federally registered service mark of MasterCard International, Inc.

**  VISA® is a registered service mark of Visa International, Inc.

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•  on-line, downloadable detailed expense management reports that categorize purchases and itemize charges for recordkeeping and tax purposes;

•  customized cards with the cardholder’s business name displayed on the front of the card and customized business checks;

•  free on-line account management and bill payment; and

•  access to products and services that are designed to meet the unique needs of our customers on favorable terms and conditions.

      Additional benefits of our MasterCard® and VISA® business credit cards include free auto rental insurance, free purchase protection service for a specified time period and several free emergency assistance and referral services.

      We offer rewards programs with the majority of our business purpose credit cards. During 2004, we expanded our business credit card rewards program offerings. Under our rewards programs, cardholders may receive cash back or business rewards that can be redeemed for travel, gift certificates or merchandise, based on net purchases charged on their business credit card accounts. We are continually looking for innovative ways to tailor products to the unique needs of small businesses and business professionals.

      As a participant in the MasterCard® and VISA® associations, Advanta Bank Corp. receives interchange fees as partial compensation for taking credit risk, absorbing fraud losses and funding credit card receivables for a limited period prior to account billing. The interchange fees are paid to us by merchant banks, based on the purchase activity of our cardholders. In addition to interchange income, we generate revenue through interest earned on outstanding balances, balance transfer fees, cash usage fees and other fees. We also generate income through specialty credit-related insurance and other credit protection products and services that we offer to our business credit card customers.

      In 2004, substantially all of Advanta’s total revenues were derived from Advanta Business Cards. See Note 16 to the consolidated financial statements for additional segment financial information about Advanta Business Cards.

Originations

We originate, directly and through the use of third parties, substantially all of our business credit card accounts using direct marketing techniques. Our sources for potential customers include credit reporting agencies, lists from data compilers and customer lists from establishments with a small business customer base. We also acquire customers through our strategic relationships with other organizations serving the small businesses market. In an effort to expand our customer reach, we are testing new sources and channels for identifying potential customers. We target prospects for our business purpose credit card products using relevant information from the sources described above, historical solicitation data and our proprietary segmentation methods. Our targeting models and product offerings are continually updated to reflect changes in the competitive environment. We originated approximately 131 thousand new business credit card accounts during the year ended December 31, 2004.

Underwriting

We have developed sophisticated models for assessing the creditworthiness of applicants. Using a proprietary credit scoring system, we evaluate common applicant characteristics and their perceived correlation to credit risk. We regularly validate and update our scoring models to maintain and enhance their predictive power.

      On the application for our business purpose credit card product we request information about the individual signing the application (the “signing individual”) and the business. Generally, under the cardholder agreement for our core business credit card product, the signing individual (typically an owner or authorized officer of the business) and the business are jointly and severally liable for all transactions on the account. On these accounts we may consider credit-related and other relevant data about both the signing individual and the business in our assessment of the creditworthiness of potential cardholders. Through the application process, we verify the applicant’s identification information and collect information about the applicant’s business. This information, coupled with credit reports received from external credit reporting agencies, forms

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the basis for our decision to extend credit. The credit line size we offer varies and is ultimately determined based upon the information we receive regarding the credit history and credit worthiness of the business and signing individual. However, when we offer our core business credit card product to business professionals, we only consider credit-related and other relevant data about the signing individual in our assessment of the applicant for the card, because only the signing individual is liable on those accounts.

Pricing

We have a broad array of competitively-priced offerings and products designed to appeal to our target customers and to respond to the competitive environment. We continually test different pricing and reward strategies. Our pricing and reward strategies include a combination of promotional pricing and cash back or business rewards that can be redeemed for travel, gift certificates or merchandise, based on net purchases on their business credit card accounts.

      All of our credit card accounts are assigned annual interest rates which are generally variable rates that adjust from time to time according to an index such as the Prime Rate or LIBOR. With notice, we may reprice accounts at our discretion and in accordance with the terms of the applicable cardholder agreement. An account may have promotional pricing, including an introductory period during which a low or zero percent rate is charged for a specified duration after which the introductory rate generally is converted to a higher rate. Some accounts may have non-introductory promotional pricing for specified types of balances or account transactions.

      We continually monitor the credit quality of our accounts and adjust the pricing and/or credit line size on an account based on a variety of factors, including changes in a cardholder’s credit standing and other factors indicating a risk of future nonpayment. To discourage delinquent payments, we assess late fees and use “penalty pricing” which automatically increases the interest rate assessed on any account that becomes in default in accordance with the terms of the applicable cardholder agreement. The amount by which the interest rate is automatically increased may vary.

Servicing and Collections

We use internal and external resources to support our servicing and collections functions. Certain processing and administrative functions associated with the servicing of our business credit card accounts are outsourced to First Data Resources, Inc. The services performed by First Data Resources, Inc. include: authorizing transactions through the MasterCard® and VISA® systems, based upon our criteria for approval; performing billing and settlement processes; generating monthly billing statements; and issuing credit card plastics and new account agreements.

Customer Service and Support

We maintain several channels of communication and support for our customers, including a toll-free phone number, on-line account management, postal and facsimile services. We maintain multi-site contact centers, currently located in Horsham, Pennsylvania and Draper, Utah. Our contact centers are managed so that functions can be performed seamlessly regardless of geographic location. Customer contacts are distributed across these sites based on service level objectives. In addition, we leverage numerous technology solutions to increase efficiencies, reduce costs and improve customer satisfaction. We use metrics such as average speed of answer and abandon rate to measure our performance and success.

      Our customer service function works closely with other functions across the Advanta Business Cards organization to achieve seamless service and problem resolution. We are focused on supporting and maintaining our relationships with our existing customers through programs designed to stimulate card usage, enhance customer loyalty and retain existing accounts. Our objective is to maximize every contact opportunity to provide “best in class” service to our customers.

Delinquencies and Collections

Delinquencies and charge-offs are monitored by management of our collections and credit departments. We use a variety of techniques to discourage delinquent payments, including assessment of late fees and use of penalty pricing, as described above. Our credit evaluation, servicing and charge-off policies and collection

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practices may change from time to time in accordance with our business judgment and applicable laws and regulations.

      We use a variety of collections strategies to pursue late payments. Our strategies are developed using proprietary models that analyze an array of variables, including payment history, Fair, Isaac and Company (“FICO”) credit score and other credit indicators, to predict the type and timing of collections activity to be implemented for each account in order to optimize our collection efforts. Collection activities include statement messages, formal collection letters and telephone calls. We maintain multi-site collection centers, currently located in Horsham, Pennsylvania and Draper, Utah. Efforts to collect delinquent and charged-off accounts are made by our collections staff, supplemented in certain cases by external resources such as collection agencies and attorneys. Accounts that we decide not to pursue through a collection agency or litigation may be sold.

Venture Capital Investments

We make venture capital investments through certain of our affiliates. Our investments have generally focused on privately held companies, including early stage companies. In recent years, we have limited our new investment activity and we presently do not expect to make significant additional investments. We actively monitor the performance of our venture capital investments, and officers of our investment affiliates participate on the boards of directors of certain investees. See Note 16 to the consolidated financial statements for segment financial information about our venture capital investments.

Advanta Insurance

Our life/ health and property/ casualty insurance subsidiaries, Advanta Life Insurance Company and Advanta Insurance Company, respectively, provide insurance and related products mostly to existing Advanta customers. Together with unaffiliated insurance carriers, we offer specialty credit-related insurance products and services to our existing business credit card and leasing customers. Advanta Insurance uses direct mail marketing and telemarketing to enroll customers in these programs. These credit products include coverage for loss of life, disability and involuntary unemployment. Our insurance subsidiaries generally reinsure all or a portion of the risks associated with these products or services. Under reinsurance agreements, our insurance subsidiaries assume a proportional quota share of the risk from the unaffiliated insurance carriers. In consideration for assuming these risks, our insurance subsidiaries receive reinsurance premiums equal to the proportional percentage of the net premiums collected by the insurance carriers, less a ceding fee as defined by the reinsurance treaties, and proportional acquisition expenses, premium taxes and loss payments made by the carriers on these risks.

Depository Institutions

We own two depository institutions, Advanta Bank Corp. and Advanta National Bank. Advanta Bank Corp. is organized under the laws of the State of Utah with its principal executive offices located in Draper, Utah. Advanta Bank Corp is an industrial loan corporation that is authorized to operate as an industrial bank under the laws of the State of Utah. Advanta Bank Corp.’s principal activity consists of the issuance of the Advanta Business Card, our business purpose credit card, to small businesses and business professionals. Prior to first quarter 2001, Advanta Bank Corp. also was involved in our small ticket equipment leasing business and our mortgage business. We no longer operate a mortgage business or originate new equipment leases. However, Advanta Bank Corp. continues to be involved as the servicer of our small ticket equipment leasing business. See “— DISCONTINUED OPERATIONS.”

      Advanta National Bank is a national banking association organized under the laws of the United States of America with its headquarters and sole branch currently located in Wilmington, Delaware. Prior to the closing of the Mortgage Transaction, we conducted a large portion of our mortgage business through Advanta National Bank. Advanta National Bank’s operations are currently not material to our consolidated operating results.

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Deposit, Savings And Investment Products

We offer a variety of deposit products such as retail certificates of deposit and large denomination (more than $99,000) certificates of deposit that are insured by the FDIC in accordance with applicable FDIC regulations and limits. At December 31, 2004, we had total deposits of approximately $825 million at our banks, compared to approximately $672 million as of December 31, 2003. Substantially all of the deposits at December 31, 2004 and 2003 were at Advanta Bank Corp. Advanta Bank Corp. generates retail deposits from repeat deposits from existing customers and from new depositors attracted by direct mail solicitations, newspaper and other media advertising, and the internet.

      Since 1951, Advanta Corp. and its predecessor, Teachers Service Organization, Inc., have offered senior unsecured debt securities of the corporation, in the form of RediReserve Variable Rate Certificates and Investment Notes, to retail investors through our retail note programs. Advanta Corp. has sold these debt securities, also referred to in this Form 10-K as “retail notes,” predominantly on a direct basis in select states. The RediReserve Variable Rate Certificates are payable on demand and the maturities on the Investment Notes can range from 91 days to ten years. The RediReserve Variable Rate Certificates and Investment Notes are obligations of Advanta Corp. and are not insured or guaranteed by any public or private entity. We change the interest rates that we offer frequently, depending on market conditions and our funding needs. Other terms of the debt securities, including the rates, may also vary depending on the size of the investment, state of residence of the investor or other factors. At December 31, 2004, approximately $266 million of RediReserve Variable Rate Certificates and Investment Notes were outstanding with interest rates ranging from 1.59% to 11.56%.

DISCONTINUED OPERATIONS

Advanta Leasing Services

Overview

Prior to January 23, 2001, Advanta Leasing Services, a business unit of Advanta, offered flexible lease financing programs to small businesses. The primary products that we offered through our leasing business consisted of leases for small-ticket equipment such as office machinery, security systems and computers. Advanta Leasing Services originated and funded its leases and other equipment financing arrangements through Advanta Bank Corp. Advanta Business Services Corp. conducted the marketing, lease originations, customer service and collections for our leasing business.

      On January 23, 2001, we announced that after a thorough review of strategic alternatives available for our leasing business, we decided to cease originating leases. However, we are continuing to service the existing leasing portfolio.

      At December 31, 2004, we had owned lease receivables of $16 million as compared to $69 million at December 31, 2003. Based on the terms of the remaining leases, we expect the wind down of the lease portfolio to be complete by January 2007. See Note 19 to the consolidated financial statements for additional financial information about Advanta Leasing Services.

Advanta Mortgage

Effective February 28, 2001, we completed the Mortgage Transaction and no longer operate a mortgage business. In accordance with the terms of the purchase and sale agreement, Buyer acquired substantially all of the assets and operating liabilities associated with our mortgage business for a purchase price, net of operating liabilities assumed by Buyer, exceeding $1 billion. Following the Mortgage Transaction, we retained contingent liabilities, primarily relating to litigation arising out of the operation of the mortgage business through the Closing Date, that were not specifically assumed by Buyer. See “Item 3 — Legal Proceedings,” and Note 11 to the consolidated financial statements for a discussion of litigation relating to the Mortgage Transaction.

      Prior to the closing of the Mortgage Transaction, Advanta Mortgage, a business unit of Advanta, offered a broad range of mortgage products and services to consumers throughout the country. Advanta Mortgage originated and serviced non-conforming credit first and second lien mortgage loans, including home equity

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lines of credit. In addition to servicing and managing the loans we originated, Advanta Mortgage serviced the home equity loans of unaffiliated third parties through our subservicing business. See Note 19 to the consolidated financial statements for additional financial information about Advanta Mortgage.

GOVERNMENT REGULATION

The following discussion sets forth some of the elements of an extensive regulatory framework applicable to banks, their affiliates and the banking and finance industries, and provides some specific information that is relevant to Advanta Corp. and its subsidiaries. This regulatory framework is intended primarily for the protection of depositors and the Bank Insurance Fund and not for the protection of security holders and creditors. To the extent that the following information describes statutory provisions and regulatory provisions and agreements, it is qualified in its entirety by reference to the particular statutory provisions and regulatory provisions and agreements.

Advanta Corp.

Advanta Corp. is not required to register as a bank holding company under the Bank Holding Company Act of 1956, as amended (the “BHCA”). We own Advanta National Bank, which is a “bank” as defined under the BHCA, as amended by the Competitive Equality Banking Act of 1987 (“CEBA”). However, under grandfathering provisions of CEBA, we are not required to register as a bank holding company because Advanta National Bank did not come within the BHCA definition of the term “bank” prior to the enactment of CEBA. Under CEBA, our other banking subsidiary, Advanta Bank Corp., is not considered a “bank” for purposes of the BHCA. Accordingly, our ownership of Advanta Bank Corp. does not impact our exempt status under the BHCA. Because we are not a bank holding company under the BHCA, we are not subject to examination by the Federal Reserve Board, other than for purposes of assuring continued compliance with the CEBA restrictions discussed below.

      Advanta Corp. is not required to register as a bank holding company so long we continue to comply with certain restrictions under CEBA. For example, Advanta National Bank may take demand deposits but may not make commercial loans. In addition, Advanta Corp. would lose its exemption under CEBA if Advanta National Bank were to make commercial loans or Advanta Corp. were to acquire control of more than 5% of the stock or assets of an additional “bank” or “savings association,” as these terms are defined in the BHCA. The Gramm-Leach-Bliley Financial Modernization Act of 1999 (the “GLB Act”) was adopted on November 12, 1999 and became effective on May 12, 2000. Prior to the enactment of the GLB Act, if Advanta Corp. or Advanta National Bank had ceased complying with the restrictions set forth in CEBA, registration as a bank holding company under the BHCA would have been required. Under the GLB Act, should Advanta Corp. or Advanta National Bank fail to comply with any of the restrictions applicable to them under CEBA, there is a 180-day right to cure period following receipt of a notice from the Federal Reserve Board. The opportunity to cure or remediate an activity that is out of compliance significantly reduces the risk that Advanta Corp. will be required to register as a bank holding company under the BHCA. Registration as a bank holding company is not automatic and, if we were to register, it would subject us and our subsidiaries to inspection and regulation by the Federal Reserve Board.

Advanta Bank Corp.

Supervision and Regulation

Advanta Bank Corp. operates as an industrial bank under the laws of the State of Utah. It is a depository institution subject to regulatory oversight and examination by both the FDIC and the Utah Department of Financial Institutions. Under its banking charter, Advanta Bank Corp. may make consumer and commercial loans and may accept all FDIC-insured deposits other than demand deposits such as checking accounts.

      Advanta Bank Corp. is subject to provisions of federal law which restrict and control its ability to extend credit and provide or receive services between affiliates. In addition, the FDIC has regulatory authority to prohibit Advanta Bank Corp. from engaging in any unsafe or unsound practice in conducting its business.

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Capital Requirements

Advanta Bank Corp. is subject to capital adequacy guidelines issued by the Federal Financial Institutions Examination Council (the “FFIEC”). These risk-based and leverage guidelines make regulatory capital requirements more sensitive to differences in risk profiles among banking organizations and consider off-balance sheet exposures in determining capital adequacy. Under the rules and regulations of the FFIEC, at least half of a bank’s total capital is required to be “Tier I capital,” comprised of common equity, retained earnings and a limited amount of non-cumulative perpetual preferred stock. The remaining capital, “Tier II capital,” may consist of other preferred stock, certain hybrid debt/equity instruments, a limited amount of term subordinated debt or a limited amount of the reserve for possible credit losses. The FFIEC has also adopted minimum leverage ratios for banks, which are calculated by dividing Tier I capital by total quarterly average assets. Recognizing that the risk-based capital standards principally address credit risk rather than interest rate, liquidity, operational or other risks, many banks are expected to maintain capital in excess of the minimum standards.

Prompt Corrective Action

Pursuant to provisions of the FDIC Improvement Act of 1991 (the “FDICIA”) and related regulations with respect to prompt corrective action, FDIC-insured institutions such as Advanta Bank Corp. may only accept brokered deposits without FDIC permission if they meet specified capital standards, and are subject to restrictions with respect to the interest they may pay on deposits unless they are “well-capitalized.” To be “well-capitalized” under the prompt corrective action provisions, a bank must have a ratio of combined Tier I and Tier II capital to risk-weighted assets of not less than 10%, a ratio of Tier I capital to risk-weighted assets of not less than 6%, and a ratio of Tier I capital to average assets of not less than 5%. In each case, at December 31, 2004, Advanta Bank Corp. met the capital requirements of the FDICIA and had capital at levels a bank is required to maintain to be classified as “well capitalized” under the regulatory framework for prompt corrective action. See Note 14 to the consolidated financial statements.

Advanta National Bank

Supervision and Regulation

Advanta National Bank is subject to regulation and periodic examination, primarily by the Office of the Comptroller of the Currency (the “OCC”). The OCC’s regulations relate to the maintenance of reserves for certain types of deposits and other products offered by a bank, the maintenance of certain financial ratios, the terms on which a bank may engage in transactions with its affiliates and a broad range of other banking practices. As a national bank, Advanta National Bank is also subject to provisions of federal law which restrict its ability to extend credit to its affiliates or pay dividends to Advanta Corp.

Capital Requirements

Advanta National Bank is subject to the FFIEC capital adequacy guidelines described above. See “— Advanta Bank Corp. — Capital Requirements.”

Prompt Corrective Action

Advanta National Bank is subject to the FDICIA provisions and related regulations with respect to prompt corrective action and the taking of brokered deposits, as described above. See “— Advanta Bank Corp. — Prompt Corrective Action.” Presently, pursuant to its agreement with the OCC, Advanta National Bank is required to maintain capital in excess of the minimum regulatory standards. At December 31, 2004, Advanta National Bank had capital at levels a bank is required to maintain to be classified as “well-capitalized” under the regulatory framework for prompt corrective action. However, Advanta National Bank does not meet the definition of “well-capitalized” because of the existence of its agreement with the OCC, even though it has achieved the higher imposed capital ratios required by the agreement with the OCC. See Note 14 to the consolidated financial statements and “— Regulatory Agreements.”

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Regulatory Agreements

In 2000, Advanta National Bank reached agreements with its bank regulatory agency, primarily relating to the bank’s subprime lending operations. The agreements established temporary asset growth limits at Advanta National Bank, imposed restrictions on taking brokered deposits and required that Advanta National Bank maintain certain capital ratios in excess of the minimum regulatory standards. In 2001, Advanta National Bank entered into an additional agreement with its regulatory agency regarding restrictions on new business activities and product lines at Advanta National Bank after the Mortgage Transaction, and the resolution of outstanding Advanta National Bank liabilities. The agreement also reduced the capital requirements for Advanta National Bank to a ratio of 12.7% for Tier 1 and total capital to risk-weighted assets, and to a ratio of 5% for Tier 1 capital to adjusted total assets as defined in the agreement. In addition, the agreement prohibits the payment of dividends by Advanta National Bank without prior regulatory approval. Management believes that Advanta National Bank was in compliance with its regulatory agreement at December 31, 2004.

Lending Activities

Although our current lending activities are principally directed to business purpose credit for small businesses and business professionals, certain aspects of various federal and state laws, including the Equal Credit Opportunity Act, the Community Reinvestment Act, the Truth-in-Lending Act, the Fair Credit Reporting Act (the “FCRA”) as amended by the Fair and Accurate Credit Transactions Act of 2003 (the “FACT Act”) and the Servicemembers Civil Relief Act, may apply to our lending activities. To the extent applicable, provisions of these statutes and related regulations require that certain disclosures be made to borrowers, prohibit discriminatory practices in extending credit, prohibit sending unsolicited credit cards, require our FDIC-insured banking institutions to serve the banking needs of their local communities, provide certain credit protections for activated military borrowers and regulate the dissemination and use of information relating to a borrower’s creditworthiness.

      Additionally, the GLB Act contains privacy requirements dealing with the use of nonpublic information about consumer customers. Retail deposit customers of Advanta Bank Corp. and Advanta National Bank as well as investors who purchase Advanta Corp.’s retail notes are subject to the GLB Act and its accompanying regulations. The GLB Act is not preemptive and states may impose different and possibly more burdensome requirements.

Dividends

There are various legal limitations on the extent to which national banks, including Advanta National Bank, can supply funds through dividends to their parent companies or affiliates. Generally, national banks are required to obtain the prior approval of the OCC for a dividend if the total of all dividends declared by the national bank in any calendar year exceeds its net profits for that year combined with its retained net profits for the preceding two years, less any required transfers to surplus accounts. In addition, a national bank generally may not pay a dividend in an amount greater than its undivided profits then on hand after deducting its losses and bad debts. The OCC also has authority under the Financial Institutions Supervisory Act to prohibit a national bank from engaging in any unsafe or unsound practice in conducting its business. It is possible, depending upon the financial condition of the bank in question and other factors, that the OCC, pursuant to its authority under the Financial Institutions Supervisory Act, could claim that a dividend payment might under some circumstances be an unsafe or unsound practice.

      Under Advanta National Bank’s current agreement with the OCC, Advanta National Bank is not eligible to pay any dividends without the OCC’s prior approval. See “— Regulatory Agreements.”

Transfers of Funds

Sections 23A and 23B of the Federal Reserve Act and applicable regulations also impose restrictions on Advanta Bank Corp. and Advanta National Bank that limit the transfer of funds by each of these depository institutions to certain of its affiliates, including Advanta Corp., in the form of loans, extensions of credit, investments or purchases of assets. These transfers by any one depository institution to Advanta Corp. or any other single affiliate are limited in amount to 10% of the depository institution’s capital and surplus, and transfers to all affiliates are limited in the aggregate to 20% of the depository institution’s capital and surplus.

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These loans and extensions of credit are also subject to various collateral requirements. Sections 23A and 23B of the Federal Reserve Act also require generally that the depository institution’s transactions with its affiliates be on terms no less favorable to the bank than comparable transactions with unrelated third parties. In addition, in order for us to maintain our grandfathered exemption under CEBA, Advanta National Bank is not permitted to make any loans to Advanta Corp. or any of Advanta Corp.’s subsidiaries.

Regulation of Insurance

Our insurance subsidiaries are subject to the laws and regulations of, and supervision by, the states in which they are domiciled or have obtained authority to transact insurance business. These states have adopted laws and regulations which govern all insurance policy underwriting, rating, licensing, marketing, administration and financial operations of an insurance company, including dividend payments and financial solvency. In addition, our insurance subsidiaries have registered as an Arizona Holding Company which requires an annual registration and the approval of certain transactions among all affiliated entities.

      The maximum dividend that Advanta Insurance Company can distribute to Advanta Corp., its parent, in any twelve-month period, without prior approval of the State of Arizona Department of Insurance, is the lesser of: 10% of the subsidiary’s statutory surplus; or for any given twelve-month period, the subsidiary’s net investment income. Similarly, the maximum dividend that Advanta Life Insurance Company can distribute to Advanta Insurance Company, its parent, in any twelve-month period, without prior approval of the State of Arizona Department of Insurance, is the lesser of: 10% of the subsidiary’s statutory surplus; or for any given twelve-month period, the subsidiary’s net gain from operations.

      The State of Arizona has adopted minimum risk-based capital standards for insurance companies, as developed by the National Association of Insurance Commissioners. Risk-based capital is the quantification of an insurer’s investment, underwriting, reserve and business risks in relation to its total adjusted capital and surplus. The ratio of an insurer’s total adjusted capital and surplus is compared to various levels of risk-based capital to determine what intervention, if any, is required by either the insurance company or an insurance department. At December 31, 2004, our insurance subsidiaries met all risk-based capital standards and required no intervention by any party.

      Our insurance subsidiaries reinsure risks using underwriting insurance practices and rates which are regulated in part or fully by state insurance departments. State insurance departments continually review and modify these rates based on prior historical experience. Any modifications may impact the future profitability of our insurance subsidiaries.

Legislative and Regulatory Developments

Congress is considering legislation that would enhance the authority for banks to pay interest on business checking accounts and to fully implement interstate banking. With respect to both of these legislative proposals, there are initiatives under consideration that would limit their applicability so that they would not apply to state-chartered industrial loan corporations, such as Advanta Bank Corp. If the proposals were to be adopted with such limitations, unless there is an exemption that would apply to Advanta Bank Corp., it may cause Advanta Bank Corp. to lose future flexibility in branch locations or its ability to offer new products. Congress is also considering limiting the ability of commercial firms that are ineligible to own banks under the BHCA from chartering industrial loan corporations. The definition of “commercial” firms used in the proposed legislation includes companies such as Advanta Corp. that, although principally engaged in the financial services business, have not registered with the Federal Reserve Board as a bank holding company or a financial services holding company. Enactment of this limitation might also restrict Advanta Bank Corp.’s flexibility in the future.

      In 2003, Congress enacted the FACT Act which extensively amended the FCRA governing the use of consumer credit reports. In January 2005, the Federal Trade Commission, pursuant to the FACT Act, issued its final regulation to enhance required notices in prescreened offers for credit or insurance. The notices, among other things, inform consumers about their right to opt out of receiving future prescreened offers. Because our current lending activities are principally directed to business purpose credit, the FACT Act may have less of an impact on our business activities.

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      In addition, Congress is continuing to consider legislation to reform the Bankruptcy Code. The bankruptcy reform bills would require that debtors pass a means test to determine eligibility for bankruptcy relief while adding new consumer protections, such as new minimum payment and introductory rate disclosures for some credit card products and exemptions for retirement savings in bankruptcy. While directed at consumer bankruptcies, if adopted the bankruptcy reform initiatives could also impact individuals operating small businesses that file for bankruptcy liquidation under Chapter 7 of the Bankruptcy Code. While the purpose of the proposed legislation is to curb unwarranted bankruptcy filings, passage of the new stricter law may include a phase-in period during which the number of bankruptcy filings may increase as debtors seek to discharge their obligations under existing law.

      Our current marketing is based on direct marketing to small businesses and business professionals. We use primarily direct mail, but also, to a lesser extent, telemarketing solicitations, the internet and other channels. Federal and state laws that regulate and govern these marketing channels and the use of the media are subject to continuing oversight and review. For example, in 2003 Congress enacted what is known as the CAN SPAM Act which requires unsolicited commercial email messages to be labeled as such and to include opt out instructions and the sender’s physical address. It prohibits the use of deceptive subject lines and false headers in such messages. Additionally, the Federal Trade Commission (the “FTC”) is authorized, but not required, to establish a “do not email” registry. In 2003, the FTC began enforcing its amended Telemarketing Sales rule which provides a national “do not call” list by which consumers may register their home telephone numbers to prevent most interstate telemarketing calls, and the Federal Communication Commission (the “FCC”) adopted a similar rule which, unlike the FTC rule, expressly applies to banks and insurance companies. These rules exempt business to business telemarketing. We do not expect that the CAN SPAM Act or the FTC or FCC rules will have a significant impact on our business activities or results.

      Additionally, federal and state legislatures as well as government regulatory agencies are considering legislative and regulatory initiatives related to credit scoring disclosure, minimum monthly payments and other aspects of credit card lending and marketing. While these are generally directed at consumer transactions, it is possible that if any were to become effective they could impact small business and other business purpose lending. Other legislative initiatives under consideration that could impact our business, including the manner in which we conduct our business, include: proposals to impose additional anti-money laundering requirements; proposals for deposit insurance reform, such as increasing the level of coverage for each insured account; and proposals to increase credit card issuers’ liability for certain unauthorized transactions.

      The businesses we engage in are generally the subject of extensive regulation at the state and federal levels, and numerous legislative and regulatory proposals are advanced each year which, if adopted, could affect our profitability or the manner in which we conduct our activities. It is impossible to determine the extent of the impact of any new laws, regulations or initiatives that may be proposed, or whether any of the federal or state proposals will become law.

COMPETITION

As a marketer of credit products, we face intense competition from numerous financial services providers. Within the highly competitive bank credit card industry there is increased competitive use of advertising, target marketing and pricing competition with respect to both interest rates and cardholder fees as both traditional and new credit card issuers seek to expand or to enter the market. Many of our competitors are substantially larger and have more capital and other resources than we do. Competition among lenders can take many forms, including convenience in obtaining a loan, the size of their existing customer base and the ability to cross sell products to that customer base, intellectual property rights, customer service, size of loans, interest rates and other types of finance or service charges, the nature of the risk the lender is willing to assume and the type of security, if any, required by the lender. We have responded to the increased competition in the bank credit card industry primarily by focusing on business purpose credit for small businesses and business professionals, and offering cards with promotional pricing, including low or zero introductory rates, and rewards programs tailored to the needs of our customers. We also have responded by developing marketing strategies and alliances for our business purpose credit cards that are designed to attract and retain high credit quality customers. Although we believe we are generally competitive in most of the geographic areas in which

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we offer our products and services, there can be no assurance that our ability to market our products and services successfully or to obtain an adequate yield on our business purpose credit cards will not be impacted by the nature of the competition that now exists or may develop.

      In seeking investment funds from the public, including through our retail note program, we face competition from banks, savings institutions, money market funds, mutual funds, credit unions and a wide variety of private and public entities that sell debt securities, some of which are publicly traded. Many of our competitors are larger and have more capital and other resources than we have. Competition relates to matters such as: rate of return, collateral, insurance or guarantees applicable to the investment, if any; the amount required to be invested; credit ratings, if any, on the investment; convenience and the cost to and conditions imposed upon the investor in investing and liquidating the investment, including any commissions which must be paid or interest forfeited on funds withdrawn; customer service; service charges, if any; and the taxability of interest.

EMPLOYEES

As of December 31, 2004, we had 938 employees. We believe that we have good relationships with our employees. None of our employees is represented by a collective bargaining unit.

AVAILABLE INFORMATION

We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”). These filings are available to the public over the internet at the SEC’s web site at http://www.sec.gov. You may also read and copy any document we file at the SEC’s public reference room located at 450 Fifth Street, NW, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room.

      Our principal internet address is http://www.advanta.com. Through http://www.advanta.com our annual, quarterly and current reports, and amendments to those reports, are made available free of charge as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

      In addition, you may request a copy of these filings (excluding exhibits) at no cost by writing or telephoning us at the following address or telephone number: Investor Relations, Advanta Corp., Welsh & McKean Roads, P.O. Box 844, Spring House, Pennsylvania 19477, telephone: (215) 444-5335.

      We have adopted, and posted on our website, a Code of Ethics that applies to, among others, our Chief Executive Officer and senior financial officers (including the Chief Financial Officer, Chief Accounting Officer, Controller and persons performing similar functions).

This Report contains statements (including without limitation in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in this Report under Item 7), that are considered “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 (the “Act”). In addition, other written or oral communications provided by Advanta from time to time may contain “forward-looking statements.” Forward-looking statements, including statements and information relating to: anticipated earnings per share; anticipated returns on assets; anticipated growth in loans outstanding and credit card accounts; anticipated net interest margins; anticipated operating expenses and employment growth; the level of new account acquisitions, customer spending and account attrition; anticipated payment and prepayment rates of outstanding loans; anticipated marketing expense; estimated values of our retained interests in securitizations and anticipated cash flows; industry trends; our ability to replace existing credit facilities, when they expire, with appropriate levels of funding on similar terms and conditions; the value of the investments that we hold; anticipated delinquencies and charge-offs; realizability of net deferred tax asset; anticipated outcome and effects of litigation and other future expectations of Advanta that do not relate strictly to historical facts, are based on certain assumptions by management. Forward-looking statements are often identified by words or phrases such as “is anticipated,” “are expected to,” “estimate,” “intend to,” “believe,” “will likely result,” “projected,” “may,” or other similar words or phrases. The cautionary statements provided below are being made pursuant to the provisions of the Act and with the intention of obtaining the benefits of the “safe harbor” provisions of the Act for any such forward-looking information.

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      Forward-looking statements are subject to various assumptions, risks and uncertainties which change over time, and speak only as of the date they are made. We undertake no obligation to update any forward-looking information. We caution readers that any forward-looking statement provided by us is not a guarantee of future performance and that actual results may be materially different from those in the forward-looking information. In addition, future results could be materially different from historical performance. The following factors, among others, could cause actual results to be materially different from forward-looking statements and future results to be materially different from historical performance:

•  The effects of, and changes in, political conditions, social conditions and general economic conditions, such as inflation, recession or other adverse economic conditions, which effects may include lower new account originations, lower consumer spending, higher credit losses and collection costs associated with a worsening of general economic conditions, rising interest rates, rising delinquency levels, increases in the number of customers seeking protection under the bankruptcy laws resulting in accounts being charged off as uncollectible, and the effects of fraud by third parties or customers.

•  Competitive product and pricing pressures among financial institutions.

•  The effects of interest rate fluctuations on our net interest margin and the value of our assets and liabilities; the continued legal or commercial availability of techniques, including loan pricing and repricing, liability pricing, hedging and other techniques, that we use or may use to manage the risk of those fluctuations.

•  Difficulties or delays in the securitization of our receivables and the resulting impact on the cost and availability of such funding, and adverse changes in the performance of the securitized assets or the market for asset-backed securities generally.

•  Legal and regulatory developments that could adversely affect our business or our financial results, including pending or proposed changes in laws, regulations or policies concerning accounting, taxes, banking, securities, capital requirements, reserve methodologies, telemarketing and other means of solicitations, and other aspects of the financial services and marketing industries.

•  The amount, type and cost of financing available to us, including securitization of our receivables and secured financing, and any changes to that financing including any impact from: changes in the current economic, legal, regulatory, accounting or tax environments; adverse changes in the performance of our loan portfolio; and changes in the ratings on our debt or the debt of our subsidiaries.

•  Factors affecting our aggregate number of accounts or receivable balances, and the growth rate thereof, including: the amount of actual marketing investment made by us; the range and duration of pricing offers to cardholders; changes in cardholder behavior or preferences affecting product mix; retention of cardholders after promotional periods have expired; changes in the level of payments on receivable balances; and changes in general economic conditions and other factors beyond our control.

•  The impact of “seasoning” (the average age of a lender’s portfolio) on our level of delinquencies and losses which may require a higher allowance for receivable losses for on-balance sheet assets and may adversely impact securitization income. Changes in the level of account originations or balances and the rate of attrition of those accounts or balances could significantly impact the seasoning of our overall portfolio.

•  The amount of, and rate of growth in, our expenses, including employee and marketing expenses, as well as expenses relating to the development of or changes in our business and expansion into new market areas or channels.

•  The acquisition or disposition of assets (interest-earning, fixed or other).

•  The effects of changes within our organization or in our compensation and benefit plans.

•  Difficulties or delays in the development, acquisition, production, testing and marketing of products or services, including, but not limited to, a failure to implement new products or service programs when anticipated, ability and cost to obtain intellectual property rights, the failure of or delay in customers’ acceptance of these products or services, losses associated with the testing and implementation of new

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	products or services or financial, legal or other difficulties as may arise in the course of such implementation.
•	Factors resulting from the fact that our banking and finance businesses are highly regulated and subject to periodic review and examination by federal and state regulators, including the effects of, and changes in: the level of scrutiny, regulatory requirements and regulatory initiatives, including certain mandatory and possibly discretionary actions by federal and state regulators; restrictions and limitations imposed by banking laws, examinations and audits; and agreements between our bank subsidiary and its regulators.
•	The costs and other effects of legal and administrative cases and proceedings, settlements and investigations, claims and changes in those items, developments or assertions by or against us or any of our subsidiaries arising in the ordinary course of business or in connection with our discontinued operations.
•	The effects of changes in accounting policies or practices as may be required by changes in U.S. generally accepted accounting principles.
•	The completion of post-closing procedures following the Mortgage Transaction and revisions in estimates associated with the discontinued operations of our mortgage and leasing businesses.
•	The proper design and operation of our disclosure controls and procedures.
•	Our relationships with customers, significant vendors and business partners.
•	Our ability to attract and retain key personnel.

Item 2. Properties

Advanta has no owned real property and total leased office space is approximately 360,743 square feet, as described below. Advanta leases approximately 109,511 square feet in Spring House, Pennsylvania for its principal executive and corporate offices and for use by Advanta Business Cards. In Horsham, Pennsylvania, Advanta leases approximately 110,000 square feet in one building for business purpose credit cards operations and certain Advanta Bank Corp. and corporate staff functions, and approximately 12,000 square feet in a second building for storage space. Advanta also leases approximately 12,350 square feet of office space in one building in Gibbsboro, New Jersey for our leasing and business cards operations. In Delaware, Advanta leases approximately 36,589 square feet of office space for Advanta National Bank and for other corporate and business purpose credit cards operations; approximately 16,644 square feet of this office space is subleased to an unrelated third party. Advanta also leases approximately 55,718 square feet of office space in Draper, Utah for Advanta Bank Corp. In Salt Lake City, Utah, Advanta leases approximately 1,939 square feet of office space for the retail note program. In Washington, D.C., Advanta leases 100 square feet of office space for its government relations office.

      Advanta has committed to increasing its leased space at the Draper, Utah location to 72,238 square feet, or the entirety of the building, effective as of April 1, 2005. Advanta has also committed to reduce its leased space in Delaware to approximately 18,545 square feet effective as of January 1, 2006.

      Advanta ceased origination of new leases and exited the mortgage business in the first quarter of 2001 and we closed an operational location of our venture capital segment in the first quarter of 2004. Advanta has been buying out, assigning or subleasing the space formerly used for these businesses and other business locations that are no longer being used. Accordingly, the remaining leased space totals approximately 6,016 square feet, of which approximately 4,554 square feet is subleased to unrelated third parties.

Item 3. Legal Proceedings

On May 28, 2004, Advanta Corp. and certain of its subsidiaries and Bank of America signed an agreement to resolve all outstanding litigation, including partnership tax disputes, between Advanta and Fleet, which was acquired by Bank of America, relating to the transfer of our consumer credit card business to Fleet Credit Card Services, L.P. in 1998. The agreement was subject to the Internal Revenue Service’s final approval of the settlement of the tax disputes. We received the final approval of the Internal Revenue Service in January 2005 and, as a result, we received $63.8 million in cash from Bank of America in February 2005, representing a

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return of the payments that we made to Fleet in the Delaware state court litigation in February 2004. Consistent with the terms of our agreement with Bank of America, all litigation that was outstanding between Advanta and Fleet and is described below was dismissed in February 2005.

      On January 22, 1999, Fleet and certain of its affiliates filed a lawsuit against Advanta Corp. and certain of its subsidiaries in Delaware Chancery Court. Fleet’s allegations, which we denied, centered around Fleet’s assertions that we failed to complete certain post-closing adjustments to the value of the assets and liabilities we contributed to Fleet Credit Card Services, L.P. in connection with the Consumer Credit Card Transaction. We filed an answer to the complaint, and we also filed a countercomplaint against Fleet for damages we believe have been caused by certain actions of Fleet. As a result of related litigation with Fleet, $70.1 million of our reserves in connection with this litigation were funded in an interest-bearing escrow account in February 2001. On January 22, 2003, the trial court issued a ruling on all but one of the remaining issues, and ordered further briefing on the remaining outstanding issue. Effective December 31, 2002, we recognized a $43.0 million pretax loss on the transfer of our consumer credit card business, representing the estimated impact of implementing the court’s January 2003 decisions. This amount represented the amount in excess of the reserves we had been carrying for the litigation, which was based on our expectations of the outcome of the litigation. On November 7, 2003, the court ruled on the remaining outstanding issue, the method for calculating the interest to be awarded, and ordered the parties to submit revised calculations in accordance with this ruling before it issued a judgment. On February 2, 2004, the court issued its final judgment and order. In early February 2004, the escrow agent released $63.8 million from the escrow account to Fleet in satisfaction of all amounts due to Fleet in connection with this litigation and the $10.5 million of funds remaining in the escrow account were released and transferred from the escrow account to an unrestricted cash account. At December 31, 2003, the escrow account was included in restricted interest-bearing deposits on the consolidated balance sheet. There was no impact to our results of operations in 2003 since, based on the final judgment and order, our reserves at December 31, 2003 were adequate. On March 1, 2004, we filed a notice of appeal to commence the appeals process relating to orders made by the Delaware Chancery Court during the litigation, and on April 15, 2004, we filed an opening brief with the Supreme Court of Delaware setting forth the basis for our appeal. Fleet filed its answering brief with the Supreme Court of Delaware on May 17, 2004, and we filed our reply brief on June 1, 2004. As described above, this litigation was dismissed in February 2005 pursuant to the May 28, 2004 agreement between Advanta and Bank of America.

      In Fleet’s disputes with us, Fleet claimed $508 million of tax deductions from its partnership with us in connection with the Consumer Credit Card Transaction, which are required under the law to be allocated solely to Advanta. The deductions, as well as the allocation of a gain from the sale of a partnership asset of approximately $47 million, were before the Internal Revenue Service Regional Office of Appeals. As described above, this matter was resolved in February 2005 in accordance with the terms of the May 28, 2004 agreement between Advanta and Bank of America.

      On January 15, 2003, Fleet filed a complaint in Rhode Island Superior Court seeking a declaratory judgment that we indemnify Fleet under the applicable partnership agreement for any damage Fleet incurs by not being entitled to the $508 million of tax deductions. Fleet was also seeking a declaratory judgment that it should not indemnify us for any damages that we incur due to any allocation to Advanta of the $47 million gain on the sale of a partnership asset. On February 28, 2003, we filed a motion to dismiss the complaint. On August 13, 2003, the court denied the motion to dismiss on procedural grounds. We answered the complaint and filed a counterclaim against Fleet on September 19, 2003. As described above, this litigation was dismissed in February 2005 pursuant to the May 28, 2004 agreement between Advanta and Bank of America.

      On July 26, 2001, Chase Manhattan Mortgage Corporation (“Chase”) filed a complaint against Advanta Corp. and certain of its subsidiaries in the United States District Court for the District of Delaware alleging, among other things, that we breached our contract with Chase in connection with the Mortgage Transaction. Chase claims that we misled Chase concerning the value of certain of the assets sold to Chase and claims damages of approximately $70 million. In September 2001, we filed an answer to the complaint in which we denied all of the substantive allegations of the complaint and asserted a counterclaim against Chase for breach of contract relating to funds owed by Chase to us in connection with the Mortgage Transaction. In September 2003, we filed a motion for summary judgment with the court with respect to all claims raised in Chase’s

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complaint and Chase filed a motion for partial summary judgment with respect to certain of its claims. On March 4, 2004, the court denied both parties’ motions for summary judgment. On April 26, 2004, a non-jury trial commenced; at trial, Chase asserted damages totaling approximately $88 million. The trial concluded on May  26, 2004, and the court ordered the parties to make certain post-trial filings with the court. Post-trial filings were filed on July 30, 2004 and September 17, 2004. We believe that the lawsuit is without merit and will vigorously defend Advanta in this litigation and therefore, we do not have any reserves for future judgments or rulings in this litigation. Since this litigation relates to a discontinued operation, we have established reserves for estimated future litigation costs. We do not expect this lawsuit to have any impact on our continuing business and, based on the complete lack of merit, we do not anticipate that the lawsuit will have a material adverse effect on our financial position or results of operations.

      On February 13, 2004, Advanta Corp. filed a Writ of Summons against Chase in Montgomery County, Pennsylvania Court of Common Pleas, which was amended on March 4, 2004; and on March 8, 2004, Advanta Corp. and certain of its subsidiaries filed a Second Amended Writ of Summons and a Complaint against Chase in Montgomery County, Pennsylvania Court of Common Pleas seeking damages of at least $17.7 million.

      In May 2004, Chase filed an answer to the complaint and asserted a new matter and counterclaims seeking damages of at least $5 million. On August 2, 2004, we filed our reply to Chase’s new matter and counterclaims. On February 23, 2004 and June 4, 2004, Chase filed a complaint and a first amended complaint against us in the United States District Court for the District of Delaware seeking damages of at least $7 million. On August 9, 2004, we filed our answer, affirmative defenses and counterclaims to the first amended complaint in the United States District Court for the District of Delaware, asserting substantially the same claims and damages as in the Montgomery County, Pennsylvania action. On August 30, 2004, Chase filed a motion to dismiss our counterclaims. On September 15, 2004, we filed our opposition to Chase’s motion. These complaints, counterclaims and other filings relate to contractual claims, including claims for indemnification, under the purchase and sale agreement governing the Mortgage Transaction and are a continuation of the ongoing dispute associated with the Mortgage Transaction. Since this litigation relates to a discontinued operation, we have established reserves for estimated future litigation costs. We do not expect the lawsuit filed by Chase on February 23, 2004, as amended on June 4, 2004, or Chase’s new matter and counterclaims in the action brought by us in the Pennsylvania Court of Common Pleas to have a material adverse effect on our financial position or results of operations.

      Advanta Mortgage Corp. USA (“AMCUSA”) and Advanta Mortgage Conduit Services, Inc. (“AMCSI”), subsidiaries of Advanta Corp., have been involved in arbitration before the American Arbitration Association with Goodrich & Pennington Mortgage Fund, Inc. (“GPMF”), a participant in one of the programs of our former mortgage business. The arbitration process commenced June 28, 2001 in San Francisco, California with GPMF serving a demand for arbitration relating to alleged failure to provide information and documentation under the former mortgage program. In February and June 2004, GPMF filed additional statements of claim, concerning GPMF’s relationship with Advanta. Certain of GPMF’s claims were tried at an arbitration hearing during November 2004 (“Phase I Claims”). On January 10, 2005, the arbitrator issued a ruling in Advanta’s favor on all issues capable of determination from the evidence presented at the hearing on the Phase I Claims. Further evidence will be presented to address certain issues unresolved by the January 2005 ruling. On January 28, 2005, GPMF filed an amended statement of claim, raising unspecified issues relating to the effect of the Mortgage Transaction on GPMF’s relationship with Advanta and attempting to add Chase as a party to the arbitration. If the claim against Chase is permitted, this and all remaining claims are currently scheduled to be heard in July 2005 (“Phase II Claims”). The aggregate amount of damages sought by GPMF on the Phase II Claims is not known and at this time, no cognizable damage amount has been specified in its pleadings. Since this arbitration relates to a discontinued operation, we have established reserves for estimated future litigation costs. We do not expect this arbitration to have a material adverse effect on our financial position or results of operations.

      In addition to the cases described above, Advanta Corp. and its subsidiaries are involved in class action lawsuits, other litigation, claims and legal proceedings arising in the ordinary course of business or

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discontinued operations, including litigation arising from our operation of the mortgage business prior to our exit from that business in the first quarter of 2001.

      Management believes that the aggregate loss, if any, resulting from existing litigation, claims and other legal proceedings will not have a material adverse effect on our financial position or results of operations based on the level of litigation reserves we have established and our current expectations regarding the ultimate resolutions of these existing actions. We estimate our litigation reserves based on the status of litigation and our assessment of the ultimate resolution of each action after consultation with our attorneys. However, due to the inherent uncertainty in litigation and since the ultimate resolutions of our litigation, claims and other legal proceedings are influenced by factors outside of our control, it is reasonably possible that our estimated liability under these proceedings may change or that actual results will differ from our estimates.

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Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

Executive Officers Of The Registrant

The applicable Board of Directors elected each of the executive officers of Advanta Corp. and its subsidiaries listed below, to serve at the pleasure of the Board in the capacities indicated.

Name	Age		Office	Date Elected
Dennis Alter		62	Chairman of the Board and Chief Executive Officer		1972
William A. Rosoff		61	Vice Chairman of the Board and President		1996
Philip M. Browne		44	Senior Vice President and Chief Financial Officer		1998
Christopher J. Carroll		45	Chief Credit Officer		2001
John F. Moore		53	President, Advanta Bank Corp.		2004
David B. Weinstock		40	Vice President and Chief Accounting Officer		2001

      Mr. Alter became Executive Vice President and a Director of Advanta Corp.’s predecessor organization in 1967. He was elected President and Chief Executive Officer in 1972, and Chairman of the Board of Directors in August 1975. Mr. Alter has remained as Chairman of the Board since August 1975. In February 1986, he relinquished the title of President, and in August 1995 he relinquished the title of Chief Executive Officer. In October 1997, Mr. Alter reassumed the title of Chief Executive Officer.

      Mr. Rosoff joined Advanta Corp. in January 1996 as a Director and Vice Chairman. In October 1999, Mr. Rosoff became President and Vice Chairman of the Board of Advanta Corp. Prior to joining Advanta Corp., Mr. Rosoff was a long time partner of the law firm of Wolf, Block, Schorr and Solis-Cohen LLP, Advanta Corp.’s outside counsel, where he advised Advanta Corp. for over 20 years. While at Wolf, Block, Schorr and Solis-Cohen LLP, he served as Chairman of its Executive Committee and, immediately before joining Advanta Corp., as a member of its Executive Committee and Chairman of its Tax Department. Mr. Rosoff is a Trustee of Atlantic Realty Trust, a publicly held real estate investment trust.

      Mr. Browne joined Advanta Corp. in June 1998 as Senior Vice President and Chief Financial Officer. Prior to joining Advanta Corp., he was an Audit and Business Advisory Partner at Arthur Andersen LLP where, for over sixteen years, he audited public and private companies and provided business advisory and consulting services to financial services companies. Mr. Browne is a director of The Bon-Ton Stores, Inc., a publicly held corporation. He serves as Chairman of the Audit Committee and a member of the Compensation Committee for The Bon-Ton Stores, Inc.

      Mr. Carroll joined Advanta Corp. in 2001 as Chief Credit Officer. Prior to joining Advanta Corp., Mr. Carroll was a consultant with The Secura Group for two years where he assisted clients, including Advanta, with bank regulatory issues in areas such as credit risk management, credit policy and process management, regulatory compliance, due diligence, and consolidation and conversion projects. Prior to that, he held a variety of positions in credit management and administration at First Interstate Bancorp. (now Wells Fargo), where he spent 11 years as a consumer and commercial lender, credit administrator, regulatory liaison and credit risk manager.

      Mr. Moore joined Advanta Corp. in 1986 as Assistant Treasurer. In addition to serving as Assistant Treasurer, from January, 2001 until January, 2004, Mr. Moore also served as Advanta Corp.’s Managing Director, Retail Funding. In June, 2002, Mr. Moore was elected as Director and Vice President of Advanta National Bank. In January, 2004, Mr. Moore was elected President of Advanta Bank Corp.

      Mr. Weinstock joined Advanta Corp. in 1998 and became Vice President and Chief Accounting Officer in March 2001. From October 1999 to January 2005, Mr. Weinstock also served as Vice President of Investor Relations. Prior to that, from April 1999 to October 1999 he served as Controller. Prior to joining Advanta Corp., Mr. Weinstock served as Senior Manager at Arthur Andersen LLP from 1996 to 1998, where he audited public and private companies and provided business advisory and consulting services to financial services companies.

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PART II

Item 5.      Market for the Registrant’s Common Stock and Related Stockholder Matters

Common Stock Price Ranges And Dividends

Advanta Corp.’s common stock is traded on the National Market System of The Nasdaq Stock Market, Inc. under the symbols ADVNA (Class A voting common stock) and ADVNB (Class B non-voting common stock).

      Following are the high, low and closing prices and cash dividends declared for the last two years as they apply to each class of stock:

							Cash
							Dividends
Quarter Ended:	High		Low		Close		Declared
Class A:
March 31, 2003	$	9.75	$	5.95	$	6.83	$	0.063
June 30, 2003		10.45		6.70		9.84		0.063
September 30, 2003		11.75		9.49		10.98		0.063
December 31, 2003		13.48		10.60		12.93		0.063
March 31, 2004	$	16.88	$	12.92	$	16.83	$	0.063
June 30, 2004		23.21		15.43		21.93		0.095
September 30, 2004		23.55		19.73		22.80		0.095
December 31, 2004		24.19		20.34		22.62		0.095
Class B:
March 31, 2003	$	10.20	$	6.91	$	7.58	$	0.076
June 30, 2003		11.00		7.47		9.99		0.076
September 30, 2003		11.95		9.66		10.69		0.076
December 31, 2003		13.42		10.55		12.72		0.076
March 31, 2004	$	16.90	$	12.55	$	16.50	$	0.076
June 30, 2004		24.12		15.13		22.92		0.113
September 30, 2004		24.44		20.30		24.19		0.113
December 31, 2004		26.07		21.68		24.27		0.113

      At March 1, 2005, Advanta Corp. had approximately 220 and 387 holders of record of Class A and Class B common stock, respectively.

      In November 2004, our Board of Directors approved a 20% increase in the regular quarterly cash dividends beginning with the dividends payable in the second quarter of 2005. As a result of this increase, quarterly dividends declared for Class A common stock will increase to 11.34 cents per share and quarterly dividends declared for Class B common stock will increase to 13.61 cents per share. Although we anticipate that cash dividends will continue to be paid in the future, the payment of future dividends by Advanta will be at the discretion of the Board of Directors and will depend on numerous factors including Advanta’s cash flow, financial condition, capital requirements, restrictions on the ability of subsidiaries to pay dividends to Advanta Corp. and such other factors as the Board of Directors deems relevant. See “Part I, Item 1 — Government Regulation,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity, Capital Resources and Analysis of Financial Condition.”

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Item 6. Selected Financial Data

Financial Highlights

($ in thousands, except per share amounts)			Year Ended December 31,
			2004		2003			2002			2001			2000
Summary of Operations(1)
	Interest income		$	106,709	$	108,361		$	103,604		$	127,935		$	142,148
	Interest expense			45,577		48,308			47,580			82,470			86,508
	Noninterest revenues			287,841		268,541			240,101			178,876			151,033
	Provision for credit losses			42,368		45,423			40,906			35,976			36,309
	Operating expenses			234,298		225,165			201,741			180,186			150,292
	Minority interest in income of consolidated subsidiary			0		8,880			8,880			8,880			8,880
	Unusual charges(2)			0		0			0			41,750			0
	Loss on transfer of consumer credit card business			0		0			(43,000	)		0			0
	Income (loss) before income taxes			72,307		49,126			1,598			(42,451	)		11,192
	Income (loss) from continuing operations			44,273		30,213			(15,572	)		(30,456	)		11,192
	Loss from discontinued operations, net of tax			0		0			0			(8,438	)		(163,578	)
	Gain (loss), net, on discontinuance of mortgage and leasing businesses, net of tax			468		(1,968	)		(8,610	)		(31,639	)		(4,298	)
	Net income (loss)			44,741		28,245			(24,182	)		(70,533	)		(156,684	)
Per Common Share Data
	Basic income (loss) from continuing operations
		Class A	$	1.69	$	1.19		$	(0.69	)	$	(1.23	)	$	0.39
		Class B		1.80		1.29			(0.59	)		(1.17	)		0.47
		Combined(3)		1.76		1.25			(0.63	)		(1.19	)		0.44
	Diluted income (loss) from continuing operations
		Class A		1.57		1.16			(0.69	)		(1.23	)		0.39
		Class B		1.62		1.23			(0.59	)		(1.17	)		0.46
		Combined(3)		1.60		1.21			(0.63	)		(1.19	)		0.44
	Basic net income (loss)
		Class A		1.71		1.11			(1.03	)		(2.79	)		(6.28	)
		Class B		1.82		1.21			(0.94	)		(2.73	)		(6.21	)
		Combined(3)		1.78		1.17			(0.97	)		(2.75	)		(6.24	)
	Diluted net income (loss)
		Class A		1.58		1.08			(1.03	)		(2.79	)		(6.23	)
		Class B		1.64		1.16			(0.94	)		(2.73	)		(6.16	)
		Combined(3)		1.62		1.13			(0.97	)		(2.75	)		(6.19	)
	Cash dividends declared
		Class A		0.347		0.252			0.252			0.252			0.252
		Class B		0.416		0.302			0.302			0.302			0.302
	Book value-combined			14.90		13.87			13.11			14.20			17.06
	Closing stock price:
		Class A		22.62		12.93			8.98			9.94			8.81
		Class B		24.27		12.72			9.39			9.10			7.19
Financial Condition — Year End
	Investments(4)		$	482,917	$	480,935		$	503,479		$	476,568		$	866,376
	Gross business credit card receivables:
		Owned		730,483		518,040			445,083			416,265			335,087
		Securitized		2,564,147		2,463,747			2,149,147			1,626,709			1,324,137
		Managed(7)		3,294,630		2,981,787			2,594,230			2,042,974			1,659,224
	Total owned assets			1,692,924		1,698,444			1,681,613			1,636,680			2,843,472
	Deposits			825,273		672,204			714,028			636,915			1,346,976
	Debt			265,759		314,817			315,886			323,582			755,184
	Subordinated debt payable to preferred securities trust			103,093		103,093			0			0			0
	Trust preferred securities			0		0			100,000			100,000			100,000
	Stockholders’ equity			392,194		341,207			321,313			366,299			440,902

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($ in thousands, except per share amounts)			Year Ended December 31,
			2004			2003			2002			2001			2000
Selected Financial Ratios
	Return on average assets			2.81	%		1.45	%		(1.50	)%		(3.39	)%		(4.35	)%
	Return on average common equity			12.18			8.59			(6.74	)		(17.50	)		(31.37	)
	Return on average total equity			12.19			8.61			(6.68	)		(17.42	)		(31.28	)
	Equity/owned assets			23.17			20.09			19.11			22.38			15.51
	Equity/managed assets(5)			9.44			8.38			8.34			10.38			3.74
	Dividend payout(6)			23.79			26.78			N/M			N/M			N/M
	As a percentage of owned business credit card receivables:
		Total receivables 30 days or more delinquent		3.87			4.88			5.26			6.74			5.52
		Net principal charge-offs		6.38			7.42			7.92			7.16			4.45
	As a percentage of managed business credit card receivables(7):
		Total receivables 30 days or more delinquent		4.12			5.82			6.15			6.66			5.00
		Net principal charge-offs		6.66			7.90			8.80			7.67			4.71

(1)	The results of the mortgage and leasing businesses are reported as discontinued operations in all periods presented.
(2)	2001 amounts included severance, outplacement and other compensation costs associated with restructuring our corporate functions commensurate with the ongoing businesses as well as expenses associated with exited businesses and asset impairments.
(3)	Combined represents net income (loss) allocable to common stockholders divided by the combined total of Class A and Class B weighted average common shares outstanding.
(4)	Includes federal funds sold and investments available for sale.
(5)	See “Liquidity, Capital Resources and Analysis of Financial Condition” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for a reconciliation of managed assets to on-balance sheet assets and a description of why management believes the ratio of equity to managed assets is useful to investors.
(6)	The dividend payout ratio for the years ended December 31, 2002, 2001 and 2000 is negative and, therefore, not meaningful.
(7)	See “Securitization Income” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for a reconciliation of managed data to the most directly comparable GAAP financial measure and a description of why management believes managed data is useful to investors.

N/M — Not Meaningful

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

Our primary business segment is Advanta Business Cards, which is one of the nation’s largest issuers (through Advanta Bank Corp.) of business purpose credit cards to small businesses and business professionals. Our business purpose credit card accounts provide approved customers with unsecured revolving business credit lines. Advanta Business Cards revenue is generated through interest earned on outstanding balances, interchange income, balance transfer fees, cash usage fees and other fees. In addition to our business credit card lending business, we have venture capital investments. Through the first quarter of 2001, we had two additional lending businesses, Advanta Mortgage and Advanta Leasing Services. In the first quarter of 2001, we completed our exit from the mortgage business, announced the discontinuance of our leasing business, and restructured our corporate functions to a size commensurate with our ongoing businesses. We are continuing to service the existing leasing portfolio. The results of the mortgage and leasing businesses are reported as discontinued operations in all periods presented. The results of our ongoing businesses are reported as continuing operations for all periods presented.

      Our strategy in Advanta Business Cards is to maximize long-term growth and increase profitability by attracting and retaining high credit quality customers and deepening our customer relationships. Our marketing campaigns are designed to achieve our strategy by utilizing a broad array of competitively-priced offerings and products, including promotional pricing and rewards programs. Through our focus on the small business market, we have identified numerous market segments distinguishable by characteristics such as size of business and industry. We use a targeted approach to these market segments, aiming to anticipate the distinct needs of various small businesses and business professionals, and to offer them products and services geared to their needs. Our strategy also involves strengthening and deepening our relationships with our existing customers by emphasizing access to products and services that meet the unique demands of small businesses and business professionals and provide exceptional value to our customers. During 2004, we formed strategic relationships with other organizations serving the small business market in our efforts to deepen relationships with our customers.

      Our largest competitors are among the largest issuers of credit cards in the United States. We believe our focus on small businesses and business professionals as well as our experience in serving this market provide us with a competitive advantage as compared to these larger competitors. Small business credit cards generally represent a less significant business to our competitors than their consumer credit card portfolios. We believe that our focus and size enable us to quickly respond to the market environment. The small business credit card market has grown significantly in the past several years. We expect the migration of small businesses to business credit cards from consumer credit cards and increased usage of business credit cards as a payment vehicle to generate growth. We believe that the potential for future growth in the small business credit card market, and our focus in this market, give us a unique and competitive advantage.

      While the current market environment presents opportunities for us, it also presents us with inherent and specific challenges. The competitive environment in the credit card industry affects our ability to attract and retain high credit quality customers and deepen our customer relationships. Competition in the credit card marketplace increased during 2004 as measured by an increase in the type and volume of direct mail credit card solicitations. The general economic environment in the United States may also affect our results. We believe that continued improvement in the U.S. economy could favorably impact the credit quality of our receivables and increase customer activity, while a deterioration in the U.S. economy could negatively impact the credit quality of our receivables and decrease customer activity. Increased competition and further improvement in the U.S. economy could result in lower net interest income that we believe will be offset by improvements in the credit quality of our receivables and increases in customer activity. In response to these challenges, we continue to develop and refine our programs and strategies to assist us with originating and retaining profitable relationships with high credit quality customers. As part of our response we may test new means of marketing to complement our direct mail offers, build additional marketing alliances with companies focused on the small business market and develop additional offerings to meet and anticipate the needs of small businesses and business professionals.

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      Income (loss) from continuing operations includes the following business segment results for the years ended December 31:

($ in thousands, except per share amounts)	2004			2003			2002
Pretax income (loss):
Advanta Business Cards	$	75,182		$	56,250		$	63,244
Venture Capital		(2,875	)		(7,124	)		(10,101	)
Other(1)		0			0			(51,545	)
Total pretax income		72,307			49,126			1,598
Income tax expense		28,034			18,913			17,170
Income (loss) from continuing operations	$	44,273		$	30,213		$	(15,572	)
Per combined common share, assuming dilution	$	1.60		$	1.21		$	(0.63	)

(1)  Other includes investment and other activities not attributable to the Advanta Business Cards or Venture Capital segments.

      Advanta Business Cards pretax income increased for the year ended December 31, 2004 as compared to 2003 due primarily to growth in average owned and securitized receivables and a decrease in net principal charge-off rates, partially offset by a decline in yields. Advanta Business Cards pretax income decreased for the year ended December 31, 2003 as compared to 2002 due primarily to a decline in yields that was partially offset by growth in both owned and securitized receivables, a decrease in net principal charge-off rates and a decrease in operating expenses as a percentage of owned and securitized receivables.

      The decreases in yields reflect our competitively-priced offerings and products, including promotional pricing and rewards, designed to selectively attract and retain high credit quality customers and to respond to the competitive environment. We are experiencing the benefits of high credit quality customers in lower delinquency and charge-off rates and increased transaction volume, and we expect these benefits to continue in future periods.

      Our Venture Capital segment represents the operating results of venture capital investment activities. We make venture capital investments through certain of our affiliates. In recent years, we have limited our new investment activity and we presently do not expect to make significant additional investments. We actively monitor the performance of our venture capital investments, and officers of our investment affiliates participate on the boards of directors of certain investees. Venture Capital segment results include pretax investment losses of $1.5 million for the year ended December 31, 2004, $3.8 million for 2003 and $6.9 million for 2002, which reflect the market conditions for our venture capital investments in each respective period. Venture Capital pretax loss for the year ended December 31, 2004 also includes $807 thousand of expenses relating to the lease commitments and severance costs associated with the closure of an operational location of our Venture Capital segment in the first quarter of 2004.

      Income from continuing operations for the year ended December 31, 2002 includes a pretax charge of $43.0 million related to a ruling in the litigation associated with the transfer of our consumer credit card business in 1998. See discussion regarding recent developments in this litigation in Note 23 to the consolidated financial statements. Other for the year ended December 31, 2002 also includes net interest expense on excess liquidity not attributable to the Advanta Business Cards or Venture Capital segments.

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      Gain (loss), net, on discontinuance of mortgage and leasing businesses had the following components for the years ended December 31:

($ in thousands, except per share amounts)	2004			2003			2002
Mortgage business pretax loss on discontinuance	$	(3,270	)	$	(2,600	)	$	(25,300	)
Leasing business pretax gain (loss) on discontinuance		4,035			(600	)		11,300
Income tax (expense) benefit		(297	)		1,232			5,390
Gain (loss), net, on discontinuance of mortgage and leasing businesses	$	468		$	(1,968	)	$	(8,610	)
Per combined common share, assuming dilution	$	0.02		$	(0.08	)	$	(0.34	)

      Effective February 28, 2001, we completed our exit from the mortgage business through a purchase and sale agreement with Chase Manhattan Mortgage Corporation as buyer (the “Mortgage Transaction”), resulting in an estimated pretax gain for the year ended December 31, 2001 of $20.8 million. In the years ended December 31, 2004, 2003 and 2002, we revised our estimate of costs related to our exit from the mortgage business and recognized pretax losses on discontinuance of the mortgage business as shown in the table above. In connection with the discontinuance of the leasing business, we recorded a $4.3 million pretax loss effective December 31, 2000, representing the estimated operating results through the remaining term of the leasing portfolio. In the years ended December 31, 2004, 2003 and 2002, we revised our estimate and recognized pretax gains or losses on discontinuance of the leasing business as shown in the table above. See “Discontinued Operations” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion.

Critical Accounting Policies and Estimates

Our significant accounting policies are described in Note 2 to the consolidated financial statements. The preparation of financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Estimates are inherently subjective and are susceptible to significant revision as more information becomes available. Changes in estimates could have a material impact on our financial position or results of operations. We have identified the following as our most critical accounting policies and estimates because they require management’s most difficult, subjective or complex judgments as a result of the need to make estimates about the effect of matters that are inherently uncertain. We have discussed the development, selection and disclosure of the critical accounting policies and estimates with the Audit Committee of our Board of Directors. Where management has provided sensitivities below, they depict only certain possibilities out of a large set of possible scenarios. These sensitivities do not reflect management’s expectation regarding future expected changes and are for demonstrative purposes only.

Allowance for Receivable Losses

Receivables on the consolidated balance sheets are presented net of the allowance for receivable losses. We establish the allowance for receivable losses as losses are estimated to have occurred through provisions charged to earnings. We report provisions for credit losses, representing the portion of receivable losses attributable to principal, separately on the consolidated income statements. We record provisions for interest and fee losses as direct reductions to interest and fee income. The allowance for receivable losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of receivables in light of historical experience by receivable type, the nature and volume of the receivable portfolio, adverse situations that may affect the borrowers’ ability to repay and prevailing economic conditions. Since our business credit card receivable portfolio is comprised of smaller balance homogeneous receivables, we generally evaluate the receivables collectively for impairment through the use of a migration analysis as well as the consideration of other factors that may indicate increased risk of loss, such as bankrupt accounts, overlimit accounts or accounts that have been re-aged or entered a credit counseling program. A migration analysis is a technique used to estimate the likelihood that a receivable will progress through various delinquency stages and ultimately charge off. The allowance evaluation is inherently subjective as it requires

25

estimates that are susceptible to significant revision as more information becomes available. Changes in economic conditions, the composition and risk characteristics of the receivables portfolio, bankruptcy laws or other regulatory policies could impact our credit losses. A 10% change in the allowance for business credit card receivable losses at December 31, 2004 would impact the allowance for receivable losses and pretax income of the Advanta Business Cards segment by $4.9 million. See Note 5 to the consolidated financial statements for a rollforward of the allowance for receivable losses including provisions and charge-offs in each reporting period.

Securitization Income

A significant portion of our funding for the Advanta Business Cards segment is through securitizations. Retained interests in securitizations are included in accounts receivable from securitizations on the consolidated balance sheets. These assets are carried at estimated fair value and the resulting unrealized gain or loss from the valuation is included in securitization income on the consolidated income statements. We estimate the fair value of retained interests in securitizations based on a discounted cash flow analysis when quoted market prices are not available. We estimate the cash flows of the retained interest-only strip as the excess of the weighted average interest yield on the pool of the receivables sold over the sum of the interest rate earned by noteholders, the servicing fee and an estimate of future credit losses over the life of the existing receivables. We discount cash flows from the date the cash is expected to become available to us using an interest rate that management believes a third party purchaser would demand. The discounted cash flow analysis requires estimates that are susceptible to significant revision as more information becomes available. Changes in economic conditions, market interest rates and pricing spreads, changes in the level of payments on securitized receivables, the composition and risk characteristics of the securitized receivables, bankruptcy laws or other regulatory policies could cause actual cash flows from the securitized receivables to vary from management’s estimates. Note 6 to the consolidated financial statements summarizes the key assumptions used to estimate the fair value of retained interests in securitizations during each of the reporting periods and at December 31, 2004 and 2003. It also includes a sensitivity analysis of the valuations of retained interests in securitizations, assuming two changes in each of those assumptions at December 31, 2004.

Business Credit Card Rewards Programs

We offer cash back rewards and/or business rewards programs with the majority of our business credit cards. We estimate the costs of future reward redemptions and record a liability at the time cash back rewards or business rewards are earned by the cardholder. These costs of future reward redemptions are recorded as a reduction of other revenues on the consolidated income statements. Estimates of the costs of future reward redemptions require management to make predictions about future cardholder behavior, including assumptions regarding the percentage of earned rewards that cardholders will ultimately redeem and the cost of business rewards. We base the assumptions on historical experience, consideration of changes in portfolio composition and changes in the rewards programs, including redemption terms. It is reasonably possible that actual results will differ from our estimates or that our estimated liability for these programs may change. If either the estimated percentage of earned rewards that cardholders will ultimately redeem for each program or the estimated cost per redeemed reward point increased by 10% at December 31, 2004, other revenues of the Advanta Business Cards segment would decrease by $1.9 million and our liabilities would increase by the same amount.

      We revised our estimated costs of future reward redemptions in each of the years ended December 31, 2004, 2003 and 2002 as discussed in Note 17 to the consolidated financial statements. The changes in estimated costs of future reward redemptions decreased other revenue by $2.7 million in the year ended December 31, 2004 and increased other revenues by $2.8 million in 2003 and $1.9 million in 2002.

Litigation Contingencies

We estimate our litigation reserves based on the status of litigation and our assessment of the ultimate resolution of each action after consultation with our attorneys. However, due to the inherent uncertainty in litigation and since the ultimate resolutions of our litigation, claims and other legal proceedings are influenced by factors outside of our control, it is reasonably possible that our estimated liability under these proceedings

26

may change or that actual results will differ from our estimates. Litigation reserves are included in other liabilities on the consolidated balance sheets if related to continuing operations. Changes in estimates or other charges related to litigation are included in operating expenses of the respective business segment if related to continuing operations. For a discussion of discontinued operations estimates, see “Discontinued Operations” below. In the year ended December 31, 2002, we recorded a $43 million loss on transfer of consumer credit card business in connection with a ruling issued by the court in the Fleet Financial Group, Inc. (“Fleet”) litigation. This charge was classified in continuing operations as a loss on transfer of consumer credit card business in noninterest revenues, consistent with the classification of the gain on transfer of consumer credit card business of $541 million in 1998. See Note 23 to the consolidated financial statements and also the ‘’Liquidity, Capital Resources and Analysis of Financial Condition” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations for a discussion of recent developments in the Fleet litigation. In addition, other operating expenses for the year ended December 31, 2002 were reduced by a $1.1 million decrease in litigation reserves resulting from a reduction of damages in a jury verdict in a case involving a former executive. See Note 11 to the consolidated financial statements for further discussion of litigation contingencies.

Income Taxes

Our effective tax rate is based on expected income, statutory tax rates, current tax law and tax planning opportunities available to us in the various jurisdictions in which we operate. Management judgment is required in determining our effective tax rate and in evaluating our tax positions. While it is often difficult to predict the final outcome or the timing of resolution of any particular tax matter, we believe that our income tax accruals reflect the probable outcome of known tax contingencies.

      Deferred income tax assets and liabilities are determined based on the tax effects of the temporary differences between the book and tax bases of the various assets and liabilities and give current recognition to changes in tax rates and laws. Changes in tax laws, rates, regulations and policies could materially affect our tax estimates and are outside of our control. We evaluate the realizability of the deferred tax asset and recognize a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. Changes in estimates of deferred tax asset realizability or effective tax rates may impact the income tax expense of a specific business segment or affect all business segments, depending on the circumstances associated with the change in estimate. The net deferred tax asset is included in other assets on the consolidated balance sheets.

      In establishing the valuation allowance on the deferred tax asset, we consider (1) estimates of expected future taxable income, (2) existing and projected book/tax differences, (3) tax planning strategies available, and (4) the general and industry specific economic outlook. Estimates of expected future taxable income are based on forecasts for continuing operations over a reasonable forecasting horizon and the general and industry specific economic outlook. This realizability analysis is inherently subjective, as it requires management to forecast the business credit card market and the competitive and general economic environment in future periods. A 10% change in the estimated realizability of our net deferred tax assets related to net operating losses would impact deferred tax assets and income tax expense by $1.1 million at December 31, 2004.

      In January 2005, we received the Internal Revenue Service’s final approval of the settlement of tax disputes in our May 28, 2004 agreement with Bank of America Corporation (“Bank of America”). The settlement results in a reduction of our deferred tax asset related to net operating loss carryforwards and a reduction in the valuation allowance in the first quarter of 2005. See Note 23 to the consolidated financial statements for further discussion.

Discontinued Operations

Our exit from the mortgage business and discontinuance of the leasing business represent the disposal of business segments and the results of these segments are classified as discontinued operations in all periods presented. We use estimates of future cash flows in the accounting for discontinued operations, including estimates of the future costs of mortgage business-related litigation and estimates of operating results through the remaining term of the leasing portfolio. Estimates regarding mortgage business-related litigation include

27

assumptions about the number of future claims, the resolution of existing claims, the anticipated timeframe of proceedings and potential recoveries from insurance reimbursements. Estimates of future leasing operating results through the remaining term of the leasing portfolio include estimates of credit performance, asset realization rates, fee revenues and operating expenses, including sales tax assessments.

      Discontinued operations estimates are based on historical experience, current levels of contingent liabilities and our current expectations regarding the ultimate resolutions of those contingent liabilities. As all estimates used are influenced by factors outside of our control, there is uncertainty inherent in these estimates, making it reasonably possible that they could change. Changes in estimates related to discontinued operations are included in gain (loss), net, on discontinuance of mortgage and leasing businesses on the consolidated income statements. We have made significant changes to these estimates in recent years. Estimates of leasing business operating results increased $4.0 million in the year ended December 31, 2004, decreased $600 thousand in 2003, and increased $11.3 million in 2002. The estimated costs of mortgage business-related litigation increased by $3.3 million in the year ended December 31, 2004, $2.6 million in 2003 and $25.3 million in 2002. See the “Discontinued Operations” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations for a detailed description of the nature of changes in discontinued operations estimates in the reporting periods.

Advanta Business Cards

Advanta Business Cards originates new accounts directly and through the use of third parties. The following table provides key statistical information on our business credit card portfolio for the years ended December 31. Credit quality statistics for the business credit card portfolio are included in the “Provision and Allowance for Receivable Losses” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

($ in thousands)	2004		2003		2002
Average owned receivables	$	626,383	$	588,219	$	472,103
Average securitized receivables	$	2,524,547	$	2,238,157	$	1,727,864
Cardholder transaction volume	$	8,256,552	$	7,041,114	$	5,464,033
New account originations		130,563		170,544		241,869
Average number of active accounts(1)		582,625		586,342		517,876
Ending number of accounts at December 31		777,943		786,700		780,326

(1)  Active accounts are defined as accounts with a balance at month-end. Active account statistics do not include charged-off accounts. The statistics reported above are the average number of active accounts for the years ended December 31.

      We continually enhance our targeting and decision models used in identifying prospective customers. The decreases in new account originations in the years ended December 31, 2004 and 2003 are due primarily to refinements in our targeting and decision models that increased the selectivity of our customer acquisitions. The timing of marketing campaigns and the competitive environment also impact the number of accounts we originate. We expect the volume of new account originations in the year ended December 31, 2005 to be higher than the volume of new account originations in 2004, based on the number and timing of planned marketing campaigns and other strategic initiatives.

      We expect managed business credit card receivables to grow 10% to 20% and owned receivables to grow 23% to 33% in the year ended December 31, 2005, based on our current plans and strategies. The following is a

28

reconciliation of projected estimated owned business credit card receivable growth to managed business credit card receivable growth:

			Projected Estimate at December 31, 2005
	Actual at
	December 31,		Low End of		Percentage			High End of		Percentage
($ in thousands)	2004		Range		Increase			Range		Increase
Owned receivables	$	730,483	$	898,500		23.0	%	$	971,500		33.0	%
Securitized receivables		2,564,147		2,725,500		6.3	%		2,982,500		16.3	%
Managed receivables	$	3,294,630	$	3,624,000		10.0	%	$	3,954,000		20.0	%

      Pretax income for Advanta Business Cards was $75.2 million for the year ended December 31, 2004 as compared to $56.3 million for the year ended December 31, 2003 and $63.2 million for the year ended December 31, 2002. The components of pretax income for Advanta Business Cards for the years ended December 31 were as follows:

($ in thousands)	2004			2003			2002
Net interest income on owned interest-earning assets	$	63,415		$	55,621		$	55,204
Noninterest revenues		285,610			266,475			246,957
Provision for credit losses		(42,486	)		(45,670	)		(40,006	)
Operating expenses		(231,357	)		(220,176	)		(198,911	)
Pretax income	$	75,182		$	56,250		$	63,244

      Net interest income on owned interest-earning assets increased by $7.8 million for the year ended December 31, 2004 as compared to 2003. The increase in net interest income in 2004 was due primarily to a decrease in the cost of funding on-balance sheet assets and an increase in average owned business credit card receivables of $38.2 million, partially offset by a decrease in yields on owned business credit card receivables. The decrease in the cost of funding on-balance sheet assets in 2004 was due primarily to the principal collections of receivables allocated to the Series 2000-B securitization during its amortization period in 2003 that resulted in higher levels of on-balance sheet assets and therefore, higher costs of funding for 2003. The increase in net interest income on owned interest-earning assets of $417 thousand for the year ended December 31, 2003 as compared to 2002 was due primarily to an increase in average owned business credit card receivables of $116.1 million, partially offset by a decline in yields. The cost of funding higher on-balance sheet assets in 2003 discussed above did not result in a significant variance in net interest income in 2003 as compared to 2002 because the impact was offset by a decrease in the prevailing interest rate environment in 2003 as compared to 2002. The decreases in yields earned on our business credit cards in both 2004 and 2003 were a result of our competitively-priced offerings and products.

      Noninterest revenues include securitization income, servicing revenues, interchange income, business credit card rewards costs and other fee revenues. The increases in noninterest revenues for the years ended December 31, 2004 and 2003 were due primarily to higher transaction volume that resulted in higher interchange income, and increased volume of securitized business credit card receivables that produced higher securitization income and servicing fees. Noninterest revenues also include the impact of changes in estimated costs of future reward redemptions in each reporting period. See further discussion in the “Other Revenues” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

      The decrease in provision for credit losses for the year ended December 31, 2004 as compared to 2003 reflects a reduction in the estimate of losses inherent in the portfolio based on the delinquency and principal charge-off trends and the current composition of the portfolio as compared to 2003, partially offset by the increase in average owned business credit card receivables. The increase in the provision for credit losses for the year ended December 31, 2003 as compared to 2002 primarily reflects the increase in average owned business credit card receivables, partially offset by a reduction in the estimate of losses inherent in the portfolio based on the delinquency and principal charge-off trends and the composition of the portfolio as compared to 2002.

      The increase in operating expenses for the year ended December 31, 2004 as compared to 2003 was due primarily to an increase in salaries and employee benefits expense including higher incentive compensation

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expense resulting from improved earnings and collections performance, and personnel hired in connection with initiatives to originate and retain relationships with high credit quality customers. In addition, salaries and employee benefits expenses in 2004 include executive compensation expense incurred related to changes in senior management. Marketing expense also increased in 2004 as compared to 2003 due primarily to costs incurred related to our development of alliances with other organizations serving segments of the small business market and amortization expense on marketing rights related to certain of these alliances, as well as increased marketing activity in response to the competitive environment. Operating expenses reflect decreases in the amortization of deferred origination costs, due to the number and timing of new account originations. The increase in operating expenses for the year ended December 31, 2003 as compared to 2002 resulted from growth in owned and securitized receivables and additional investments in initiatives to strengthen our position as a leading issuer of business credit cards to the small business market.

Venture Capital

The components of pretax loss for our Venture Capital segment for the years ended December 31 were as follows:

($ in thousands)	2004			2003			2002
Net interest expense	$	(311	)	$	(481	)	$	(711	)
Realized gains (losses), net		1,162			(1,809	)		(48	)
Unrealized losses, net		(2,678	)		(2,034	)		(6,860	)
Other revenues		0			0			16
Operating expenses		(1,048	)		(2,800	)		(2,498	)
Pretax loss	$	(2,875	)	$	(7,124	)	$	(10,101	)

      As shown in the table above, pretax loss for our Venture Capital segment is comprised primarily of realized and unrealized gains or losses on our venture capital investments, which reflect the market conditions for those investments in each respective period, and operating expenses. The estimated fair value of our venture capital investments was $5.3 million at December 31, 2004 and $9.5 million at December 31, 2003. Operating expenses for the year ended December 31, 2004 include expenses associated with the closure of an operational location of our Venture Capital segment in the first quarter of 2004, consisting of $571 thousand of expense relating to lease commitments and $236 thousand of severance costs. Due to the closure of the operational location, we expect to incur minimal operating expenses in the Venture Capital segment in future periods. Operating expenses for the year ended December 31, 2003 include approximately $410 thousand of lease termination costs paid in 2003.

Interest Income and Expense

Interest income decreased by $1.7 million to $106.7 million for the year ended December 31, 2004 as compared to 2003. The decrease was due primarily to a decrease in the average yield earned on our business credit card receivables, an $89.7 million decrease in the average balance of federal funds sold and a $68.1 million decrease in average restricted interest-bearing deposits. The average yield earned on our business credit card receivables decreased in 2004 as compared to 2003 as a result of our competitively-priced offerings and products, partially offset by higher short-term interest rates. The impact of the decrease in yields was partially offset by a $38.2 million increase in average business credit card receivables in 2004 as compared to 2003.

      Interest income increased by $4.8 million to $108.4 million for the year ended December 31, 2003 as compared to 2002. The average yield earned on our business credit card receivables decreased in 2003 as compared to 2002 as a result of our competitively-priced offerings and products. In addition, yields on federal funds sold and investments decreased due primarily to the prevailing interest rate environment. The decrease in yields was more than offset by an increase in average interest-earning assets of $286 million in the year ended December 31, 2003, resulting in an increase in interest income.

      Interest expense for the year ended December 31, 2004 includes $9.2 million of interest expense on subordinated debt payable to preferred securities trust. Our adoption of Financial Accounting Standards Board

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(“FASB”) Interpretation No. 46, “Consolidation of Variable Interest Entities — An Interpretation of ARB No. 51” (“FIN 46”), as revised, resulted in the deconsolidation of the subsidiary trust that issued our trust preferred securities effective December 31, 2003. As a result of the deconsolidation of that trust, the consolidated income statement includes interest expense on subordinated debt payable to preferred securities trust beginning January 1, 2004, as compared to the periods through December 31, 2003 that included payments on the trust preferred securities classified as minority interest in income of consolidated subsidiary.

      For the year ended December 31, 2004, interest expense decreased by $2.7 million to $45.6 million as compared to 2003. The decrease in interest expense is due primarily to decreases in our average deposits and debt outstanding, partially offset by the increase of $9.2 million related to interest expense on subordinated debt payable to preferred securities trust described above. Average balances of deposits and debt outstanding decreased $284 million for the year ended December 31, 2004 as compared to 2003. Average debt and deposits for the year ended December 31, 2003 reflected the funding of higher levels of on-balance sheet receivables and assets as a result of securitizations in their amortization periods in 2003. We expect our average cost of funds on deposits to increase in future periods based on the current market expectations for future interest rates and our anticipated funding needs resulting from expected higher levels of on-balance sheet receivables and assets at Advanta Bank Corp. in 2005. However, this may not result in an increase in our aggregate average cost of funds due to the fluctuation in funding mix and our parent company liquidity position in 2005 that will provide us with the flexibility to manage our debt pricing and maturities. See further discussion in the “Liquidity, Capital Resources and Analysis of Financial Condition” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations. We expect higher levels of average on-balance sheet receivables and assets for the year ended December 31, 2005 as compared to 2004 as a result of our current growth plans and strategies and securitizations in their amortization periods in 2005.

      For the year ended December 31, 2003, interest expense increased by $728 thousand to $48.3 million as compared to 2002. The increase in interest expense in 2003 was due to increases in our average interest-bearing liabilities outstanding, partially offset by a decrease in our average cost of funds. Our average outstanding deposits and debt increased $305 million for the year ended December 31, 2003 as compared to 2002. Our average cost of funds decreased from 5.17% for the year ended December 31, 2002 to 3.80% for the year ended December 31, 2003. The decrease in our average cost of funds is primarily a result of the prevailing interest rate environment in those periods, partially offset by an increase in the weighted average maturity of our debt securities at the time of origination and our deposit origination strategy related to funding and growth in average on-balance sheet assets during 2003.

      The following table provides an analysis of interest income and expense data, average balance sheet data, net interest spread and net interest margin for both continuing and discontinued operations. The net interest spread represents the difference between the yield on interest-earning assets and the average rate paid on interest-bearing liabilities. The net interest margin represents the difference between the yield on interest-earning assets and the average rate paid to fund interest-earning assets. Interest income includes late fees on business credit card receivables.

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Interest Rate Analysis and Average Balances

			Year Ended December 31,
			2004							2003							2002
			Average				Average			Average				Average			Average				Average
($ in thousands)			Balance		Interest		Rate			Balance		Interest		Rate			Balance		Interest		Rate
Interest-earning assets:
	Owned receivables:
		Business credit cards(1)	$	626,383	$	82,054		13.10	%	$	588,219	$	83,511		14.20	%	$	472,103	$	81,391		17.24	%
		Other receivables		11,406		525		4.60			20,794		924		4.44			27,600		1,278		4.63
	Total receivables			637,789		82,579		12.95			609,013		84,435		13.86			499,703		82,669		16.54
	Federal funds sold			279,952		3,824		1.37			369,631		4,139		1.12			272,301		4,516		1.66
	Restricted interest-bearing deposits			10,045		100		1.00			78,121		936		1.20			95,482		1,537		1.61
	Tax-free investments(2)			806		45		5.58			707		54		7.64			1,281		84		6.56
	Taxable investments			169,618		3,037		1.79			170,083		2,507		1.47			127,197		4,124		3.24
	Retained interests in securitizations			151,770		17,140		11.29			140,127		16,311		11.64			96,185		10,658		11.08
	Interest-earning assets of discontinued operations			40,624		4,207		10.36			62,775		7,012		11.17			52,238		5,391		10.32
Total interest-earning assets(3)				1,290,604	$	110,932		8.60	%		1,430,457	$	115,394		8.07	%		1,144,387	$	108,979		9.52	%
Noninterest-earning assets				301,726							516,103							465,730
Total assets			$	1,592,330						$	1,946,560						$	1,610,117
Interest-bearing liabilities:
	Deposits:
		Money market savings	$	2,962	$	85		2.88	%	$	2,610	$	34		1.31	%	$	168	$	4		2.38	%
		Time deposits under $100,000		338,547		9,715		2.87			428,268		13,207		3.08			329,414		13,675		4.15
		Time deposits of $100,000 or more		348,957		10,120		2.90			507,172		14,174		2.79			316,827		12,528		3.95
	Total deposits			690,466		19,920		2.89			938,050		27,415		2.92			646,409		26,207		4.05
	Debt			281,973		17,445		6.19			318,026		20,337		6.39			304,893		23,043		7.56
	Subordinated debt payable to preferred securities trust			103,093		9,158		8.88			0		0		0.00			0		0		0.00
	Other borrowings			145		2		1.58			562		8		1.43			3,527		67		1.90
Total interest-bearing liabilities(4)				1,075,677	$	46,525		4.33	%		1,256,638	$	47,760		3.80	%		954,829	$	49,317		5.17	%
Non interest-bearing liabilities				149,535							261,877							193,182
Total liabilities				1,225,212							1,518,515							1,148,011
Company-obligated mandatorily redeemable preferred securities of subsidiary trust holding solely subordinated debentures of Advanta Corp. (trust preferred securities)				0							100,000							100,000
Stockholders’ equity				367,118							328,045							362,106
Total liabilities and stockholders’ equity			$	1,592,330						$	1,946,560						$	1,610,117
Net interest spread								4.27	%						4.27	%						4.35	%
Net interest margin								4.99	%						4.73	%						5.21	%

(1)	Interest income includes late fees for owned business credit card receivables of $5.8 million for the year ended December 31, 2004, $6.7 million for the year ended December 31, 2003 and $7.8 million for the year ended December 31, 2002.
(2)	Interest and average rate for tax-free securities are computed on a tax equivalent basis using a statutory rate of 35%.
(3)	Includes assets held and available for sale and nonaccrual receivables.
(4)	Includes funding of assets for both continuing and discontinued operations.

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Interest Variance Analysis

The following table presents the effects of changes in average volume and interest rates on individual financial statement line items on a tax equivalent basis using a statutory rate of 35%. The effects on individual financial statement line items are not necessarily indicative of the overall effect on net interest income. Total interest income includes income from assets held and available for sale.

			2004 vs. 2003												2003 vs. 2002
			Increase (Decrease) Due to												Increase (Decrease) Due to
									Changes												Changes
			Changes			Changes			in			Total			Changes			Changes			in			Total
			in			in			Rate/			Increase			in			in			Rate/			Increase
($ in thousands)			Volume(1)			Rate(2)			Volume(3)			(Decrease)			Volume(1)			Rate(2)			Volume(3)			(Decrease)
Interest income from:
	Owned receivables:
		Business credit cards	$	5,419		$	(6,470	)	$	(406	)	$	(1,457	)	$	20,018		$	(14,352	)	$	(3,546	)	$	2,120
		Other receivables		(417	)		33			(15	)		(399	)		(315	)		(52	)		13			(354	)
	Federal funds sold			(1,004	)		924			(235	)		(315	)		1,616			(1,470	)		(523	)		(377	)
	Restricted interest-bearing deposits			(817	)		(156	)		137			(836	)		(280	)		(391	)		70			(601	)
	Tax-free investments			8			(15	)		(2	)		(9	)		(38	)		14			(6	)		(30	)
	Taxable investments			(7	)		544			(7	)		530			1,390			(2,251	)		(756	)		(1,617	)
	Retained interests in securitizations			1,355			(490	)		(36	)		829			4,869			539			245			5,653
	Interest-earning assets of discontinued operations			(2,474	)		(508	)		177			(2,805	)		1,087			444			90			1,621
Total interest income			$	2,063		$	(6,138	)	$	(387	)	$	(4,462	)	$	28,347		$	(17,519	)	$	(4,413	)	$	6,415
Interest expense on:
	Deposits:
		Money market savings	$	5		$	41		$	5		$	51		$	58		$	(2	)	$	(26	)	$	30
		Time deposits under $100,000		(2,763	)		(899	)		170			(3,492	)		4,102			(3,525	)		(1,045	)		(468	)
		Time deposits of $100,000 or more		(4,414	)		558			(198	)		(4,054	)		7,519			(3,675	)		(2,198	)		1,646
	Debt			(2,304	)		(636	)		48			(2,892	)		993			(3,567	)		(132	)		(2,706	)
	Subordinated debt payable to preferred securities trust			9,158			0			0			9,158			0			0			0			0
	Other borrowings			(6	)		1			(1	)		(6	)		(56	)		(17	)		14			(59	)
Total interest expense				(324	)		(935	)		24			(1,235	)		12,616			(10,786	)		(3,387	)		(1,557	)
Net interest income			$	2,387		$	(5,203	)	$	(411	)	$	(3,227	)	$	15,731		$	(6,733	)	$	(1,026	)	$	7,972

(1)	Equals change in volume multiplied by prior year rate.
(2)	Equals change in rate multiplied by prior year volume.
(3)	Equals change in rate multiplied by change in volume.

Provision and Allowance for Receivable Losses

For the year ended December 31, 2004, provision for credit losses on a consolidated basis decreased $3.1 million to $42.4 million as compared to 2003. For the year ended December 31, 2004, the provision for interest and fee losses, which is recorded as a direct reduction to interest and fee income, decreased by $1.9 million to $9.7 million as compared to 2003. The decreases in provision for credit losses and provision for interest and fee losses were due primarily to a reduction in the estimate of losses inherent in the portfolio based on delinquency and principal charge-off trends and the current composition of the portfolio that included more high credit quality customers, partially offset by growth in average owned business credit card receivables of $38.2 million for the year ended December 31, 2004 as compared to 2003.

      For the year ended December 31, 2003, the provision for credit losses increased by $4.5 million to $45.4 million as compared to 2002. The increase was due primarily to growth in average owned business credit card receivables of $116 million for the year ended December 31, 2003 as compared to 2002. The impact of the growth in owned receivables was partially offset by a reduction in the estimate of losses inherent in the portfolio based on the improved delinquency and principal charge-off trends and the composition of the portfolio in 2003 as compared to 2002.

      For the year ended December 31, 2003, the provision for interest and fee losses increased by $4.7 million to $11.6 million as compared to 2002. The increase was due to a change in income billing practice effective October 1, 2002 and the increase in average owned business credit card receivables for the year ended December 31, 2003 as compared to 2002. Prior to October 1, 2002, the billing and recognition of interest and fees was discontinued when the related receivable became 90 days past due or when the account was classified

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as fraudulent, bankrupt, deceased, hardship or credit counseling. Effective October 1, 2002, we continue to bill and recognize interest and fees on accounts when they become 90 days past due, and an additional allowance for receivable losses is established for the additional billings estimated to be uncollectible through a provision for interest and fee losses. The billing and recognition of interest and fees is still discontinued when the account is classified as fraudulent, bankrupt, deceased, hardship or credit counseling.

      The allowance for receivable losses on business credit card receivables was $49.2 million as of December 31, 2004, or 6.73% of owned receivables, which was lower as a percentage of owned receivables than the allowance of $47.0 million, or 9.08% of owned receivables, as of December 31, 2003. Owned business credit card receivables increased to $730 million at December 31, 2004 from $518 million at December 31, 2003. The decrease in allowance as a percentage of owned receivables is due to a reduction in the estimate of losses inherent in the portfolio based on delinquency and principal charge-off trends and the current composition of the portfolio that included more high credit quality customers as compared to December 31, 2003. In addition, refinements and enhancements to our procedures and tools used in the risk management of existing customers have helped to reduce credit risk in the portfolio. Owned business credit card receivables 90 or more days delinquent were 1.87% as a percentage of ending receivables at December 31, 2004 as compared to 2.45% at December 31, 2003. Owned business credit card receivables 30 or more days delinquent were 3.87% as a percentage of ending receivables at December 31, 2004 as compared to 4.88% at December 31, 2003.

      Our charge-off and re-age policies conform to the Uniform Retail Credit Classification and Account Management Policy, as well as the Credit Card Lending Guidance, issued by the Federal Financial Institutions Examination Council (“FFIEC”). Our charge-off policy for contractually delinquent business credit card accounts is to charge-off an unpaid receivable no later than the end of the month in which it becomes past due 180 cumulative days from the contractual due date. Our charge-off policy for bankrupt business credit card accounts is to charge-off the unpaid receivable within 60 days of receipt of notification of filing from the bankruptcy court or within the timeframes adopted in the FFIEC Uniform Retail Credit Classification and Account Management Policy, whichever is shorter.

      Although charge-off levels are not always predictable since they are impacted by the economic environment and other factors beyond our control, and there may be month-to-month or quarterly variations in losses or delinquencies, we anticipate that the owned and managed net principal charge-off rates for the year ended December 31, 2005 will be lower than those experienced for the year ended December 31, 2004. This expectation is based upon the level of receivables 90 days or more delinquent and bankruptcy petitions at December 31, 2004 as well as the current composition of the portfolio that reflects our strategic initiative to selectively attract and retain high credit quality customers.

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      The following table provides credit quality data as of and for the year-to-date periods indicated for our owned receivable portfolio including a summary of allowances for receivable losses, delinquencies, nonaccrual receivables, accruing receivables past due 90 days or more, and net principal charge-offs. Consolidated data includes business credit cards and other receivables. Accounts previously reported as delinquent that have been re-aged after meeting prescribed criteria and are not reported in delinquency statistics at December 31, 2004 totaled $8.6 million. Gross interest income that would have been recorded for nonaccrual receivables, had interest been accrued throughout the year in accordance with the assets’ original terms, was $2.9 million for the year ended December 31, 2004, $2.6 million for 2003 and $4.6 million for 2002.

		December 31,
($ in thousands)		2004(1)			2003(1)			2002(1)			2001			2000
Consolidated — Owned
Allowance for receivable losses		$	50,478		$	48,454		$	46,159		$	41,971		$	33,367
Receivables 30 days or more delinquent			28,369			25,413			25,197			29,520			19,395
Receivables 90 days or more delinquent			13,638			12,808			12,755			14,474			9,090
Accruing receivables past due 90 days or more			12,233			11,320			10,535			0			0
Nonaccrual receivables			11,393			7,978			5,525			20,052			10,700
As a percentage of gross receivables:
	Allowance for receivable losses		6.81	%		9.06	%		9.81	%		9.44	%		9.29	%
	Receivables 30 days or more delinquent		3.83			4.75			5.35			6.64			5.40
	Receivables 90 days or more delinquent		1.84			2.39			2.71			3.26			2.53
	Accruing receivables past due 90 days or more		1.65			2.12			2.24			0.00			0.00
	Nonaccrual receivables		1.54			1.49			1.17			4.51			2.98
Net principal charge-offs		$	39,943		$	43,704		$	37,416		$	27,372		$	17,807
As a percentage of average gross receivables:
	Net principal charge-offs		6.26	%		7.18	%		7.49	%		6.67	%		4.21	%
Business Credit Cards — Owned
Allowance for receivable losses		$	49,190		$	47,041		$	44,466		$	41,169		$	33,165
Receivables 30 days or more delinquent			28,287			25,301			23,406			28,040			18,512
Receivables 90 days or more delinquent			13,638			12,696			11,959			13,891			8,530
Accruing receivables past due 90 days or more			12,233			11,320			10,535			0			0
Nonaccrual receivables			11,393			7,866			4,729			19,469			10,140
As a percentage of gross receivables:
	Allowance for receivable losses		6.73	%		9.08	%		9.99	%		9.89	%		9.90	%
	Receivables 30 days or more delinquent		3.87			4.88			5.26			6.74			5.52
	Receivables 90 days or more delinquent		1.87			2.45			2.69			3.34			2.55
	Accruing receivables past due 90 days or more		1.67			2.19			2.37			0.00			0.00
	Nonaccrual receivables		1.56			1.52			1.06			4.68			3.03
Net principal charge-offs		$	39,936		$	43,670		$	37,400		$	27,369		$	17,805
As a percentage of average gross receivables:
	Net principal charge-offs		6.38	%		7.42	%		7.92	%		7.16	%		4.45	%

(1)   See “Interest and Fee Income on Receivables” in Note 2 to the consolidated financial statements for a discussion of the change in income billing practice effective October 1, 2002.

Securitization Income

Securitization income was $124.8 million for the year ended December 31, 2004, $122.8 million for 2003 and $119.0 million for 2002. The increase in securitization income in 2004 as compared to 2003 was due to the positive impacts from increased volume of securitized receivables and a decrease in the net principal charge-off rate on securitized receivables, partially offset by a decrease in yield on securitized receivables and an increase in the floating interest rates earned by noteholders. The increase in the floating interest rates earned by noteholders resulted from the rising interest rate environment, which we expect may continue in 2005 based on the current market expectations for future interest rates. The increase in securitization income in 2003 as compared to 2002 was due to increased volume of securitized receivables, a decrease in the floating interest rates earned by noteholders and a decrease in the net principal charge-off rate on securitized receivables, partially offset by a decrease in yield on securitized receivables. The fluctuations in yields and net principal charge-off rates on our securitized receivables are similar to those experienced in our owned business credit card receivables as discussed in the “Interest Income and Expense” and “Provision and Allowance for Receivable Losses” sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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     Managed Receivable Data

In addition to evaluating the financial performance of the Advanta Business Cards segment under GAAP, we evaluate Advanta Business Cards’ performance on a managed basis. Our managed business credit card receivable portfolio is comprised of both owned and securitized business credit card receivables. We sell business credit card receivables through securitizations accounted for as sales under GAAP. We continue to own and service the accounts that generate the securitized receivables. Managed data presents performance as if the securitized receivables had not been sold. We believe that performance on a managed basis provides useful supplemental information because we retain interests in the securitized receivables and, therefore, we have a financial interest in and exposure to the performance of the securitized receivables. Revenue and credit data on the managed portfolio provides additional information useful in understanding the performance of the retained interests in securitizations. The following tables provide managed data for Advanta Business Cards and a reconciliation of the managed data to the most directly comparable GAAP financial measures:

	Income Statement Measures and Statistics
									Advanta
	Advanta								Business
	Business		GAAP			Securitization			Cards		Managed
($ in thousands)	Cards GAAP		Ratio(3)			Adjustments			Managed		Ratio(3)
Year Ended December 31, 2004
Interest income	$	99,194		12.75	%	$	364,240		$	463,434		14.71	%
Interest expense		35,779		4.60			53,731			89,510		2.84
Net interest income		63,415		8.15			310,509			373,924		11.87
Noninterest revenues		285,610		36.70			(140,485	)		145,125		4.61
Provision for credit losses		42,486		5.46			170,024	(2)		212,510		6.75
Risk-adjusted revenues(1)		306,539		39.39			0			306,539		9.73
Average business credit card interest-earning assets		778,153					2,372,777			3,150,930
Average business credit card receivables		626,383					2,524,547			3,150,930
Net principal charge-offs		39,936		6.38			170,024			209,960		6.66
Year Ended December 31, 2003
Interest income	$	99,822		13.71	%	$	350,334		$	450,156		15.93	%
Interest expense		44,201		6.07			39,649			83,850		2.97
Net interest income		55,621		7.64			310,685			366,306		12.96
Noninterest revenues		266,475		36.59			(131,147	)		135,328		4.79
Provision for credit losses		45,670		6.27			179,538	(2)		225,208		7.97
Risk-adjusted revenues(1)		276,426		37.95			0			276,426		9.78
Average business credit card interest-earning assets		728,346					2,098,030			2,826,376
Average business credit card receivables		588,219					2,238,157			2,826,376
Net principal charge-offs		43,670		7.42			179,538			223,208		7.90
Year Ended December 31, 2002
Interest income	$	92,049		16.20	%	$	318,970		$	411,019		18.68	%
Interest expense		36,845		6.48			38,923			75,768		3.44
Net interest income		55,204		9.71			280,047			335,251		15.24
Noninterest revenues		246,957		43.46			(123,765	)		123,192		5.60
Provision for credit losses		40,006		7.04			156,282	(2)		196,288		8.92
Risk-adjusted revenues(1)		262,155		46.13			0			262,155		11.92
Average business credit card interest-earning assets		568,288					1,631,679			2,199,967
Average business credit card receivables		472,103					1,727,864			2,199,967
Net principal charge-offs		37,400		7.92			156,282			193,682		8.80

(1)	Risk-adjusted revenues represent net interest income and noninterest revenues, less provision for credit losses.
(2)	Includes the amount by which the credit losses would have been higher had the securitized receivables remained as owned and the provision for credit losses on securitized receivables been equal to actual reported charge-offs.
(3)	Ratios are as a percentage of average business credit card interest-earning assets except net principal charge-off ratios, which are as a percentage of average business credit card receivables.

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	Balance Sheet Measures and Statistics
								Advanta
	Advanta							Business
	Business		GAAP			Securitization		Cards		Managed
($ in thousands)	Cards GAAP		Ratio(1)			Adjustments		Managed		Ratio(1)
As of December 31, 2004
Number of business credit card accounts		777,943					N/A		777,943
Ending business credit card receivables	$	730,483				$	2,564,147	$	3,294,630
Receivables 30 days or more delinquent		28,287		3.87	%		107,546		135,833		4.12	%
Receivables 90 days or more delinquent		13,638		1.87			51,770		65,408		1.99
Accruing receivables past due 90 days or more		12,233		1.67			45,981		58,214		1.77
Nonaccrual receivables		11,393		1.56			43,114		54,507		1.65
As of December 31, 2003
Number of business credit card accounts		786,700					N/A		786,700
Ending business credit card receivables	$	518,040				$	2,463,747	$	2,981,787
Receivables 30 days or more delinquent		25,301		4.88	%		148,177		173,478		5.82	%
Receivables 90 days or more delinquent		12,696		2.45			74,762		87,458		2.93
Accruing receivables past due 90 days or more		11,320		2.19			66,376		77,696		2.61
Nonaccrual receivables		7,866		1.52			47,381		55,247		1.85

(1)  Ratios are as a percentage of ending business credit card receivables.

Servicing Revenues

Servicing revenues were $49.5 million for the year ended December 31, 2004, $40.7 million for 2003 and $34.0 million for 2002. The increases in servicing revenues in 2004 and 2003 were due to increased volume of securitized business credit card receivables.

Other Revenues

	Year Ended December 31,
($ in thousands)	2004			2003			2002
Interchange income	$	140,534		$	118,294		$	93,023
Business credit cards cash back rewards		(24,713	)		(19,400	)		(2,500	)
Business credit cards business rewards		(16,513	)		(9,870	)		(10,042	)
Balance transfer fees		4,572			5,007			3,545
Cash usage fees		3,097			3,061			3,602
Other business credit card fees		2,911			4,181			4,684
Earnings on investment in Fleet Credit Card Services, L.P.		2,545			3,150			0
Investment securities losses, net		(1,498	)		(3,651	)		(6,169	)
Valuation adjustments on other receivables held for sale		0			50			(1,085	)
Other, net		2,621			4,156			2,094
Total other revenues, net	$	113,556		$	104,978		$	87,152

      Interchange income includes interchange fees on both owned and securitized business credit cards. The increases in interchange income for the years ended December 31, 2004 and 2003 as compared to prior periods were due primarily to higher transaction volume. The average interchange rate was 2.1% in each of the years ended December 31, 2004, 2003, and 2002.

      The increases in business credit cards cash back rewards for the years ended December 31, 2004 and 2003 as compared to prior periods were due primarily to increases in average business credit card accounts in the cash back rewards programs.

      The fluctuations in business credit cards business rewards in the years ended December 31, 2004 and 2003 as compared to prior periods were due primarily to changes in estimates of anticipated costs of redemptions. Estimates of costs of future reward redemptions increased by $2.7 million in the year ended

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December 31, 2004 as compared to a decrease of $2.8 million in 2003 and a decrease of $1.9 million in 2002. See Note 17 to the consolidated financial statements for further discussion.

      The increase in balance transfer fees for the year ended December 31, 2003 as compared to 2002 was due primarily to an increase in balance transfer promotional offers included in our marketing campaigns that resulted in a higher volume of balance transfers.

      The decrease in cash usage fees for the year ended December 31, 2003 as compared to 2002 was due primarily to a decrease in the average fee charged on transactions due to promotional offers, partially offset by an increase in the number of cash usage transactions resulting from the promotional offers.

      As a result of our May 28, 2004 agreement with Bank of America and the combination of Bank of America’s and Fleet Credit Card Services, L.P.’s consumer credit card businesses, our partnership interest in Fleet Credit Card Services, L.P. represents an interest in the combined business. Subsequent to the date of the agreement with Bank of America, we have accounted for our investment in Fleet Credit Card Services, L.P. using the cost method and have recognized dividends received distributed from net accumulated earnings as income. Prior to the date of the agreement, we recognized earnings allocable to our partnership interest using the equity method. Cumulative estimated earnings allocable to our partnership interest as of December 31, 2002 were included in the calculation of loss on transfer of consumer credit card business in 2002 as a result of the trial court ruling on January 22, 2003 in the Fleet litigation.

      Investment securities losses, net, primarily represent realized and unrealized gains and losses in venture capital investments reflecting the market conditions for our investments in each respective period. Investment securities losses, net, also include net realized gains on other investments of $18 thousand for the year ended December 31, 2004, $192 thousand for the year ended December 31, 2003 and $738 thousand for the year ended December 31, 2002.

Loss on Transfer of Consumer Credit Card Business

On January 22, 1999, Fleet and certain of its affiliates filed a lawsuit against Advanta Corp. and certain of its subsidiaries in Delaware Chancery Court in connection with the transfer of our consumer credit card business in 1998. On January 22, 2003, the trial court issued a ruling on all but one of the issues that were to be determined at trial, and ordered further briefing on the remaining outstanding issue. Effective December 31, 2002, we recognized a $43.0 million pretax charge representing the estimated impact of implementing the court’s January 2003 decisions. This charge was classified in continuing operations as a loss on transfer of consumer credit card business, consistent with the classification of the gain on transfer of consumer credit card business of $541 million in 1998. On November 7, 2003, the court ruled on the remaining outstanding issue, the method for calculating the interest to be awarded, and ordered the parties to submit revised calculations in accordance with this ruling before it issued a judgment. On February 2, 2004, the court issued its final judgment and order in this litigation. There was no impact to the results of our operations in 2003 since, based on the final judgment and order, our reserves at December 31, 2003 were adequate. See Note 23 to the consolidated financial statements and also the “Liquidity, Capital Resources and Analysis of Financial Condition” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations for a discussion of recent developments in this litigation.

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Operating Expenses

	Year Ended December 31,
($ in thousands)	2004		2003		2002
Salaries and employee benefits	$	92,863	$	76,062	$	69,227
Amortization of deferred origination costs, net		33,508		49,923		49,597
Marketing		21,014		15,749		11,061
External processing		20,267		20,189		18,339
Professional fees		14,043		12,357		11,431
Equipment		11,173		11,292		10,676
Occupancy		8,695		8,467		6,612
Credit		5,781		5,055		5,607
Insurance		4,222		4,257		2,870
Travel and entertainment		4,213		3,251		2,384
Postage		3,514		3,604		3,470
Fraud		3,382		3,606		2,896
Other		11,623		11,353		7,571
Total operating expenses	$	234,298	$	225,165	$	201,741

      Salaries and employee benefits increased for the year ended December 31, 2004 as compared to 2003 due to higher incentive compensation expense resulting from improved earnings and collections performance and personnel hired in connection with initiatives to originate and retain relationships with high credit quality customers. In addition, salaries and employee benefits in 2004 include $1.6 million of expense associated with executive compensation expense incurred in connection with changes in senior management and Venture Capital segment severance costs. Salaries and employee benefits increased for the year ended December 31, 2003 as compared to 2002 due primarily to growth in owned and securitized business credit card receivables.

      In December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment” which addresses accounting for equity-based compensation arrangements, including employee stock options. Upon implementation, entities are no longer able to account for equity-based compensation using the intrinsic value method. Entities are required to measure the cost of employee services received in exchange for awards of equity instruments at the grant date of the award using a fair value based method. The revised standard is effective for reporting periods beginning after June 15, 2005. As discussed in Note 2 to the consolidated financial statements, compensation expense for stock option plans in the three years ended December 31, 2004 was measured using the intrinsic value based method, rather than a fair value based method, so we expect the implementation of this standard to result in an increase in compensation expense related to stock option plans effective July 1, 2005. Compensation expense calculated in accordance with SFAS 123(R) in future periods may differ from the pro forma amounts disclosed in Note 2 to the consolidated financial statements for the three years ended December 31, 2004. The amount of compensation expense will vary depending on the number of options granted in 2005, the market value of our common stock and changes in other variables impacting stock option valuation estimates. In addition, upon adoption of SFAS 123(R), we may choose to use a different valuation model to estimate stock option fair value. Accordingly, we have not yet quantified the impact that the adoption of this statement will have on our results of operations.

      Amounts paid to third parties to acquire business credit card accounts and certain other origination costs are deferred and netted against any related business credit card origination fee, and the net amount is amortized on a straight-line basis over the privilege period of one year. Amortization of deferred origination costs, net, decreased for the year ended December 31, 2004 as compared to 2003 due primarily to the number and timing of new account originations. We originated a significant volume of new accounts in the fourth quarter of 2002, and the costs to originate those accounts were included in amortization expense throughout most of 2003. For the year ended December 31, 2003 as compared to 2002, the volume of account originations in the fourth quarter of 2002 did not result in a significant increase in amortization of deferred origination costs due to a decrease in our average acquisition cost per account in 2003 as compared to 2002. The decrease in average acquisition cost per account in 2003 resulted from our competitively-priced offerings and products.

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      Marketing expense increased for the year ended December 31, 2004 as compared to 2003 due primarily to costs incurred related to our development of alliances with other organizations serving segments of the small business market and amortization expense on marketing rights related to certain of these alliances, as well as increased marketing activity in response to the competitive environment. Marketing expense increased for the year ended December 31, 2003 as compared to 2002 due to Advanta’s sponsorship and advertising costs associated with tennis events, and also due to our development of programs to originate new customers and our customer relationship management initiatives to enhance and maintain our relationships with existing high credit quality business credit card customers, including marketing programs to stimulate usage, enhance customer loyalty and retain existing accounts.

      External processing expense increased for the year ended December 31, 2003 as compared to 2002 due to growth in active business credit card accounts, partially offset by a decrease in the effective rate as a result of meeting volume thresholds in the service agreement.

      Professional fees increased for the years ended December 31, 2004 and 2003 as compared to prior periods due primarily to an increase in the use of external consultants for initiatives to originate and retain relationships with high credit quality customers in both years and due to costs for other corporate matters in 2004. The impact in 2004 was partially offset by a decrease in legal expenses.

      Occupancy expense in the year ended December 31, 2004 includes approximately $571 thousand of expense relating to lease commitments associated with the closure of an operational location of our Venture Capital segment in the first quarter of 2004 and occupancy expense in the year ended December 31, 2003 included approximately $410 thousand of lease termination costs paid relating to office space formerly used in our Venture Capital segment. In addition, occupancy expense increased for the year ended December 31, 2003 as compared to 2002 due to additional office space that we began leasing in March 2003.

      Credit expense increased for the year ended December 31, 2004 as compared to 2003 due primarily to increased outsourced individual account recovery expense and the utilization of additional services from credit information service providers. Credit expense decreased for the year ended December 31, 2003 as compared to 2002 due to a shift in the types of recoveries. There was an increase in the proportion of total recoveries collected through sales of pools of charged-off accounts and a decrease in the proportion collected through outsourced individual account recovery efforts as compared to 2002. The decrease in credit expense in 2003 as compared to 2002 was partially offset by an increase in credit expense related to additional services from credit information service providers.

      Insurance expense increased for the year ended December 31, 2003 as compared to 2002 due primarily to an increase in directors’ and officers’ professional liability insurance costs as a result of market rates for this type of insurance.

      Travel and entertainment expense increased for the year ended December 31, 2004 as compared to 2003 due primarily to increased travel and related costs associated with sponsorship activities relating to cultural events. Travel and entertainment expense increased for the year ended December 31, 2003 as compared to 2002 due primarily to increased travel costs associated with building marketing alliances with companies focused on the small business market and other initiatives to originate new customers.

      Other operating expenses increased for the year ended December 31, 2003 as compared to 2002 due to growth in owned and securitized business credit card receivables and an increase in charitable contributions. In addition, other operating expenses for the year ended December 31, 2002 were reduced by a $1.1 million decrease in litigation reserves resulting from a reduction of damages in a jury verdict in a case involving a former executive.

Income Taxes

Income tax expense from continuing operations was $28.0 million and our effective tax rate was 38.8% for the year ended December 31, 2004.

      Income tax expense from continuing operations was $18.9 million and our effective tax rate was 38.5% for the year ended December 31, 2003.

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      We reported a pretax loss for the year ended December 31, 2002 as a result of the $43.0 million charge related to the ruling in the litigation associated with the transfer of our consumer credit card business in 1998. See Note 11 to the consolidated financial statements. Since the gain on the transfer of our consumer credit card business of $541 million in 1998 was not subject to income tax, the $43.0 million charge in 2002 did not result in a tax benefit. As a result, we reported income tax expense from continuing operations of $17.2 million for the year ended December 31, 2002. Our effective tax rate, excluding the $43.0 million charge, was 38.5% for 2002.

      At December 31, 2004, net operating loss carryforwards were $447 million. The scheduled expirations of net operating loss carryforwards were as follows at December 31, 2004 ($ in thousands):

Year Ended December 31,
2018	$	172,847
2019		40,489
2021		233,466

      Our capital loss carryforwards of $4.0 million at December 31, 2004 are scheduled to expire in the year ended December 31, 2009.

      In January 2005, we received the Internal Revenue Service’s final approval of the settlement of tax disputes in our May 28, 2004 agreement with Bank of America and in February 2005, we received $63.8 million in cash from Bank of America. See Note 23 to the consolidated financial statements. The settlement of the tax disputes resulted in an allocation of $381 million of the disputed partnership tax deductions to Fleet and $617 thousand of the disputed $47 million partnership taxable gain to Advanta. The impact to us of the tax deduction and gain allocation is a reduction in our deferred tax asset related to net operating loss carryforwards of $133 million and a corresponding reduction in our valuation allowance on deferred tax assets of $133 million, both in the first quarter of 2005. Upon receipt of the Internal Revenue Service’s approval of the settlement of the tax disputes, the remaining valuation allowance of $12 million was evaluated, and management determined that it was more likely than not that the remaining deferred tax asset was realizable and therefore, no valuation allowance was needed, resulting in a reduction in tax expense and an increase in additional paid-in capital in the first quarter of 2005. The gain associated with the original transfer of assets to Fleet Credit Card Services, L.P. in the 1998 Consumer Credit Card Transaction was not subject to income tax, and therefore, a substantial portion of the February 2004 payment to Fleet was not tax-deductible. A substantial portion of the $63.8 million payment received in February 2005 is not taxable since it is a return of our payment to Fleet in February 2004. After the February 2005 payment, the cumulative Consumer Credit Card Transaction gain for which no deferred taxes will have been provided is approximately $650 million, as the transaction structure remains nontaxable under current tax law.

Discontinued Operations

For the year ended December 31, 2004, we recorded a net after-tax gain on the discontinuance of our mortgage and leasing businesses of $468 thousand. The components of this net gain include a $3.3 million pretax loss on the discontinuance of the mortgage business, a $4.0 million pretax gain on the discontinuance of the leasing business, and tax expense of $297 thousand. The loss on the discontinuance of the mortgage business was the result of an increase in our estimated future costs of mortgage business-related contingent liabilities, due primarily to disputes related to one of our former mortgage programs and recent litigation with Chase Manhattan Mortgage Corporation (“Chase”), partially offset by an insurance settlement. The gain on the discontinuance of the leasing business was principally associated with favorable performance in revenues and credit losses and an insurance settlement, partially offset by increased operating expenses due to a lengthening of the anticipated timeframe over which we expect to incur certain operating expenses related to the lease portfolio.

      For the year ended December 31, 2003, we recorded an after-tax loss on the discontinuance of our mortgage and leasing businesses of $2.0 million. The components of this net loss include a pretax loss on the discontinuance of the mortgage business of $2.6 million, a pretax loss on the discontinuance of the leasing business of $600 thousand, and a tax benefit of $1.2 million. The loss on the discontinuance of the mortgage business represented an increase in our estimated future costs of mortgage business-related contingent

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liabilities, due primarily to a lengthening of the anticipated timeframe of the resolution for those contingent liabilities, which included an extension of the discovery process and a delay in the scheduled trial date in the original litigation with Chase. The loss on the discontinuance of the leasing business represented an adjustment in our estimate of operating results of the leasing segment over the remaining life of the lease portfolio. The decrease in estimated operating results of the leasing segment was primarily associated with an unfavorable sales tax assessment, partially offset by favorable credit performance on the leasing portfolio.

      In the year ended December 31, 2003, we sold two buildings formerly used in our mortgage business that were classified as assets from discontinued operations on the consolidated balance sheets. Proceeds from the sale were approximately $27 million.

      For the year ended December 31, 2002, we recorded an after-tax loss on the discontinuance of our mortgage and leasing businesses of $8.6 million. The components of this net loss include a pretax charge of $7.5 million for a litigation settlement related to a mortgage loan servicing agreement termination fee collected in December 2000, a $17.8 million pretax charge primarily related to an increase in our estimated costs of mortgage business-related contingent liabilities, an $11.3 million pretax gain on leasing discontinuance, and a tax benefit of $5.4 million. The $17.8 million charge related primarily to an increase in our estimated 2002 and future costs of mortgage business-related contingent liabilities in connection with (1) contingent liabilities and litigation costs arising from the operation of the mortgage business prior to the Mortgage Transaction that were not assumed by the buyer, and (2) costs related to Advanta’s original litigation with Chase in connection with the Mortgage Transaction. The change in estimate reflected the legal and consulting fees and other costs that we expected to incur based on the levels of contingent liabilities and expense rates, expected recoveries from insurance reimbursements and considered the status of the discovery process associated with the Mortgage Transaction litigation. The $11.3 million pretax gain on leasing discontinuance represented a revision in the estimated operating results of the leasing segment over the remaining life of the lease portfolio due primarily to favorable credit performance. The leasing portfolio performed favorably as compared to the expectations and assumptions established in 2001. This improvement was the result of successfully obtaining a replacement vendor to service leased equipment for a former leasing vendor that had filed for bankruptcy protection, and operational improvements in the leasing collections area.

Off-balance Sheet Arrangements

     Off-Balance Sheet Business Credit Card Securitizations

Off-balance sheet business credit card securitizations provide a significant portion of our funding and they are one of our primary sources of liquidity. At December 31, 2004, off-balance sheet securitized receivables represented 61% of our funding. These transactions enable us to limit our credit risk in the securitized receivables to the amount of our retained interests in securitizations. We had securitized business credit card receivables of $2.6 billion at December 31, 2004 and $2.5 billion at December 31, 2003.

      We generally retain an interest in securitized receivables in the form of subordinated trust assets, cash reserve accounts and retained interest-only strips related to securitizations. Subordinated trust assets represent an ownership interest in the securitized receivables that is subordinated to the other noteholders’ interests. Retained interests in securitizations serve as credit enhancement to the noteholders’ interests in the securitized receivables. We had $162.5 million of retained interests in securitizations at December 31, 2004 and $150.0 million at December 31, 2003. The fair values of retained interests in securitizations are dependent upon the performance of the underlying securitized receivables. Our retained interests in securitizations entitle us to the excess spread on the receivables. Excess spread represents income-related cash flows on securitized receivables (interest, interchange and fees) net of noteholders’ interest, servicing fees, and credit losses. If the income-related cash flows on securitized receivables do not exceed the other components of the excess spread, the value of our retained interests will decline, potentially to zero.

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      The following table summarizes securitization data including income and cash flows for the years ended December 31:

($ in thousands)	2004		2003		2002
Average securitized receivables	$	2,524,547	$	2,238,157	$	1,727,864
Securitization income		124,769		122,816		118,976
Discount accretion		17,140		16,311		10,658
Interchange income		112,568		92,164		70,830
Servicing revenues		49,516		40,747		33,973
Proceeds from new securitizations		131,641		957,051		494,486
Proceeds from collections reinvested in revolving-period securitizations		6,557,489		4,475,645		3,964,178
Cash flows received on retained interests		264,391		287,926		205,027

      See Note 6 to the consolidated financial statements for the key assumptions used in estimating the fair value of retained interests in securitizations during each reporting period and at December 31, 2004 and 2003. Our accounting policies related to securitization transactions are discussed in Note 2 to the consolidated financial statements and the “Critical Accounting Policies and Estimates” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations.

      We completed one public securitization in the year ended December 31, 2004, using a new structure that de-links the issuance of senior and subordinated securities. This structure provides flexibility to issue different classes of asset-backed securities with varying maturities, sizes, and terms based on our funding needs and prevailing market conditions. The interest rate spread to LIBOR on the BBB-rated securities issued in this securitization was lower than the BBB-rated securities in our prior securitizations due to the asset quality performance of our business credit card portfolio and market demand for these securities.

      The revolving periods of our securitizations extend to the following dates:

		Noteholder
		Principal				Extended End
		Balance at		Scheduled End of		of Revolving
($ in thousands)		December 31, 2004		Revolving Period		Period
Series 1997-A		$	9,750		June 2005		N/A
Series 2000-C			400,000		January 2005		July 2005
Series 2001-A			300,000		July 2007		N/A
Series 2002-A			300,000		September 2004		March 2005
Series 2003-A			400,000		May 2005		N/A
Series 2003-B			300,000		September 2005		N/A
Series 2003-C			300,000		November 2004		May 2005
Series 2003-D			400,000		February 2006		N/A
AdvantaSeries
	2004-C1		100,000		January 2009		N/A
	2004-D1		10,000		January 2009		N/A

      In addition to noteholder principal balance, our securitized business credit card receivables include billed interest and fees of $44.4 million on those accounts at December 31, 2004.

      When a securitization is in its revolving period, principal collections on securitized receivables allocated to that securitization are used to purchase additional receivables to replenish receivables that have been repaid. In contrast, when a securitization starts its amortization period, principal collections are held in the trust until the payment date of the notes. As principal is collected on securitized receivables during an amortization period of a securitization, we need to replace that amount of funding. The revolving periods for each securitization, except Series 1997-A, may be extended for up to seven months past the scheduled end of the revolving period, if the payment rates on the receivables in the trust meet certain thresholds. As shown in the table above, certain securitizations with revolving periods scheduled in 2004 and 2005 have been extended based on the current payment rates. We expect to replace the funding of securitizations amortizing in 2005 through additional securitizations with similar conditions as our existing securitizations and expect that the new securitizations will have terms, including interest rate spreads, consistent with the improvements experienced in our November 2004 securitization. We also anticipate utilizing the AdvantaSeries de-linked

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securitization structure discussed above. The level of investment-grade notes issued as part of the AdvantaSeries de-linked securitization structure in November 2004 provides additional capacity for future securitization issuances in excess of $1.7 billion.

      Our Series 1997-A securitization represents a $280 million committed commercial paper conduit facility that provides off-balance sheet funding, none of which was used at December 31, 2004 or 2003. Upon the expiration of this facility in June 2005, management expects to obtain the appropriate level of replacement funding under similar terms and conditions. Based on a review of our funding needs and the flexibility provided by our new de-linked securitization structure, we may decrease the amount of funding available through our committed commercial paper conduit in 2005.

      The securitization agreements contain conditions that would trigger an early amortization event. An early amortization event would result in the end of the revolving period prior to the expected dates above, which would require us to find an alternate means of funding new receivables generated on existing business credit card accounts. The conditions to trigger an early amortization event include the failure to make payments under the terms of the agreement, or the insolvency or other similar event of Advanta Bank Corp. An early amortization event would also be triggered for each individual securitization, except the AdvantaSeries, if the three-month average excess spread percentage was not maintained at a level greater than 0% for that securitization. An early amortization event for the AdvantaSeries would be triggered if the three-month average excess spread amount was not maintained at a level greater than $0. At December 31, 2004, our three-month average excess spread percentage for each securitization, excluding the AdvantaSeries, was at least 9%. For the AdvantaSeries, the three-month average excess spread calculation will not be applicable until three months of performance have occurred. We issued the AdvantaSeries 2004 C-1 and 2004 D-1 notes in November 2004. Based on the current levels of excess spread, our financial position and other considerations, management believes that it is unlikely that the trust or any individual securitization will have an early amortization event. The securitization agreements do not have any provisions or conditions involving the debt rating of Advanta Corp.

      In June 2003, the FASB issued an exposure draft, “Qualifying Special-Purpose Entities and Isolation of Transferred Assets — An Amendment of FASB Statement No. 140.” The changes and clarifications in the proposed statement would prevent derecognition by transferors that may continue to retain effective control of transferred assets by providing financial support other than a subordinated retained interest or making decisions about beneficial interests. The changes would also help to ensure that variable interest entities will not qualify for the qualifying special-purpose entity exception to FASB Interpretation No. 46, as revised, if any party involved is in a position to enhance or protect the value of its own subordinated interest by providing financial support for or making decisions about reissuing beneficial interests. For public entities, this proposed statement would apply prospectively to transfers of assets occurring after the beginning of the first interim period after the issuance of the final statement. In January 2005, the FASB announced plans to issue a revised exposure draft in the third quarter of 2005 and a final standard in the first half of 2006. Management will evaluate any potential impact of this revised proposed statement when it is available.

Obligations under Guarantees

In the normal course of business, including discontinued operations, we enter into agreements pursuant to which we may be obligated under specified circumstances to indemnify the counterparties with respect to certain matters. These indemnification obligations typically arise in the context of agreements entered into by us to, among other things, purchase or sell assets or services, establish alliances or other strategic business relationships, service assets (including for unaffiliated third parties), buy or lease real property and license intellectual property. The agreements we enter into in the normal course of business, including discontinued operations, generally require us to pay certain amounts to the other party associated with claims or losses if they result from our breach of the agreement, including the inaccuracy of representations or warranties. The agreements we enter into may also contain other indemnification provisions that obligate us to pay certain amounts upon the occurrence of certain events, such as the negligence or willful misconduct of our employees or infringement of third party intellectual property rights. Under these typical indemnification provisions, payment by us is generally conditioned upon the other party making a claim pursuant to the procedures specified in the particular agreement, and the procedures typically allow us to challenge the other party’s claims. Further, our

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indemnification obligations may be limited in time and/or amount, and in some instances, we may have recourse against third parties for certain payments made by us under an indemnification agreement. Also, in connection with the securitization of receivables, we enter into agreements pursuant to which we agree to indemnify other parties to these transactions. The agreements contain standard representations and warranties about the assets that are securitized and include indemnification provisions under certain circumstances involving a breach of these representations or warranties. In connection with the securitization transactions we also include indemnifications that protect other parties to the transactions upon the occurrence of certain events such as violations of securities law and certain tax matters. Contingencies triggering material indemnification obligations have not occurred historically and are not expected to occur. Maximum exposure to loss is not possible to estimate due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement. The nature of the indemnification provisions in the various types of agreements described above are low risk and pervasive, and we consider them to have a remote risk of loss. There are no amounts reflected on the consolidated balance sheets related to these indemnifications.

      In connection with our exit from certain businesses, we have entered into agreements that include customary indemnification obligations to the other parties. In general, the agreements we have entered into in connection with our disposition of assets, liabilities and/or businesses provide that we will indemnify the other parties to the transactions for certain losses relating to the assets, liabilities or business acquired by them. The obligations to indemnify are transaction and circumstance specific, and in most cases the other party must suffer a minimum threshold amount of losses before our indemnification obligation is triggered. Under the indemnification provisions, payment by us is generally conditioned upon the other party making a claim pursuant to the procedures specified in the particular agreement, and the procedures typically allow us to challenge the other party’s claims. It is not possible to determine the maximum potential amount of future payments under these or similar arrangements due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement. Litigation relating to indemnification provisions of transaction agreements governing the Consumer Credit Card Transaction and the Mortgage Transaction is described in Note 11 to the consolidated financial statements.

      See Note 21 to the consolidated financial statements for a discussion of parent guarantees of subsidiary obligations.

Preferred Securities Trust

We own 100% of a statutory business trust that issued $100 million of trust preferred securities, representing preferred beneficial interests in the assets of the trust. The trust was deconsolidated from our balance sheet effective December 31, 2003, in connection with our adoption of FIN 46, as revised. The trust was established in 1996 as a financing vehicle and we used the proceeds from the issuance of the trust preferred securities for general corporate purposes. The assets of the trust consist of $103 million of 8.99% junior subordinated debentures issued by Advanta Corp. due December 17, 2026. The trust preferred securities are subject to mandatory redemption upon the optional prepayment by Advanta Corp. of the junior subordinated debentures at any time on or after December 17, 2006 at an amount per trust preferred security equal to 104.495% of the principal amount plus accrued and unpaid distributions. This amount declines ratably on each December 17 thereafter to 100% on December 17, 2016. Dividends on the trust preferred securities are cumulative, payable semi-annually in arrears at an annual rate of 8.99%. The trust has no operations or assets separate from its investment in the junior subordinated debentures.

      Advanta Corp. provides a full and unconditional guarantee of payments of distributions and other amounts due on the trust preferred securities. At December 31, 2004, the maximum amount of the undiscounted future payments that Advanta Corp. could be required to make under this guarantee was $298 million, representing the amount of trust preferred securities outstanding of $100 million at December 31, 2004 and future dividends of approximately $9 million per year through December 2026. Our consolidated balance sheets reflect the subordinated debt payable to the trust of $103 million.

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ASSET/LIABILITY MANAGEMENT

Market Risk Sensitivity

Market risk is the potential for loss or diminished financial performance arising from adverse changes in market forces including interest rates and market prices. Market risk sensitivity is the degree to which a financial instrument, or a company that owns financial instruments, is exposed to market forces. Fluctuations in interest rates, changes in economic conditions, shifts in customer behavior, and other factors can affect our financial performance. Changes in economic conditions and shifts in customer behavior are difficult to predict, and our financial performance generally cannot be completely insulated from these forces.

      We are exposed to equity price risk on the equity securities in our investments available for sale portfolio. We typically do not attempt to reduce or eliminate the market exposure on equity investments. A 20% adverse change in equity prices would result in an approximate $2.9 million decrease in the fair value of our equity investments at December 31, 2004. A 20% adverse change would have resulted in an approximate $4.0 million decrease in fair value at December 31, 2003.

      Financial performance variability as a result of fluctuations in interest rates is commonly called interest rate risk. Interest rate risk generally results from mismatches in the timing of asset and liability repricing (gap risk) and from differences between the repricing indices of assets and liabilities (basis risk). We regularly evaluate our interest rate risk profile and attempt to minimize the impact of interest rate risk on net interest income, securitization income and net income. In managing interest rate risk exposure, we may periodically securitize receivables, sell and purchase assets, alter the mix and term structure of our funding base or change our investment portfolio.

      Risk exposure levels vary continuously, as changes occur in our asset/liability mix, market interest rates and other factors affecting the timing and magnitude of cash flows. We attempt to analyze the impact of interest rate risk by regularly evaluating the perceived risks inherent in our asset and liability structure. We use simulations to generate expected financial performance in a variety of interest rate environments. We analyze those results to determine if we need to take actions to mitigate our interest rate risk.

      We measure our interest rate risk using a rising rate scenario and a declining rate scenario. We estimate net interest income using a third party software model that uses standard income modeling techniques. We measure the effect of interest rate risk on our managed net interest income, which includes net interest income on owned assets and net interest income on securitized receivables. The measurement of managed net interest income in addition to net interest income on owned assets is meaningful because our securitization income fluctuates with yields on securitized receivables and interest rates earned by securitization noteholders. Both increasing and decreasing rate scenarios assume an instantaneous shift in rates and measure the corresponding change in expected net interest income as compared to a base case scenario. As of December 31, we estimated that our net interest income would change as follows over a twelve-month period:

		2004			2003
Estimated percentage increase (decrease) in net interest income on owned receivables:
	Assuming 200 basis point increase in interest rates		12	%		11	%
	Assuming 200 basis point decrease in interest rates		(4	)%		3	%
Estimated percentage increase (decrease) in net interest income on securitized receivables:
	Assuming 200 basis point increase in interest rates		(6	)%		(5	)%
	Assuming 200 basis point decrease in interest rates		14	%		9	%
Estimated percentage increase (decrease) in net interest income on managed receivables:
	Assuming 200 basis point increase in interest rates		(1	)%		(2	)%
	Assuming 200 basis point decrease in interest rates		9	%		8	%

      Our business credit card receivables include interest rate floors that cause our net interest income on managed receivables to rise in the declining rate scenario. Our net interest income on managed receivables decreases in a rising rate scenario due to the variable rate funding of off-balance sheet securitized receivables and the portion of the business credit card portfolio that is effectively at a fixed rate because of the nature of the pricing of the accounts or because the cardholder pays their balance in full each month. Changes in the

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composition of our balance sheet and the interest rate environment have resulted in fluctuations in the results of the net interest income sensitivity analyses at December 31, 2004 as compared to December 31, 2003.

      The above estimates of net interest income sensitivity alone do not provide a comprehensive view of our exposure to interest rate risk. The quantitative risk information is limited by the parameters and assumptions utilized in generating the results. These analyses are useful only when viewed within the context of the parameters and assumptions used. The above rate scenarios do not reflect management’s expectation regarding the future direction of interest rates, and they depict only two possibilities out of a large set of possible scenarios.

Liquidity, Capital Resources and Analysis of Financial Condition

Our goal is to maintain an adequate level of liquidity, for both long-term and short-term needs, through active management of both assets and liabilities. Since Advanta Corp.’s debt rating is not investment grade, our access to unsecured institutional debt is limited. However, we do have access to a diversity of funding sources as described below, and had a high level of liquidity at December 31, 2004. At December 31, 2004, we had $299 million of federal funds sold, $377 million of receivables held for sale, and $160 million of investments which could be sold to generate additional liquidity.

      Components of funding were as follows at December 31:

	2004					2003
($ in thousands)	Amount		%			Amount		%
Off-balance sheet securitized receivables(1)	$	2,462,220		61	%	$	2,371,819		62	%
Deposits		825,273		20			672,204		18
Debt		265,759		7			314,817		8
Subordinated debt payable to preferred securities trust		103,093		2			103,093		3
Equity		392,194		10			341,207		9
Total	$	4,048,539		100	%	$	3,803,140		100	%

(1)  Excludes our ownership interest in the noteholder principal balance of securitizations (subordinated trust assets) that are held on-balance sheet and classified as retained interests in securitizations.

      Our ratio of equity to on-balance sheet assets was 23.17% at December 31, 2004 as compared to 20.09% at December 31, 2003. The ratio of equity, including subordinated debt payable to preferred securities trust, to on-balance sheet assets was 29.26% at December 31, 2004 as compared to 26.16% at December 31, 2003. In managing our capital needs, we also consider our ratio of equity to managed assets, since our on-balance sheet assets include retained interests in securitizations that serve as credit enhancement to the noteholders’ interests in the securitized receivables. Our ratio of equity to managed assets was 9.44% at December 31, 2004 as compared to 8.38% at December 31, 2003. The ratio of equity, including subordinated debt payable to preferred securities trust, to managed assets was 11.92% at December 31, 2004 as compared to 10.92% at December 31, 2003. We calculate managed assets as follows at December 31:

($ in thousands)	2004		2003
Total on-balance sheet assets	$	1,692,924	$	1,698,444
Off-balance sheet securitized receivables		2,462,220		2,371,819
Managed assets	$	4,155,144	$	4,070,263

Off-Balance Sheet Securitized Receivables

As shown in the components of funding table above, off-balance sheet securitizations provide a significant portion of our funding and they are one of our primary sources of liquidity. See the “Off-Balance Sheet Arrangements” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations for further discussion of off-balance sheet securitizations and their impact on our liquidity, capital resources and financial condition.

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Deposits, Debt and Equity

We continue to offer senior unsecured debt securities of Advanta Corp., in the form of RediReserve Variable Rate Certificates and Investment Notes, to retail investors through our retail note program. We change the interest rates we offer frequently, depending on market conditions and our funding needs. In 2004, we reduced originations of retail notes due to our liquidity position and, as a result, the balance of RediReserve Variable Rate Certificates and Investment Notes outstanding decreased by $49.0 million for the year to $266 million at December 31, 2004.

      In February 2004, the Board of Directors of Advanta Corp. approved a 50% increase in the regular quarterly cash dividends on Class A and Class B Common Stock beginning with the dividends payable in the second quarter of 2004. In November 2004, the Board of Directors of Advanta Corp. approved a 20% increase in the regular quarterly cash dividends on Class A and Class B Common Stock beginning with the dividends payable in the second quarter of 2005. We are funding the increase in dividends with operating cash flows.

Litigation

On February 2, 2004, the court issued its final judgment and order in the Delaware Chancery Court litigation with Fleet. As a result of the court’s order and $63.8 million payment to Fleet in February 2004, there was a decrease in other assets and other liabilities as of the payment date. In accordance with the court’s order, the payment to Fleet was net of amounts due to Advanta from Fleet. There was no impact to the results of our operations in 2003 since, based on the final judgment and order, our reserves at December 31, 2003 were adequate.

      On May 28, 2004, Advanta Corp. and certain of its subsidiaries and Bank of America signed an agreement to resolve all outstanding litigation, including partnership tax disputes, between Advanta and Fleet, which was acquired by Bank of America, relating to the transfer of our consumer credit card business to Fleet Credit Card Services, L.P. in 1998. The agreement was subject to the Internal Revenue Service’s final approval of the settlement of the tax disputes. We received the Internal Revenue Service’s final approval in January 2005 and, as a result, we received $63.8 million in cash from Bank of America in February 2005, representing a return of the payments that we made to Fleet in the Delaware state court litigation in February 2004. We anticipate using the $63.8 million of cash for general corporate purposes and to enable us to have lower debt levels than would otherwise be the case. Consistent with the terms of our agreement with Bank of America, all outstanding litigation between Advanta and Fleet was dismissed in February 2005. See Note 11 to the consolidated financial statements for a description of the litigation. The overall impact of the agreement with Bank of America, including the cash received, settlement of the tax disputes and reevaluation of the valuation allowance on deferred tax assets, is a net after-tax gain of $62 million and an increase in additional paid-in capital of $6 million in the first quarter of 2005.

      Advanta Corp. and its subsidiaries are involved in other litigation, including litigation relating to the Mortgage Transaction, class action lawsuits, claims and legal proceedings arising in the ordinary course of business or discontinued operations, including litigation arising from our operation of the mortgage business prior to our exit from that business in the first quarter of 2001. See Note 11 to the consolidated financial statements. Management believes that the aggregate loss, if any, resulting from existing litigation, claims and other legal proceedings will not have a material adverse effect on our liquidity or capital resources based on our current expectations regarding the ultimate resolutions of these actions. However, due to the inherent uncertainty in litigation and since the ultimate resolutions of these proceedings are influenced by factors outside of our control, it is reasonably possible that the estimated cash flow related to these proceedings may change or that actual results will differ from our estimates.

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Contractual Obligations

The following table summarizes our contractual cash obligations at December 31, 2004 by period.

	Payments Due by Period
			Less than
			or equal		1-3		3-5		After 5
($ in thousands)	Total		to 1 year		years		years		years
Time deposits	$	816,193	$	317,203	$	421,569	$	77,421	$	0
Debt		265,759		114,390		80,604		66,028		4,737
Subordinated debt payable to preferred securities trust		103,093		0		0		0		103,093
Operating leases		32,178		6,114		11,277		10,656		4,131
Purchase obligations		47,656		34,923		9,781		1,237		1,715
Total	$	1,264,879	$	472,630	$	523,231	$	155,342	$	113,676

      We expect to fund commitments related to operating leases and purchase obligations with operating cash flows. Sources of operating cash flow include securitization of receivables, excess spread and servicing revenues related to securitized receivables, interchange income, and interest and fee income on owned receivables. Uses of cash in operations include funding of receivables, operating expenses, interest expense and costs of rewards programs. Management expects to fund our deposit and debt obligations with replacement deposits or debt having similar terms and conditions. The subordinated debt payable to preferred securities trust is not due until 2026.

      We have commitments to purchase goods and services that are purchase obligations. These agreements are legally binding, specify all significant terms about the transaction and may be renewable or cancelable without notice or penalty. Certain agreements are cancelable with a specified notice period or penalty, however all contracts are reflected in the table above as if they will be performed for the full term of the original agreement without regard to such notice period.

      We have a contract with a third party service provider to perform data processing and administrative functions associated with the servicing of our business credit card portfolio. This agreement is effective until December 31, 2005 and we are obligated to pay the greater of $4 million or 80% of the fees paid in the previous year on an annual basis. If the contract had been terminated on December 31, 2004, the liquidated damages upon termination would be approximately $2.2 million plus any costs incurred for programming in order to convert to a new third party service provider. We also have a contract with a third party communications provider for voice and data services, which is effective until February 28, 2007 with an annual minimum commitment of $3.5 million. The financial impact of the termination provisions of this contract is similar to utilizing the contract under its full term.

      In addition to these obligations, we have commitments to extend credit to our business credit card customers, representing unused lines of credit, of $7.2 billion at December 31, 2004 and $6.7 billion at December 31, 2003. Total lines of credit on our customers’ business credit cards were $10.5 billion at December 31, 2004 and $9.7 billion at December 31, 2003. We believe that our customers’ utilization of their lines of credit will continue to be substantially less than the amount of the commitments, as has been our experience to date. We expect to fund the commitments to extend credit with the various components of funding described above, similar to the funding of other new receivables.

     Restrictions at Subsidiaries and Undistributed Earnings of Limited Partnership Interest

Advanta Bank Corp. and Advanta National Bank are subject to regulatory capital requirements and other regulatory provisions that restrict their ability to lend and/or pay dividends to Advanta Corp. and its affiliates. Advanta Bank Corp. issues and funds our business credit cards and is the servicer of our discontinued leasing business. Prior to our exit from the mortgage business in the first quarter of 2001, Advanta National Bank issued and funded a large portion of our mortgage business. Advanta National Bank’s operations are currently not material to our consolidated operating results. Our insurance subsidiaries are also subject to certain capital and dividend rules and regulations as prescribed by state jurisdictions in which they are authorized to operate. See “Part I, Item 1 — Government Regulation.”

49

      Advanta Bank Corp. paid $32 million in cash dividends and a $3 million noncash dividend to Advanta Corp. in 2004. There were no dividends from Advanta Bank Corp. to Advanta Corp. in the years ended December 31, 2003 or 2002. Advanta National Bank paid no dividends to Advanta Corp. in the three years ended December 31, 2004. There were no dividends from insurance subsidiaries to Advanta Corp. in the year ended December 31, 2004. In the year ended December 31, 2003, insurance subsidiaries paid an extraordinary dividend of $9.6 million and a return of capital of $10.4 million to Advanta Corp. In 2002, insurance subsidiaries paid dividends to Advanta Corp. of $2.2 million.

      At December 31, 2004, Advanta Bank Corp.’s combined total capital ratio (combined Tier I and Tier II capital to risk-weighted assets) was 26.07% as compared to 26.28% at December 31, 2003. At both dates, Advanta Bank Corp. had capital in excess of levels a bank is required to maintain to be classified as well-capitalized under the regulatory framework for prompt corrective action.

      Total stockholders’ equity of our banking and insurance subsidiaries was $373 million at December 31, 2004, of which $228 million was restricted. At January  1, 2005, $145 million of stockholders’ equity of our bank and insurance subsidiaries was available for payment of cash dividends in 2005 under applicable regulatory guidelines without prior regulatory approval.

      In addition to dividend restrictions at banking and insurance subsidiaries, one of our other subsidiaries is subject to a minimum equity requirement as part of a transaction agreement. The total minimum equity requirement of this subsidiary was $10 million at December 31, 2004 and the subsidiary was in compliance with its minimum equity requirement. Also, we have an investment in a limited partnership, Fleet Credit Card Services, L.P., and estimated undistributed partnership earnings included in our retained earnings were $12.1 million at December 31, 2004.

      Management believes that the restrictions, for bank, insurance and other subsidiaries and undistributed earnings of our limited partnership interest, will not have an adverse effect on Advanta Corp.’s ability to meet its cash obligations due to the current levels of liquidity and diversity of funding sources.

      Subordinated trust assets are a component of retained interest in securitizations and represent a significant portion of assets held at non-bank subsidiaries. At December 31, 2004, $92.2 million of subordinated trust assets held at non-bank subsidiaries were rated BB by Standard & Poors and Ba2 by Moody’s Investor Service and could be sold to generate additional liquidity to the parent company, Advanta Corp.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The information called for by this Item is incorporated by reference to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Asset/ Liability Management.”

50

Item 8. Financial Statements and Supplementary Data

Advanta Corp. and Subsidiaries

Consolidated Balance Sheets

		December 31,
(In thousands, except share amounts)		2004			2003
ASSETS
Cash		$	35,565		$	26,941
Federal funds sold			298,677			258,311
Restricted interest-bearing deposits			2,946			77,872
Investments available for sale			184,240			222,624
Receivables, net:
	Held for sale		377,158			214,664
	Other		328,872			291,109
Total receivables, net			706,030			505,773
Accounts receivable from securitizations			244,362			244,337
Premises and equipment (at cost, less accumulated depreciation of $34,225 in 2004 and $28,700 in 2003)			17,958			20,414
Other assets			191,451			278,703
Assets of discontinued operations, net			11,695			63,469
Total assets		$	1,692,924		$	1,698,444
LIABILITIES
Deposits		$	825,273		$	672,204
Debt			265,759			314,817
Subordinated debt payable to preferred securities trust			103,093			103,093
Other liabilities			106,605			267,123
Total liabilities			1,300,730			1,357,237
Commitments and contingencies
STOCKHOLDERS’ EQUITY
Class A preferred stock, $1,000 par value:
	Authorized, issued and outstanding — 1,010 shares in 2004 and 2003		1,010			1,010
Class A voting common stock, $.01 par value:
	Authorized — 200,000,000 shares; issued — 10,041,017 shares in 2004 and 2003		100			100
Class B non-voting common stock, $.01 par value:
	Authorized — 200,000,000 shares; issued — 21,537,061 shares in 2004 and 20,542,097 shares in 2003		215			206
Additional paid-in capital			258,223			245,295
Unearned restricted stock			(9,460	)		(13,242	)
Unearned ESOP shares			(9,930	)		(10,387	)
Accumulated other comprehensive income (loss)			(261	)		63
Retained earnings			201,772			167,783
Treasury stock at cost, 434,155 Class A common shares and 3,186,647 Class B common shares in 2004; 434,132 Class A common shares and 3,197,614 Class B common shares in 2003			(49,475	)		(49,621	)
Total stockholders’ equity			392,194			341,207
Total liabilities and stockholders’ equity		$	1,692,924		$	1,698,444

See Notes to Consolidated Financial Statements.

51

Advanta Corp. and Subsidiaries

Consolidated Income Statements

			Year Ended December 31,
(In thousands, except per share amounts)			2004		2003			2002
Interest income:
	Receivables		$	82,579	$	84,435		$	82,720
	Investments			6,990		7,615			10,226
	Other interest income			17,140		16,311			10,658
		Total interest income		106,709		108,361			103,604
Interest expense:
	Deposits			19,261		26,024			23,825
	Debt and other borrowings			17,158		22,284			23,755
	Subordinated debt payable to preferred securities trust			9,158		0			0
		Total interest expense		45,577		48,308			47,580
Net interest income				61,132		60,053			56,024
Provision for credit losses				42,368		45,423			40,906
Net interest income after provision for credit losses				18,764		14,630			15,118
Noninterest revenues:
	Securitization income			124,769		122,816			118,976
	Servicing revenues			49,516		40,747			33,973
	Other revenues, net			113,556		104,978			87,152
	Loss on transfer of consumer credit card business (See Note 11)			0		0			(43,000	)
		Total noninterest revenues		287,841		268,541			197,101
Expenses:
	Operating expenses			234,298		225,165			201,741
	Minority interest in income of consolidated subsidiary			0		8,880			8,880
		Total expenses		234,298		234,045			210,621
Income before income taxes				72,307		49,126			1,598
Income tax expense				28,034		18,913			17,170
Income (loss) from continuing operations				44,273		30,213			(15,572	)
Gain (loss), net, on discontinuance of mortgage and leasing businesses, net of tax				468		(1,968	)		(8,610	)
Net income (loss)			$	44,741	$	28,245		$	(24,182	)
Basic income (loss) from continuing operations per common share
	Class A		$	1.69	$	1.19		$	(0.69	)
	Class B			1.80		1.29			(0.59	)
	Combined			1.76		1.25			(0.63	)
Diluted income (loss) from continuing operations per common share
	Class A		$	1.57	$	1.16		$	(0.69	)
	Class B			1.62		1.23			(0.59	)
	Combined			1.60		1.21			(0.63	)
Basic net income (loss) per common share
	Class A		$	1.71	$	1.11		$	(1.03	)
	Class B			1.82		1.21			(0.94	)
	Combined			1.78		1.17			(0.97	)
Diluted net income (loss) per common share
	Class A		$	1.58	$	1.08		$	(1.03	)
	Class B			1.64		1.16			(0.94	)
	Combined			1.62		1.13			(0.97	)
Basic weighted average common shares outstanding
	Class A			8,798		9,028			9,152
	Class B			16,225		14,999			15,909
	Combined			25,023		24,027			25,061
Diluted weighted average common shares outstanding
	Class A			8,798		9,028			9,152
	Class B			18,750		15,908			15,909
	Combined			27,548		24,936			25,061

See Notes to Consolidated Financial Statements.

52

Advanta Corp. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

															Unearned			Accumulated
															Restricted			Other
		Comprehensive			Class A		Class A		Class B			Additional			Stock &			Comprehensive									Total
		Income			Preferred		Common		Common			Paid-In			Unearned			Income			Retained			Treasury			Stockholders’
($ in thousands)		(Loss)			Stock		Stock		Stock			Capital			ESOP Shares			(Loss)			Earnings			Stock			Equity
Balance at December 31, 2001					$	1,010	$	100	$	179		$	223,362		$	(11,359	)	$	1,259		$	179,370		$	(27,622	)	$	366,299
Net income (loss)		$	(24,182	)																		(24,182	)					(24,182	)
Other comprehensive income (loss):
	Change in unrealized appreciation (depreciation) of investments, net of tax benefit (expense) of $577		(1,073	)															(1,073	)								(1,073	)
Comprehensive income (loss)		$	(25,255	)
Preferred and common cash dividends declared																						(7,983	)					(7,983	)
Exercise of stock options										1			362															363
Stock option exchange program stock distribution																									542			542
Issuance of restricted stock										28			22,529			(22,557	)											0
Amortization of restricted stock																2,842												2,842
Forfeitures of restricted stock										(4	)		(2,275	)		1,941												(338	)
Stock buyback																									(15,554	)		(15,554	)
ESOP shares committed to be released													(68	)		465												397
Balance at December 31, 2002					$	1,010	$	100	$	204		$	243,910		$	(28,668	)	$	186		$	147,205		$	(42,634	)	$	321,313
Net income (loss)		$	28,245																			28,245						28,245
Other comprehensive income (loss):
	Change in unrealized appreciation (depreciation) of investments, net of tax benefit (expense) of $66		(123	)															(123	)								(123	)
Comprehensive income (loss)		$	28,122
Preferred and common cash dividends declared																						(7,667	)					(7,667	)
Exercise of stock options										3			2,310															2,313
Stock option exchange program stock distribution																									183			183
Issuance of restricted stock										2			2,150			(2,152	)											0
Amortization of restricted stock																4,105												4,105
Forfeitures of restricted stock										(3	)		(2,976	)		2,643												(336	)
Stock buyback																									(7,170	)		(7,170	)
ESOP shares committed to be released													(99	)		443												344
Balance at December 31, 2003					$	1,010	$	100	$	206		$	245,295		$	(23,629	)	$	63		$	167,783		$	(49,621	)	$	341,207
Net income (loss)		$	44,741																			44,741						44,741
Other comprehensive income (loss):
	Change in unrealized appreciation (depreciation) of investments, net of tax benefit (expense) of $175		(324	)															(324	)								(324	)
Comprehensive income (loss)		$	44,417
Preferred and common cash dividends declared																						(10,752	)					(10,752	)
Exercise of stock options										8			8,489															8,497
Modification of stock options													196															196
Stock option exchange program stock distribution																									146			146
Stock-based nonemployee compensation expense													482															482
Issuance of restricted stock										3			5,427			(5,430	)											0
Amortization of restricted stock																7,740												7,740
Forfeitures of restricted stock										(2	)		(1,887	)		1,473												(416	)
ESOP shares committed to be released													221			456												677
Balance at December 31, 2004					$	1,010	$	100	$	215		$	258,223		$	(19,390	)	$	(261	)	$	201,772		$	(49,475	)	$	392,194

See Notes to Consolidated Financial Statements.

53

Advanta Corp. and Subsidiaries

Consolidated Statements of Cash Flows

		Year Ended December 31,
($ in thousands)		2004			2003			2002
OPERATING ACTIVITIES — CONTINUING OPERATIONS
Net income (loss)		$	44,741		$	28,245		$	(24,182	)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
	(Gain) loss, net, on discontinuance of mortgage and leasing businesses, net of tax		(468	)		1,968			8,610
	Investment securities losses, net		1,498			3,651			6,169
	Valuation adjustments on other receivables held for sale		0			(50	)		1,085
	Depreciation and amortization		9,666			8,440			8,479
	Stock-based compensation expense		8,002			3,769			2,504
	Provision for credit losses		42,368			45,423			40,906
	Provision for interest and fee losses		9,714			11,623			6,889
	Change in deferred origination costs, net of deferred fees		3,466			11,623			(9,910	)
	Change in receivables held for sale		(299,496	)		(992,879	)		(466,364	)
	Proceeds from sale of receivables held for sale		137,002			961,985			494,486
	Change in accounts receivable from securitizations		(25	)		(46,099	)		(29,255	)
	Change in other assets and other liabilities		(48,737	)		37,393			57,964
Net cash (used in) provided by operating activities			(92,269	)		75,092			97,381
INVESTING ACTIVITIES — CONTINUING OPERATIONS
	Change in federal funds sold and restricted interest-bearing deposits		34,560			75,523			(67,861	)
	Purchase of investments available for sale		(563,030	)		(828,404	)		(503,723	)
	Proceeds from sales of investments available for sale		572,309			538,031			465,520
	Proceeds from maturing investments available for sale		27,108			235,130			105,840
	Change in receivables not held for sale		(93,311	)		(88,151	)		(99,032	)
	Purchases of premises and equipment, net		(5,977	)		(2,968	)		(8,253	)
Net cash used in investing activities			(28,341	)		(70,839	)		(107,509	)
FINANCING ACTIVITIES — CONTINUING OPERATIONS
	Change in demand and savings deposits		875			(737	)		(1,068	)
	Proceeds from issuance of time deposits		539,954			580,429			412,170
	Payments for maturing time deposits		(393,736	)		(629,743	)		(343,447	)
	Proceeds from issuance of debt		29,319			84,804			111,515
	Payments on redemption of debt		(90,625	)		(100,928	)		(141,910	)
	Change in cash overdraft and other borrowings		(4,596	)		23,279			(32,317	)
	Proceeds from exercise of stock options		8,497			2,313			363
	Cash dividends paid		(10,752	)		(7,667	)		(7,983	)
	Stock buyback		0			(7,170	)		(15,554	)
Net cash provided by (used in) financing activities			78,936			(55,420	)		(18,231	)
DISCONTINUED OPERATIONS
	Net cash provided by operating activities		50,298			36,715			22,241
	Net cash provided by investing activities		0			26,559			0
Net cash provided by discontinued operations			50,298			63,274			22,241
Net increase (decrease) in cash			8,624			12,107			(6,118	)
Cash at beginning of year			26,941			14,834			20,952
Cash at end of year		$	35,565		$	26,941		$	14,834

See Notes to Consolidated Financial Statements.

54

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands except per share amounts, unless otherwise noted)

In these notes to consolidated financial statements, “Advanta”, “we”, “us”, and “our” refer to Advanta Corp. and its subsidiaries, unless the context otherwise requires.

Note 1. Nature of Operations and Basis of Presentation

Advanta focuses on the small business market and related community, providing funding and support to the nation’s small businesses and business professionals through innovative products and services. Using our direct marketing and information based expertise, we identify potential customers and provide a high level of service tailored to the unique needs of small businesses. Since 1951, Advanta has pioneered many of the marketing techniques common in the financial services industry today, including remote lending and direct mail, affinity and relationship marketing. Our primary business segment is Advanta Business Cards, which is one of the nation’s largest issuers (through Advanta Bank Corp.) of business purpose credit cards to small businesses and business professionals. In addition to our business credit card lending business, we have venture capital investments. We own two depository institutions, Advanta Bank Corp. and Advanta National Bank. Advanta Business Cards is primarily funded and operated through Advanta Bank Corp., which offers a variety of deposit products, such as retail and large denomination certificates of deposits that are insured by the Federal Deposit Insurance Corporation. At December 31, 2004, we had approximately 778 thousand business purpose credit card accounts and had owned business credit card receivables of $730 million and securitized business credit card receivables of $2.6 billion. We outsource certain processing and administrative functions associated with the servicing of our business credit card accounts to a single third party processor.

      Through the first quarter of 2001, we had two additional lending businesses, Advanta Mortgage and Advanta Leasing Services. In the first quarter of 2001, we completed our exit from the mortgage business, Advanta Mortgage, through a purchase and sale agreement with Chase Manhattan Mortgage Corporation as buyer (the “Mortgage Transaction”), announced the discontinuance of our leasing business, and restructured our corporate functions to a size commensurate with our ongoing businesses. We are continuing to service the existing leasing portfolio. The results of the mortgage and leasing businesses are reported as discontinued operations in all periods presented. The results of our ongoing businesses are reported as continuing operations for all periods presented.

      The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of Advanta Corp. and its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

      Certain prior period amounts have been reclassified to conform to the current year’s presentation.

Note 2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant changes in the near term relate to the accounting for the allowance for receivable losses, securitization income, business credit card rewards programs, litigation contingencies, income taxes, and discontinued operations.

Investments Available for Sale

Investments available for sale include securities that we sell from time to time to provide liquidity and in response to changes in the market. Debt and equity securities classified as available for sale are reported at fair value and unrealized gains and losses on these securities are reported in other comprehensive income, net of income taxes. The fair values of investments available for sale are based on quoted market prices, dealer quotes or estimates using quoted market prices for similar securities. Declines in the fair values of investments

55

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

available for sale below their cost that are deemed to be other than temporary, if any, are reflected in earnings as realized losses. In estimating other than temporary impairment losses, we consider (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition of the issuer, and (3) the intent and ability of Advanta to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value.

      Investments of our Venture Capital segment are included in investments available for sale and are carried at estimated fair value. We primarily invest in privately held companies, including early stage companies. The fair values of these equity investments are subject to significant volatility. Our investments in specific companies and industry segments may vary over time, and changes in concentrations may affect price volatility. These investments are inherently risky as the market for the technologies or products the investees have under development may never materialize. Management makes fair value determinations based on quoted market prices, when available, and considers each investee’s financial results, conditions and prospects and overall market liquidity, when market prices are not available. In accordance with the specialized industry accounting principles of venture capital investment companies, the unrealized and realized gains and losses on these investments are included in other revenues rather than other comprehensive income and the equity method of accounting for investments is not applied.

      Purchase premiums and discounts are recognized in interest income using the interest method over the term of the securities. Gains and losses on the sales of securities are recorded on the trade date and are determined using the specific identification method.

Receivables Held for Sale

Receivables held for sale represent receivables currently on the balance sheet that we intend to sell or securitize within the next six months. These assets are reported at the lower of aggregate cost or fair market value by receivable type. Net unrealized losses, if any, are recognized through a valuation allowance by charges to income.

Allowance for Receivable Losses

The allowance for receivable losses is established as losses are estimated to have occurred through provisions charged to earnings. Business credit card receivables are comprised of principal amounts due from cardholders for purchase activities, balance transfers and cash usage, and amounts due from cardholders relating to billed interest and fees. Provisions for credit losses, representing the portion of receivable losses attributable to principal, are reported separately on the consolidated income statements. Provisions for interest and fee receivable losses are recorded as direct reductions to interest and fee income as described below in “Interest and Fee Income on Receivables.” The allowance for receivable losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of receivables in light of historical experience by receivable type, the nature and volume of the receivable portfolio, adverse situations that may affect the borrowers’ ability to repay and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. Since our business credit card receivable portfolio is comprised of smaller balance homogeneous receivables, we generally evaluate the receivables collectively for impairment through the use of a migration analysis as well as the consideration of other factors that may indicate increased risk of loss, such as bankrupt accounts, overlimit accounts or accounts that have been re-aged or entered a credit counseling program. Accordingly, we do not separately identify individual receivables for impairment disclosures. A migration analysis is a technique used to estimate the likelihood that a receivable will progress through various delinquency stages and ultimately charge off.

      Our charge-off and re-age policies for business credit card accounts conform to the Uniform Retail Credit Classification and Account Management Policy, as well as the Credit Card Lending Guidance, issued by the Federal Financial Institutions Examination Council (“FFIEC”). Our charge-off policy for contractually

56

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

delinquent business credit card accounts is to charge-off an unpaid receivable no later than the end of the month in which it becomes past due 180 cumulative days from the contractual due date. Our charge-off policy for bankrupt business credit card accounts is to charge-off the unpaid receivable within 60 days of receipt of notification of filing from the bankruptcy court or within the timeframes adopted in the FFIEC Uniform Retail Credit Classification and Account Management Policy, whichever is shorter. Our charge-off policy for other receivables is to charge-off the unpaid receivable when management believes the uncollectibility of a receivable balance is confirmed. Subsequent recoveries are credited to the allowance for receivable losses.

Interest and Fee Income on Receivables

Interest income is accrued on the unpaid balance of receivables. Interest income includes late fees billed on business credit card receivables. Fee income is recognized when billed to the cardholder, with the exception of origination fees as discussed in “Origination Costs and Fees” below. Prior to October 1, 2002, the billing and recognition of interest and fees was discontinued when the related receivable became 90 days past due or when the account was classified as fraudulent, bankrupt, deceased, hardship or credit counseling. Effective October 1, 2002, we continue to bill and recognize interest and fees on accounts when they become 90 days past due, and an additional allowance for receivable losses is established for the additional billings estimated to be uncollectible through a provision for interest and fee losses. The billing and recognition of interest and fees is still discontinued when the account is classified as fraudulent, bankrupt, deceased, hardship or credit counseling. Provisions for interest and fee losses are recorded as direct reductions to interest and fee income. The accrued interest and fee portion of charged-off receivables is charged against the allowance for receivable losses. All subsequent recoveries of charged-off receivables are classified as principal recoveries, since any amounts related to accrued interest and fees are de minimus.

Origination Costs and Fees

We engage unrelated third parties to solicit and originate business credit card account relationships. Amounts paid to third parties to acquire business credit card accounts and certain other origination costs are deferred and netted against any related business credit card origination fee, and the net amount is amortized on a straight-line basis over the privilege period of one year. These costs represent the cost of acquiring business credit card account relationships, and the net amortization is included in operating expenses. A substantial portion of amounts paid to acquire new business credit card accounts are paid to a single third party vendor.

Securitization Income

A significant portion of our funding for Advanta Business Cards is through off-balance sheet securitizations using a securitization trust. The securitization trust was created to hold the collateral (the securitized receivables) and issue notes to primarily institutional investors. The securitization trust is a qualifying special-purpose entity as defined by Statement of Financial Accounting Standards (“SFAS”) No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities — a Replacement of FASB Statement No. 125,” and therefore, is not consolidated as part of Advanta’s consolidated financial statements. We do not provide any guarantee of the notes issued by the special-purpose entity and our recourse in the transactions is limited to the value of our interests in securitizations that serve as credit enhancement to the noteholders’ interests in the securitized receivables.

      We sell business credit card receivables through securitizations with servicing retained. When we securitize receivables, we surrender control over the transferred assets and account for the transaction as a sale to the extent that consideration other than beneficial interests in the transferred assets is received in exchange. We allocate the previous carrying amount of the securitized receivables between the assets sold and the retained interests, based on their relative estimated fair values at the date of sale. Securitization income is recognized at the time of the sale, equal to the excess of the fair value of the assets obtained (principally cash) over the allocated cost of the assets sold and transaction costs. During the revolving period of each business credit card securitization, securitization income is recorded representing estimated gains on the sale of new

57

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

receivables to the securitization trust on a continuous basis to replenish the noteholders’ interest in securitized receivables that have been repaid by the business credit card account holders. Fair value estimates used in the recognition of securitization income require assumptions of payment, default and interest rates. To the extent actual results are different than those estimates, the impact is recognized in securitization income.

      On a monthly basis, income-related cash flows on securitized receivables (interest, interchange and fees) are used to pay interest to noteholders and servicing fees, and any excess cash flow serves as credit enhancement to cover credit losses in that month.

Accounts Receivable from Securitizations

Accounts receivable from securitizations include retained interests in securitizations, accrued interest and fees on securitized receivables, amounts due from the trust for the purchase of new receivables during the revolving period, and amounts due from the trust for one month’s servicing fee and one month’s income-related cash flows in excess of that month’s noteholders’ interest, servicing fees and credit losses.

      Retained interests in securitizations include cash reserve accounts, retained interest-only strips and subordinated trust assets related to securitizations. Subordinated trust assets represent an ownership interest in the securitized receivables that is subordinated to the other noteholders’ interests. Retained interests in securitizations serve as credit enhancement to the noteholders’ interests in the securitized receivables. We account for retained interests in securitizations as trading securities. These assets are carried at estimated fair value and the resulting unrealized gain or loss from the valuation is included in securitization income.

      We estimate the fair value of retained interests in securitizations based on a discounted cash flow analysis when quoted market prices are not available. The cash flows of the retained interest-only strip are estimated as the excess of the weighted average interest yield on the pool of the receivables sold over the sum of the interest rate earned by noteholders, the servicing fee and an estimate of future credit losses over the life of the existing receivables. Cash flows are discounted from the date the cash is expected to become available to us using an interest rate that management believes a third party purchaser would demand. The discounted cash flow analysis is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. Interest income is recognized over the life of the retained interests in securitizations by applying the discount rate used in the valuation.

      We adjust accrued interest and fees on securitized receivables for amounts estimated to be uncollectible. The estimate is based on the same methodology as that used for on-balance sheet receivables that is described above in “Allowance for Receivable Losses” and “Interest and Fee Income on Receivables.” Provisions for interest and fee losses on securitized receivables are recorded as a reduction of securitization income.

Servicing Assets

Servicing assets associated with business credit card securitization transactions are not recognized because the benefits of servicing are not expected to be more or less than adequate compensation for performing the servicing.

Premises and Equipment

Premises, equipment, computer hardware and software are stated at cost less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Repairs and maintenance are charged to expense as incurred. Estimated useful lives used for premises and equipment are as follows:

Furniture, fixtures and equipment	4 to 7 years
Computer hardware and software	3 to 4 years

58

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Leasehold improvements are amortized over the shorter of the lives of the leases or estimated service lives of the leasehold improvements.

Investment in Limited Partnership

On February 20, 1998, we completed a transaction with Fleet Financial Group, Inc. (“Fleet”) to contribute substantially all of our consumer credit card receivables, subject to liabilities, to a newly formed entity controlled by Fleet that is now known as Fleet Credit Card Services, L.P. As of the consummation of the transaction on February 20, 1998, our ownership interest in the newly formed entity was 4.99% and the carrying value of the investment was $20.0 million. Our ownership interest at December 31, 2004 and 2003 was approximately 1.3%. As a result of our May 28, 2004 agreement with Bank of America and the combination of Bank of America’s and Fleet Credit Card Services, L.P.’s consumer credit card businesses, our partnership interest in Fleet Credit Card Services, L.P. represents an interest in the combined business.

      Subsequent to the date of the agreement with Bank of America, we have accounted for our investment in Fleet Credit Card Services, L.P. using the cost method and have recognized dividends received distributed from net accumulated earnings as income. Prior to the date of the agreement with Bank of America, we recognized earnings allocable to our partnership interest using the equity method in accordance with Emerging Issues Task Force Topic D-46, “Accounting for Limited Partnership Interests.” The partnership interest is included in other assets on the consolidated balance sheets and earnings on the partnership interest are included in other revenues on the consolidated income statements. We received distributions from the partnership of $2.4 million in the year ended December 31, 2004 and $1.2 million in 2003. Distributions were withheld in the year ended December 31, 2002 due to the litigation with Fleet. Cumulative estimated earnings allocable to our partnership interest as of December 31, 2002 were included in the calculation of loss on transfer of consumer credit card business in 2002 as a result of the trial court ruling on January 22, 2003 in the Fleet litigation.

Intangible Assets

Intangible assets are initially recognized and measured based on their fair value. Intangible assets are amortized on a straight-line basis over their estimated useful lives unless they are deemed to have indefinite useful lives. Intangible assets with indefinite useful lives are not amortized and are subject to impairment tests at least annually. Impairment losses are recognized if the carrying value of an intangible asset exceeds its fair value.

Business Credit Card Rewards Programs

We offer cash back rewards and/or business rewards programs with the majority of our business credit cards. Eligible cardholders earn cash back rewards or business rewards based on net purchases charged on their business credit card account. The costs of future reward redemptions are estimated and a liability is recorded at the time cash back rewards or business rewards are earned by the cardholder. These costs of future rewards redemptions are recorded as a reduction of other revenues on the consolidated income statements. Estimates of the costs of future reward redemptions include assumptions regarding the percentage of earned rewards that cardholders will ultimately redeem and the cost of business rewards. It is reasonably possible that actual results will differ from our estimates or that our estimated liability for these programs may change.

Securities Sold Under Repurchase Agreements

Securities sold under agreements to repurchase are accounted for as secured borrowings because we maintain effective control over the transferred assets. Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction. We may be required to provide additional collateral based on the fair value of the underlying securities.

59

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Interchange Income

Interchange income represents fees paid to us by merchant banks through the credit card interchange network based on the purchase activity of our cardholders as partial compensation for taking credit risk, absorbing fraud losses and funding credit card receivables for a limited period prior to account billing. Interchange income includes interchange fees on both owned and securitized business credit cards.

Stock-Based Compensation

SFAS No. 123, “Accounting for Stock Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure,” (“SFAS No. 123”) defines a fair value based method of accounting for employee stock compensation plans, whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. However, entities are permitted to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board Opinion (“Opinion”) No. 25, “Accounting for Stock Issued to Employees,” whereby compensation cost is the excess, if any, of the quoted market price of the stock at the grant date or other measurement date over the amount an employee must pay to acquire the stock. We have elected to continue with the accounting methodology in Opinion No. 25 and, as a result, have provided pro forma disclosures of compensation expense for options granted to employees under our stock option plans, net of related tax effects, net income and earnings per share, as if the fair value based method of accounting had been applied. Had compensation cost for these plans been determined using the fair value method, our compensation expense for stock option plans, net of related tax effects, net income (loss) and net income (loss) per common share would have changed to the following pro forma amounts for the years ended December 31:

			2004		2003		2002
Stock-based employee compensation expense for stock option plans, net of related tax effects
	As reported		$	119	$	0	$	0
	Pro forma			3,120		2,353		3,114
Net income (loss)
	As reported		$	44,741	$	28,245	$	(24,182	)
	Pro forma			41,740		25,892		(27,296	)
Basic net income (loss) per common share
	As reported
		Class A	$	1.71	$	1.11	$	(1.03	)
		Class B		1.82		1.21		(0.94	)
		Combined		1.78		1.17		(0.97	)
	Pro forma
		Class A	$	1.59	$	1.01	$	(1.16	)
		Class B		1.70		1.11		(1.06	)
		Combined		1.66		1.07		(1.09	)
Diluted net income (loss) per common share
	As reported
		Class A	$	1.58	$	1.08	$	(1.03	)
		Class B		1.64		1.16		(0.94	)
		Combined		1.62		1.13		(0.97	)
	Pro forma
		Class A	$	1.48	$	0.99	$	(1.16	)
		Class B		1.54		1.07		(1.06	)
		Combined		1.52		1.04		(1.09	)

60

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions for the years ended December 31:

	2004			2003			2002
Dividend yield		2.85	%		3.79	%		3.57	%
Expected life (in years)		5.0			7.0			7.0
Expected volatility		54.74	%		59.19	%		57.78	%
Risk-free interest rate		3.62	%		3.23	%		4.41	%

Income Taxes

Our effective tax rate is based on expected income, statutory tax rates, current tax law and tax planning opportunities available to us in the various jurisdictions in which we operate. Management judgment is required in determining our effective tax rate and in evaluating our tax positions. Deferred income tax assets and liabilities are determined using the asset and liability (or balance sheet) method. Under this method, we determine the net deferred tax asset or liability based on the tax effects of the temporary differences between the book and tax bases of the various assets and liabilities and give current recognition to changes in tax rates and laws. Changes in tax laws, rates, regulations and policies could materially affect our tax estimates and are outside of our control. We evaluate the realizability of the deferred tax asset and recognize a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized. In establishing the valuation allowance, we consider (1) estimates of expected future taxable income, (2) existing and projected book/tax differences, (3) tax planning strategies available, and (4) the general and industry specific economic outlook. This realizability analysis is inherently subjective, as it requires management to forecast the business credit card market and the competitive and general economic environment in future periods. Changes in estimate of deferred tax asset realizability, if applicable, are included in income tax expense on the consolidated income statements.

Discontinued Operations

Our exit from the mortgage business and discontinuance of the leasing business represent the disposal of business segments following Opinion No. 30, “Reporting the Results of Operations — Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions.” Accordingly, results of these segments are classified as discontinued operations in all periods presented. Our accounting for discontinued operations was not impacted by the issuance of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” since its provisions for disposal groups of long-lived assets are effective for disposal activities initiated after January 1, 2002. Estimates of future cash flows are used in the accounting for discontinued operations, including estimates of the future costs of mortgage business-related litigation and estimates of operating results through the remaining term of the leasing portfolio. As all estimates used are influenced by factors outside our control, there is uncertainty inherent in these estimates, making it reasonably possible that they could change. Changes in estimates related to discontinued operations are included in gain (loss), net, on discontinuance of mortgage and leasing businesses on the consolidated income statements.

Earnings Per Share

Basic earnings per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Net income available to common stockholders is computed by deducting preferred stock dividends from net income. Diluted earnings per common share is computed by dividing net income available to common stockholders by the sum of weighted average common shares outstanding plus dilutive common shares for the period. Potentially dilutive common shares include stock options and restricted stock. Since the cash dividends declared on our Class B Common Stock were higher than the dividends declared on the Class A Common Stock, basic and diluted

61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

earnings per common share have been calculated using the “two-class” method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock according to dividends declared and participation rights in undistributed earnings. Both classes of our common stock share equally in undistributed earnings. We have also presented combined earnings per common share, which represents net income available to common stockholders divided by the combined total of Class A and Class B weighted average common shares outstanding.

Recently Issued Accounting Standards

In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, “Consolidation of Variable Interest Entities — An Interpretation of ARB No. 51” (“FIN 46”). This interpretation requires a company to consolidate a variable interest entity if the company has variable interests that give it a majority of the expected losses or a majority of the expected residual returns of the entity. The consolidation requirements apply to all variable interest entities created after January 31, 2003 and were effective for the annual or interim periods beginning after December 15, 2003. In December 2003, the FASB revised FIN 46 to clarify some of the provisions and incorporate several FASB staff positions related to FIN 46 that were already effective. This interpretation, as revised, did not have a material effect on our financial position or results of operations since qualifying special-purpose entities, as defined in SFAS No. 140, are exempt from the consolidation requirements of FIN 46. However, our adoption of the revised interpretation resulted in the deconsolidation of the subsidiary trust that issued our company-obligated mandatorily redeemable preferred securities (the “trust preferred securities”) effective December 31, 2003. As a result of the deconsolidation of that trust, the consolidated balance sheets include subordinated debt payable to preferred securities trust of $103 million and an equity investment in the trust of $3 million, rather than $100 million of trust preferred securities. Also, the consolidated income statement includes interest expense on subordinated debt payable to preferred securities trust beginning January 1, 2004, as compared to the periods through December 31, 2003 that included payments on the trust preferred securities classified as minority interest in income of consolidated subsidiary.

      In June 2003, the FASB issued an exposure draft, “Qualifying Special-Purpose Entities and Isolation of Transferred Assets — An Amendment of FASB Statement No. 140.” The changes and clarifications in the proposed statement would prevent derecognition by transferors that may continue to retain effective control of transferred assets by providing financial support other than a subordinated retained interest or making decisions about beneficial interests. The changes would also help to ensure that variable interest entities will not qualify for the qualifying special-purpose entity exception to FIN 46, as revised, if any party involved is in a position to enhance or protect the value of its own subordinated interest by providing financial support for or making decisions about reissuing beneficial interests. For public entities, this proposed statement would apply prospectively to transfers of assets occurring after the beginning of the first interim period after the issuance of the final statement. In January 2005, the FASB announced plans to issue a revised exposure draft in the third quarter of 2005 and a final standard in the first half of 2006. Management will evaluate any potential impact of this revised proposed statement when it is available.

      In December 2004, the FASB issued SFAS No. 123(R), “Share-Based Payment” (“SFAS No. 123R”) which, when effective, replaces SFAS No. 123 and supercedes Opinion No. 25 and the related implementation guidance. SFAS No. 123R addresses accounting for equity-based compensation arrangements, including employee stock options. Upon implementation, entities are no longer able to account for equity-based compensation using the intrinsic value method under Opinion No. 25. Entities are required to measure the cost of employee services received in exchange for awards of equity instruments at the grant date of the award using a fair value based method. The revised standard is effective for reporting periods beginning after June 15, 2005. The adoption of this standard will increase our operating expenses effective July 1, 2005. Compensation expense calculated in accordance with SFAS 123R in future periods may differ from the pro forma amounts disclosed in our footnotes for the three years ended December 31, 2004. The amount of compensation expense will vary depending on the number of options granted in 2005, the market value of our common stock and

62

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

changes in other variables impacting stock option valuation estimates. In addition, upon adoption of SFAS 123R, we may choose to use a different valuation model to estimate stock option fair value. Accordingly, we have not yet quantified the impact that the adoption of this statement will have on our results of operations.

Cash Flow Reporting

Cash paid for interest was $47.1 million for the year ended December 31, 2004, $48.5 million for 2003 and $52.2 million for 2002. Cash paid for taxes was $13.6 million for the year ended December 31, 2004, $1.9 million for 2003 and $1.7 million for 2002.

Note 3. Restricted Interest-Bearing Deposits and Investments Available for Sale

At December 31, 2003, restricted interest-bearing deposits included amounts held in escrow in connection with our litigation with Fleet of $74.2 million. On February 2, 2004, the court issued its final judgment and order in the Delaware Chancery Court litigation with Fleet. In early February 2004, the escrow agent released $63.8 million from the escrow account to Fleet in satisfaction of all amounts due to Fleet in connection with this litigation and the $10.5 million of funds remaining in the escrow account were released and transferred from the escrow account to an unrestricted cash account. See Note 23 for a discussion of recent developments related to this litigation.

      Restricted interest-bearing deposits also include amounts held in escrow in connection with other litigation-related contingencies of $1.5 million at December 31, 2004 and $1.7 million at December 31, 2003.

      Investments available for sale consisted of the following at December 31:

	2004									2003									2002
			Gross		Gross							Gross		Gross							Gross		Gross
	Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair		Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value		Cost		Gains		Losses			Value		Cost		Gains		Losses			Value
U.S. Treasury and government agency securities	$	69,402	$	0	$	(485	)	$	68,917	$	28,593	$	23	$	(72	)	$	28,544	$	29,212	$	45	$	0		$	29,257
State and municipal securities		3,329		46		(5	)		3,370		1,946		68		0			2,014		2,218		84		0			2,302
Corporate bonds		12,308		0		(49	)		12,259		0		0		0			0		0		0		0			0
Collateralized mortgage obligations		0		0		0			0		27		0		0			27		3,408		29		(1	)		3,436
Mortgage-backed securities		4,358		87		(47	)		4,398		4,954		113		(71	)		4,996		3,852		98		0			3,950
Equity securities(1)		14,626		51		0			14,677		20,018		35		0			20,053		20,223		30		0			20,253
Money market funds(2)		80,509		0		0			80,509		166,875		0		0			166,875		111,903		0		0			111,903
Other		110		0		0			110		115		0		0			115		121		0		0			121
Total investments available for sale	$	184,642	$	184	$	(586	)	$	184,240	$	222,528	$	239	$	(143	)	$	222,624	$	170,937	$	286	$	(1	)	$	171,222

(1)	Includes venture capital investments of $5.3 million at December 31, 2004, $9.5 million at December 31, 2003 and $13.5 million at December 31, 2002. The amount shown as amortized cost represents fair value for these investments. See Note 2.
(2)	Money market funds include an investment in the Merrill Lynch Premier Institutional Fund of $44.0 million and the Barclays Global Investors Prime Money Market Fund of $35.0 million at December 31, 2004. Money market funds include an investment in the Merrill Lynch Premier Institutional Fund of $163.8 million at December 31, 2003 and $110.9 million at December 31, 2002.

      Distributions from money market funds were $1.2 million in the year ended December 31, 2004, $1.4 million in 2003 and $1.1 million in 2002 and were included in interest income on the consolidated income statements.

63

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Maturities of investments available for sale at December 31, 2004 were as follows:

		Amortized
		Cost		Fair Value
Due in 1 year		$	38,496	$	38,418
Due after 1 but within 5 years			44,259		43,819
Due after 5 but within 10 years			1,281		1,286
Due after 10 years			1,113		1,133
	Subtotal		85,149		84,656
Mortgage-backed securities			4,358		4,398
Equity securities			14,626		14,677
Money market funds			80,509		80,509
Total investments available for sale		$	184,642	$	184,240

      Net realized gains and losses on the sale of investments are included in other revenues on the consolidated income statements. Realized gains and losses on sales of investments available for sale were as follows for the years ended December 31:

	2004		2003			2002
Gross realized gains	$	1,179	$	389		$	1,240
Gross realized losses		0		(2,006	)		(549	)
Net realized gains (losses)	$	1,179	$	(1,617	)	$	691

      There were no declines in the fair value of investments available for sale below their cost that were deemed to be other than temporary at December 31, 2004 or 2003. At December 31, 2004, Advanta Corp. held twenty investments in U.S. Treasury and government agency securities and seventeen investments in other debt securities that were in an unrealized loss position. The range of unrealized losses per individual investment was $1 thousand to $77 thousand and resulted from increases in interest rates, not from deterioration in the creditworthiness of the issuers. These unrealized losses were not deemed to be other than temporary impairments based upon the length of time and the extent to which the fair value has been less than cost, review of the current interest rate environment, the underlying credit rating of the issuers, anticipated volatility in the market and our intent and ability to retain the investments for a period of time sufficient to allow for recovery in fair value. The fair value of investments available for sale in an unrealized loss position and the related unrealized losses were as follows at December 31, 2004:

	Less Than					12 Months
	12 Months in an					or Longer in an
	Unrealized Loss					Unrealized Loss
	Position					Position				Total
	Gross					Gross				Gross
	Unrealized			Fair		Unrealized		Fair		Unrealized			Fair
	Amount			Value		Amount		Value		Amount			Value
U.S. Treasury and government agency securities	$	(485	)	$	66,323	$	0	$	0	$	(485	)	$	66,323
State and municipal securities		(5	)		715		0		0		(5	)		715
Corporate bonds		(49	)		12,259		0		0		(49	)		12,259
Mortgage-backed securities		(47	)		2,699		0		0		(47	)		2,699
Total	$	(586	)	$	81,996	$	0	$	0	$	(586	)	$	81,996

64

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Investments deposited with insurance regulatory authorities to meet statutory requirements or held by a trustee for the benefit of primary insurance carriers were $6.3 million at December 31, 2004 and $6.2 million at December 31, 2003.

Note 4. Receivables

Receivables on the balance sheet, including those held for sale, consisted of the following at December 31:

			2004			2003
Business credit card receivables			$	730,483		$	518,040
Other receivables				10,280			16,976
		Gross receivables		740,763			535,016
Add: Deferred origination costs, net of deferred fees				15,745			19,211
Less: Allowance for receivable losses
	Business credit cards			(49,190	)		(47,041	)
	Other receivables			(1,288	)		(1,413	)
		Total allowance for receivable losses		(50,478	)		(48,454	)
Receivables, net			$	706,030		$	505,773

      In June 2001, Advanta Corp. provided a $353 thousand mortgage financing loan and a $100 thousand revolving home equity line of credit to an executive officer as part of a relocation agreement. The line of credit was used to finance certain costs associated with establishing and maintaining the residence. The interest rate on the mortgage financing loan and revolving note was 7% and both loans were secured with liens against the property. The mortgage financing loan extended through June 30, 2031 and the line of credit extended through June 30, 2011. Both loans were subject to certain acceleration provisions. Repayment of principal and interest was deferred for the initial three-year period of the respective loans. Borrowings on the line of credit were $15 thousand in 2004, $15 thousand in 2003 and $33 thousand in 2002. Upon the termination of the executive officer’s employment in February 2004, a repayment event under the terms of the agreement occurred. The former executive officer sold the property in May 2004 and used the net proceeds from the sale to satisfy his loan obligations in accordance with the terms of the relocation agreement. The outstanding balances on these loans of $474 thousand were included in other receivables at December 31, 2003. We recognized $91 thousand of compensation expense in the year ended December 31, 2004 related to loan forgiveness, based on the net proceeds from the sale of the property.

      We had commitments to extend credit to our credit card customers, representing unused lines of credit, of $7.2 billion at December 31, 2004 and $6.7 billion at December 31, 2003. Lines of credit on our customers’ business credit cards totaled $10.5 billion at December 31, 2004 and $9.7 billion at December 31, 2003. We believe that our customers’ utilization of their lines of credit will continue to be substantially less than the amount of the commitments, as has been our experience to date.

      See Note 6 for information on geographic concentrations for owned business credit card receivables. Also see Note 6 for statistical information on owned receivables 30 days or more delinquent, 90 days or more delinquent, on nonaccrual status, accruing receivables past due 90 days or more, and net principal charge-offs.

65

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 5. Allowance for Receivable Losses

The following table displays five years of allowance history for the years ended December 31:

			2004			2003			2002			2001			2000
Balance at January 1			$	48,454		$	46,159		$	41,971		$	33,367		$	14,865
Provision for credit losses				42,368			45,423			40,906			35,976			36,309
Provision for interest and fee losses(1)				9,714			11,623			6,889			4,404			2,293
Gross principal charge-offs:
	Business credit cards			(42,991	)		(46,597	)		(41,660	)		(30,540	)		(20,174	)
	Other receivables			(11	)		(34	)		(16	)		(3	)		(2	)
		Total gross principal charge-offs		(43,002	)		(46,631	)		(41,676	)		(30,543	)		(20,176	)
Principal recoveries:
	Business credit cards			3,055			2,927			4,260			3,171			2,369
	Other receivables			4			0			0			0			0
		Total principal recoveries		3,059			2,927			4,260			3,171			2,369
Net principal charge-offs				(39,943	)		(43,704	)		(37,416	)		(27,372	)		(17,807	)
Interest and fee charge-offs:
	Business credit cards			(10,115	)		(11,047	)		(6,191	)		(4,404	)		(2,293	)
Balance at December 31			$	50,478		$	48,454		$	46,159		$	41,971		$	33,367

(1)  See “Interest and Fee Income on Receivables” in Note 2 for a discussion of the change in income billing practice effective October 1, 2002. Provisions for interest and fee losses are recorded as direct reductions to interest and fee income.

Note 6. Securitization Activities

Accounts receivable from securitizations consisted of the following at December 31:

	2004		2003
Retained interests in securitizations	$	162,473	$	149,998
Accrued interest and fees on securitized receivables, net (1)		50,814		58,178
Amounts due from the securitization trust		31,075		36,161
Total accounts receivable from securitizations	$	244,362	$	244,337

(1)  Reduced by an estimate for uncollectible interest and fees of $9.2 million at December 31, 2004 and $12.6 million at December 31, 2003.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The following represents securitization data for the years ended December 31, and the key assumptions used in estimating the fair value of retained interests in securitizations at the time of each new securitization or replenishment if quoted market prices were not available.

		2004			2003			2002
Average securitized receivables			$2,524,547			$2,238,157			$1,727,864
Securitization income			124,769			122,816			118,976
Discount accretion			17,140			16,311			10,658
Interchange income			112,568			92,164			70,830
Servicing revenues			49,516			40,747			33,973
Proceeds from new securitizations			131,641			957,051			494,486
Proceeds from collections reinvested in revolving-period securitizations			6,557,489			4,475,645			3,964,178
Cash flows received on retained interests			264,391			287,926			205,027
Key assumptions:
	Discount rate		9.79% -  14.33	%		11.44% -  14.56	%		9.03% -  15.00	%
	Monthly payment rate		20.63% -  22.65	%		18.79% -  22.25	%		18.16% -  21.00	%
	Loss rate		5.90% -     8.47	%		7.70% -  10.29	%		9.35% -  12.78	%
	Interest yield, net of interest earned by noteholders		11.28% -  13.84	%		13.84% -  15.00	%		14.85% -  15.87	%

      There were no purchases of delinquent accounts from the securitization trust in the three years ended December 31, 2004.

      The following assumptions were used in measuring the fair value of retained interests in securitizations at December 31. The assumptions listed represent weighted averages of assumptions used for each securitization. The retained interest-only strip valuation includes cash flow projections over the three month weighted average life of existing receivables at December 31, 2004 and 2003.

	2004			2003
Discount rate		9.79% -  11.27	%		12.44% -  14.33	%
Monthly payment rate		21.77% -  22.65	%		20.80% -  22.25	%
Loss rate		5.90% -     6.79	%		7.70% -     8.47	%
Interest yield, net of interest earned by noteholders		11.28	%		13.84	%

      In addition to the assumptions identified above, management also considered qualitative factors such as the impact of the current economic environment on the performance of the receivables sold and the potential volatility of the current market for similar instruments in assessing the fair value of retained interests in securitizations.

      We have prepared sensitivity analyses of the valuations of retained interests in securitizations estimated using the assumptions identified above. The sensitivity analyses show the hypothetical effect on the estimated fair value of those assets of two unfavorable variations from expected levels for each key assumption,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

independently from any change in another key assumption. Set forth below are the results of those sensitivity analyses on the valuation at December 31.

		2004			2003
Effect on estimated fair value of the following hypothetical changes in key assumptions:
	Discount rate increased by 2%	$	(2,183	)	$	(2,481	)
	Discount rate increased by 4%		(4,304	)		(4,872	)
	Monthly payment rate at 110% of base assumption		(1,510	)		(1,754	)
	Monthly payment rate at 125% of base assumption		(3,516	)		(3,836	)
	Loss rate at 110% of base assumption		(3,622	)		(4,501	)
	Loss rate at 125% of base assumption		(9,054	)		(11,251	)
	Interest yield, net of interest earned by noteholders, decreased by 1%		(6,138	)		(5,845	)
	Interest yield, net of interest earned by noteholders, decreased by 2%		(12,277	)		(11,690	)

      The objective of these hypothetical analyses is to measure the sensitivity of the fair value of the retained interests in securitizations to changes in assumptions. The methodology used to calculate the estimated fair value in the analyses is a discounted cash flow analysis, the same methodology used to calculate the estimated fair value as described in Note 2. These estimates do not factor in the impact of simultaneous changes in other key assumptions. The above scenarios do not reflect management’s expectation regarding the future direction of these rates, and they depict only certain possibilities out of a large set of possible scenarios.

Managed business credit card receivable data

Our managed business credit card receivable portfolio is comprised of both owned and securitized business credit card receivables. Performance on a managed receivable portfolio basis is useful and relevant because we retain interests in the securitized receivables and, therefore, we have a financial interest in and exposure to the performance of the securitized receivables. Credit quality data on the managed business credit card receivable portfolio was as follows at December 31:

		2004		2003
Owned business credit card receivables		$	730,483	$	518,040
Securitized business credit card receivables			2,564,147		2,463,747
Total managed receivables			3,294,630		2,981,787
Receivables 30 days or more delinquent:
	Owned		28,287		25,301
	Securitized		107,546		148,177
	Total managed		135,833		173,478
Receivables 90 days or more delinquent:
	Owned		13,638		12,696
	Securitized		51,770		74,762
	Total managed		65,408		87,458
Accruing receivables past due 90 days or more:
	Owned		12,233		11,320
	Securitized		45,981		66,376
	Total managed		58,214		77,696
Nonaccrual receivables:
	Owned		11,393		7,866
	Securitized		43,114		47,381
	Total managed		54,507		55,247

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

		2004		2003
Net principal charge-offs for the year ended December 31 (1):
	Owned		39,936		43,670
	Securitized		170,024		179,538
	Total managed		209,960		223,208

(1)  Net principal charge-offs for the year ended December 31, 2002 were $37.4 million on owned receivables and $156.3 million on securitized receivables, for a total of $193.7 million on managed receivables.

      Approximately 13% of our owned and managed business credit card receivables are concentrated in the state of California. No other single state had a concentration in excess of 10% of total owned or managed business credit card receivables. Based on U.S. Census population estimates, our concentration of business credit card receivables in the state of California is generally consistent with the 12% of the U.S. population residing in that state.

Note 7. Selected Balance Sheet Information

Other assets consisted of the following at December 31:

	2004		2003
Net deferred tax asset	$	70,260	$	82,175
Investment in Fleet Credit Card Services, L.P.		32,095		35,988
Cash surrender value of insurance contracts		21,346		21,792
Intangible assets		3,360		4,295
Investment in preferred securities trust		3,093		3,093
Amounts due from transfer of consumer credit card business		0		70,545
Other assets		61,297		60,815
Total other assets	$	191,451	$	278,703

      We own rights to host an annual tennis event held in the Philadelphia area, purchased in 2002 for $3 million, to raise awareness of Advanta’s involvement in the local community. We determined that the intangible asset has an indefinite useful life, and therefore no amortization is recorded. This asset is tested annually for impairment or more frequently if events or changes in circumstances indicate that the asset might be impaired. There was no impairment in the three years ended December 31, 2004.

      In the year ended December 31, 2003, we purchased sponsorship rights and exclusive marketing rights to a professional association’s members for $1.6 million. This intangible asset is being amortized over the 24-month period of the agreement. The carrying value of this asset was $245 thousand at December 31, 2004 and $1.2 million at December 31, 2003. Marketing expense included $980 thousand of amortization expense on this asset for the year ended December 31, 2004 and $375 thousand of amortization expense for the year ended December 31, 2003. The remaining carrying value of this asset will be amortized in 2005.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Other liabilities consisted of the following at December 31:

	2004		2003
Accounts payable and accrued expenses	$	33,091	$	28,458
Business credit card business rewards liability		16,872		15,141
Business credit card cash back rewards liability		2,817		9,644
Current income tax payable		16,068		13,449
Amounts due to the securitization trust		4,493		4,021
Accrued interest payable		3,310		4,008
Other(1)		29,954		192,402
Total other liabilities	$	106,605	$	267,123

(1)  A substantial portion of other liabilities at December 31, 2003 represented our litigation reserves.

      In February 2004, the court issued its final judgment and order in the Delaware Chancery Court litigation with Fleet, and a payment was made to Fleet in satisfaction of all amounts due in connection with this litigation. In accordance with the court’s February 2004 order, the payment to Fleet was net of amounts due to Advanta from Fleet. As a result of the court’s order and payment to Fleet in February 2004, there was a decrease in other assets and other liabilities as of the payment date. There was no impact to our results of operations in 2003 since, based on the final judgment and order, our reserves at December 31, 2003 were adequate. See Note 23 for a discussion of recent developments related to this litigation.

Note 8. Deposits

Deposit accounts consisted of the following at December 31:

	2004		2003
Demand deposits	$	5,466	$	6,624
Money market savings		3,614		1,581
Time deposits of $100,000 or less		469,733		467,236
Time deposits of more than $100,000		346,460		196,763
Total deposits	$	825,273	$	672,204

      All deposits are interest bearing except demand deposits. Time deposit maturities were as follows at December 31, 2004:

Year Ended December 31,
2005	$	317,203
2006		291,610
2007		129,959
2008		15,690
2009		61,731

      The average interest cost of our deposits was 2.89% in the year ended December 31, 2004, 2.92% in 2003 and 4.05% in 2002.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 9. Debt and Other Borrowings

The composition of debt was as follows at December 31:

	2004		2003
RediReserve Variable Rate demand certificates, (1.65% - 2.25%)	$	14,851	$	24,910
6 month retail notes, fixed		0		4,259
12 month retail notes, fixed (1.59% - 3.68%)		27,428		57,323
18 month retail notes, fixed (1.83% - 4.64%)		7,651		12,710
24 month retail notes, fixed (2.47% - 6.63%)		53,079		83,177
30 month retail notes, fixed (3.44% - 9.08%)		16,702		18,471
36 month retail notes, fixed (4.50% - 7.33%)		19,296		9,679
48 month retail notes, fixed (5.45% - 11.51%)		19,092		16,863
60 month retail notes, fixed (6.39% - 11.56%)		101,773		85,299
120 month retail notes, fixed (7.56% - 9.53%)		4,026		0
Other retail notes, fixed (1.59% - 11.33%)		1,861		2,126
Total debt	$	265,759	$	314,817

      Interest rates shown in the table above represent the range of rates on debt outstanding at December 31, 2004.

      The annual contractual maturities of debt were as follows at December 31, 2004:

Year Ended December 31,
2005	$	114,390
2006		37,124
2007		43,480
2008		42,944
2009 and thereafter		27,821

      The average interest cost of our debt was 6.19% in the year ended December 31, 2004, 6.39% in 2003 and 7.56% in 2002.

      We had no short-term borrowings outstanding at December 31, 2004 or 2003. The following table displays information related to selected types of short-term borrowings during the years ended December 31:

		2004					2003					2002
		Amount		Rate			Amount		Rate			Amount		Rate
Average for the year:
	Securities sold under repurchase agreements	$	0		0	%	$	55		1.72	%	$	3,527		1.86	%
	Federal funds purchased		145		1.58			507		1.40			0		0
Total		$	145		1.58	%	$	562		1.43	%	$	3,527		1.86	%
Maximum month-end balance:
	Securities sold under repurchase agreements	$	0				$	0				$	25,035
	Federal funds purchased		18,536					30,000					0

      The weighted average interest rates were calculated by dividing the interest expense for the period by the average amount of short-term borrowings outstanding during the period, calculated as an average of daily amounts.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      At December 31, 2004, Advanta Bank Corp. had uncommitted federal funds purchased facilities available with two correspondent banks totaling $60.0 million.

Note 10. Subordinated Debt Payable to Preferred Securities Trust

We own 100% of a statutory business trust, Advanta Capital Trust I, that issued $100 million of trust preferred securities, representing preferred beneficial interests in the assets of the trust. The trust was established in 1996 as a financing vehicle and we used the proceeds from the issuance for general corporate purposes. The assets of the trust consist of $103 million of 8.99% junior subordinated debentures issued by Advanta Corp. due December 17, 2026. The trust preferred securities are subject to mandatory redemption upon the optional prepayment by Advanta Corp. of the junior subordinated debentures at any time on or after December 17, 2006 at an amount per trust preferred security equal to 104.495% of the principal amount plus accrued and unpaid distributions. This amount declines ratably on each December 17 thereafter to 100% on December 17, 2016. Advanta Corp. provides a full and unconditional guarantee of payments of distributions and other amounts due on the trust preferred securities. Dividends on the trust preferred securities are cumulative, payable semi-annually in arrears at an annual rate of 8.99%, and are deferrable at our option for up to ten consecutive semi-annual periods, provided that no extension may extend beyond December 17, 2026. We cannot pay dividends on our preferred or common stocks during deferments. There have been no deferments as of December 31, 2004. The trust has no operations or assets separate from its investment in the junior subordinated debentures.

      As described in Note 2, our adoption of FIN 46, as revised, resulted in the deconsolidation of the subsidiary trust that issued the trust preferred securities effective December 31, 2003. As a result of the deconsolidation of that trust, the consolidated balance sheets include subordinated debt payable to preferred securities trust of $103 million and an equity investment in the trust of $3 million, rather than $100 million of trust preferred securities. Also, the consolidated income statement includes interest expense on subordinated debt payable to preferred securities trust beginning January 1, 2004, as compared to the periods through December 31, 2003 that included payments on the trust preferred securities classified as minority interest in income of consolidated subsidiary.

      The following is summarized financial information for Advanta Capital Trust I:

	December 31,
	2004		2003
Balance Sheet
Total assets	$	103,453	$	103,453
Total liabilities		360		360
Mandatorily redeemable preferred securities		100,000		100,000
Total securityholder’s equity		3,093		3,093

	Year Ended December 31,
	2004		2003		2002
Income Statement
Interest income	$	9,628	$	9,628	$	9,628
Expenses		0		0		0
Net income	$	9,628	$	9,628	$	9,628

72

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 11. Commitments and Contingencies

Litigation Contingencies

All outstanding litigation between Advanta and Fleet was dismissed in February 2005, consistent with the terms of the May 28, 2004 agreement between Advanta and Bank of America. See further discussion in Note 23 and discussion of the litigation below.

      On January 22, 1999, Fleet and certain of its affiliates filed a lawsuit against Advanta Corp. and certain of its subsidiaries in Delaware Chancery Court. Fleet’s allegations, which we denied, centered around Fleet’s assertions that we failed to complete certain post-closing adjustments to the value of the assets and liabilities we contributed to Fleet Credit Card Services, L.P. in connection with the Consumer Credit Card Transaction. We filed an answer to the complaint, and we also filed a countercomplaint against Fleet for damages we believe have been caused by certain actions of Fleet. As a result of related litigation with Fleet, $70.1 million of our reserves in connection with this litigation were funded in an interest-bearing escrow account in February 2001. On January 22, 2003, the trial court issued a ruling on all but one of the remaining issues, and ordered further briefing on the remaining outstanding issue. Effective December 31, 2002, we recognized a $43.0 million pretax loss on the transfer of our consumer credit card business, representing the estimated impact of implementing the court’s January 2003 decisions. This amount represented the amount in excess of the reserves we had been carrying for the litigation, which was based on our expectations of the outcome of the litigation. On November 7, 2003, the court ruled on the remaining outstanding issue, the method for calculating the interest to be awarded, and ordered the parties to submit revised calculations in accordance with this ruling before it issued a judgment. On February 2, 2004, the court issued its final judgment and order. In early February 2004, the escrow agent released $63.8 million from the escrow account to Fleet in satisfaction of all amounts due to Fleet in connection with this litigation and the $10.5 million of funds remaining in the escrow account were released and transferred from the escrow account to an unrestricted cash account. At December 31, 2003, the escrow account was included in restricted interest-bearing deposits on the consolidated balance sheet. There was no impact to our results of operations in 2003 since, based on the final judgment and order, our reserves at December 31, 2003 were adequate. On March 1, 2004, we filed a notice of appeal to commence the appeals process relating to orders made by the Delaware Chancery Court during the litigation, and on April 15, 2004, we filed an opening brief with the Supreme Court of Delaware setting forth the basis for our appeal. Fleet filed its answering brief with the Supreme Court of Delaware on May 17, 2004, and we filed our reply brief on June 1, 2004. As described in Note 23, this litigation was dismissed in February 2005 pursuant to the May 28, 2004 agreement between Advanta and Bank of America.

      In Fleet’s disputes with us, Fleet claimed $508 million of tax deductions from its partnership with us in connection with the Consumer Credit Card Transaction, which are required under the law to be allocated solely to Advanta. The deductions, as well as the allocation of a gain from the sale of a partnership asset of approximately $47 million, were before the Internal Revenue Service Regional Office of Appeals. As described in Note 23, this matter was resolved in February 2005 in accordance with the terms of the May 28, 2004 agreement between Advanta and Bank of America.

      On January 15, 2003, Fleet filed a complaint in Rhode Island Superior Court seeking a declaratory judgment that we indemnify Fleet under the applicable partnership agreement for any damage Fleet incurs by not being entitled to the $508 million of tax deductions. Fleet was also seeking a declaratory judgment that it should not indemnify us for any damages that we incur due to any allocation to Advanta of the $47 million gain on the sale of a partnership asset. On February 28, 2003, we filed a motion to dismiss the complaint. On August 13, 2003, the court denied the motion to dismiss on procedural grounds. We answered the complaint and filed a counterclaim against Fleet on September 19, 2003. As described in Note 23, this litigation was dismissed in February 2005 pursuant to the May 28, 2004 agreement between Advanta and Bank of America.

      On July 26, 2001, Chase Manhattan Mortgage Corporation (“Chase”) filed a complaint against Advanta Corp. and certain of its subsidiaries in the United States District Court for the District of Delaware alleging, among other things, that we breached our contract with Chase in connection with the Mortgage Transaction.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Chase claims that we misled Chase concerning the value of certain of the assets sold to Chase and claims damages of approximately $70 million. In September 2001, we filed an answer to the complaint in which we denied all of the substantive allegations of the complaint and asserted a counterclaim against Chase for breach of contract relating to funds owed by Chase to us in connection with the Mortgage Transaction. In September 2003, we filed a motion for summary judgment with the court with respect to all claims raised in Chase’s complaint and Chase filed a motion for partial summary judgment with respect to certain of its claims. On March 4, 2004, the court denied both parties’ motions for summary judgment. On April 26, 2004, a non-jury trial commenced; at trial, Chase asserted damages totaling approximately $88 million. The trial concluded on May 26, 2004, and the court ordered the parties to make certain post-trial filings with the court. Post-trial filings were filed on July 30, 2004 and September 17, 2004. We believe that the lawsuit is without merit and will vigorously defend Advanta in this litigation and therefore, we do not have any reserves for future judgments or rulings in this litigation. Since this litigation relates to a discontinued operation, we have established reserves for estimated future litigation costs. We do not expect this lawsuit to have any impact on our continuing business and, based on the complete lack of merit, we do not anticipate that the lawsuit will have a material adverse effect on our financial position or results of operations.

      On February 13, 2004, Advanta Corp. filed a Writ of Summons against Chase in Montgomery County, Pennsylvania Court of Common Pleas, which was amended on March 4, 2004; and on March 8, 2004, Advanta Corp. and certain of its subsidiaries filed a Second Amended Writ of Summons and a Complaint against Chase in Montgomery County, Pennsylvania Court of Common Pleas seeking damages of at least $17.7 million. In May 2004, Chase filed an answer to the complaint and asserted a new matter and counterclaims seeking damages of at least $5 million. On August 2, 2004, we filed our reply to Chase’s new matter and counterclaims. On February 23, 2004 and June 4, 2004, Chase filed a complaint and a first amended complaint against us in the United States District Court for the District of Delaware seeking damages of at least $7 million. On August 9, 2004, we filed our answer, affirmative defenses and counterclaims to the first amended complaint in the United States District Court for the District of Delaware, asserting substantially the same claims and damages as in the Montgomery County, Pennsylvania action. On August 30, 2004, Chase filed a motion to dismiss our counterclaims. On September 15, 2004, we filed our opposition to Chase’s motion. These complaints, counterclaims and other filings relate to contractual claims, including claims for indemnification, under the purchase and sale agreement governing the Mortgage Transaction and are a continuation of the ongoing dispute associated with the Mortgage Transaction. Since this litigation relates to a discontinued operation, we have established reserves for estimated future litigation costs. We do not expect the lawsuit filed by Chase on February 23, 2004, as amended on June 4, 2004, or Chase’s new matter and counterclaims in the action brought by us in the Pennsylvania Court of Common Pleas to have a material adverse effect on our financial position or results of operations.

      Advanta Mortgage Corp. USA (“AMCUSA”) and Advanta Mortgage Conduit Services, Inc. (“AMCSI”), subsidiaries of Advanta Corp., have been involved in arbitration before the American Arbitration Association with Goodrich & Pennington Mortgage Fund, Inc. (“GPMF”), a participant in one of the programs of our former mortgage business. The arbitration process commenced June 28, 2001 in San Francisco, California with GPMF serving a demand for arbitration relating to alleged failure to provide information and documentation under the former mortgage program. In February and June 2004, GPMF filed additional statements of claim, concerning GPMF’s relationship with Advanta. Certain of GPMF’s claims were tried at an arbitration hearing during November 2004 (“Phase I Claims”). On January 10, 2005, the arbitrator issued a ruling in Advanta’s favor on all issues capable of determination from the evidence presented at the hearing on the Phase I Claims. Further evidence will be presented to address certain issues unresolved by the January 2005 ruling. On January 28, 2005, GPMF filed an amended statement of claim raising unspecified issues relating to the effect of the Mortgage Transaction on GPMF’s relationship with Advanta and attempting to add Chase as a party to the arbitration. If the claim against Chase is permitted, this and all remaining claims are currently scheduled to be heard in July 2005 (“Phase II Claims”). The aggregate amount of damages sought by GPMF on the Phase II Claims is not known and at this time, no cognizable damage amount has been specified in its pleadings. Since this arbitration relates to a discontinued operation,

74

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

we have established reserves for estimated future litigation costs. We do not expect this arbitration to have a material adverse effect on our financial position or results of operations.

      In addition to the cases described above, Advanta Corp. and its subsidiaries are involved in class action lawsuits, other litigation, claims and legal proceedings arising in the ordinary course of business or discontinued operations, including litigation arising from our operation of the mortgage business prior to our exit from that business in the first quarter of 2001.

      Management believes that the aggregate loss, if any, resulting from existing litigation, claims and other legal proceedings will not have a material adverse effect on our financial position or results of operations based on the level of litigation reserves we have established and our current expectations regarding the ultimate resolutions of these existing actions. We estimate our litigation reserves based on the status of litigation and our assessment of the ultimate resolution of each action after consultation with our attorneys. However, due to the inherent uncertainty in litigation and since the ultimate resolutions of our litigation, claims and other legal proceedings are influenced by factors outside of our control, it is reasonably possible that our estimated liability under these proceedings may change or that actual results will differ from our estimates.

Obligations under Guarantees

In the normal course of business, including discontinued operations, we enter into agreements pursuant to which we may be obligated under specified circumstances to indemnify the counterparties with respect to certain matters. These indemnification obligations typically arise in the context of agreements entered into by us to, among other things, purchase or sell assets or services, establish alliances or other strategic business relationships, service assets (including for unaffiliated third parties), buy or lease real property and license intellectual property. The agreements we enter into in the normal course of business, including discontinued operations, generally require us to pay certain amounts to the other party associated with claims or losses if they result from our breach of the agreement, including the inaccuracy of representations or warranties. The agreements we enter into may also contain other indemnification provisions that obligate us to pay certain amounts upon the occurrence of certain events, such as the negligence or willful misconduct of our employees or infringement of third party intellectual property rights. Under these typical indemnification provisions, payment by us is generally conditioned upon the other party making a claim pursuant to the procedures specified in the particular agreement, and the procedures typically allow us to challenge the other party’s claims. Further, our indemnification obligations may be limited in time and/or amount, and in some instances, we may have recourse against third parties for certain payments made by us under an indemnification agreement. Also, in connection with the securitization of receivables, we enter into agreements pursuant to which we agree to indemnify other parties to these transactions. The agreements contain standard representations and warranties about the assets that are securitized and include indemnification provisions under certain circumstances involving a breach of these representations or warranties. In connection with the securitization transactions we also include indemnifications that protect other parties to the transactions upon the occurrence of certain events such as violations of securities law and certain tax matters. Contingencies triggering material indemnification obligations have not occurred historically and are not expected to occur. Maximum exposure to loss is not possible to estimate due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement. The nature of the indemnification provisions in the various types of agreements described above are low risk and pervasive, and we consider them to have a remote risk of loss. There are no amounts reflected on the consolidated balance sheets related to these indemnifications.

      In connection with our exit from certain businesses, we have entered into agreements that include customary indemnification obligations to the other parties. In general, the agreements we have entered into in connection with our disposition of assets, liabilities and/or businesses provide that we will indemnify the other parties to the transactions for certain losses relating to the assets, liabilities or business acquired by them. The obligations to indemnify are transaction and circumstance specific, and in most cases the other party must suffer a minimum threshold amount of losses before our indemnification obligation is triggered. Under the

75

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

indemnification provisions, payment by us is generally conditioned upon the other party making a claim pursuant to the procedures specified in the particular agreement, and the procedures typically allow us to challenge the other party’s claims. It is not possible to determine the maximum potential amount of future payments under these or similar arrangements due to the conditional nature of our obligations and the unique facts and circumstances involved in each particular agreement. Litigation relating to indemnification provisions of transaction agreements governing the Consumer Credit Card Transaction and the Mortgage Transaction is described above in “Litigation Contingencies.”

      We own 100% of a statutory business trust that issued $100 million of trust preferred securities, representing preferred beneficial interests in the assets of the trust. See Note 10 for further discussion. Advanta Corp. provides a full and unconditional guarantee of payments of distributions and other amounts due on the trust preferred securities. At December 31, 2004, the maximum amount of the undiscounted future payments that Advanta Corp. could be required to make under this guarantee was $298 million, representing the amount of trust preferred securities outstanding of $100 million at December 31, 2003 and future dividends of approximately $9 million per year through December 2026. Our consolidated balance sheets reflect subordinated debt payable to the preferred securities trust of $103 million.

      See Note 21 for a discussion of parent guarantees of subsidiary obligations.

Commitments

We lease office space in several states under leases accounted for as operating leases. Total rent expense related to continuing operations was $5.5 million for the year ended December 31, 2004, $6.4 million for 2003 and $5.5 million for 2002. The future minimum lease payments of non-cancelable operating leases are as follows at December 31, 2004:

Year Ended December 31,
2005	$	6,114
2006		5,767
2007		5,510
2008		5,322
2009		5,334
Thereafter		4,131

      In the normal course of business, we have commitments to extend credit to our business credit card customers. See Note 4 for further discussion.

Note 12. Capital Stock

Class A Preferred Stock is entitled to 1/2 vote per share and a noncumulative dividend of $140 per share per year, which must be paid prior to any dividend on the common stock. The redemption price of the Class A Preferred Stock is equivalent to its par value and redemption is only permitted upon approval of the Board of Directors of Advanta Corp.

      In 2001 and 2002, the Board of Directors of Advanta Corp. authorized the purchase of up to 3.0 million shares of Advanta Corp. common stock. We repurchased 693 thousand shares of our Class B Common Stock in the year ended December 31, 2001 and 1.6 million shares of our Class B Common Stock in 2002. In the year ended December 31, 2003, we repurchased 434 thousand shares of our Class A Common Stock and 315 thousand shares of our Class B Common Stock, which substantially completed our purchases under these authorizations.

76

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Cash dividends per share of common stock declared were as follows for the years ended December 31:

	2004		2003		2002
Class A Common Stock	$	0.347	$	0.252	$	0.252
Class B Common Stock		0.416		0.302		0.302

      In November 2004, the Board of Directors of Advanta Corp. approved a 20% increase in the regular quarterly cash dividends on Class A and Class B Common Stock beginning with the dividends payable in the second quarter of 2005.

Note 13. Benefit Plans

We have adopted a stock-based incentive plan designed to provide incentives to participating employees to remain in our employ and devote themselves to Advanta’s success. Our incentive plan authorizes an aggregate of 20.0 million shares of Advanta Corp. Class B Common Stock for the grant of options, awards of shares of stock or awards of stock appreciation rights to employees and directors. Shares available for future grant were 6.9 million at December 31, 2004 and 8.0 million at December 31, 2003.

Restricted Stock Awards

Under our management incentive programs, eligible employees are given the opportunity to elect to take portions of their anticipated, or target, bonus payments for future years in the form of restricted shares of Advanta Corp. Class B Common Stock. To the extent that these elections are made, or are required by the terms of the programs for executive officers, restricted stock is issued to employees. The number of shares of restricted stock granted to employees is determined by dividing the amount of future target bonus payments that the employee elects to receive in stock by the market price as determined under the incentive program. When newly eligible employees elect to participate in this program, the number of shares issued to them with respect to their target bonus payments for the relevant performance years is determined based on the average market price of the stock for the 90 days prior to the first day of the month in which they are eligible to join the program. The current program covers the performance years 2002 through 2005. Restricted stock vests 10 years from the date of grant and is subject to forfeiture prior to vesting should an employee terminate employment with us. Vesting has been and may continue to be accelerated annually with respect to the restricted stock granted under the program covering the particular performance year, based on the extent to which the employee and Advanta met or meet their respective performance goals for that performance year. We also may issue restricted stock to executive officers as part of employment agreements. The vesting and forfeiture terms vary depending on the specific terms of the employment agreement.

      Compensation expense on restricted stock is recognized over the vesting period of the shares. Compensation expense recognized in connection with restricted stock was $7.3 million for the year ended December 31, 2004, $3.8 million for 2003 and $2.5 million for 2002.

77

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The following table summarizes restricted stock activity for the years ended December 31:

	2004					2003					2002
				Weighted Average					Weighted Average					Weighted Average
	Number of			Price at Date of		Number of			Price at Date of		Number of			Price at Date of
(Shares in thousands)	Shares			Issuance		Shares			Issuance		Shares			Issuance
Outstanding at beginning of year		2,089		$	8.27		2,492		$	8.20		187		$	8.19
Issued		351			15.46		239			9.02		2,740			8.24
Released from restriction		(433	)		8.23		(287	)		8.13		(135	)		8.27
Forfeited		(223	)		8.47		(355	)		8.41		(300	)		8.57
Outstanding at end of year		1,784		$	9.67		2,089		$	8.27		2,492		$	8.20

Stock Options

Stock option transactions in the years ended December 31 were as follows:

	2004					2003					2002
	Number of			Weighted Average		Number of			Weighted Average		Number of			Weighted Average
(Shares in thousands)	Options			Exercise Price		Options			Exercise Price		Options			Exercise Price
Outstanding at beginning of year		5,358		$	9.79		4,776		$	10.01		2,897		$	11.17
Granted		1,352			16.03		1,100			8.08		2,236			8.54
Exercised		(867	)		9.78		(311	)		7.44		(45	)		8.07
Forfeited		(320	)		12.83		(201	)		8.99		(312	)		9.46
Expired		(1	)		22.13		(6	)		14.86		0			0
Outstanding at end of year		5,522		$	11.14		5,358		$	9.79		4,776		$	10.01
Options exercisable at end of year		2,795					2,287					1,490
Weighted average fair value of options granted in the year	$	6.56				$	3.46				$	3.80

      The following table summarizes information about stock options outstanding at December 31, 2004.

	Options Outstanding						Options Exercisable
(Shares in thousands)	Number		Weighted Average				Number
Range of	Outstanding		Remaining		Weighted Average		Exercisable		Weighted Average
Exercise Prices	at 12/31/04		Contractual Life		Exercise Price		at 12/31/04		Exercise Price
$ 1.00 to $ 5.00		96		5.7 years	$	4.56		96	$	4.56
$ 5.01 to $10.00		3,126		5.7		8.24		1,767		8.24
$10.01 to $15.00		900		6.4		13.11		653		13.06
$15.01 to $20.00		1,270		8.6		16.27		170		18.71
$20.01 to $25.00		130		3.0		22.25		109		22.13
Total		5,522		6.4	$	11.14		2,795	$	10.42

78

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Options generally are issued at an exercise price equal to the market price of Advanta’s Class B Common Stock on the date of grant, vest over a four-year period and expire 10 years after the date of grant. All options outstanding in the three years ended December 31, 2004 were options to purchase Class B Common Stock.

      Due to the restructuring of Advanta in the first quarter of 2001, we implemented a program whereby certain out-of-the-money options were exchanged for shares of stock. Shares granted in exchange for options were immediately vested but their distribution is deferred. Participants receive distributions of 25% of their shares on the first, second, third and fourth anniversaries of the program or they may elect to defer distributions of any installment of shares until the second through tenth anniversaries of the program. If a participant terminates employment with Advanta, any unpaid installments will be distributed on the tenth anniversary of the program. We distributed 11 thousand shares in the year ended December 31, 2004, 14 thousand shares in 2003 and 7 thousand shares in 2002. There were 96 thousand shares remaining to be distributed in connection with this program at December 31, 2004.

Employee Savings Plan

Our Employee Savings Plan is a defined contribution plan available to all of our employees who have reached age 21 with one year of service. It provides tax-deferred savings and investment opportunities, including the ability to invest in Advanta Corp. Class B Common Stock. The plan provides for discretionary employer contributions equal to a portion of the first 5% of an employee’s compensation contributed to the plan. For the three years ended December 31, 2004, our contributions equaled 100% of the first 5% of participating employees’ compensation contributed to the plan, subject to certain limitations on matching contributions to highly compensated employees under applicable provisions of the Internal Revenue Code. The compensation expense for this plan totaled $1.7 million for the year ended December 31, 2004, $1.7 million for 2003 and $1.2 million for 2002. All shares of Advanta Corp. Class B Common Stock purchased by the plan in the three years ended December 31, 2004 were purchased on the open market.

Employee Stock Purchase Plan

We have an Employee Stock Purchase Plan, which allows employees and directors to purchase Advanta Corp. Class B Common Stock at a 15% discount from the market price without paying brokerage fees. We report this 15% discount as compensation expense and we incurred expense of $65 thousand for the year ended December 31, 2004, $68 thousand for 2003 and $56 thousand for 2002. All shares of Advanta Corp. Class B Common Stock purchased by the plan in the three years ended December 31, 2004 were purchased on the open market.

Employee Stock Ownership Plan

On September 10, 1998, our Board of Directors authorized the formation of an Employee Stock Ownership Plan (“ESOP”), available to all of our employees who have reached age 21 with one year of service. In 1998, the ESOP borrowed approximately $12.6 million from Advanta Corp. and used the proceeds to purchase approximately 1 million shares of Class A Common Stock. The ESOP loan is repayable with an interest rate of 8% over 30 years. We make contributions to the ESOP equal to the ESOP’s debt service less dividends received on ESOP shares. As the ESOP makes loan payments, an appropriate percentage of stock is allocated to eligible employees’ accounts based on relative participant compensation. Unallocated shares are reported as unearned ESOP shares on the consolidated balance sheets. As shares of common stock acquired by the ESOP are committed to be released to each employee, we report compensation expense equal to the current market price of the shares, and the shares become outstanding for earnings per share computations. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings. Dividends on unallocated ESOP shares are used to fund debt service of the ESOP. ESOP compensation expense was $639 thousand for the year ended December 31, 2004, $320 thousand for 2003 and $350 thousand for 2002. At December 31, 2004, there were 799 thousand unearned and unallocated ESOP shares with a fair value of $18.1 million. At December 31, 2003, there were 825 thousand unearned and unallocated ESOP shares with a fair value of $10.7 million.

79

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 14. Minimum Regulatory Capital Requirements

Advanta Bank Corp. and Advanta National Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory — and possibly additional discretionary — actions by regulators that, if undertaken, could have a direct material effect on the banks’ and our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, banks must meet specific capital guidelines that involve quantitative measures of their assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The banks’ capital amounts and classification are also subject to qualitative judgments by the bank regulators about components, risk weightings and other factors.

      Quantitative measures established by regulation to ensure capital adequacy require the banks to maintain minimum amounts and ratios (set forth in the table below) of total and Tier I capital to risk-weighted assets, and of Tier I capital to average assets, each as defined in the regulations. Management believes that Advanta Bank Corp. and Advanta National Bank meet all capital adequacy requirements to which they are subject as of December 31, 2004 and 2003.

      In 2000, Advanta National Bank reached agreements with its bank regulatory agency, primarily relating to the bank’s subprime lending operations. The agreements established temporary asset growth limits at Advanta National Bank, imposed restrictions on taking brokered deposits and required that Advanta National Bank maintain certain capital ratios in excess of the minimum regulatory standards. In 2001, Advanta National Bank entered into an additional agreement with its regulatory agency regarding restrictions on new business activities and product lines at Advanta National Bank after the Mortgage Transaction, and the resolution of outstanding Advanta National Bank liabilities. The agreement also reduced the capital requirements for Advanta National Bank to a ratio of 12.7% for Tier 1 and total capital to risk-weighted assets, and to a ratio of 5% for Tier 1 capital to adjusted total assets as defined in the agreement. In addition, the agreement prohibits the payment of dividends by Advanta National Bank without prior regulatory approval. Advanta National Bank’s operations are currently not material to our consolidated operating results. Management believes that Advanta National Bank was in compliance with its regulatory agreements at December 31, 2004.

      As set forth in the table below, at December 31, 2004 and 2003, Advanta Bank Corp. and Advanta National Bank had capital at levels a bank is required to maintain to be classified as “well-capitalized” under the regulatory framework for prompt corrective action. However, Advanta National Bank does not meet the

80

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

definition of “well-capitalized” because of the existence of its agreement with its regulatory agency, even though it has achieved the higher imposed capital ratios required by the agreement.

							To Be Adequately					To Be Well-
							Capitalized Under					Capitalized Under
							Prompt Corrective					Prompt Corrective
		Actual					Action Provisions					Action Provisions
		Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 2004
Total Capital (to Risk-Weighted Assets)
	Advanta Bank Corp.	$	340,632		26.07	%	$	178,082		³ 8.0	%	$	196,071		³ 10.0	%
	Advanta National Bank		51,211		219.80			1,865		³ 8.0			2,330		³ 10.0
Tier I Capital (to Risk-Weighted Assets)
	Advanta Bank Corp.	$	312,541		23.92	%	$	122,280		³ 4.0	%	$	142,632		³ 6.0	%
	Advanta National Bank		50,919		218.55			931		³ 4.0			1,397		³ 6.0
Tier I Capital (to Average Assets)
	Advanta Bank Corp.	$	312,541		25.93	%	$	48,205		³ 4.0	%	$	60,257		³ 5.0	%
	Advanta National Bank		50,919		46.70			4,360		³ 4.0			5,450		³ 5.0
December 31, 2003
Total Capital (to Risk-Weighted Assets)
	Advanta Bank Corp.	$	293,708		26.28	%	$	164,550		³ 8.0	%	$	178,690		³ 10.0	%
	Advanta National Bank		49,731		28.99			13,725		³ 8.0			17,150		³ 10.0
Tier I Capital (to Risk-Weighted Assets)
	Advanta Bank Corp.	$	267,709		23.95	%	$	116,570		³ 4.0	%	$	132,750		³ 6.0	%
	Advanta National Bank		49,207		28.69			6,865		³ 4.0			10,290		³ 6.0
Tier I Capital (to Average Assets)
	Advanta Bank Corp.	$	267,709		22.69	%	$	47,150		³ 4.0	%	$	59,000		³ 5.0	%
	Advanta National Bank		49,207		22.38			8,800		³ 4.0			11,000		³ 5.0

Note 15. Restrictions On Dividends, Loans And Advances

In the normal course of business, Advanta Corp. and its subsidiaries enter into agreements, or are subject to regulatory requirements, that result in dividend and loan restrictions.

      Federal Deposit Insurance Corporation-insured banks are subject to certain provisions of the Federal Reserve Act which impose various legal limitations on the extent to which banks may finance or otherwise supply funds to certain of their affiliates. In particular, Advanta Bank Corp. and Advanta National Bank are subject to certain restrictions on any extensions of credit to, or other covered transactions, such as certain purchases of assets, with Advanta Corp. or its affiliates. These restrictions prevent Advanta Bank Corp. and Advanta National Bank from lending to Advanta Corp. and its affiliates unless these extensions of credit are secured by U.S. Government obligations or other specified collateral. Further, secured extensions of credit are limited in amount: (1) as to Advanta Corp. or any affiliate, to 10% of each bank’s capital and surplus; and (2) as to Advanta Corp. and all affiliates in the aggregate, to 20% of each bank’s capital and surplus.

      Under grandfathering provisions of the Competitive Equality Banking Act of 1987, Advanta Corp. is not required to register as a bank holding company under the Bank Holding Company Act of 1956, as amended, so long as Advanta Corp. and Advanta National Bank continue to comply with certain restrictions on their activities. These restrictions include the limitation that Advanta National Bank may take demand deposits but

81

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

may not make commercial loans. We have no present plans to register as a bank holding company under the Bank Holding Company Act.

      Advanta Bank Corp. paid $32 million in cash dividends and a $3 million noncash dividend to Advanta Corp. in 2004. There were no dividends from Advanta Bank Corp. to Advanta Corp. in the years ended December 31, 2003 or 2002. Advanta National Bank’s agreements with its regulatory agency prohibit the payment of dividends by Advanta National Bank without prior regulatory approval. Advanta National Bank paid no dividends to Advanta Corp. in the three years ended December 31, 2004.

      Our insurance subsidiaries are also subject to certain capital and dividend rules and regulations as prescribed by state jurisdictions in which they are authorized to operate. At December 31, 2004, the insurance subsidiaries were in compliance with these rules and regulations. The insurance subsidiaries paid no dividends to Advanta Corp. in the year ended December 31, 2004. In the year ended December 31, 2003, insurance subsidiaries paid an extraordinary dividend of $9.6 million and a return of capital of $10.4 million to Advanta Corp. In 2002, insurance subsidiaries paid dividends to Advanta Corp. of $2.2 million.

      Total stockholders’ equity of our banking and insurance subsidiaries was $373 million at December 31, 2004 and $326 million at December 31, 2003. Of our total equity in these subsidiaries, $228 million was restricted at December 31, 2004 and $210 million was restricted at December 31, 2003. At January 1, 2005, $145 million of stockholders’ equity of our bank and insurance subsidiaries was available for payment of cash dividends in 2005 under applicable regulatory guidelines without prior regulatory approval.

      In addition to dividend restrictions at banking and insurance subsidiaries, one of our other subsidiaries is subject to a minimum equity requirement as part of a transaction agreement. The total minimum equity requirement of this subsidiary was $10 million at December 31, 2004 and the subsidiary was in compliance with its minimum equity requirement. Also, we have an investment in a limited partnership, Fleet Credit Card Services, L.P., and estimated undistributed partnership earnings included in our retained earnings were $12.1 million at December 31, 2004.

Note 16. Segment Information

Our reportable segments are Advanta Business Cards and our Venture Capital segment.

      Our primary business segment is Advanta Business Cards, which issues business purpose credit cards to small businesses and business professionals through our subsidiary, Advanta Bank Corp. Our business purpose credit card accounts provide approved customers with unsecured revolving business credit lines. Advanta Business Cards revenue is generated through interest earned on outstanding balances, interchange income, balance transfer fees, cash usage fees and other fees.

      Our Venture Capital segment represents the operating results of venture capital investment activities. We make venture capital investments through certain of our affiliates. In recent years, we have limited our new investment activity and we presently do not expect to make significant additional investments. We actively monitor the performance of our venture capital investments, and officers of our investment affiliates participate on the boards of directors of certain investees.

82

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Information about reportable segments and a reconciliation of such information to the consolidated financial statements follows:

	Advanta
	Business		Venture
	Cards		Capital			Other(1)			Total
Year Ended December 31, 2004
Interest income	$	99,194	$	8		$	7,507		$	106,709
Interest expense		35,779		319			9,479			45,577
Noninterest revenues (losses), net		285,610		(1,516	)		3,747			287,841
Pretax income (loss) from continuing operations		75,182		(2,875	)		0			72,307
Total assets at end of period		994,194		5,801			692,929			1,692,924
Capital expenditures		187		0			6,925			7,112
Depreciation and amortization		2,012		12			7,642			9,666
Year Ended December 31, 2003
Interest income	$	99,822	$	1		$	8,538		$	108,361
Interest expense		44,201		482			3,625			48,308
Noninterest revenues (losses), net		266,475		(3,843	)		5,909			268,541
Pretax income (loss) from continuing operations		56,250		(7,124	)		0			49,126
Total assets at end of period		754,953		10,471			933,020			1,698,444
Capital expenditures		32		0			8,753			8,785
Depreciation and amortization		1,164		6			7,270			8,440
Year Ended December 31, 2002
Interest income	$	92,049	$	3		$	11,552		$	103,604
Interest expense		36,845		714			10,021			47,580
Noninterest revenues (losses), net		246,957		(6,892	)		36			240,101
Loss of transfer of consumer credit card business		0		0			(43,000	)		(43,000	)
Pretax income (loss) from continuing operations		63,244		(10,101	)		(51,545	)		1,598
Total assets at end of period		659,963		13,994			1,007,656			1,681,613
Capital expenditures		823		0			7,607			8,430
Depreciation and amortization		689		30			7,760			8,479

(1)  Other includes investment and other activities not attributable to reportable segments. Total assets in the “Other” segment include assets of discontinued operations.

Note 17.     Selected Income Statement Information

Other Revenues	Year Ended December 31,
	2004			2003			2002
Interchange income	$	140,534		$	118,294		$	93,023
Business credit cards cash back rewards		(24,713	)		(19,400	)		(2,500	)
Business credit cards business rewards		(16,513	)		(9,870	)		(10,042	)
Balance transfer fees		4,572			5,007			3,545
Cash usage fees		3,097			3,061			3,602
Other business credit card fees		2,911			4,181			4,684
Earnings on investment in Fleet Credit Card Services, L.P.		2,545			3,150			0
Investment securities losses, net(1)		(1,498	)		(3,651	)		(6,169	)
Valuation adjustments on other receivables held for sale		0			50			(1,085	)
Other		2,621			4,156			2,094
Total other revenues, net	$	113,556		$	104,978		$	87,152

(1)  Investment securities losses, net, include changes in the fair value and realized gains and losses on venture capital investments.

83

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      In each reporting period, we adjust our estimates of the percentage of earned rewards that cardholders will ultimately redeem and the costs of business rewards based on historical experience, consideration of changes in portfolio composition and changes in the rewards programs, including redemption terms. In 2004, we expanded our business rewards program to include offers of gift certificates and merchandise in addition to our traditional travel rewards. We increased our estimate of business rewards liability in 2004 since we anticipate that the expanded program will have the effect of increasing the volume of future reward redemptions, partially offset by a decrease in the associated costs per redemption. In the years ended December 31, 2003 and 2002, we decreased our estimate of the percentage of earned rewards that cardholders will ultimately redeem based on life-to-date experience at those dates. In 2003, we also changed the redemption terms of certain business reward programs resulting in a decrease in the estimated costs of future rewards redemptions for those programs. The following table shows the impact of the changes in the estimated percentage of earned rewards that cardholders will ultimately redeem and other changes in estimated costs of future period rewards redemptions for the years ended December 31.

	2004			2003		2002
Increase (decrease) in other revenues	$	(2,700	)	$	2,800	$	1,900
Increase (decrease) in net income		(1,660	)		1,720		1,200
Amount per combined diluted share	$	(0.06	)	$	0.07	$	0.05

Operating Expenses	Year Ended December 31,
	2004		2003		2002
Salaries and employee benefits	$	92,863	$	76,062	$	69,227
Amortization of deferred origination costs, net		33,508		49,923		49,597
Marketing		21,014		15,749		11,061
External processing		20,267		20,189		18,339
Professional fees		14,043		12,357		11,431
Equipment		11,173		11,292		10,676
Occupancy		8,695		8,467		6,612
Credit		5,781		5,055		5,607
Insurance		4,222		4,257		2,870
Travel and entertainment		4,213		3,251		2,384
Postage		3,514		3,604		3,470
Fraud		3,382		3,606		2,896
Other		11,623		11,353		7,571
Total operating expenses	$	234,298	$	225,165	$	201,741

Note 18.     Income Taxes

Income tax expense was as follows for the years ended December 31:

		2004		2003			2002
Income tax expense (benefit) attributable to:
	Continuing operations	$	28,034	$	18,913		$	17,170
	Gain (loss), net, on discontinuance of mortgage and leasing businesses		297		(1,232	)		(5,390	)
Total income tax expense		$	28,331	$	17,681		$	11,780

84

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Income tax expense on income from continuing operations consisted of the following components for the years ended December 31:

		2004		2003		2002
Current:
	Federal	$	13,139	$	1,390	$	0
	State		2,699		3,675		262
Total current			15,838		5,065		262
Deferred:
	Federal		12,032		13,848		16,587
	State		164		0		321
Total deferred			12,196		13,848		16,908
Total income tax expense		$	28,034	$	18,913	$	17,170

      The reconciliation of the statutory federal income tax to income tax expense on income from continuing operations is as follows for the years ended December 31:

	2004			2003			2002
Statutory federal income tax	$	25,307		$	17,194		$	560
State income taxes, net of federal income tax benefit		1,861			2,389			379
Nondeductible expenses		982			237			4,158
Compensation limitation		512			196			196
Loss on transfer of consumer credit card business		0			0			15,050
Change in valuation allowance		0			(1,073	)		(3,762	)
Other		(628	)		(30	)		589
Income tax expense	$	28,034		$	18,913		$	17,170

      Our effective tax rate was 38.8% for the year ended December 31, 2004 and 38.5% for 2003.

      We reported a pretax loss for the year ended December 31, 2002 as a result of the $43.0 million charge related to the ruling in the litigation associated with the transfer of our consumer credit card business in 1998. See Note 11. Since the gain on the transfer of our consumer credit card business of $541 million in 1998 was not subject to income tax, the $43.0 million charge in 2002 did not result in a tax benefit. As a result, we reported income tax expense from continuing operations of $17.2 million for the year ended December 31, 2002. Our effective tax rate, excluding the $43.0 million charge, was 38.5% for the year ended December 31, 2002. As of December 31, 2004, no deferred taxes have been provided on the cumulative gain on the transfer of our consumer credit card business, as the transaction structure remains nontaxable under current tax law.

      Deferred taxes are provided to reflect the estimated future tax effects of the differences between the financial statement and tax bases of assets and liabilities and currently enacted tax laws. The net deferred tax asset is comprised of the following at December 31:

	2004			2003
Deferred tax assets	$	81,947		$	107,329
Deferred tax liabilities		(11,687	)		(25,154	)
Net deferred tax asset	$	70,260		$	82,175

85

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The components of the net deferred tax asset are as follows at December 31:

	2004			2003
Net operating loss carryforwards	$	156,381		$	191,308
Valuation allowance		(145,745	)		(139,783	)
Allowance for receivable losses		21,618			17,759
Alternative minimum tax credit carryforwards		15,187			2,047
Unrealized venture capital investment losses		9,304			10,220
Deferred compensation		6,925			4,618
Rewards programs		6,891			8,769
Deferred origination fees and costs		(5,233	)		(7,096	)
Securitization income		(2,624	)		(1,818	)
Capital loss carryforwards		1,399			2,275
Other		6,157			(6,124	)
Net deferred tax asset	$	70,260		$	82,175

      Tax deductions for stock-based employee compensation in excess of financial reporting expense for the year ended December 31, 2004 increased our net operating loss carryforwards. The increase in the deferred tax asset was offset by a $6.0 million increase in the valuation allowance in the year ended December 31, 2004, since management estimated that it was more likely than not that the incremental asset would not be realized.

      At December 31, 2004, net operating loss carryforwards were $447 million. The scheduled expirations of net operating loss carryforwards were as follows at December 31, 2004:

Year Ended December 31,
2018	$	172,847
2019		40,489
2021		233,466

      Our capital loss carryforwards of $4.0 million at December 31, 2004 are scheduled to expire in the year ended December 31, 2009. Alternative minimum tax credit carryforwards do not expire.

      In January 2005, we received the Internal Revenue Service’s final approval of the settlement of tax disputes in our May 28, 2004 agreement with Bank of America. The settlement results in a reduction of our deferred tax asset related to net operating loss carryforwards and a reduction in the valuation allowance in the first quarter of 2005. See Note 23 for further discussion.

Note 19.     Discontinued Operations

Effective February 28, 2001, we completed the Mortgage Transaction. Prior to the Mortgage Transaction, Advanta Mortgage made nonconforming home equity loans directly to consumers and through brokers. This business unit originated and serviced first and second lien mortgage loans, including home equity lines of credit, through subsidiaries of Advanta. In addition to servicing and managing the loans it originated, Advanta Mortgage contracted with third parties to service their nonconforming home equity loans on a subservicing basis. Following the Mortgage Transaction, we no longer operate a mortgage business. The purchase and sale agreement provided for the sale, transfer and assignment of substantially all of the assets and operating liabilities associated with our mortgage business, as well as specified contingent liabilities arising from our operation of the mortgage business prior to closing that were identified in the purchase and sale agreement. We retained contingent liabilities, primarily relating to litigation, arising from our operation of the mortgage business before closing that were not specifically assumed by the buyer.

86

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      On January 23, 2001, we announced that after a thorough review of strategic alternatives available for our leasing business, Advanta Leasing Services, we decided to cease originating leases. Advanta Leasing Services offered flexible lease financing programs on small-ticket equipment to small businesses. The primary products financed included office machinery, security systems and computers. We are continuing to service the existing portfolio. Based on the terms of the remaining leases, we expect the wind down of the lease portfolio to be complete by January 2007.

      The components of the gain (loss) on discontinuance of our mortgage and leasing businesses for the years ended December 31 were as follows:

	2004						2003						2002
				Advanta						Advanta						Advanta
	Advanta			Leasing			Advanta			Leasing			Advanta			Leasing
	Mortgage			Services			Mortgage			Services			Mortgage			Services
Pretax gain (loss) on discontinuance of mortgage and leasing businesses	$	(3,270	)	$	4,035		$	(2,600	)	$	(600	)	$	(25,300	)	$	11,300
Income tax (expense) benefit		1,268			(1,565	)		1,001			231			9,740			(4,350	)
Gain (loss) on discontinuance of mortgage and leasing businesses, net of tax	$	(2,002	)	$	2,470		$	(1,599	)	$	(369	)	$	(15,560	)	$	6,950

      The loss on discontinuance of the mortgage business in each of the reported periods represents an increase in our estimates of the future costs of mortgage business-related contingent liabilities based on new developments in litigation or disputes related to our former mortgage programs. The gain or loss on discontinuance of the leasing business in each of the reported periods represents changes in estimated operating results of the leasing segment over the remaining life of the lease portfolio based on trends in the performance of the leasing portfolio, sales tax assessments, or changes in the anticipated timeframe over which we expect to incur certain operating expenses related to the lease portfolio

      Per share amounts were as follows for the years ended December 31:

		Advanta Mortgage									Advanta Leasing Services
		2004			2003			2002			2004		2003			2002
Basic gain (loss), net, on discontinuance of mortgage and leasing businesses, net of tax, per common share
	Class A	$	(0.08	)	$	(0.07	)	$	(0.62	)	$	0.10	$	(0.02	)	$	0.28
	Class B		(0.08	)		(0.07	)		(0.62	)		0.10		(0.02	)		0.28
	Combined		(0.08	)		(0.07	)		(0.62	)		0.10		(0.02	)		0.28
Diluted gain (loss), net, on discontinuance of mortgage and leasing businesses, net of tax, per common share
	Class A	$	(0.07	)	$	(0.06	)	$	(0.62	)	$	0.09	$	(0.01	)	$	0.28
	Class B		(0.07	)		(0.06	)		(0.62	)		0.09		(0.01	)		0.28
	Combined		(0.07	)		(0.06	)		(0.62	)		0.09		(0.01	)		0.28

      The components of assets of discontinued operations, net, were as follows at December 31:

	2004			2003
Lease receivables, net	$	15,577		$	68,860
Other assets		1,093			1,719
Liabilities		(4,975	)		(7,110	)
Assets of discontinued operations, net	$	11,695		$	63,469

87

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      In the year ended December 31, 2003, we sold two buildings formerly used in our mortgage business that were classified as assets from discontinued operations on the consolidated balance sheets. Proceeds from the sale were approximately $27 million.

Note 20. Calculation Of Earnings Per Share

The following table shows the calculation of basic earnings per common share and diluted earnings per common share for the years ended December 31:

		2004			2003			2002
Income (loss) from continuing operations		$	44,273		$	30,213		$	(15,572	)
	Less: Preferred A dividends		(141	)		(141	)		(141	)
Income (loss) from continuing operations allocable to common stockholders			44,132			30,072			(15,713	)
Gain (loss), net, on discontinuance of mortgage and leasing businesses, net of tax			468			(1,968	)		(8,610	)
Net income (loss) allocable to common stockholders			44,600			28,104			(24,323	)
	Less: Class A dividends declared		(3,067	)		(2,266	)		(2,302	)
	Less: Class B dividends declared		(7,544	)		(5,260	)		(5,540	)
Undistributed net income (loss)		$	33,989		$	20,578		$	(32,165	)
Basic income (loss) from continuing operations per common share
	Class A	$	1.69		$	1.19		$	(0.69	)
	Class B		1.80			1.29			(0.59	)
	Combined(1)		1.76			1.25			(0.63	)
Diluted income (loss) from continuing operations per common share
	Class A	$	1.57		$	1.16		$	(0.69	)
	Class B		1.62			1.23			(0.59	)
	Combined(1)		1.60			1.21			(0.63	)
Basic net income (loss) per common share
	Class A	$	1.71		$	1.11		$	(1.03	)
	Class B		1.82			1.21			(0.94	)
	Combined(1)		1.78			1.17			(0.97	)
Diluted net income (loss) per common share
	Class A	$	1.58		$	1.08		$	(1.03	)
	Class B		1.64			1.16			(0.94	)
	Combined(1)		1.62			1.13			(0.97	)
Basic weighted average common shares outstanding
	Class A		8,798			9,028			9,152
	Class B		16,225			14,999			15,909
	Combined		25,023			24,027			25,061
Dilutive effect of
	Options Class B		919			456			0
	Restricted stock Class B		1,606			453			0
Diluted weighted average common shares outstanding
	Class A		8,798			9,028			9,152
	Class B		18,750			15,908			15,909
	Combined		27,548			24,936			25,061
Antidilutive shares
	Options Class B		161			1,734			4,838
	Restricted stock Class B		0			63			2,446

(1)  Combined represents income (loss) allocable to common stockholders divided by the combined total of Class A and Class B weighted average common shares outstanding.

88

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 21.     Parent Company Financial Statements

ADVANTA CORP. (Parent Company Only)

Condensed Balance Sheets

($ in thousands)	December 31,
	2004		2003
Assets
Cash	$	5,792	$	102
Commercial paper equivalent(1)		44,000		134,000
Restricted interest-bearing deposits		2,525		2,927
Investments available for sale		77,810		44,769
Investments in and advances to bank and insurance subsidiaries		377,118		331,430
Investments in and advances to other subsidiaries		164,860		188,524
Premises and equipment		114		210
Other assets		126,361		143,816
Total assets	$	798,580	$	845,778
Liabilities
Debt	$	265,759	$	314,817
Subordinated debt payable to preferred securities trust		103,093		103,093
Other liabilities		37,534		86,661
Total liabilities		406,386		504,571
Stockholders’ Equity
Preferred stock		1,010		1,010
Common stock		315		306
Other stockholders’ equity		390,869		339,891
Total stockholders’ equity		392,194		341,207
Total liabilities and stockholders’ equity	$	798,580	$	845,778

(1)  Commercial paper equivalent refers to unsecured loans made to Advanta Business Services Holding Corp. for terms of less than 35 days in maturity which are not automatically renewable, consistent with commercial paper issuance.

      The parent company guarantees certain lease payments of its subsidiaries in connection with lease agreements extending through November 30, 2010. At December 31, 2004, the maximum amount of undiscounted future payments that the parent could be required to make under these lease agreement guarantees was $16.4 million. The parent company also guarantees payments of distributions and other amounts due on trust preferred securities issued by its wholly-owned statutory business trust. See Note 10 for a discussion of Advanta Corp. guarantee of payments of distributions and other amounts due on the trust preferred securities.

89

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

ADVANTA CORP. (Parent Company Only)

Condensed Statements of Operations

($ in thousands)			Year Ended December 31,
			2004			2003			2002
Income (loss):
	Dividends from bank and insurance subsidiaries		$	35,000		$	10,378		$	2,152
	Dividends from other subsidiaries			1,542			625			278
	Interest income			2,057			2,605			4,886
	Other revenues, net			1,388			12,589			696
	Loss on transfer of consumer credit card business			0			0			(43,000	)
		Total income (loss)		39,987			26,197			(34,988	)
Expenses:
	Interest expense			23,299			27,133			29,739
	Operating expenses			33,763			13,589			7,204
		Total expenses		57,062			40,722			36,943
Loss from continuing operations before income taxes and equity in undistributed net income in subsidiaries				(17,075	)		(14,525	)		(71,931	)
Income tax benefit				(18,008	)		(9,118	)		(12,773	)
Income (loss) from continuing operations before equity in undistributed net income of subsidiaries				933			(5,407	)		(59,158	)
Loss on discontinuance of mortgage business, net of tax				(1,999	)		(2,340	)		(8,238	)
Loss before equity in undistributed net income of subsidiaries				(1,066	)		(7,747	)		(67,396	)
Equity in undistributed net income of subsidiaries				45,807			35,992			43,214
Net income (loss)			$	44,741		$	28,245		$	(24,182	)

      The Parent Company Only Statements of Changes in Stockholders’ Equity are the same as the Consolidated Statements of Changes in Stockholders’ Equity.

90

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

ADVANTA CORP. (Parent Company Only)

Condensed Statements of Cash Flows

($ in thousands)		Year Ended December 31,
		2004			2003			2002
Operating Activities
Net income (loss)		$	44,741		$	28,245		$	(24,182	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
	Equity in net income of subsidiaries		(82,349	)		(46,995	)		(45,644	)
	Dividends received from subsidiaries		33,559			11,003			2,430
	Depreciation		97			102			118
	Change in other assets and other liabilities		(10,513	)		165			50,348
Net cash used in operating activities			(14,465	)		(7,480	)		(16,930	)
Investing Activities
	Investments in subsidiaries		(59	)		(317	)		(2,332	)
	Return of investment from subsidiaries		6,028			9,622			7,577
	Purchase of investments available for sale		(468,082	)		(487,333	)		(301,151	)
	Proceeds from sales of investments available for sale		424,797			389,120			336,160
	Proceeds from maturing investments available for sale		10,000			67,500			19,382
	Net change in commercial paper equivalents		90,000			(34,000	)		(3,000	)
	Net change in restricted interest-bearing deposits		402			2,375			5,265
	Net change in premises and equipment		(1	)		925			(202	)
Net cash provided by (used in) investing activities			63,085			(52,108	)		61,699
Financing Activities
	Proceeds from issuance of debt		29,319			84,804			111,515
	Payments on redemption of debt		(90,625	)		(100,928	)		(141,910	)
	Decrease in affiliate borrowings		20,631			11,775			37,520
	Change in other borrowings		0			0			(32,317	)
	Proceeds from exercise of stock options		8,497			2,313			363
	Cash dividends paid		(10,752	)		(7,667	)		(7,983	)
	Stock buyback		0			(7,170	)		(15,554	)
Net cash used in financing activities			(42,930	)		(16,873	)		(48,366	)
Net increase (decrease) in cash			5,690			(76,461	)		(3,597	)
Cash at beginning of year			102			76,563			80,160
Cash at end of year		$	5,792		$	102		$	76,563

      In 2004, noncash transactions of the Parent Company included noncash dividends of $3.0 million from subsidiaries and noncash investment in subsidiaries of $3.0 million. In 2003, noncash transactions of the Parent Company included noncash investment in subsidiaries of $12.0 million. There were no significant noncash transactions of the Parent Company in 2002.

91

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Note 22. Fair Value of Financial Instruments

The estimated fair values, and related carrying amounts, of our financial instruments are as follows at December 31:

		2004				2003
		Carrying				Carrying
		Amount		Fair Value		Amount		Fair Value
Financial assets:
	Cash	$	35,565	$	35,565	$	26,941	$	26,941
	Federal funds sold		298,677		298,677		258,311		258,311
	Restricted interest-bearing deposits		2,946		2,946		77,872		77,872
	Investments available for sale		184,240		184,240		222,624		222,624
	Receivables, net		706,030		752,732		505,773		543,415
	Accounts receivable from securitizations		244,362		244,362		244,337		244,337
	Accrued interest receivable		4,568		4,568		22,286		22,286
Financial liabilities:
	Demand and savings deposits	$	9,080	$	9,080	$	8,205	$	8,205
	Time deposits		816,193		814,125		663,999		667,835
	Debt		265,759		276,296		314,817		327,879
	Subordinated debt payable to preferred securities trust		103,093		100,516		103,093		81,057
	Accrued interest payable		3,310		3,310		4,008		4,008
Off-balance sheet financial instruments:
	Commitments to extend credit	$	0	$	0	$	0	$	0

      The fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, quoted market prices are not available for our various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. SFAS No. 107, “Disclosures about Fair Value of Financial Instruments,” excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of Advanta.

      We used the following methods and assumptions in estimating fair value disclosures for financial instruments:

Cash, Federal Funds Sold, Restricted Interest-Bearing Deposits, Accrued Interest Receivable and Accrued Interest Payable

For cash and these short-term financial instruments, the carrying amount approximates the fair value.

Investments Available for Sale

Investments available for sale are carried at fair value. The fair values of investments available for sale are based on quoted market prices, dealer quotes or estimates using quoted market prices for similar securities. For investments that are not publicly traded, management has made estimates of fair value that consider several factors including the investees’ financial results, conditions and prospects.

92

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Receivables, Net

The fair values of receivables are estimated using a discounted cash flow analysis that incorporates estimates of the excess of the weighted average interest and fee yield over the aggregate cost of funds, servicing costs, future credit losses over the life of the receivables and interest rates currently being offered for receivables with similar terms to borrowers of similar credit quality.

Accounts Receivable from Securitizations

Retained interests in securitizations are carried at fair value. The fair values of retained interests in securitizations are estimated based on discounted cash flow analyses as described in Note 2. See Note 6 for the assumptions used in the estimation of fair values of the retained interests in securitizations.

      The carrying amount approximates the fair value of other components of accounts receivable from securitizations based on the short-term nature of the assets.

Demand and Savings Deposits

The fair value of demand and money market savings deposits is the amount payable on demand at the reporting date. This fair value does not include any benefit that may result from the low cost of funding provided by these deposits compared to the cost of borrowing funds in the market.

Time Deposits

The fair value of fixed-maturity certificates of deposit is estimated using discounted cash flow analyses based on the rates currently offered for deposits of similar remaining maturities.

Debt

The fair value of our debt is estimated using discounted cash flow analyses based on our current incremental borrowing rates for similar types of borrowing arrangements.

Subordinated Debt Payable to Preferred Securities Trust

The fair value of our subordinated debt is estimated using dealer quotes for similar securities.

Commitments to Extend Credit

There is no fair value associated with commitments to extend credit to our credit card customers, since any fees charged are consistent with the fees charged by other companies at the reporting date to enter into similar agreements. We had commitments to extend credit of $7.2 billion at December 31, 2004 and $6.7 billion at December 31, 2003.

Note 23. Subsequent Event

On May 28, 2004, Advanta Corp. and certain of its subsidiaries and Bank of America signed an agreement to resolve all outstanding litigation, including partnership tax disputes, between Advanta and Fleet, which was acquired by Bank of America, relating to the transfer of our consumer credit card business to Fleet Credit Card Services, L.P. in 1998. The agreement was subject to the Internal Revenue Service’s final approval of the settlement of the tax disputes. We received the final approval of the Internal Revenue Service in January 2005 and, as a result, we received $63.8 million in cash from Bank of America in February 2005, representing a return of the payments that we made to Fleet in the Delaware state court litigation in February 2004. Consistent with the terms of our agreement with Bank of America, all outstanding litigation between Advanta and Fleet was dismissed in February 2005. See Note 11 for a description of the litigation.

93

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The settlement of the tax disputes resulted in an allocation of $381 million of the disputed partnership tax deductions to Fleet and $617 thousand of the disputed $47 million partnership taxable gain to Advanta. The impact to us of the tax deduction and gain allocation is a reduction in our deferred tax asset related to net operating loss carryforwards of $133 million and a corresponding reduction in our valuation allowance on deferred tax assets of $133 million, both in the first quarter of 2005. Upon receipt of the Internal Revenue Service’s approval of the settlement of the tax disputes, the remaining valuation allowance of $12 million was evaluated, and management determined that it was more likely than not that the remaining deferred tax asset was realizable and therefore, no valuation allowance was needed, resulting in a reduction in tax expense and an increase in additional paid-in capital in the first quarter of 2005. The gain associated with the original transfer of assets to Fleet Credit Card Services, L.P. in the 1998 Consumer Credit Card Transaction was not subject to income tax, and therefore, a substantial portion of the February 2004 payment to Fleet was not tax-deductible. A substantial portion of the $63.8 million payment received in February 2005 is not taxable since it is a return of our payment to Fleet in February 2004. After the February 2005 payment, the cumulative Consumer Credit Card Transaction gain for which no deferred taxes will have been provided is approximately $650 million, as the transaction structure remains nontaxable under current tax law.

      The overall impact of the agreement with Bank of America, including the cash received, settlement of the tax disputes and reevaluation of the valuation allowance on deferred tax assets, is a net after-tax gain of $62 million and an increase in additional paid-in capital of $6 million in the first quarter of 2005.

94

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Advanta Corp.:

      We have audited the accompanying consolidated balance sheets of Advanta Corp. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2004 and 2003, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2004. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Advanta Corp. and subsidiaries as of December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.

      As discussed in Notes 2 and 10 to the consolidated financial statements, effective December 31, 2003, the Company adopted the provisions of FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities”.

      We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Advanta Corp.’s internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 8, 2005 expressed an unqualified opinion on management’s assessment of, and the effective operation of, internal control over financial reporting.

/s/ KPMG LLP

Philadelphia, PA

March 8, 2005

95

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Advanta Corp.:

      We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting, that Advanta Corp. and subsidiaries (the “Company”) maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Advanta Corp.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit.

      We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

      A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

      Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

      In our opinion, management’s assessment that Advanta Corp. maintained effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, Advanta Corp. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

      We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Advanta Corp. and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2004, and our report dated March 8, 2005 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Philadelphia, PA

March 8, 2005

96

SUPPLEMENTAL SCHEDULES (UNAUDITED)

QUARTERLY DATA

(In thousands, except per share amounts)		2004
		December 31,		September 30,		June 30,		March 31,
Interest income		$	30,214	$	27,850	$	25,234	$	23,411
Interest expense			11,961		11,239		10,846		11,531
Net interest income			18,253		16,611		14,388		11,880
Provision for credit losses			10,705		11,658		10,494		9,511
Net interest income after provision for credit losses			7,548		4,953		3,894		2,369
Noninterest revenues			71,850		70,659		73,905		71,427
Operating expenses			58,117		58,091		59,896		58,194
Income before income taxes			21,281		17,521		17,903		15,602
Income from continuing operations			13,402		10,600		10,832		9,439
Gain, net, on discontinuance of mortgage and leasing businesses, net of tax(1)			308		0		160		0
Net income		$	13,710	$	10,600	$	10,992	$	9,439
Basic income from continuing operations per common share
	Class A	$	0.51	$	0.40	$	0.42	$	0.37
	Class B		0.54		0.43		0.44		0.39
	Combined(2)		0.53		0.42		0.43		0.38
Diluted income from continuing operations per common share
	Class A	$	0.46	$	0.37	$	0.39	$	0.34
	Class B		0.48		0.38		0.40		0.36
	Combined(2)		0.47		0.38		0.40		0.35
Basic net income per common share
	Class A	$	0.52	$	0.40	$	0.42	$	0.37
	Class B		0.55		0.43		0.45		0.39
	Combined(2)		0.54		0.42		0.44		0.38
Diluted net income per common share
	Class A	$	0.47	$	0.37	$	0.40	$	0.34
	Class B		0.49		0.38		0.41		0.36
	Combined(2)		0.48		0.38		0.41		0.35
Basic weighted average common shares outstanding
	Class A		8,811		8,803		8,794		8,786
	Class B		16,630		16,479		16,172		15,502
	Combined		25,441		25,282		24,966		24,288
Diluted weighted average common shares outstanding
	Class A		8,811		8,803		8,794		8,786
	Class B		19,589		19,303		18,329		17,656
	Combined		28,400		28,106		27,123		26,442

(1)	See Note 19 to the consolidated financial statements.
(2)	Combined represents income available to common stockholders divided by the combined total of Class A and Class B weighted average common shares outstanding.

97

SUPPLEMENTAL SCHEDULES (UNAUDITED) — Continued

QUARTERLY DATA — Continued

(In thousands, except per share amounts)		2003
		December 31,		September 30,		June 30,			March 31,
Interest income		$	26,354	$	33,566	$	25,450		$	22,991
Interest expense			10,961		12,965		13,111			11,271
Net interest income			15,393		20,601		12,339			11,720
Provision for credit losses			10,149		16,563		9,265			9,446
Net interest income after provision for credit losses			5,244		4,038		3,074			2,274
Noninterest revenues			72,834		64,084		66,554			65,069
Operating expenses			57,686		54,762		57,195			55,522
Minority interest in income of consolidated subsidiary			2,220		2,220		2,220			2,220
Total expenses			59,906		56,982		59,415			57,742
Income before income taxes			18,172		11,140		10,213			9,601
Income from continuing operations			11,176		6,851		6,281			5,905
Loss, net, on discontinuance of mortgage and leasing businesses, net of tax(1)			0		0		(1,968	)		0
Net income		$	11,176	$	6,851	$	4,313		$	5,905
Basic income from continuing operations per common share
	Class A	$	0.45	$	0.27	$	0.25		$	0.22
	Class B		0.47		0.29		0.27			0.25
	Combined(2)		0.47		0.28		0.26			0.24
Diluted income from continuing operations per common share
	Class A	$	0.43	$	0.26	$	0.24		$	0.22
	Class B		0.44		0.28		0.26			0.25
	Combined(2)		0.44		0.27		0.26			0.24
Basic net income per common share
	Class A	$	0.45	$	0.27	$	0.16		$	0.22
	Class B		0.47		0.29		0.19			0.25
	Combined(2)		0.47		0.28		0.18			0.24
Diluted net income per common share
	Class A	$	0.43	$	0.26	$	0.16		$	0.22
	Class B		0.44		0.28		0.18			0.25
	Combined(2)		0.44		0.27		0.18			0.24
Basic weighted average common shares outstanding
	Class A		8,803		8,978		9,151			9,183
	Class B		15,186		15,100		14,893			14,816
	Combined		23,989		24,078		24,044			23,999
Diluted weighted average common shares outstanding
	Class A		8,803		8,978		9,151			9,184
	Class B		16,704		16,251		15,445			15,212
	Combined		25,507		25,229		24,596			24,396

(1)	See Note 19 to the consolidated financial statements.
(2)	Combined represents income available to common stockholders divided by the combined total of Class A and Class B weighted average common shares outstanding.

98

SUPPLEMENTAL SCHEDULES (UNAUDITED) — Continued

ALLOCATION OF ALLOWANCE FOR RECEIVABLE LOSSES

($ in thousands)	December 31,
	2004					2003					2002					2001					2000
	Amount		%			Amount		%			Amount		%			Amount		%			Amount		%
Business credit cards	$	49,190		97	%	$	47,041		97	%	$	44,466		96	%	$	41,169		98	%	$	33,165		99	%
Other receivables		1,288		3			1,413		3			1,693		4			802		2			202		1
Total	$	50,478		100	%	$	48,454		100	%	$	46,159		100	%	$	41,971		100	%	$	33,367		100	%

COMPOSITION OF GROSS RECEIVABLES

($ in thousands)	December 31,
	2004					2003					2002					2001					2000
	Amount		%			Amount		%			Amount		%			Amount		%			Amount		%
Business credit cards	$	730,483		99	%	$	518,040		97	%	$	445,083		95	%	$	416,265		94	%	$	335,087		93	%
Other receivables		10,280		1			16,976		3			25,589		5			28,189		6			24,203		7
Total	$	740,763		100	%	$	535,016		100	%	$	470,672		100	%	$	444,454		100	%	$	359,290		100	%

YIELD AND MATURITY OF INVESTMENTS AT DECEMBER 31, 2004

($ in thousands)	Maturing
						After One But					After Five But
	Within One Year					Within Five Years					Within Ten Years					After Ten Years
	Fair Value		Yield(3)			Fair Value		Yield(3)			Fair Value		Yield(3)			Fair Value		Yield(3)
U.S. Treasury and government agency securities	$	28,167		1.79	%	$	40,750		2.61	%	$	0		0.00	%	$	0		0.00	%
State and municipal securities (1)		25		5.40			1,036		3.23			1,287		3.51			1,022		4.99
Corporate bonds		10,226		1.72			2,033		2.91			0		0.00			0		0.00
Other(2)		0		0.00			615		6.50			0		0.00			3,893		5.33
Total investments available for sale	$	38,418		1.77	%	$	44,434		2.69	%	$	1,287		3.51	%	$	4,915		5.26	%

(1)	Yield computed on a tax equivalent basis using a statutory rate of 35%.
(2)	Equity investments and other securities without a stated maturity are excluded from this table.
(3)	Yields are computed by dividing interest by the amortized cost of the respective investment securities.

MATURITY OF TIME DEPOSITS OF $100,000 OR MORE

		December 31,
($ in thousands)		2004
Maturity:
	3 months or less	$	84,943
	Over 3 months through 6 months		36,278
	Over 6 months through 12 months		30,533
	Over 12 months		308,706
Total		$	460,460

99

SUPPLEMENTAL SCHEDULES (UNAUDITED) — Continued

COMPOSITION OF DEPOSIT BASE

($ in millions)	December 31,
	2004					2003					2002					2001					2000
	Amount		%			Amount		%			Amount		%			Amount		%			Amount		%
Demand deposits	$	5.5		1	%	$	6.6		1	%	$	6.6		1	%	$	6.5		1	%	$	4.6		0	%
Money market savings		3.6		0			1.6		0			2.3		0			3.5		1			64.0		5
Time deposits of $100,000 or less		469.7		57			467.2		70			441.6		62			389.9		61			916.9		68
Time deposits of more than $100,000		346.5		42			196.8		29			263.5		37			237.0		37			361.5		27
Total deposits	$	825.3		100	%	$	672.2		100	%	$	714.0		100	%	$	636.9		100	%	$	1,347.0		100	%

COMPOSITION OF DEBT, OTHER BORROWINGS AND SUBORDINATED DEBT

PAYABLE TO PREFERRED SECURITIES TRUST

($ in millions)	December 31,
	2004					2003					2002					2001					2000
	Amount		%			Amount		%			Amount		%			Amount		%			Amount		%
Subordinated retail notes and certificates	$	0.0		0	%	$	0.0		0	%	$	0.0		0	%	$	0.6		0	%	$	0.7		0	%
Retail notes and certificates		265.8		72			314.8		75			315.8		100			322.8		91			404.2		53
Medium-term bank notes		0.0		0			0.0		0			0.0		0			0.0		0			3.4		1
Medium-term notes		0.0		0			0.0		0			0.0		0			0.2		0			343.6		45
Value notes		0.0		0			0.0		0			0.0		0			0.0		0			3.3		0
Securities sold under agreements to repurchase		0.0		0			0.0		0			0.0		0			32.3		9			0.0		0
Other borrowings		0.0		0			0.0		0			0.0		0			0.0		0			4.3		1
Subordinated debt payable to preferred securities trust		103.1		28			103.1		25			0.0		0			0.0		0			0.0		0
Total	$	368.9		100	%	$	417.9		100	%	$	315.8		100	%	$	355.9		100	%	$	759.5		100	%

100

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, rather than absolute, assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

      An evaluation was performed by management with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2004, our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. There have been no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Exchange Act. Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control — Integrated Framework, management concluded that our internal control over financial reporting was effective as of December 31, 2004. Management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2004 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is included herein.

Item 9B. Other Information

None.

101

PART III

Item 10. Directors and Executive Officers of the Registrant

The text of the Proxy Statement under the captions “Election of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” are hereby incorporated by reference, as is the text in Part I of this Report under the caption, “Executive Officers of the Registrant,” and “Available Information.”

Item 11. Executive Compensation

The text of the Proxy Statement under the captions “Executive Compensation,” “Compensation Committee Report on Executive Compensation,” “Stock Performance Graph” and “Election of Directors — Committees, Meetings and Compensation of the Board of Directors,” “— Compensation Committee Interlocks and Insider Participation” and “— Other Matters” are hereby incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The text of the Proxy Statement under the captions “Security Ownership of Certain Beneficial Owners” and “Security Ownership of Management” are hereby incorporated herein by reference.

      The following table gives information about equity awards under our 2000 Omnibus Stock Incentive Plan and our Employee Stock Purchase Plan as of December 31, 2004.

Equity Compensation Plan Information

(In thousands, except weighted-average exercise price)
	(a)			(b)		(c)
						Number of Securities
						Remaining Available for
	Number of Securities to be					Future Issuance under
	Issued upon Exercise of			Weighted-Average Exercise		Equity Compensation Plans
	Outstanding Options,			Price of Outstanding Options		(excluding securities
Plan Category	Warrants and Rights			Warrants and Rights		reflected in column (a))
Equity Compensation plans approved by shareholders		5,522	(1)	$	11.14		6,938	(2)
Equity Compensation Plans not approved by shareholders(3)		—			—		—
Total		5,522		$	11.14		6,938	(2)(3)

(1)	Does not include 1.8 million shares of restricted Class B Common Stock granted pursuant to the Advanta Corp. 2000 Omnibus Stock Incentive Plan. Generally, restrictions on these shares may be removed between 2005 and 2012.
(2)	All of the shares remaining available for future issuance are available under the 2000 Omnibus Stock Incentive Plan which provides for the issuance of stock options, restricted stock, stock appreciation rights, phantom shares and other awards.
(3)	Advanta Corp.’s Employee Stock Purchase Plan (the “Stock Purchase Plan”) does not specify a maximum number of shares that may be issued. An aggregate of 26 thousand shares of Class B Common Stock were purchased under the Stock Purchase Plan in 2004.

102

Summary Description of Equity Compensation Plans

Advanta Corp. 2000 Omnibus Stock Incentive Plan

The 2000 Omnibus Stock Incentive Plan (the “Omnibus Plan”) was adopted by the Board of Directors in April 2000 and approved by the shareholders of the Company on June 7, 2000. The Omnibus Plan provides for the issuance of a maximum of 20,000,000 shares of Class B Common Stock (including 9,860,191 shares that were available for issuance under the Company’s prior stock incentive plans that were in effect at the time the Omnibus Plan was approved by the shareholders and which plans were amended and restated by the Omnibus Plan). The Omnibus Plan provides for the issuance of options to acquire Class B Common Stock, awards of Class B Common Stock and/or awards of stock appreciation rights (referred to collectively as “Awards”). Shares of Class B Common Stock awarded pursuant to the Omnibus Plan must be authorized and unissued shares or shares acquired for the treasury of the Company. Generally, if an Award granted under the Omnibus Plan expires, terminates or lapses for any reason, without the issuance of shares of Class B Common Stock thereunder, such shares shall be available for reissuance under the Omnibus Plan. Employees and directors of the Company, and consultants and advisors to the Company, who render bona fide services to the Company unrelated to the offer of securities, are eligible to receive Awards under the Omnibus Plan. The terms of any Award made pursuant to the Omnibus Plan are described and established in a grant document provided to the Award recipient. No Awards may be granted under the Omnibus Plan after April 5, 2010. Awards granted and outstanding as of the date the Omnibus Plan terminates will not be affected by the termination of the plan. In the event of a change of control of the Company (as defined by the Omnibus Plan), stock options and stock appreciation rights granted pursuant to the Omnibus Plan will become immediately exercisable in full, and all Awards will become fully vested. Shares subject to Awards granted pursuant to the Omnibus Plan are subject to adjustment for changes in capitalization for stock splits, stock dividends and similar events.

Advanta Corp. Employee Stock Purchase Plan

In September 1989, the Board of Directors adopted its Employee Stock Purchase Plan (the “Stock Purchase Plan”). The Stock Purchase Plan is a broad-based plan that has not been approved by stockholders and is not intended to qualify as an employee stock purchase plan pursuant to Section 423 of the Internal Revenue Code, as amended. All full-time and part-time employees and non-employee directors of the Company or its subsidiaries with at least six months of service with the Company are eligible to participate in the plan. Eligible employees may acquire shares of Class B Common Stock (and under certain limited circumstances Class A Common Stock) under the plan through payroll deductions. Non-employee directors may contribute a portion of their directors’ fees to the plan to purchase shares of Class B Common Stock. No individual participant may purchase more than $25,000 of stock under the plan in any one year. Shares are purchased monthly under the plan. Participants in the Stock Purchase Plan in effect purchase shares at a 15% discount from the market price because the Company contributes to the plan an amount equal to 15% of the market price of the shares actually purchased for the month, and also pays all fees and commissions relating to the administration of the Stock Purchase Plan and the purchases of shares under the plan.

Item 13. Certain Relationships and Related Transactions

The text of the Proxy Statement under the caption “Election of Directors — Other Matters” is hereby incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The text of the Proxy Statement under the captions “Audit Fees” and “Pre-Approval Policy for Services by Independent Auditors” are hereby incorporated by reference.

103

PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

The following Financial Statements, Schedules, and Other Information of the Registrant and its subsidiaries are included in this Form 10-K:

(a)(1)	Financial Statements.
1.	Consolidated Balance Sheets at December 31, 2004 and 2003.
2.	Consolidated Income Statements for each of the three years in the period ended December 31, 2004.
3.	Consolidated Statements of Changes in Stockholders’ Equity for each of the three years in the period ended December 31, 2004.
4.	Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2004.
5.	Notes to Consolidated Financial Statements.
(a)(2)	Schedules.
	Other statements and schedules are not being presented either because they are not required or the information required by such statements and schedules is presented elsewhere in the financial statements.
(a)(3)	Exhibits
2-a	Purchase and Sale Agreement, dated January 8, 2001, by and between Advanta Corp. and Chase Manhattan Mortgage Corporation (incorporated by reference to Annex I to Advanta Corp.’s Definitive Proxy Statement filed January 25, 2001).
2-b	Mortgage Loan Purchase and Sale Agreement, dated February 23, 2001, by and among Advanta Corp., Chase Manhattan Mortgage Corporation, and Chase Manhattan Bank USA, National Association (incorporated by reference to Exhibit 2.2 to the Registrant’s Current Report on Form 8-K dated March 14, 2001).
2-c	Mortgage Loan Purchase and Sale Agreement, dated February 28, 2001, by and among Advanta Corp., Chase Manhattan Mortgage Corporation, and Chase Manhattan Bank USA, National Association (incorporated by reference to Exhibit 2.3 to the Registrant’s Current Report on Form 8-K dated March 14, 2001).
3-a	Restated Certificate of Incorporation of Registrant (incorporated by reference to Exhibit 4.1 to Pre-Effective Amendment No. 1 to the Registrant’s Registration Statement on Form S-3 (File No. 33-53475), filed June 10, 1994), as amended by the Certificate of Designations, Preferences, Rights and Limitations of the Registrant’s 63/4% Convertible Class B Preferred Stock, Series 1995 (Stock Appreciation Income Linked Securities (SAILS)) (incorporated by reference to Exhibit 4.3 to the Registrant’s Current Report on Form 8-K dated August 15, 1995), as further amended by the Certificate of Designations, Preferences, Rights and Limitations of the Registrant’s Series A Junior Participating Preferred Stock (incorporated by reference to Exhibit 1 to the Registrant’s Registration Statement on Form 8-A, dated March 17, 1997).
3-b	By-laws of the Registrant, as amended (incorporated by reference to Exhibit 3.1 the Registrant’s Current Report on Form 8-K dated March 17, 1997).

104

3-c	Rights Agreement, dated as of March 14, 1997, by and between the Registrant and the Rights Agent, which includes as Exhibit B thereto the Form of Rights Certificate (incorporated by reference to Exhibit 1 to the Registrant’s Registration Statement on Form 8-A dated March 17, 1997), as amended by Amendment No. 1, dated as of June 4, 1998 (incorporated by reference to Exhibit 1 to the Registrant’s Amended Registration Statement on Form 8-A/A, dated June 11, 1998), and Amendment No. 2, dated as of September 4, 1998, (incorporated by reference to Exhibit 1 to the Registrant’s Amended Registration Statement on Form 8-A/A, dated September 23, 1998).
4-a	Specimen of Class A Common Stock Certificate and specimen of Class B Common Stock Certificate (incorporated by reference to Exhibit 1 of the Registrant’s Amendment No. 1 to Form 8 and Exhibit 1 to Registrant’s Form 8-A, respectively, both dated April 22, 1992).
4-b	Trust Indenture dated as of November 15, 1993 between the Registrant and The Chase Manhattan Bank (National Association), as Trustee (incorporated by reference to Exhibit 4 to the Registrant’s Registration Statement on Form S-3 (No. 33-50883), filed November 2, 1993).
4-c	Senior Trust Indenture, dated as of October 23, 1995, between the Registrant and Mellon Bank, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-3 (File No. 33-62601), filed September 13, 1995).
4-d	Indenture dated as of December 17, 1996 between Advanta Corp. and The Chase Manhattan Bank, as trustee relating to the Junior Subordinated Debentures (incorporated by reference to Exhibit 4-g to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1996).
4-e	Declaration of Trust dated as of December 5, 1996 of Advanta Capital Trust I (incorporated by reference to Exhibit 4-h to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1996).
4-f	Amended and Restated Declaration of Trust dated as of December 17, 1996 for Advanta Capital Trust I (incorporated by reference to Exhibit 4-i to the Registrant’s Annual Report on Form  10-K for the year ended December 31, 1996).
4-g	Series A Capital Securities Guarantee Agreement dated as of December 17, 1996 (incorporated by reference to Exhibit 4-j to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1996).
10-a	Advanta Corp. 2000 Omnibus Stock Incentive Plan (incorporated by reference to 4(f) to Post-Effective Amendment No. 1 to the Registrant’s Registration Statement on Form S-8 (File No. 333-04469).†
10-a.1	Form of Stock Option Agreement.†
10-a.2	Form of Restricted Stock Award.†
10-b	Card Member License Agreement between Colonial National Financial Corp. (now known as Advanta Bank Corp.) and MasterCard International Incorporated dated April 14, 1994 (incorporated by reference to Exhibit 10-b to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001).
10-c	VISA U.S.A. Inc. Membership Agreement and Principal Member Addendum executed by Advanta Corp. on February 27, 1997 (incorporated by reference to Exhibit 10-c to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001).
10-d	VISA U.S.A. Inc. Membership Agreement executed by Advanta Bank Corp. on March 3, 2000 (incorporated by reference to Exhibit 10-d to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2001).
10-e	Description of Advanta Corp. Supplemental Executive Retirement Plan.
10-f	Advanta Corp. Executive Deferral Plan (incorporated by reference to the Exhibit 10-j to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1995).†

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10-g	Advanta Corp. Non-Employee Directors Deferral Plan (incorporated by reference to Exhibit 10-K to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1995).†
10-h	Summary of Life Insurance Benefits for Directors and Executives.†
10-i	Amended and Restated Agreement of Limited Partnership of Advanta Partners LP, dated as of October 1, 1996 (incorporated by reference to Exhibit 10-o to the Registrant’s Annual Report on Form  10-K for the year ended December 31, 1996).
10-j	Agreement of Limited Partnership of Advanta Growth Capital Fund L.P., dated as of July 28, 2000 (incorporated by reference to Exhibit 10-i to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2000).
10-k	Agreement dated as of January 15, 1996 between the Registrant and William A. Rosoff (incorporated by reference to Exhibit 10-u to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1995).†
10-l	Agreement dated May 11, 1998 between the Registrant and Philip M. Browne (incorporated by reference to Exhibit 10-r to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 1998).†
10-m	Contribution Agreement, dated as of October 28, 1997, by and between Advanta Corp. and Fleet Financial Group (incorporated by reference to Exhibit (c)(2) to the Registrant’s Schedule 13E-4, dated January 20, 1998), as amended by the First Amendment to the Contribution Agreement, dated as of February 10, 1998, by and among Advanta Corp., Fleet Financial Group and Fleet Credit Card, LLC (incorporated by reference to Exhibit 2.2 to the Registrant’s Current Report on Form 8-K, filed March 6, 1998).
10-n	Commercial Lease, dated September 28, 1995, by and between Draper Park North, L.C. and Advanta Financial Corp., as amended January 31, 1996 and May 20, 1996, as amended (incorporated by reference to Exhibit 10-p to the Registrant’s Annual Report on Form  10-K for the year ended December 31, 2002).
10-n.1	Amendment to Commercial Lease, dated as of December 6, 2004, between Carramerica Realty, L.P. and Advanta Bank Corp.
10-n.2	Amendment to Commercial Lease, dated as of January 25, 2005, between Carramerica Realty, L.P. and Advanta Bank Corp.
10-o	Master Indenture, dated as of August 1, 2000, between Wilmington Trust Company, as Owner Trustee of the Advanta Business Card Master Trust and Bankers Trust Company, as Indenture Trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K, filed August 30, 2000 by Advanta Business Receivables Corp.).
10-p	Transfer and Servicing Agreement, dated as of August 1, 2000, among Advanta Business Receivables Corp., Advanta Bank Corp., as Servicer, and Advanta Business Card Master Trust (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K, filed August 30, 2000 by Advanta Business Receivables Corp.).
10-q	Limited Partnership Agreement of Fleet Credit Card Services, L.P., dated as of May 26, 1998.
10-r	Agreement relating to Fleet Credit Card Services, L.P., dated as of May 28, 2004, by and between Advanta Corp., Advanta National Bank, Advanta Service Corp., Fleet Credit Card Holdings, Inc., Fleet Credit Card Services, L.P. and Bank of America Corp. (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q, filed August 9, 2004 by Advanta Corp.).
10-s	Service Agreement between First Data Resources Inc. and Advanta Bank Corp., dated as of January 1, 2002 (incorporated by reference to Exhibit 10-u to the Registrant’s Annual Report on Form  10-K for the year ended December 31, 2001).

106

10-t	Letter Agreement between Advanta Corp. and Brian Tierney dated June 8, 2004 (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q, filed August 9, 2004 by Advanta Corp.).
10-u	Relocation Agreement by and between Advanta Corp. and John F. Moore, dated as of May 20, 2004 (incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q, filed August 9, 2004 by Advanta Corp.).
10-v	Letter Agreement between Advanta Corp. and Arthur Bellis dated June 8, 2004 (incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q, filed August 9, 2004 by Advanta Corp.).
10-w	Direct Marketing Agreement, dated effective as of December  15, 1999, by and among Advanta Bank Corp. and CFM Direct, as amended (incorporated by reference to Exhibit 10-z to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002).
10-x	Advanta Corp. Employee Stock Purchase Plan, as amended (incorporated by reference to Exhibit 10-aa to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002).
10-y	Lease Agreement, dated August 4, 1995, between Ortho Pharmaceutical Corporation and Advanta Corp. (incorporated by reference to Exhibit 10-ee to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2002).
10-z	Agreement of Lease dated February 27, 2003 between Advanta Shared Services Corp and Liberty Property Limited Partnership (without exhibits) and Guaranty of Advanta Corp. (incorporated by reference to Exhibit 10 to the Registrant’s Quarterly Report on Form  10-Q for the quarter ended June 30, 2003).
10-aa	Master Agreement between Dun & Bradstreet, Inc. and Advanta Bank Corp., effective as of March 18, 2004 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004).
10-bb	Letter Agreement dated as of October 14, 2003, between Advanta Corp. and Jeffrey D. Beck (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003).†
10-cc	Advanta Corp. Office of the Chairman Supplemental Compensation Program.†
10-dd	Advanta Senior Management Change of Control Severance Plan Restated December 21, 2000.†
10-ee	Advanta Senior Management Change of Control Severance Plan.†
12	Computation of Ratio Earnings to Fixed Charges.
21	Subsidiaries of the Registrant.
23	Consent of Independent Public Accountants.
24	Powers of Attorney (included on the signature page hereof).
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

†  Management contract or compensatory plan or arrangement.

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SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Advanta Corp.

By: /s/ William A. Rosoff

William A. Rosoff, President and

Vice Chairman of the Board

Dated: March 9, 2005

      KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned does hereby constitute and appoint Dennis Alter, William A. Rosoff, Philip M. Browne, David B. Weinstock and Elizabeth H. Mai, or any of them (with full power to each of them to act alone), his or her true and lawful attorney-in-fact and agent, with full power of substitution, for him or her and on his or her behalf to sign, execute and file an Annual Report on Form 10-K under the Securities Exchange Act of 1934, as amended, for the fiscal year ended December 31, 2004 relating to Advanta Corp. and any or all amendments thereto, with all exhibits and any and all documents required to be filed with respect thereto, with the Securities and Exchange Commission or any regulatory authority, granting unto such attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises in order to effectuate the same as fully to all intents and purposes as he or she might or could do if personally present, hereby ratifying and confirming all that such attorneys-in-fact and agents, or any of them, or their substitute or substitutes, may lawfully do or cause to be done.

      Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities indicated on the 9th day of March, 2005.

Name	Title
/s/ Dennis Alter Dennis Alter	Chairman of the Board and Chief Executive Officer
/s/ William A. Rosoff William A. Rosoff	President and Vice Chairman of the Board
/s/ Philip M. Browne Philip M. Browne	Senior Vice President and Chief Financial Officer
/s/ David B. Weinstock David B. Weinstock	Vice President and Chief Accounting Officer
/s/ Robert S. Blank Robert S. Blank	Director
/s/ Max Botel Max Botel	Director
/s/ Dana Becker Dunn Dana Becker Dunn	Director
/s/ Ronald Lubner Ronald Lubner	Director

108

Name	Title
/s/ Olaf Olafsson Olaf Olafsson	Director
/s/ Robert H. Rock Robert H. Rock	Director
/s/ Michael Stolper Michael Stolper	Director

109 EX-10.A.1 2 w06406exv10waw1.htm FORM OF STOCK OPTION AGREEMENT

Exhibit 10-a.1

ADVANTA CORP.

NON-QUALIFIED STOCK OPTION

     THIS NON-QUALIFIED STOCK OPTION (the “Option”) is granted as of «Date» by Advanta Corp., a Delaware corporation (the “Company”), to «Name» (the “Optionee”), pursuant to the Advanta Corp. 2000 Omnibus Stock Incentive Plan (the “Plan”). 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» Shares of the Company’s Class B Common Stock, par value $0.01 per share (the “Option Shares”), at the purchase price of «Price» per share (the “Option Price”), that being the Fair Market Value of an Option Share as of the close of business on «Date». 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) «Term» (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;

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               (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 improperly 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. 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.”

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          3. Vesting. This Option shall vest over a period of four years, beginning from the date first written above (the “Date of Grant”). This Option may be exercised only to the extent that it has vested. Beginning on the first anniversary of the Date of Grant, 25% of the Option shall vest, (i.e., 25% of the Option Shares covered by the Option shall become eligible for purchase). Beginning on each of the second through fourth anniversaries of the Date of Grant , an additional 25% of the Option shall vest, so that on the fourth anniversary of the Date of Grant, this Option shall be 100% vested. In the event of the Optionee’s retirement prior to the date on which the option has become fully vested, there shall be a partial year pro rata vesting of the Option in an amount equal to 1/12th of the Option shares which would have become vested on the next anniversary of the Date of Grant of the Option, for each full 30 day period which has elapsed between the most recent anniversary of the date of grant and the date of the employee’s retirement. Notwithstanding the foregoing, in the event of a Change of Control, the Option shall be 100% vested.

          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 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,

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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 sibilings), 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 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,

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(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 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.

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          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, 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

6

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 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.

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          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, duties or authority to represent the Company as a member of its Board of Directors, or to discontinue the Optionee’s services to the Company in any capacity at any time for any reason whatsoever.

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     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

EX-10.A.1

exv10waw1

EX-10.A.2

Exhibit 10-a.2

SAMPLE
ADVANTA CORP.
STOCK AWARD GRANT DOCUMENT

          This Restricted Stock Award Grant Document (the “Grant Document”) constitutes the Grant Document for the Award granted by Advanta Corp. (the “Company”) pursuant to the terms of the Advanta Corp. 2000 Omnibus Stock Incentive Plan (the “Plan”), on <<GrantDate>> (the “Date of Grant”) to <<Recipient>> (the “Grantee”), and is subject to all applicable terms and conditions set forth in the Plan.

     1. Definitions. All terms stated with initial capitalization within this Grant Document shall have the meaning set forth in the Plan unless otherwise defined herein or as may be required by the context. As used herein:

(a)	“Base Price” means <<price>>, which is the 90 day trailing average of Advanta Class B common stock beginning with the first of the month in which you entered the program.
(b)	“Restricted Period” means, with respect to each Share that is subject to this Grant Document, the period beginning on the Date of Grant and ending on the Vesting Date.
(c)	“Restricted Stock” means the <<#>>shares that have been granted subject to the terms of this Grant Document.
(d)	“Target Bonus” means the bonus generally payable to the Grantee under the terms of the Advanta Management Incentive Program.
(e)	“Target Bonus Percentage” means the percentage of Performance Salary on which the Target Bonus is determined.
(f)	“Vesting Date” shall mean the date on which a share of Restricted Stock ceases to be subject to restrictions, as set forth in Section 3, below.
(g)	“Election Percentage” means the portion of the Target Bonus, elected by the Grantee upon entry in the Advanta Management Incentive Program, to be received in the form of Restricted Stock.
(h)	“Target Change” means the implementation of a higher or lower Target Bonus Percentage for a Grantee. From time-to-time, a Grantee’s position may change and the Committee may revise a Grantee’s Target Percentage, which will often result in a higher Target Bonus. In such cases, for each year remaining in the AMIP program, the difference between the new and prior Target Bonuses will be divided by the new Base Price and multiplied by the Election Percentage to compute a grant of Restricted Stock.

(i)   “Performance Salary” means the base salary in effect for the Grantee on the later of:

•   the date the participant entered the program,

•   the date the Grantee receives a Target Change, or

•   January 1^st of the performance year.

(j)   “Award Percentage” means the percentage of Target Bonus that the Committee determines should be paid to the Grantee for performance in the year in question.

     2. Restrictions on the Restricted Stock. During the Restricted Period, Grantee shall not be permitted to sell, transfer, pledge or assign the Restricted Stock except by will or by the laws of descent and distribution. The Company shall, in its discretion, either maintain possession of the certificates respecting the Restricted Stock, place the certificates in the custody of an escrow agent for the duration of the Restricted Period or transfer certificates to the Grantee; provided, however, that such certificates shall be legended in a manner determined to be appropriate by the Committee that indicates such restrictions as are in effect with respect to the Restricted Stock evidenced by such certificates.

     3. Lapse of Restrictions. Subject to the terms and conditions set forth herein and in the Plan, the restrictions set forth in Paragraph 2 with respect to each of the shares of Restricted Stock shall lapse on the applicable Vesting Date.

          (a) General Vesting Date: For purposes of this Grant Document, the applicable Vesting Date for all shares of Restricted Stock shall occur on the 10th anniversary of the Date of Grant; provided, however, that on such date the Grantee is, and has continuously been, during the period commencing on the Date of Grant and ending on the Vesting Date as determined under this subparagraph 3(a), an employee of the Company or of an Affiliate.

          (b) Establishment of Accelerated Vesting Date: Notwithstanding the determination of the applicable Vesting Date under subparagraph 3(a), above, an earlier Vesting Date may be established by the Committee with respect to Restricted Stock as follows:

               (i) A Vesting Date may be established with respect to a maximum of the number of shares of Restricted Stock which comprise the Target Bonus with respect to the year in question; which Vesting Date shall be the date a bonus would be payable to Grantee under the terms of the Advanta Management Incentive Program with respect to services provided during the years 2002, 2003, 2004, and 2005; provided, however, that no Vesting Date shall be established under this subparagraph 3(b) unless Grantee continues to be an employee of the Company as of such date.

               (ii) The number of shares of Restricted Stock for which a Vesting Date is established shall be equal to the Award Percentage multiplied by the dollar value of the Grantee’s Target Bonus at the time the Restricted Stock was granted and multiplied by the Election Percentage, divided by the Base Price. Base Prices as applicable with respect to initial grants and grants associated with Target Changes.

          (c) Vesting Date on Death, Disability or Retirement: In the event of the death, Disability or retirement of the Grantee, the Committee may, after considering any recommendation of the President with respect to the performance of the Grantee and of the Company for the portion of the then current year prior to such death, Disability or retirement, direct that a Vesting Date be established with respect to a portion of the Restricted Shares for which a Vesting Date would have been established had the Grantee worked the entire year and been granted a Target Bonus for such year. The determination of the portion of such Restricted Shares for which a Vesting Date is established shall be made entirely at the discretion of the Committee. The Vesting Date established pursuant to this subparagraph 3(c) shall be the date established as soon as administratively practicable following the date of such determination.

          (d) Vesting Date on Change of Control: In the event there is a Change of Control or, if the Committee establishes an accelerated vesting date in anticipation of a Change of Control, the Committee may, after considering any recommendation of the Chairman and President with respect to the performance of the Grantee and of the Company with respect to the portion of the then current year prior to such actual or anticipated Change of Control, direct that a Vesting Date be established with respect to a pro rata portion of the Restricted Shares which would have become vested had the employee worked the entire year, all as determined at the discretion of the Committee.

     4. Rights of Grantee. During the Restricted Period, Grantee shall have all of the rights of an owner of Common Stock, including the right to receive dividends. Stock dividends with respect to the Restricted Stock shall be subject to the same restrictions as the Restricted Stock.

     5. Forfeiture of Restricted Shares. All Restricted Shares for which a Vesting Date has not been attained shall be forfeited without the receipt of any payment by the Grantee upon the last day of the Grantee’s employment or service with the Company or a subsidiary thereof, except to the extent that the Committee determines to establish a Vesting Date, as set forth in Section 3 with respect to termination of employment on account of death, Disability or Retirement. Restricted Shares, which are forfeited, shall be canceled by the Company without any action by the Grantee.

     6. Notices. Any notice to the Company under this Agreement shall be made in care of the Committee to the office of the General Counsel, at the Company’s main office in Spring House, Pennsylvania. All notices under this Agreement shall be deemed to have been given when hand-delivered or mailed, first class postage prepaid, and shall be irrevocable once given.

     7. Securities Laws. The Committee may from time to time impose any conditions on the Restricted Stock as it deems necessary or advisable to ensure that Shares are issued and resold in compliance with the Securities Act of 1933, as amended.

     8. Delivery of Shares. Within ten (10) business days of the Vesting Date, the Company shall, without payment from the Grantee (or the person to whom ownership rights may have passed by will or the laws of descent and distribution) for the Restricted Stock, deliver to the Grantee (or such other person) a certificate for the Restricted Stock without any legend or restrictions, except for such restrictions as may be imposed by the Committee, in its sole judgment, under this Paragraph 8. Prior to delivery of the Restricted Stock Certificate, the Grantee must satisfy the tax withholding requirements imposed by the federal, state and local governments. The Company may condition delivery of certificates for Shares upon the prior receipt from Grantee (or such other person) of any undertakings which it may determine are required to assure that the certificates are being issued in compliance with federal and state securities laws. The right to payment of any fractional Shares shall be satisfied in cash, measured by the product of the fractional amount times the fair market value of a Share on the Vesting Date, as determined by the Committee.

     9. Award Not to Affect Employment. The Award granted hereunder shall not confer upon Grantee any right to continue in the employment of the Company or any Subsidiary Company or Affiliate of the Company.

     10. Amendment to Grant Document. Notwithstanding anything contained herein to the contrary, the Committee shall have the authority to amend or modify the terms and conditions set forth in this Grant Document, including, without limitation, a change in the Base Price, if the Committee determines, at its discretion, that any such amendment or modification is appropriate in order to maintain the effectiveness of the Award as a method for providing current performance incentives for the Grantee or to effectuate such other goals or objectives that the Committee determines may appropriately be furthered by any such amendment or modification; provided, however, that the terms of this Grant Document may not be changed in a manner that is unfavorable to the Grantee without the Grantee’s consent.

     11. Miscellaneous.

          (a) The address for Grantee to which notice, demands and other communications to be given or delivered under or by reason of the provisions hereof shall be the Grantee’s address as reflected in the Company’s personnel records.

          (b) Grantee acknowledges receipt of a copy of the Plan, a copy of which is annexed hereto, and represents that he/she is familiar with the terms and provisions thereof, and hereby accepts the Award subject to all of the terms and provisions thereof. Grantee agrees to hereby accept as binding, conclusive and final all decisions or interpretations of the Committee upon any questions arising under the Plan or this Agreement. Grantee authorizes the Company to withhold in accordance with applicable law from any compensation payable to him/her any taxes required to be withheld be federal, state or local law in connection with the Award.

          (c) The validity, performance, construction and effect of this Award shall be governed by the laws of Pennsylvania, without giving effect to principles of conflicts of law.

EX-10.E

Exhibit 10 - e

Summary of Advanta Corp. Supplemental Executive Retirement Plan

On February 11, 2005, the Compensation Committee of the Board of Directors of Advanta Corp. and the Board of Directors approved and established the Advanta Corp. Supplemental Executive Retirement Plan (the “SERP”). The SERP was established in order to provide Dennis Alter, Chairman and Chief Executive Officer, with certain retirement benefits in recognition of his more than 45 years of service to the Company. Subject to the vesting requirements described below, under the terms of the SERP, Mr. Alter will be entitled to an annual retirement benefit of $625,000 upon reaching age 70 for his and his spouse’s lives. The amount payable was determined based on a percentage of Mr. Alter’s 2001 base salary and target bonus. The annual benefit vests ratably over an eight year period beginning in 2005. In the event of death, disability or a change in control, as defined in the SERP, the annual benefit will become fully vested and immediately payable. In the event of a change in control, Mr. Alter is also entitled to receive a gross up for excise taxes that arise and for the reimbursement for such taxes.

EX-10.H

Exhibit 10-h

Summary of Life Insurance Benefits for Directors and Executives

The Company pays the premiums for life insurance policies on the lives of non-employee Directors. The Board member has the right to designate the beneficiary under the applicable life insurance policy. Each non-employee Director is eligible to receive a $500,000 policy. The policies insuring the non-employee Directors are term life insurance policies, on which there is no build-up in cash value.

In 1993, the Company established as an executive benefit a split dollar life insurance program for certain of the Company’s executive officers. The agreements used for this program are substantially in the form attached hereto. In connection with the split dollar life insurance program, the Company agreed to make premium payments on life insurance policies purchased for the benefit of certain of its executives. The executive officer has the right to designate the beneficiary under the policies. If either party terminates the agreement, the executive must pay the Company the amount of premiums paid by or on behalf of the Company but not more than the cash value of the life insurance policy. Upon the death of an insured executive, the Company is entitled to receive, out of the proceeds of the policy, the amount of its cash investment in the policies. Effective July 30, 2002, in response to the enactment of the Sarbanes-Oxley Act of 2002, the Company stopped paying the premiums associated with the life insurance policies purchased for the split dollar life insurance program. Presently there are split dollar life insurance policies in place for three of the Company’s executives which are expected to pay death benefits aggregating approximately $68 million.

In addition to the insurance benefits described above, the Company provides a $1,000,000 term life insurance benefit for certain senior management employees.

SPLIT DOLLAR INSURANCE AGREEMENT

     SPLIT DOLLAR INSURANCE AGREEMENT dated as of _________by and between _________(the “Owner”) and ADVANTA CORP. (“Company”).

     The parties hereto in consideration of the agreements and covenants hereinafter set forth and intending to be legally bound, agree as follows:

     1. This agreement relates to [insert applicable policy numbers] on the life of [name of exectutive] (“Insured”) issued by [name of insurance company] (“Insurer”). The Policies have been included as part of a split-dollar life insurance arrangement established by the Company on [insert date]. Subject to the conditions hereinafter set forth, the Owner shall be the sole owner of the Policies.

     2. The Company has heretofore and shall continue to pay the portion of the annual premiums on the Policies equal to: (i) the annual net premiums, minus (ii) the value of the death benefits to which the Owner is then entitled, determined by using the lesser of (a) the applicable one-year term premium cost computed under Revenue Ruling 55-747, 1955-2 C.B. 228 (or any superseding ruling thereto) or (b) the applicable premium rates charged by the Insurer for initial issue one-year term insurance. The Owner shall pay to the Company in connection with the Policies, or directly to the Insurer, the amount described in clause (ii) above, and such payments shall continue to be made to the Company notwithstanding the fact that there are no annual net premiums on the Policies or that the Company’s obligation to pay premiums is satisfied by distributions from the Policies. In any year, the “annual net premiums” shall equal the gross premiums

less Policy dividends, which are not used to purchase additional insurance. The aggregate of such Company payments, reduced by amounts received by the Company with respect to the Policies, is hereinafter referred to as the Company’s “Cash Investment” in the Policies. The Company shall also pay to or on behalf of [name of executive] a bonus equal to the amount described in clause (ii) above.

     3. In consideration of the payments made pursuant to paragraph 2 hereof, the Company shall receive from the proceeds of the Policies, upon the death of the Insured (or upon the surrender of the Policies during the Insured’s lifetime) an amount equal to the Company’s Cash Investment in the Policies, as calculated under paragraph 2 hereof. The balance of the proceeds, if any, shall be paid as provided by the Owner in the Policies.

     4. To secure the Cash Investment, the Owner shall assign to the Company a security interest in the Policies equal in amount to the Cash Investment and such security interest shall be limited to the Company’s right to receive such amount out of the proceeds of the Policies.

     5. The assignment to the Company provided for in this agreement shall be effectuated by the execution of a Collateral Assignment Agreement substantially in the form attached hereto as Exhibit “A”.

     6. The Owner shall notify the Insurer of the Collateral Assignment Agreement and shall take no action that would impair the security interest of the Company under the Collateral Assignment Agreement.

     7. Each and every right, interest or incident of ownership associated with the Policies which are not expressly assigned to the Company by the Collateral Assignment Agreement shall be retained by the Owner, including, but not limited to, the right to designate and change the beneficiaries of the Policies, the right to transfer the Policies subject to the rights assigned to the Company, the right to surrender the Policies subject to the rights assigned to the Company, and the right to exercise any option provided in the Policies.

     8. Subject to taking notice of the Collateral Assignment Agreement when it is filed at its home office, the Insurer shall have no obligation except as set forth in the Policies. The Insurer shall not be bound to inquire into or take notice of any of the covenants herein contained. Upon the Insured’s death (or upon surrender of the Policies prior to the death of the Insured), the Insurer shall be discharged from its obligations upon payment of the proceeds in accordance with the provisions of the Policies and the Collateral Assignment Agreement and without regard to this agreement or any amendment hereof.

     9. For purposes of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), the Company is the “Named Fiduciary” and “Administrator” within the meaning of sections 402(a) and 3(16)(A) of ERISA, respectively, and the fiduciary for deciding claims. All claims shall be resolved under procedures that comply with regulations promulgated under section 503 of ERISA.

     10. This agreement may be terminated at any time while the Insured is living by written notice thereof by either the Company or the Owner to the other. As of

the date of such termination, the Company shall be repaid its Cash Investment solely to the extent of funds available from the Policies, the Company shall have no further rights in the Policies and the Collateral Assignment Agreement shall be terminated.

     11. Amendments may be made to this agreement by a writing signed by each of the parties and attached hereto.

     12. All matters respecting the validity, effect and interpretation of this agreement shall be determined in accordance with the laws of the Commonwealth of Pennsylvania.

     13. This agreement shall be binding upon the parties hereto and their successors and assigns.

     IN WITNESS WHEREOF, this agreement has been executed on _________, ___.

ADVANTA CORP.		[OWNER}
By:		By:	(SEAL)
Attest:
	[Corporate Seal]

Exhibit A

COLLATERAL ASSIGNMENT AGREEMENT

     COLLATERAL ASSIGNMENT AGREEMENT dated as of _________, by and between _________(“Owner”), and ADVANTA CORP. (“Company”).

     This Agreement relates to [name of insurance company] (“Insurer”) Policy No. _________, (“Policy”) on the life of [name of executive], (“Insured”).

     The parties have entered into a Split Dollar Insurance Agreement (“Insurance Agreement”) relating to this Collateral Assignment Agreement.

     Pursuant to the Insurance Agreement, the Owner has agreed to assign to the Company a security interest in the Policy in order to provide for the payment to the Company of the Cash Investment, as defined in the Insurance Agreement.

     The parties hereto, in consideration of the foregoing and the agreements and covenants hereinafter set forth and intending to be legally bound hereby, agree as follows:

     1. The Owner hereby assigns to the Company a security interest in the Policy in order to secure for the Company the payment of the Cash Investment in the Policy, consisting of the following rights:

          (a) Upon the death of the Insured, the Company shall have the right to receive so much of the proceeds payable under the Policy as is equal to the Cash Investment, determined as of the date of the Insured’s death. The Company may collect such portion of the proceeds directly from the Insurer.

          (b) In the event the Policy is surrendered by the Owner prior to the death of the Insured, the Company shall have the right to receive so much of the proceeds received as is equal to the Cash Investment, determined as of the date of surrender. The Company may collect such portion of the proceeds on surrender of the Policy directly from the Insurer.

     2. The Insurer is authorized to rely solely on the written statement of the Company and the Owner for the exercise of any rights under the Policy assigned herein and as to the amount of the Cash Investment as of any date. The Insurer is hereby authorized to recognize such statement without investigation or the giving of any notice. The written acknowledgment of receipt by the Company for any sums paid to it by the Insurer pursuant to the written statement of the Cash Investment in the Policy shall be a full discharge and release of the Insurer with respect to the Company’s interest in the Policy. Payment of the Cash Investment shall be made to the exclusive order of the Company.

     3. Each and every right, interest or incident of ownership associated with the Policy which is not expressly assigned to the Company by this Collateral Assignment Agreement is retained by the Owner, including, but not limited to, the right to designate and change the beneficiaries of the Policy, the right to transfer the Policy subject to the rights assigned to the Company, the right to surrender the Policy subject to the rights assigned to the Company, and the right to exercise any option provided in the Policy.

     4. Each of the undersigned declares that no proceedings in bankruptcy are pending against it or them and that its or their property is not subject to any assignment for the benefit of creditors.

     5. All matters respecting the validity, effect and interpretation of this Collateral Assignment Agreement shall be determined in accordance with the laws of the Commonwealth of Pennsylvania.

     6. This Collateral Assignment Agreement shall be binding upon the parties hereto and their successors and assigns.

     IN WITNESS WHEREOF, the parties have hereunto set their hands and seals on _________, _________.

ADVANTA CORP.		[OWNER]
By:		By:
	(SEAL)
Attest:
	[Corporate Seal]

EX-10.N.1

Exhibit 10-n.1

SIXTH AMENDMENT TO COMMERCIAL LEASE
[CarrAmerica Realty, L.P./Advanta Bank Corp.]

     THIS SIXTH AMENDMENT (this “Amendment”) is entered into as of the 6^th day of December, 2004, between CARRAMERICA REALTY, L.P., a Delaware limited partnership (“Landlord”), whose address is 1850 K Street, N.W., Suite 500, Washington, D.C. 20006, and ADVANTA BANK CORP., a Utah corporation, formerly known as Advanta Financial Corp. (“Tenant”), whose address is 11850 South Election Road, Draper, Utah 84020. (Landlord and Tenant are referred to in this Amendment collectively as the “Parties.”)

     FOR THE SUM OF TEN DOLLARS ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Parties agree as follows:

     1. Definitions. As used in this Amendment, each of the following terms shall have the indicated meaning, and any capitalized term that is used but not defined in this Amendment shall have the meaning set forth in the Lease (as defined below in this Paragraph 1):

     1.1. “Additional Space” means the additional space located on the second floor of the Building being added to the Existing Space by this Amendment, shown on the attached Exhibit A, consisting of approximately 5,093 rentable square feet.

     1.2. “Delivered” means, with respect to any Additional Space, the earlier of either of the following: (a) the date on which such Additional Space is delivered by Landlord to Tenant with Substantial Completion of the tenant improvements described in Paragraph 7 of this Amendment; or (b) the date on which Tenant first conducts business in such Additional Space.

     1.3. “Existing Space” means the space covered by the Lease prior to this Amendment.

     1.4. “Expansion Date(s)” means the date(s) on which all or any portion of the Additional Space is Delivered, which is anticipated to occur on or about December 15, 2004 for the portion of the Additional Space located on the eastern side of the Building, consisting of approximately 2,579 rentable square feet, and January 15, 2005 for the portion of the Additional Space located on the western side of the Building, consisting of approximately 2,514 rentable square feet.

     1.5. “Lease” means the Commercial Lease, dated September 28, 1995, as previously amended by the First Amendment to Lease, dated February 13, 1996, the Second Amendment to Lease (the “Second Amendment”), dated May 20, 1996, the Third Amendment to Commercial Lease, dated October 27, 2000, the Fourth Amendment to Commercial Lease, dated May 3, 2001, and the Fifth Amendment to Commercial Lease, dated February 28, 2002, all entered

into between Landlord or its predecessor in interest, Draper Park North, L.C., a Utah limited liability company, as landlord, and Tenant, as tenant.

     2. Purpose. The Parties desire to (a) expand the Existing Space to add the Additional Space, (b) extend the term of the Lease, and (c) provide to Tenant additional options to extend the term of the Lease, all in accordance with the terms and conditions of this Amendment.

     3. Term. The Lease term shall expire on April 30, 2010, unless extended in accordance with Paragraph 9 of this Amendment or sooner terminated in accordance with the Lease, as amended by this Amendment. Article 2(b) of the Lease shall have no further force or effect.

     4. Premises. As of the Expansion Date(s), the Additional Space then being Delivered shall be added to the Existing Space, and on and after the date on which all of the Additional Space is Delivered to Tenant, the “Premises” shall mean and consist of approximately 56,360 rentable square feet in the aggregate, as shown on the table attached as Exhibit B.

     5. Base Rent.

     5.1. For the period expiring on April 30, 2005, the Base Rent for the Existing Space shall be as set forth in the Lease, without reference to this Amendment.

     5.2. For the three (3) month period after any Additional Space is Delivered, no Base Rent shall be payable by Tenant to Landlord for such Additional Space. On the first day of the first month following such three (3) month period, and on the first day of any month thereafter (if any) prior to May 1, 2005, Tenant shall pay to Landlord Base Rent on such Additional Space at the rate of $15.95 per rentable square foot of such Additional Space for the period commencing on the day after the expiration of such three (3) month period and expiring on April 30, 2005.

     5.3. On and after May 1, 2005, the Base Rent payable under the Lease (as amended by this Amendment) for the Premises shall be as follows:

Dates	Annual Rent	Monthly Rent	Annual Rent Per RSF
5-01-05 to 4-30-06	$898,941.96	$74,911.83	$15.95
5-01-06 to 4-30-07	$925,994.76	$77,166.23	$16.43
5-01-07 to 4-30-08	$953,611.20	$79,467.60	$16.92
5-01-08 to 4-30-09	$982,354.80	$81,862.90	$17.43
5-01-09 to 4-30-10	$1,011,662.04	$84,305.17	$17.95

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     6. Operating Expenses. With respect to (i) the Existing Space for the period on and after May 1, 2005, and (ii) the Additional Space:

          6.1. The Base Year shall be calendar year 2004, subject to adjustment to a level of 95% occupancy as set forth in Article 7(b)(i) of the Lease.

          6.2. Article 7(b)(iv) of the Lease and all references to the Cap in the Lease are deleted and shall have no further force or effect. However, with respect to (i) the Existing Space for the period on and after May 1, 2005, and (ii) the Additional Space, the following shall be applicable to the Operating Expenses Escalation payable by Tenant under the Lease:

               (a) The Operating Expenses Escalation for Controllable Operating Expenses (defined below) applicable to calendar year 2005 shall be the lesser of (i) Tenant’s Prorata Share of Controllable Operating Expenses for calendar year 2005, less Tenant’s Prorata Share of Controllable Operating Expenses for calendar year 2004, or (ii) the sum of Tenant’s Prorata Share of Controllable Operating Expenses for calendar year 2004, plus five percent (5%) (such sum is the initial “Cap Amount”), less Tenant’s Prorata Share of Controllable Operating Expenses for calendar year 2004; provided, however, that Tenant’s Prorata Share of Controllable Operating Expenses for calendar year 2004 shall be adjusted by Landlord to the amount that Landlord reasonably believes it would have been if ninety-five percent (95%) of the rentable area of the Building had been occupied.

               (b) The Operating Expenses Escalation for Controllable Operating Expenses applicable to each calendar year thereafter shall be the lesser of (i) Tenant’s Prorata Share of Controllable Operating Expenses for the applicable calendar year, less Tenant’s Prorata Share of Controllable Operating Expenses for calendar year 2004, or (ii) the sum of the Cap Amount for the immediately preceding calendar year, plus five percent (5%), less Tenant’s Prorata Share of Controllable Operating Expenses for calendar year 2004.

               (c) “Controllable Operating Expenses” means all Operating Expenses other than those costs that are not within the control of Landlord. Those costs that are not within the control of Landlord include, without limitation, insurance, electricity and other utilities and janitorial expenses. There is no cap on Operating Expenses other than Controllable Operating Expenses, or on Real Estate Taxes.

               (d) Assume, for example, Tenant’s Prorata Share of Controllable Operating Expenses for calendar year 2004 is $100.00. In calendar year 2005, the Operating Expenses Escalation for Controllable Operating Expenses would be the lesser of (i) Tenant’s Prorata Share of Controllable Operating Expenses for calendar year 2005, less $100.00, or (ii) $5.00 ($100.00 plus five percent (5%), less $100.00). In calendar year 2006, the Operating Expenses Escalation for Controllable Operating Expenses would be the lesser of (i) Tenant’s Prorata Share of Controllable Operating Expenses for calendar year 2006, less $100.00, or (ii) $10.25 ($105.00 plus five percent (5%), less $100.00), and so on.

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               (e) All calculations made under this Paragraph 6.2 shall take into account, and be adjusted for, any partial calendar year periods, and any periods in which there is a difference in the number of rentable square feet comprising the Premises.

          6.3. The exclusion of electric and gas expenses from Operating Expenses is deleted, meaning that electric and gas expenses shall be included in Operating Expenses.

          6.4. Tenant may be billed separately for, and if billed shall pay to Landlord within thirty (30) days after receipt of an itemized invoice therefor, the actual cost of any utilities used during any period other than Monday through Friday from 8:00 a.m. to 6:00 p.m., as such cost is reasonably estimated and determined by Landlord.

     7. Tenant Improvements—Additional Space. Landlord shall, as soon as reasonably practicable, at its sole cost and expense, improve the Additional Space by demising, constructing, wiring, painting and carpeting or tiling, as appropriate, in accordance with the space plan attached as Exhibit C, using the Building standard materials described on Exhibit C.1.

     8. Parking Stalls. Pursuant to Article 1(d) of the Lease, commencing on the Expansion Date(s), Landlord shall provide Tenant with six additional non-reserved parking stalls per 1,000 rentable square feet of the Additional Space Delivered in the parking lots adjacent to the Building. When all of the Additional Space has been Delivered, Landlord shall provide Tenant with a total of 327 non-reserved parking stalls and 11 reserved parking stalls in the parking lots adjacent to the Building.

     9. Options to Extend. Subject to the balance of this Paragraph 9, Tenant may, at its option, extend the term of the Lease for the entire Premises for three (3) periods of two (2) years each (each, an “Extension Term”) upon the same terms contained in the Lease (other than tenant improvements made previously by Landlord), except for the amount of Base Rent payable during each Extension Term. Tenant shall have no additional extension options, unless otherwise agreed by the Parties in a written agreement entered into by the Parties after the date of this Amendment.

          9.1. The Base Rent during each Extension Term shall be the greater of (a) the Base Rent applicable to the last day of the term of the Lease prior to the applicable Extension Term, or (b) the then-prevailing market rate for a comparable term commencing on the first day of the Extension Term for tenants of comparable size and creditworthiness for comparable space in the Building and other first-class office buildings in the vicinity of the Building as reasonably determined by Landlord.

          9.2. To exercise its option, Tenant must deliver an initial non-binding notice to Landlord not less than nine (9) months prior to the proposed commencement of the applicable Extension Term. At some point between ten (10) and eight (8) months prior to the proposed commencement of the applicable Extension Term, Landlord shall calculate and inform Tenant of

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the Base Rent for the Premises. Such calculation shall be final and shall not be recalculated at the actual commencement of the Extension Term, if any. Tenant shall give Landlord final binding notice of intent to exercise its option to extend within fifteen (15) days after receiving Landlord’s calculation of Base Rent. If Tenant fails to give either its initial non-binding notice or its final binding notice timely, Tenant will be deemed to have waived that option (and any other option) to extend.

          9.3. Tenant’s option to extend the Lease is subject to the conditions that: (a) on the date that Tenant delivers its final binding notice exercising its option to extend, Tenant is not in default under the Lease beyond the expiration of any applicable notice and cure periods; and (b) Tenant shall not have assigned the Lease or sublet any portion of the Premises under a sublease which is in effect at any time during the final twelve (12) months prior to the applicable Extension Term, but excluding any assignment or sublease to an affiliate of Tenant. As used in the immediately preceding sentence, “affiliate” means an entity that controls, is controlled by, or is under common control with, Tenant, where “control” is the holding of fifty percent (50%) or more of the outstanding voting interests.

     10. Tenant Improvements—Existing Space. With respect to the Existing Space, Landlord shall:

          10.1. repaint the first floor;

          10.2. pay Tenant for the actual, reasonable costs paid or incurred by Tenant in replacing the carpeting on the first floor of the Building with carpet tiles, such payment (a) to be made by Landlord to Tenant within ten (10) days after receipt by Landlord of third-party invoices for completed work, and (b) not to exceed One Hundred Five Thousand Dollars ($105,000);

          10.3. replace the doors at both ends of the restroom corridor located on the first floor of the Building;

          10.4. install protective bollards near the electricity transformer and emergency generator located outside of the Building near its Southwest corner;

          10.5. separate the HVAC system for the mailroom/receiving area;

          10.6. increase the illumination of certain areas outside the Building and in the parking lot as may be determined by Landlord; provided, however, that by undertaking to increase such illumination, Landlord is not in any way undertaking or assuming any additional obligation (including, without limitation, any additional obligation with respect to security or safety) with respect to Tenant, Tenant’s employees or any other person; and

          10.7. pay Tenant for the actual, reasonable costs paid or incurred by Tenant in enhancing its security, such payment (a) to be made by Landlord to Tenant within ten (10) days

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after receipt by Landlord of third-party invoices for completed work, and (b) not to exceed Three Thousand Dollars ($3,000).

     11. Security Station. On or before January 15, 2005, Tenant shall, at its sole cost and expense, and in accordance with all applicable provisions of the Lease including, without limitation, Article 8 of the Lease, and after obtaining Landlord’s prior written approval of the drawings for such work, relocate its existing security station (currently located in the lobby of the Building) to a space within the Existing Space adjoining the front door vestibule, with a window in the wall of the vestibule.

     12. Right of First Refusal. The Parties confirm that the “Right of First Refusal” described in Paragraph 2 of the Second Amendment remains in full force and effect in accordance with its terms.

     13. General Provisions. In the event of any conflict between the provisions of the Lease and the provisions of this Amendment, the provisions of this Amendment shall control. As modified by this Amendment, the Lease and all of Tenant’s obligations under the Lease are ratified and affirmed in their entirety. This Amendment shall inure to the benefit of, and be binding on, the Parties and their respective successors and assigns. This Amendment shall be governed by, and construed and interpreted in accordance with, the laws (excluding the choice of laws rules) of the state of Utah. This Amendment may be executed in any number of duplicate originals or counterparts, each of which when so executed shall constitute in the aggregate but one and the same document. Each individual executing this Amendment represents and warrants that such individual has been duly authorized to execute and deliver this Amendment in the capacity and for the entity set forth where such individual signs. Each exhibit referred to in, and attached to, this Amendment is an integral part of this Amendment and is incorporated in this Amendment by this reference.

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     THE PARTIES have executed this Amendment on the respective dates set forth below, to be effective as of the date first set forth above.

LANDLORD:
CARRAMERICA REALTY, L.P.,
a Delaware limited partnership,
by its general partner:
CARRAMERICA REALTY GP HOLDINGS, LLC,
a Delaware limited liability company,
by its sole member:
CARRAMERICA REALTY OPERATING
PARTNERSHIP, L.P.,
a Delaware limited partnership,
by its general partner:
CARRAMERICA REALTY CORPORATION,
a Maryland corporation
By	/s/
Its	VP
Date	12-21-04
TENANT:
ADVANTA BANK CORP.
By	/s/ John F. Moore
Its	President
Date	12/13/04

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EXHIBIT A

to

SIXTH AMENDMENT TO COMMERCIAL LEASE

ADDITIONAL SPACE

     The Additional Space referred to in the foregoing instrument is shown on the attachment, consisting of one page.

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EXHIBIT B

to

SIXTH AMENDMENT TO COMMERCIAL LEASE

BOMA TABLE

     The table showing the total rentable square footage of the Premises referred to in the foregoing instrument is attached and consists of one page.

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EXHIBIT C

to

SIXTH AMENDMENT TO COMMERCIAL LEASE

SPACE PLAN

     The space plan referred to in the foregoing instrument is attached and consists of one page.

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EXHIBIT C.1

to

SIXTH AMENDMENT TO COMMERCIAL LEASE

BUILDING STANDARD MATERIALS

     The Building standard materials referred to in the foregoing instrument are described as follows:

1.   Standard interior office partitions will be as shown on the foregoing space plan. New walls will be floor to underside of ceiling walls, consisting of 3-5/8” metal studs, 24” o.c. max with staggered bracing 8’ o.c. max, 1 layer of 5/8” standard gypsum board on each side and mud set J bead on top of wall.

2.   Existing and new demising walls are floor to underside of deck, consisting of 3-5/8” metal studs, 16” o.c., 1 layer of 5/8” standard gypsum board on each side, painted with smooth finish and eggshell paint.

3.   Floor finishes consist of Bigelow “No Limits”, or Bigelow “No Barriers” (or equivalent) carpet in office areas and exercise room with 4” rubber base. Existing VCT in “File Room/Check Printing Room” will remain as is. Shower/Locker room floor finishes shall consist of 2” x 2” ceramic tile flooring.

4.   Existing ceilings consist of a 1” nominal, low gloss white finish, intermediate duty grid system with “2’ x 2’ x 5/8” tiles. Existing ceiling will be patched as necessary where new walls are constructed. Ceiling tiles will be reused where possible.

5.   Existing doors, frames and hardware consist of: 3’ x 7’ solid core stain grade oak veneer, as manufactured by Weyerhaeuser or equal, field finished to match the existing base building doors. Locksets shall match existing. All frames are 26 ga. hollow metal, knock down, steel frames, painted to match building standard. All locks shall be keyed to base building master key system with matching keyway and all doors shall have 2 pair of hinges and a wall or floor bumper as appropriate.

6.   Wall finishes: All new drywall surfaces shall be painted, with two coats to cover, in color to match existing. Existing drywall surfaces will be touched up as necessary.

7.   Window coverings are limited to existing blinds.

8.   Specialties are limited to lockers, mirrors, and benches in men’s and women’s shower/locker rooms. Lockers shall be double tier steel lockers with a maximum of 24 openings per locker

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room. Benches shall be 1¹/4” hardwood mounted on two steel pedestals. Mirror shall be unframed wall mounted 24” x 48” max at the rate of one per locker/shower room.

9.   Sprinkler system work is limited to reworking the base building sprinkler layout to meet NFPA 13 requirements for the attached layout. Existing sprinkler heads will be re-used. Shifting or adding heads for aesthetic reasons is specifically excluded.

10.   HVAC consists of existing rooftop units with existing programmable thermostats, and an exhaust fan to serve exercise and locker/shower rooms. Any supplemental HVAC for server room, telephone room, exercise room, or other equipment rooms, if necessary, will be supplied and maintained by Tenant.

11.   Lighting provisions include utilization of existing 2’ x 2’ parabolic, 3” deep 18 cell, 277-volt, 3-lamp fixtures with electronic ballasts. All offices, conference and individual rooms shall have individual wall switches and open office areas shall have ganged lighting switches. Shower stalls shall each have one wet location suitable can light.

12.   Fire alarm system, emergency lighting, and exit signs shall be provided in accordance with applicable codes.

13.   Telephone and data provisions are limited to existing boxes and cabling. Termination devices and any additional cabling shall be provided and connected by Tenant.

14.   Electrical convenience outlets are existing. New walls will receive convenience outlets at the rate of one per 10 feet.

15.   Shower stalls shall be provided at the rate of 3 per shower/locker room. Stalls shall consist of 4¹/4” x 4¹/4” Daltile Bright Glaze or Matte Series Price Group One (or equivalent) wall tiles and 2x2 Daltile Keystone Price Group One (or equivalent) floor tiles. Wall tiles will be provided in shower stalls only. All other locker room walls shall be painted drywall. Floor tiles shall cover the entire floor of the locker room. One shower stall in each shower/locker room shall have an ADA bench and showerhead installed.

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CONSENT AND CONFIRMATION OF GUARANTOR

     THE UNDERSIGNED, ADVANTA CORP., a Delaware corporation, the guarantor of the Lease identified in the foregoing Sixth Amendment to Commercial Lease, (i) consents to such amendment, (ii) agrees that the undersigned’s guaranty of the Lease is in full force and effect and will continue to apply to the Lease, as amended by the foregoing amendment, or as otherwise amended on or after the date of this instrument, and (iii) agrees that the undersigned has no defenses to the enforcement of such guaranty, which is and shall continue to be enforceable in accordance with its terms.

     DATED: December 13, 2004

ADVANTA CORP.
By	/s/ Marcia M. Wilf
Its	Vice President
Date	12/13/04

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EX-10.N.2

Exhibit 10-n.2

SEVENTH AMENDMENT TO COMMERCIAL LEASE

[CarrAmerica Realty, L.P./Advanta Bank Corp.]

     THIS SEVENTH AMENDMENT (this “Amendment”) is entered into as of the 25^th day of January, 2005, between CARRAMERICA REALTY, L.P., a Delaware limited partnership (“Landlord”), whose address is 1850 K Street, N.W., Suite 500, Washington, D.C. 20006, and ADVANTA BANK CORP., a Utah corporation, formerly known as Advanta Financial Corp. (“Tenant”), whose address is 11850 South Election Road, Draper, Utah 84020. (Landlord and Tenant are referred to in this Amendment collectively as the “Parties,” and individually as a “Party.”)

     FOR THE SUM OF TEN DOLLARS ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the Parties agree as follows:

     1. Definitions. As used in this Amendment, each of the following terms shall have the indicated meaning, and any capitalized term that is used but not defined in this Amendment shall have the meaning set forth in the Lease (as defined below in this Paragraph 1):

          1.1. “Final Expansion Date” means April 1, 2005.

          1.2. “Lease” means the Commercial Lease, dated September 28, 1995, as previously amended by the First Amendment to Lease, dated February 13, 1996, the Second Amendment to Lease, dated May 20, 1996, the Third Amendment to Commercial Lease, dated October 27, 2000, the Fourth Amendment to Commercial Lease, dated May 3, 2001, the Fifth Amendment to Commercial Lease, dated February 28, 2002, and the Sixth Amendment to Commercial Lease (the “Sixth Amendment”), dated December 9, 2004, all entered into between Landlord or its predecessor in interest, Draper Park North, L.C., a Utah limited liability company, as landlord, and Tenant, as tenant.

          1.3. “Previous Space” means the space covered by the Lease prior to this Amendment (comprised of both the “Existing Space” and the “Additional Space” identified in the Sixth Amendment), consisting of approximately 56,360 rentable square feet, plus any additional square footage added by the expansion of the exercise facility pursuant to Paragraph 6 of this Amendment.

          1.4. “Remaining Space” means the additional space located on the second floor of the Building being added to the Previous Space by this Amendment, shown on the attached Exhibit A, consisting of approximately 15,878 rentable square feet, minus any square footage added to the Previous Space, as set forth in Paragraph 1.3 of this Amendment.

     2. Purpose. The Parties desire to expand the Previous Space to add the Remaining Space, in accordance with the terms and conditions of this Amendment.

     3. Premises. As of the Final Expansion Date, the Remaining Space shall be added to the Previous Space. As of the later of (a) the Final Expansion Date, and (b) the date on which all of the Additional Space is Delivered to Tenant (as those terms are defined in the Sixth Amendment), the “Premises” shall mean and consist of approximately 72,238 rentable square feet in the aggregate.

     4. Base Rent.

          4.1. Previous Space—Prior to May 1, 2005. Tenant shall pay to Landlord Base Rent on the Previous Space in accordance with the Lease, without reference to this Amendment, for the period expiring on April 30, 2005.

          4.2. Remaining Space—Prior to May 1, 2005. Tenant shall pay to Landlord Base Rent on the Remaining Space at the rate of $15.95 per rentable square foot for the period commencing on the Final Expansion Date and expiring on April 30, 2005.

          4.3. Premises—On and after May 1, 2005. Tenant shall pay to Landlord Base Rent on the Premises (comprised of both the Previous Space and the Remaining Space) on and after May 1, 2005 in accordance with the following schedule:

Dates	Annual Rent	Monthly Rent	Annual Rent Per RSF
5-01-05 to 4-30-06	$1,152,196.08	$96,016.34	$15.95
5-01-06 to 4-30-07	$1,186,870.32	$98,905.86	$16.43
5-01-07 to 4-30-08	$1,222,266.96	$101,855.58	$16.92
5-01-08 to 4-30-09	$1,259,108.40	$104,925.70	$17.43
5-01-09 to 4-30-10	$1,296,672.12	$108,056.01	$17.95

     5. Operating Expenses. Operating Expenses for the Remaining Space shall be handled in the same manner as those for the Additional Space, as set forth in Paragraph 6 of the Sixth Amendment.

     6. Tenant Improvements. Landlord shall, as soon as reasonably practicable, at its sole cost and expense, expand the size of the exercise facility identified in the Sixth Amendment by an amount determined by Tenant, up to an additional 400 square feet. At Tenant’s request made within fifteen (15) days after the date of this Amendment, Landlord shall, at Tenant’s sole cost and expense, expand the size of such exercise facility beyond such additional 400 square feet. In addition, Landlord shall contribute up to One Hundred Fifty-Eight Thousand Seven Hundred Eighty Dollars ($158,780) (the “Landlord’s Contribution”) toward improvements to the

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Premises made by Tenant in accordance with Article 8 of the Lease during the period commencing on the date of this Amendment and expiring on the expiration or sooner termination of the Term. The Landlord’s Contribution shall be made by Landlord to Tenant within ten (10) days after receipt by Landlord of third-party invoices for completed work. The Landlord’s Contribution is in addition to, and not in any manner in derogation of, the tenant improvement obligations of Landlord set forth in Paragraph 7 of the Sixth Amendment.

     7. Parking Stalls. In complete satisfaction of Tenant’s parking rights set forth in the Lease, commencing on the Final Expansion Date, Tenant shall be entitled to the exclusive use of the four hundred nineteen (419) parking stalls in the parking lots and parking structure (upper and lower levels) adjacent to the Building, comprising one hundred percent (100%) of all parking stalls serving the Building. Tenant may, at its sole cost and expense, subject to reimbursement as part of the Landlord’s Contribution, install a security gate at the entrance to the lower level of such parking structure, which may be linked to Tenant’s security system, provided that Tenant first obtains Landlord’s written approval of the size, color and style of such security gate.

     8. Options to Extend. The options to extend set forth in the Sixth Amendment shall apply to the entire Premises, comprised of the Previous Space and the Remaining Space.

     9. Security Station. Notwithstanding Paragraph 11 of the Sixth Amendment to the contrary, Tenant may, at its option, leave its security station in its current location.

     10. General Provisions. In the event of any conflict between the provisions of the Lease and the provisions of this Amendment, the provisions of this Amendment shall control. As modified by this Amendment, the Lease and all of Tenant’s obligations under the Lease are ratified and affirmed in their entirety. This Amendment shall inure to the benefit of, and be binding on, the Parties and their respective successors and assigns. This Amendment shall be governed by, and construed and interpreted in accordance with, the laws (excluding the choice of laws rules) of the state of Utah. This Amendment may be executed in one document or in any number of duplicate originals or counterparts, each of which when so executed shall constitute in the aggregate but one and the same document, and shall be binding after each Party has signed this Amendment and Advanta Corp. has signed the attached Consent and Confirmation of Guarantor, and each Party has received a fully executed copy of this Amendment and such attachment. Each individual executing this Amendment represents and warrants that such individual has been duly authorized to execute and deliver this Amendment in the capacity and for the entity set forth where such individual signs. Each exhibit referred to in, and attached to, this Amendment is an integral part of this Amendment and is incorporated in this Amendment by this reference.

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     THE PARTIES have executed this Amendment on the respective dates set forth below, to be effective as of the date first set forth above.

LANDLORD:
CARRAMERICA REALTY, L.P.,
a Delaware limited partnership,
by its general partner:
CARRAMERICA REALTY GP HOLDINGS, LLC,
a Delaware limited liability company,
by its sole member:
CARRAMERICA REALTY OPERATING
PARTNERSHIP, L.P.,
a Delaware limited partnership,
by its general partner:
CARRAMERICA REALTY CORPORATION,
a Maryland corporation
By	/s/
Its	Vice President
Date	2/2/05
TENANT:
ADVANTA BANK CORP.
By	/s/ John F. Moore
Its	President
Date	1/28/05

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EXHIBIT A

to

SEVENTH AMENDMENT TO COMMERCIAL LEASE

REMAINING SPACE

     The Remaining Space referred to in the foregoing instrument is shown on the attachment.

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CONSENT AND CONFIRMATION OF GUARANTOR

     THE UNDERSIGNED, ADVANTA CORP., a Delaware corporation, the guarantor of the Lease identified in the foregoing Seventh Amendment to Commercial Lease, (i) consents to such amendment, (ii) agrees that the undersigned’s guaranty of the Lease is in full force and effect and will continue to apply to the Lease, as amended by the foregoing amendment, or as otherwise amended on or after the date of this instrument, and (iii) agrees that the undersigned has no defenses to the enforcement of such guaranty, which is and shall continue to be enforceable in accordance with its terms.

     DATED: January 27, 2005

ADVANTA CORP.
By	/s/ Marcia M. Wilf
Its	Vice President
Date	1/27/05

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EX-10.Q

Exhibit 10.q

LIMITED PARTNERSHIP AGREEMENT

of

FLEET CREDIT CARD SERVICES, L.P.

Dated as of May 26, 1998

TABLE OF CONTENTS

	Page
BACKGROUND	1
SECTION 1 - DEFINITIONS	1
SECTION 2 - FORMATION OF THE COMPANY	9
2.1 Formation	9
2.2 Name of the Company	9
2.3 Purpose	9
2.4 Term	9
2.5 Principal Office	10
2.6 Registered Agent	10
2.7 Partners	10
2.8 Scope of Authority	10
2.9 Opening Balance Sheet	10
2.10 Company Property	10
SECTION 3 - PARTNERS; CAPITAL; CAPITAL ACCOUNTS	11
3.1 Initial Capital Contributions of Initial Partners	11
3.2 Additional Capital Contributions	11
3.3 Capital Accounts	11
3.4 Additional Partners	12
3.5 Preferred Capital	12
SECTION 4 - PROFIT, LOSS AND DISTRIBUTIONS	12
4.1 Distributions of Distributable Cash Flow- Tax Withholding	12
4.2 In-Kind Distributions	13
4.3 Allocation of Net Income and Net Loss	14

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	Page
4.4 Special Allocations		15
4.5 Tax Allocations		16
4.6 Net Gains from Sales		17
4.7 General		17
SECTION 5 - MANAGEMENT: RIGHTS, POWERS, AND DUTIES		18
5.1 General Partner		18
5.2 Authority of the General Partner		18
5.3 Committees		18
5.4 Meetings and Voting		18
5.5 Executive Officers		19
5.6 Personal Services		19
5.7 Voting Rights of Partners		19
5.8 Duties of Parties		20
SECTION 6 - LIABILITY AND INDEMNIFICATION		20
6.1 Liability of Partners		20
6.2 Indemnification of Partners		21
6.3 Company Indemnity		21
6.4 Tax Indemnification		21
6.5 Indemnification Procedure		22
SECTION 7 - TRANSFER OF INTERESTS AND WITHDRAWAL OF PARTNERS		23
7.1 Transfer of Partnership Interests Permitted		23
7.2 Retirement of a Partner		23
7.3 Transfers are Void		27
SECTION 8 - DISSOLUTION, LIQUIDATION AND TERMINATION OF THE COMPANY		27
8.1 Events of Dissolution		27

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	Page
8.2 Wind-up of Affairs		28
8.3 Filing of Articles of Dissolution		28
8.4 Distributions in Liquidation		28
8.5 Claims of the Partners		28
SECTION 9 - BOOKS, RECORDS, ACCOUNTING AND CERTAIN OTHER TAX MATTERS		28
9.1 Bank Accounts		28
9.2 Books and Records		29
9.3 Annual Accounting Period		29
9.4 Reports		29
9.5 Tax Matters		29
9.6 Contingent Distributions		30
SECTION 10 - MISCELLANEOUS TERMS AND CONDITIONS		33
10.1 Dispute Resolution		33
10.2 Appraisal		34
10.3 Confidentiality		34
10.4 Public Announcements		34
10.5 Governing Law		34
10.6 Entire Agreement		34
10.7 Notices		34
10.8 Successors and Assigns		35
10.9 Expenses		35
10.10 Further Assurances		35
10.11 No Third Party Beneficiaries		35
10.12 Amendments		35
10.13 Headings		35
10.14 No Waiver		35

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	Page
10.15 Counterparts		36
10.16 Severability		36
10.17 WAIVER OF JURY TRIAL		36

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LIMITED PARTNERSHIP AGREEMENT

     THIS LIMITED PARTNERSHIP AGREEMENT is made as of the 26 day of May, 1998, for good and valuable consideration, by the Initial Partners (as defined herein).

BACKGROUND

     A. The Initial Partners are the members of Fleet Credit Card, LLC, a limited liability company formed under the laws of the State of Rhode Island (the “LLC”).

     B. The Initial Partners desire to form a limited partnership under the Act for the purpose of succeeding to the Business of, and the assets and liabilities of, the LLC upon the terms and conditions set forth herein.

     C. The LLC shall be merged with and into the Company (the “Merger”), with the Company being the surviving entity in such Merger.

     D. To effectuate the intentions of the parties, the parties now desire to set forth their agreement with respect to the limited partnership pursuant to the terms and conditions of this Agreement.

     NOW, THEREFORE, in consideration of the foregoing and the premises set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:

1.   SECTION 1 — DEFINITIONS. For the purposes of this Agreement:

          1.1 “Act” means the Rhode Island Limited Partnership Act, as amended from time to time, except that it shall not include any provision thereof adopted after the date hereof that would only be applicable to the Company absent a provision in this Agreement to the contrary unless such provision is approved by the General Partner.

          1.2 “Additional Capital Contributions” means any contributions to the capital of the Company made by any Partner after the date hereof pursuant to Section 3.2 or Section 3.5, other than the Initial Capital Contributions made by an Initial Partner pursuant to Section 3.1.

          1.3 “Adjusted Capital Account Deficit” shall mean, with respect to any Partner, the deficit balance, if any, in such Partner’s Capital Account as of the end of any relevant fiscal year and after giving effect to the following adjustments:

               (a) credit to such Capital Account any amounts which such Partner is obligated or treated as obligated

to restore with respect to any deficit balance in such Capital Account pursuant to Section 1.704-1(b)(2) (ii) (c) of the Regulations or is deemed to be obligated to restore with respect to any deficit balance pursuant to the penultimate sentences of Sections 1.704-2(g) (l) and 1.704-2 (i) (5) of the Regulations; and

               (b) debit to such Capital Account the items described in Sections 1.704-1(b)(2) (ii)(d)(4), 1.704-1(b)(2) (ii)(d)(5) and 1.704-1(b)(2) (ii)(d)(6) of the Regulations.

     1.4 “Advanta” means Advanta Corp., a Delaware corporation.

     1.5 “Advanta Credit Card Business” means the Business contributed by Advanta and its Affiliates to the LLC and its Affiliates pursuant to the Contribution Agreement.

     1.6 “Advanta Partner” means Advanta and each Partner which is an Affiliate of Advanta or an assignee of Interests of an Advanta Partner who becomes a Partner in accordance with the terms of this Agreement.

     1.7 “Affiliate” means, as to any Person, any other Person that directly or indirectly, through one or more intermediaries controls, is controlled by or is under common control with such Person. As used in this definition, the term “control” means the possession, directly or indirectly, or as trustee or executor, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, as trustee or executor, by contract or credit arrangement or otherwise.

     1.8 “Agreement” means this Limited Partnership Agreement, as it may be amended, modified, supplemented or restated from time to time.

     1.9 “Base Operating Earnings” means the pre-tax operating earnings of the Business (as operated by the Company and the LLC, as the Company’s predecessor) determined in accordance with generally accepted accounting principles, consistently applied.

     1.10 “Book/Tax Differential” shall mean the sum of (i) the difference between the financial statement value of the Company Contributed Assets and Company Transferred Liabilities (as such terms are defined in the Contribution Agreement) as provided on the Closing Balance Sheet delivered to the LLC pursuant to the Contribution Agreement and the federal income tax adjusted basis of such assets and liabilities as of the Closing Date (as provided on Schedule 3.1 attached to the Limited Liability Agreement of the LLC) and (ii) the $44,261,000 of insurance deferred acquisition costs; provided, however, that the Book/Tax Differential shall be adjusted as appropriate, to take into account adjustment to the income tax basis of the Company Contributed Assets or Company Transferred Liabilities determined as of the Closing Date to the extent of adjustments by the Internal Revenue Service.

     1.11 “Business” means the operation of a credit card lending business, including, without limitation, the origination and servicing of consumer credit cards, the determination of creditworthiness of consumer credit card account customers, the extension of credit to consumer credit card account customers and the maintenance of consumer credit card accounts and

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collection of receivables with respect thereto, anywhere in the world, and to do any and all things necessary to, convenient or, incidental to that purpose.

     1.12 “Capital Account” shall mean, with respect to any Partner, the capital account established and maintained pursuant to Section 3.3.

     1.13 “Capital Contribution” shall mean, with respect to any Partner, the aggregate amount of money, and the initial Gross Asset Value of any property or asset contributed or deemed contributed to the Company, net of liabilities assumed by the Company in connection with such contribution or as to which such property or asset is subject when contributed, as set forth on Schedule A hereto. In the case of a Partner that acquires an Interest in the Company by virtue of an assignment or transfer in accordance with the terms of this Agreement, “Capital Contribution” means the Capital Contribution of such Partner’s predecessor to the extent relating to the acquired Interest.

     1.14 “Closing Date” shall mean February 20, 1998, the date the Limited Liability Company Agreement for the LLC was signed.

     1.15 “Company” means Fleet Credit Card Services, L.P., a Rhode Island limited partnership.

     1.16 “Company Minimum Gain” shall have the meaning set forth in Section 1.704-2(b)(2) of the Regulations.

     1.17 “Contribution Agreement” means the Contribution Agreement, dated as of October 28, 1997, by and between Advanta and Fleet.

     1.18 “Covered Person” means a Partner, any Affiliate of a Partner, any officers, directors, shareholders, partners or partners of a Partner or its respective Affiliates or any officers of the Company.

     1.19 “Depreciation” shall mean, with respect to any asset of the Company for any fiscal year or other period, an amount equal to the depreciation, amortization or other cost recovery, as the case may be, allowed or allowable for federal income tax purposes in respect of such asset for such fiscal year or other period; provided, however, that if there is a difference between the Gross Asset Value and the adjusted tax basis of such asset, Depreciation shall mean “book” depreciation, cost recovery or amortization as determined under Section 1.704-1(b)(2)(iv)(g)(3) of the Regulations.

     1.20 “Distributable Cash Flow” means the amount of cash available for distribution by the Company as determined by the General Partner in its sole and absolute discretion.

     1.21 “Fleet” means Fleet Financial Group, Inc., a Rhode Island corporation.

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     1.22 “Fleet Partner” means Fleet and each Partner which is an Affiliate of Fleet or any assignee of Interests of a Fleet Partner who becomes a Partner in accordance with the terms of this Agreement.

     1.23 “General Partner” shall initially mean Fleet Credit Card Holdings, Inc., a Delaware corporation, and shall include any other Person that becomes a general partner of the Company.

     1.24 “Gross Asset Value” shall mean, with respect to any asset of the Company, such asset’s adjusted basis for federal income tax purposes, except as follows:

               (a) the initial Gross Asset Value of any asset (other than cash) contributed or deemed contributed to the Company shall be (i) in the case of any asset transferred to the Company by operation of law as a result of the Merger, the gross asset value assigned to such asset by the LLC immediately prior to the Merger and (ii) in the case of any other asset hereafter contributed by a Partner, the gross fair market value of such asset at the time of its contribution as reasonably determined by the General Partner;

               (b) if the General Partner reasonably determines that an adjustment is necessary or appropriate to reflect the relative economic interests of the Partners, the Gross Asset Values of all Company assets shall be adjusted to equal their respective gross fair market values, as reasonably determined by the General Partner, as of the following times:

                    (i) immediately prior to a Capital Contribution (other than a de minimis Capital Contribution) to the Company by a new or existing Partner as consideration for a Company Interest;

                    (ii) immediately prior to the distribution by the Company to a Partner of more than a de minimis amount of Company property as consideration for the redemption of a Company Interest; and

                    (iii) immediately prior to the liquidation of the Company within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations;

               (c) the Gross Asset Values of Company assets distributed to any Partner shall be the gross fair market values of such assets as reasonably determined by the General Partner as of the date of distribution; and

               (d) the Gross Asset Value of any Company asset shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such asset pursuant to Sections 734(b) or 743(b) of the Code, but only to the extent that such adjustment is taken into account in determining Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations; provided, however, that the Gross Asset Value shall not be adjusted pursuant to

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this paragraph to the extent that the General Partner reasonably determines that an adjustment pursuant to paragraph (b) above is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this paragraph (d).

          At all times, the Gross Asset Value of an asset shall be adjusted by any Depreciation taken into account with respect to such asset for purposes of computing Net Income and Net Loss. Any adjustment to the Gross Asset Values of Company property shall require an adjustment to the Partners’ Capital Accounts.

     1.25 “Initial Capital Contribution” means (i) as to each Partner executing this Agreement as of the Closing Date, the amount specified for that Partner as its Initial Capital Contribution (which amount shall equal the value of the interest in the LLC owned by such Partner at the time of the Merger), and (ii) in the case of new Partners admitted pursuant to Section 3.4, the Initial Capital Contribution established pursuant thereto.

     1.26 “Initial Partner” means any Person executing this Agreement as of the Closing Date as a Partner, such Initial Partners consisting of all of the members of the LLC.

     1.27 “Interest” means a Partner’s share of the capital, Net Income and Net Loss of, and the right to receive distributions from the Company.

     1.28 “Internal Revenue Code” or “Code” means the Internal Revenue Code of 1986, as amended, or any successor statute. All references to specific sections of the Internal Revenue Code shall be deemed to include any provisions of the Internal Revenue Code which replaces or supersedes the sections in effect at the time of execution of this Agreement.

     1.29 “Involuntary Withdrawal” means, with respect to any Partner, (i) the death, resignation, expulsion, bankruptcy or dissolution of such Partner as such events are construed in accordance with Section 7-13-23 of the Act or (ii) the obligatory withdrawal of such Partner caused by such Partner’s attempted Transfer of its Partnership Rights, collateral assignment, mortgage, pledge, lien encumbrance or placing of any other charge in violation of this Agreement. In the event of the Involuntary Withdrawal of a General Partner, its Interest shall be converted automatically to an Interest as a Limited Partner.

     1.30 “LLC” means Fleet Credit Card, LLC, a limited liability company formed under the laws of the State of Rhode Island.

     1.31 “Limited Partner” means any Person executing this Agreement as of the Closing Date as a limited partner as set forth on Schedule A and any Person who subsequently is admitted as a limited partner of the Company, in accordance herewith, but does not include any Person who has ceased to be a Limited Partner of the Company.

     1.32 “Merger” shall mean the merger of the LLC with and into the Company, with the Company being the entity surviving the merger.

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     1.33 “Net Gains from Sales” means the first $10 million of Net Income recognized by the Company from the sale or other disposition of all or substantially all of the Company’s assets (other than in the ordinary course of its business) in excess of the cumulative sum of the Depreciation (accrued through the date of such disposition and after the Closing Date) attributable to the Company’s assets.

     1.34 “Net Income” or “Net Loss” shall mean, for each fiscal year or other applicable period, an amount equal to the Company’s net income or loss for such year or period as determined for federal income tax purposes by the Company’s accountants, determined in accordance with Section 703(a) of the Code (for this purpose all items of income, gain, loss or deduction required to be stated separately pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss), with the following adjustments: (a) by including as an item of income any tax-exempt income received by the Company; (b) by treating as a deductible expense any expenditure of the Company described in Section 705(a)(2)(B) of the Code (including amounts paid or incurred to organize the Company (unless an election is made pursuant to Section 709(b) of the Code) or to promote the sale of Interests and by treating deductions for any losses incurred in connection with the sale or exchange of Company property disallowed pursuant to Section 267(a)(1) or Section 707(b) of the Code as expenditures described in Section 705(a)(2)(B) of the Code); (c) in lieu of depreciation, depletion, amortization, and other cost recovery deductions taken into account in computing total income or loss, there shall be taken into account Depreciation; (d) gain or loss resulting from any disposition of Company property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of such property rather than its adjusted tax basis; and (e) in the event of an adjustment of the Gross Asset Value of any Company asset, which requires that the Capital Accounts of the Company be adjusted pursuant to Regulation Section 1.704-1(b)(2)(iv)(e), (f) and (m), the amount of such adjustment is to be taken into account as additional Net Income or Net Loss pursuant to Section 4.3. If an item of income, gain, loss or deduction has been allocated pursuant to the special allocation rules in Section 4.3.3, Section 4.4 or Section 4.6, Net Income or Net Loss shall be computed without regard to such item.

     1.35 “Non-Public Information” means information not in the public domain that is provided to a Partner in its capacity as a party to any Transaction Document.

     1.36 “Nonrecourse Deductions” shall have the meaning set forth in Sections 1.704-2(b)(1) and (c) of the Regulations.

     1.37 “Nonrecourse Liabilities” shall have the meaning set forth in Section 1.704-2(b)(3) of the Regulations.

     1.38 “Partner” shall mean a General Partner or a Limited Partner of the Company.

     1.39 “Partner Nonrecourse Deductions” shall have the meaning set forth in Section 1.704-2(i)(2) of the Regulations.

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     1.40 “Partnership Rights” means all of the rights of a Partner of the Company, including, without limitation, a Partner’s (i) Interest; (ii) right to inspect the Company’s books and records; and (iii) right to participate in the management of and vote on matters coming before the Company in accordance with this Agreement.

     1.41 “Partner Nonrecourse Debt Minimum Gain” shall have the meaning set forth in Section 1.704-2(i)(2) of the Regulations.

     1.42 “Percentage” means, as to a Partner, its percentage Interest set forth after the Partner’s name on Schedule A, as amended from time to time.

     1.43 “Person” means and includes an individual and any other entity including, but not limited to, a corporation, partnership, association, limited liability company, joint stock company, trust or estate.

     1.44 “Preferred Capital Contribution Amount” means the amount contributed to the capital of the Company by the Fleet Partners and designated by the General Partner as a preferred capital contribution having such rights, designations, preferences, qualifications, privileges, limitations and restrictions as shall be fixed from time to time by the General Partner.

     1.45 “Preferred Return” means a distribution computed with respect to the amount of the Preferred Capital Contribution Amount at such annual rate fixed by the General Partner at the time of the contribution of the Preferred Capital Contribution Amount to the Company.

     1.46 “Rhode Island Secretary of State” means the Secretary of State of the State of Rhode Island.

     1.47 “Regulations” or “Treasury Regulations” shall mean the income tax regulations, including temporary regulations, promulgated under the Code, as such regulations may be amended from time to time. All references to specific sections of the Regulations shall be deemed to include any provisions of the Regulations which replace or supersede the sections in effect at the Closing Date.

     1.48 “Subsidiary” means, when used with reference to an entity, any corporation or other entity, a majority of the outstanding voting securities of which are owned directly or indirectly by such entity.

     1.49 “Tax” or “Taxes” means any and all federal, state, county, provincial, local, foreign and other taxes, charges, fees, levies or other assessments, including, without limitation, all net income, gross income, gross receipts, premium, estimated, capital, sales, use, ad valorem, property, transfer, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, customs, duties or guaranty fund assessments, together with any interest, additions to tax or interest, and penalties with respect thereto imposed by any taxing or governmental authority.

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     1.50 “Transaction Documents” mean the Contribution Agreement and all other ancillary agreements to be executed by Advanta and Fleet or their respective Affiliates in connection with the transactions contemplated by the Contribution Agreement.

     1.51 “Transfer” means, when used as a noun, any voluntary sale, exchange, disposition, assignment, or other transfer, and, when used as a verb, means voluntarily to sell, exchange, dispose of, assign or otherwise transfer. Transfer does not include collateral assignment, mortgage, pledge, lien, encumbrance or the placing of any charge or security interest.

     1.52 “US Dollars” or “US$” means the lawful currency of the United States of America.

     1.53 “Voluntary Withdrawal” means a Partner’s dissociation from the Company by means other than a Transfer of a Partner’s Partnership Rights or an Involuntary Withdrawal.

             In addition to the foregoing, the following terms are defined in the Section of this Agreement noted below:

Term	Section
Affected Gain		4.5.2
Chief Executive Officer		5.5
Claim		6.5.1
Damages		6.2
Dispute		10.1
Executive Officer		5.5
Extension		2.4
Indemnified Partner		6.5.1
Indemnifying Party		6.5.1
Initial Term		2.4
New Date		7.2.5
Notice		6.5.1
Permitted Partners		4.3.2
Regulatory Allocations		4.4.6
Restricted Sale Assets		5.7.3
Section 704(c) Tax Items		4.5.3
Tax Distribution Amount		4.1.4
Tax Items		4.5.1
Tax Loan		4.1.3
Tax Requirements		7.2.5

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2. SECTION 2 — FORMATION OF THE COMPANY

     2.1 Formation. (i) The Initial Partners hereby confirm the formation of the Company as a limited partnership under and pursuant to the Act and all other pertinent laws of the State of Rhode Island on May ___,1998 by the filing of the Certificate of Limited Partnership, in the form attached hereto as Exhibit A, in the office of the Rhode Island Secretary of State. From and after the date hereof, this Agreement shall serve as the Limited Partnership Agreement of the Company. The parties hereto agree that the rights, duties and liabilities of the Initial Partners and any additional Partner admitted to the Company in accordance with the terms hereof, shall be as provided in the Act, except as otherwise provided herein.

          (ii) CT Corporation is hereby designated as an authorized person, within the meaning of the Act, to execute, deliver and file, or to cause the execution, delivery and filing of, any amendments or restatements of the Certificate of Limited Partnership, any other certificates, notices, statements or other instruments (and any amendments or restatements thereof) necessary or advisable for the continuation of the Company or the operation of the Company in all jurisdictions where the Company may elect to do business, but no such amendment or restatement may be executed, delivered or filed unless adopted in a manner authorized by this Agreement.

     2.2 Name of the Company. The name of the Company is Fleet Credit Card Services, L.P. The Company shall do business under that name and under any other name or names upon which Fleet, or any Fleet Partner designated by Fleet, shall determine, in its sole discretion. Each of the Partners agrees to take any and all actions as may be required by law to have the LLC consent, in writing, to allow the Company to use such name as required by Section 7-13-2(3) of the Act. If the Company does business under a name other than Fleet Credit Card Services, L.P., then the Company shall file a trade name certificate as required by law. Each Partner hereby agrees to take any and all action as may be required to amend the Certificate of Limited Partnership to reflect any change in the name of the Company.

     2.3 Purpose. The Company is organized to engage in the Business. The Company may also engage in and carry on any lawful business, purpose or activity for which limited partnerships may be formed under the Act and shall possess and exercise all the powers and privileges granted to it by the Act, by any other law or by this Agreement, together with any powers incidental to the conduct, promotion and attainment of the business, purpose or activities of the Company, so far as such powers are necessary or convenient; provided, however, that the Company shall not engage in any activity other than activities that are part of, or incidental to, the business of banking and are permissible for an operating subsidiary of a national bank.

     2.4 Term. The term of the Company shall begin on the date of acceptance of the Certificate of Limited Partnership by the office of the Rhode Island Secretary of State and shall continue until December 31, 2027 (the “Initial Term”), subject to consecutive successive one (1) year extensions (each, an “Extension”) unless (a) its existence is sooner terminated pursuant to Section 8 of this Agreement or (b) at least 180 days prior to the end of the Initial Term or any Extension then in effect a Partner shall notify all other Partners of such Partner’s refusal to

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extend, in which case the term shall continue until the end of such Initial Term or Extension, as applicable. The existence of the Company as a separate legal entity shall continue until dissolution of the Company in the manner required by the Act.

     2.5 Principal Office. The principal office of the Company shall be located at 50 Kennedy Plaza, Providence, Rhode Island 02903 or at any other place which the General Partner may determine.

     2.6 Registered Agent. The name and address of the Company’s registered agent and office in the State of Rhode island shall be Edwards & Angell, 2700 Hospital Trust Tower, Providence, Rhode Island 02903. At any time, the Chief Executive Officer may designate another registered agent and/or registered office.

     2.7 Partners. The name, present mailing address, Initial Capital Contribution and Percentage of each Partner are set forth on Schedule A. The Chief Executive Officer, if any, or a designee of the Chief Executive Officer, shall be authorized and required to update from time to time as necessary to accurately reflect the information therein as known by the Chief Executive Officer, but no such update shall modify Schedule A in any manner inconsistent with this Agreement or the Act. Any amendment or revision to Schedule A made in accordance with this Agreement shall not be deemed an amendment to this Agreement for purposes of Section 10.12. Any reference in this Agreement to Schedule A shall be deemed to be a reference to Schedule A, as amended and in effect from time to time.

     2.8 Scope of Authority. No Limited Partner shall have any authority to bind or act for, or assume any obligations or responsibility on behalf of, any other Partner or the Company, and neither the Company nor any Partner shall be responsible or liable for any indebtedness or obligation of any other Partner or otherwise relating to the Company incurred or arising either before or after the execution of this Agreement, except as to those liabilities and obligations assumed by the Company pursuant to the terms of the Contribution Agreement, and the other Transaction Documents and those joint responsibilities, liabilities or obligations incurred after the date hereof pursuant to and as limited by the terms of this Agreement.

     2.9 Opening Balance Sheet; Tax Consequences of the Merger. The Initial Partners acknowledge that the Company’s opening balance sheet as of the Closing Date will be the same as the closing balance sheet of the LLC on the date of the Merger. The Initial Partners acknowledge that, for federal income tax purposes, the Company is treated as a continuation of the LLC under Section 708 of the Code and that the Merger has no effect on the adjusted income tax basis, Gross Asset Value or other tax attributes of any assets or liabilities of the Company. The federal, state and local income tax and other tax returns of the Company will be prepared in a manner consistent with the foregoing, except to the extent required by applicable law or regulation.

     2.10 Company Property. All property of the Company, whether real, personal or mixed, tangible or intangible, shall be deemed to be owned by the Company as an entity, and no Partner, individually, shall have any direct ownership interest in such property.

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3. SECTION 3 — PARTNERS; CAPITAL; CAPITAL ACCOUNTS

     3.1 Initial Capital Contributions of Initial Partners. At the time of the Merger, each of the Initial Partners shall be deemed to have made a capital contribution to the Company equal to the fair market value of its interest in the LLC. The Gross Asset Value to the Company and the federal income tax adjusted basis of such Initial Capital Contributions will be as set forth on Schedule B attached hereto.

     3.2 Additional Capital Contributions.

          3.2.1 Each Partner may, upon request of the General Partner, elect to contribute to the Company, in cash or other property, as determined by the General Partner, all amounts that, in the judgment of the General Partner, are necessary to enable the Company to cause the assets of the Company to be properly operated and maintained and to discharge its costs, expenses, obligations and liabilities; provided, however, that no Advanta Partner shall be required to make any Additional Capital Contributions; provided, further, however, that no Fleet Partner will, be able to make an Additional Capital Contribution if such contribution would violate the provisions of Section 5.7.1. The General Partner shall notify such Partner or Partners as the General Partner, in its sole discretion, elects of the need for voluntary Additional Capital Contributions when appropriate.

          3.2.2 Each Additional Capital Contribution made by a Partner shall cause an increase in such Partner’s Capital Account and an adjustment to such Partner’s and each other Partner’s Percentage; provided, however, that the aggregate Percentage of all Advanta Partners shall be no less than one percent (1 %) throughout the entire term of this Agreement.

          3.2.3 Except as provided in this Agreement, a Partner shall not be entitled to a withdrawal or a return of any part of its Capital Contributions, interest on its Capital Contributions or to receive property or assets other than cash in return thereof.

          3.2.4 Except as otherwise provided in this Agreement, no Partner shall be entitled to priority over any other Partner with respect to a return of its Capital Contributions, to the property and assets of the Company or to allocations of income, gains, losses, deductions, expenses, obligations, liabilities, credits or distributions.

          3.2.5 No Partner with a deficit balance in its Capital Account shall have any obligation to the Company, to any other Partner or to any third party to restore the deficit balance, except as expressly provided herein and except to the extent required by the Act.

     3.3 Capital Accounts. The Company will maintain a capital account (the “Capital Account”) for each Partner. The initial value of the Capital Account of each Initial Partner shall be equal to its Initial Capital Contribution. Each Partner’s Capital Account shall be (i) increased by (A) any Additional Capital Contributions made by such Partner, (B) the share of Company Net Income allocated to such Partner and any income allocated pursuant to Section 4.3.3, 4.4,

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and Section 4.6 and (C) the amount of liabilities of the Company assumed by such Partner or that are secured by any Company assets distributed to such Partner and (ii) decreased by (A) the amount of cash and the Gross Asset Value of any Company assets distributed to such Partner, (B) the share of Company Net Loss allocated to such Partner and (C) the amount of liabilities of the Partner assumed by the Company or that are secured by any assets contributed to the Company by such Partner. In the event that an Interest is transferred in accordance with this Agreement, the Capital Account of the transferor (at the time of such transfer) shall carry over to the transferee; provided, however, that if any Partner transfers less than its entire Interest in the Company, the transferor’s Capital Account shall be allocated pro rata to the Interest retained by the transferor and the Interest transferred. In furtherance of the foregoing, the Capital Accounts shall be maintained in compliance with Section 1.704-1(b)(2)(iv) of the Regulations, and the provisions hereof shall be interpreted and applied in a manner consistent therewith.

     3.4 Additional Partners. Additional Persons may be admitted to the Company as Partners and Partnership Rights may be created and issued to those Persons and to existing Partners upon the approval of the General Partner and on such terms and conditions as the General Partner may determine at the time of admission. The terms of admission or issuance must specify the Percentage, the amount of such Partner’s Initial Capital Contribution and any priority applicable thereto. At the time of admission, each new Partner shall agree in writing to be bound by the terms of this Agreement and shall make the applicable representations and warranties contained in the Contribution Agreement.

     3.5 Preferred Capital. Additional Capital Contributions may be made in the form of Preferred Capital Contribution Amounts having such rights, designations, preferences, qualifications, privileges, limitations and restrictions as shall be fixed from time to time by the General Partner.

4. SECTION 4 — PROFIT, LOSS AND DISTRIBUTIONS

     4.1 Distributions of Distributable Cash Flow- Tax Withholding.

          4.1.1 Distributable Cash Flow may be distributed from time to time in the discretion of the General Partner in proportion to the Partners’ Percentages.

          4.1.2 The Company shall pay to the Fleet Partners, in the aggregate, at least annually, a distribution equal to the amount of the Preferred Return.

          4.1.3 Notwithstanding any other provision of this Agreement, the Company shall withhold and deposit, as required under applicable law, all withholding taxes imposed with respect to allocation of Net Income (or items thereof) or distributions made to the Partners. Such amounts shall be treated as a distribution to such Partner for all purposes of this Agreement. To the extent that the amount treated as a distribution pursuant to this Section 4.1.3 exceeds the amount which would otherwise be distributed to such Partner under all of the provisions of Section 4.1 for the entire fiscal year, such excess shall be treated as a loan from the Company to

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the Partner (a “Tax Loan”) which shall be repaid within thirty days after the close of the fiscal year.

          4.1.4 Notwithstanding any other provision of Section 4.1, with respect to any fiscal quarter of the Company in which a Partner would be allocated taxable income for federal, state and local income tax purposes if such fiscal quarter were a separate taxable year (and for this purpose all items of income, gain, loss or deduction required to be separately stated pursuant to Section 703 of the Code shall be included in this calculation of taxable income (other than the amount, if any, by which capital losses exceed capital gains)) the Company shall distribute to each such Partner, within 10 days after the close of such fiscal quarter, the amount determined by multiplying the Partner’s share of the Company’s taxable income (computed as set forth in this sentence) by the highest composite federal, state and local income tax rate applicable to all of the Partners (the “Tax Distribution Amount”); provided, however, that with respect to the fourth quarter of each fiscal year of the Company the distribution shall be made 20 days prior to the close of the fiscal quarter based on an estimate of the taxable income, if any, for such quarter; and provided, further, that within 120 days after the close of the fiscal year, a final calculation of such Partner’s share of the taxable income of the Company for its entire fiscal year shall be made and if the sum of the Tax Distribution Amounts to such Partner made for each fiscal quarter differs from the Tax Distribution Amount calculated based on such final determination of the entire fiscal year’s taxable income, the difference shall be distributed to the Partner or paid by such Partner to the Company, as the case may be. If there is a subsequent increase in a Partner’s share of taxable income for any fiscal period (as a result, for example, of an audit by a governmental unit), the Company shall distribute an amount to such Partner sufficient for such Partner to make any payment of Taxes, interest, penalties, or additions to Tax, actually due and owing, by reason of such increase in a Partner’s share of the Company’s taxable income; provided, however, that no increase in the amount of the Tax Distribution shall be made as a result of an increase in Tax arising out of the transactions effected by the Contribution Agreement. It is further understood by the Partners that the Tax Distribution made pursuant to this Section 4.1.4 is being made in lieu of the distribution of the income or gain from which such Tax arises. Accordingly, to the extent that a distribution of income or gain is made to any Partner pursuant to any other provision of Section 4.1, the amount of such distribution or the amount of this Tax Distribution, as the case may be, shall be decreased to take into account the fact that the Partner has received the income or gain which gives rise to the Tax.

     4.2 In-Kind Distributions. Except as otherwise provided in this Agreement, assets of the Company (other than cash) may be distributed in kind. If any assets of the Company are distributed to the Partners in kind, such assets shall be valued on the basis of the fair market value thereof on the date of distribution, and the Capital Accounts of the Partners shall be adjusted to reflect the manner in which the unrealized income, gain, loss, and deduction inherent in such property (that has not previously been reflected in the Capital Accounts of the Partners) would be allocated among the Partners if there were a taxable disposition of such property for its fair market value (taking into account Section 7701 (g) of the Code) on the date of distribution.

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     4.3 Allocation of Net Income and Net Loss.

          4.3.1 Net Income. After giving effect to the special allocations set forth in Section 4.4, Section 4.3.3 and Section 4.6, Net Income for any fiscal year or other applicable period shall be allocated as set forth in this Section 4.3.1:

               (i) First, to the Fleet Partners until the cumulative Net Income allocated pursuant to this Section 4.3.1 (i) for the current and all prior periods equals the cumulative Net Loss allocated pursuant Section 4.3.2(ii) to such Partners;

               (ii) Second, to the Partners, until the cumulative Net Income allocated pursuant to this Section 4.3.1(ii) for the current and all prior periods equals the cumulative Net Loss allocated to such Partners pursuant to Sections 4.3.2 (i) and (iii) hereof for all prior periods among the Partners in the reverse order that such Net Loss was allocated pursuant to Sections 4.3.2(i) and (iii) hereof;

               (iii) Third, to the Partners, in proportion to their respective Percentages, until the cumulative sum allocated under Section 4.3.1 (i) and (ii) hereof and this Section 4.3.1 (iii) results in a positive Capital Account balance for each Partner equal to the aggregate of such Partner’s Capital Contributions, including such Partners Initial Capital Contributions, Preferred Capital Contribution Amount and Additional Capital Contributions (without taking into account in determining Capital Account balances an amount equal to (x) any income or gain allocated to a Partner under Sections 4.6 and 4.3.1(iv) hereof, minus (y) the sum of distributions under Sections 4.1.1, 4.1.3 and 4.1.4 hereof to such Partner, but only up to an amount of distributions that does not exceed the amount determined under clause (x)); and,

               (iv) Fourth, to the Partners in proportion to their respective Percentages.

         4.3.2 Net Loss. After giving effect to the special allocations set forth in Section 4.4, Section 4.3.3 and Section 4.6, Net Loss of the Company for each fiscal year or other applicable period shall be allocated as follows:

               (i) To the Partners in proportion to their respective Percentages, until the amount of the Capital Account balance of each Fleet Partner is equal to the amount of its Preferred Capital Contribution Amount and the amount of the Capital Account balance of each Advanta Partner is equal to $0.

               (ii) To the Fleet Partners, to the extent of and in proportion to, the remaining positive balance in their respective Capital Accounts; and

               (iii) Thereafter, to the Partners in proportion to their respective Percentages.

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               (iv) Notwithstanding Section 4.3.2(i)-(iii) hereof, to the extent any Net Loss allocated to a Partner under Section 4.3.2(i)-(iii) would cause such Partner to have an Adjusted Capital Account Deficit as of the end of the fiscal year to which such Net Loss relates, such Net Loss shall not be allocated to such Partner and instead shall be allocated to other Partners (herein the “Permitted Partners”), if any, having positive Capital Account balances, in proportion to such balances, and thereafter in accordance with the Permitted Partners’ respective economic risk of loss with respect to any indebtedness to which the remaining Net Loss (or any item thereof) is attributable.

          4.3.3 For each fiscal year or other applicable period of the Company, gross income of the Company shall be allocated to the Fleet Partners to the extent of the excess of the cumulative Preferred Return paid to the Fleet Partners for all periods over the cumulative amount of gross income previously allocated to the Fleet Partners pursuant to this Section 4.3.3.

     4.4 Special Allocations. The following special allocations shall be made in the following order:

          4.4.1 Minimum Gain Chargeback. If there is a net decrease in Company Minimum Gain for any Company fiscal year (except as a result of conversion or refinancing of Company indebtedness, certain capital contributions or revaluation of the Company property as further outlined in Sections 1.704-2(d)(4), (f)(2) or (f)(3) of the Regulations), each Partner shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to that Partner’s share of the net decrease in Company Minimum Gain. The items to be so allocated shall be determined in accordance with Section 1.704-2(f) of the Regulations. This Section 4.4.1 is intended to comply with the minimum gain chargeback requirement in said Section of the Regulations and shall be interpreted consistently therewith. Allocations pursuant to this Section 4.4.1 shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant hereto.

          4.4.2 Minimum Gain Attributable to Partner Nonrecourse Debt. If there is a net decrease in Partner Nonrecourse Debt Minimum Gain during any fiscal year (other than due to the conversion, refinancing or other change in the debt instrument causing it to become partially or wholly nonrecourse, certain capital contributions, or certain revaluations of Company property (as further outlined in Section 1.704-2(i)(4)of the Regulations), each Partner shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to the Partner’s share of the net decrease in the Partner Nonrecourse Debt Minimum Gain. The items to be so allocated shall be determined in accordance with Section 1.704-2(i)(4) and (j)(2)of the Regulations. This paragraph 4.4.2 is intended to comply with the minimum gain chargeback requirement with respect to Partner Nonrecourse Debt contained in said section of the Regulations and shall be interpreted consistently therewith. Allocations pursuant to this Section 4.4.2 shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant hereto.

          4.4.3 Qualified Income Offset. In the event a Partner unexpectedly receives any adjustments, allocations or distributions described in Section 1.704-1(b)(2)(ii)(d)(4), (5), or (6) of

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the Regulations, and such Partner has an Adjusted Capital Account Deficit, items of Company income and gain shall be specially allocated to such Partner in an amount and manner sufficient to eliminate the Adjusted Capital Account Deficit as quickly as possible. This paragraph 4.4.3 is intended to constitute a “qualified income offset” under Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently therewith.

          4.4.4 Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year or other applicable period shall be allocated to the Partners in accordance with their respective Percentages.

          4.4.5 Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for any fiscal year or other applicable period shall be specially allocated to the Partner that bears the economic risk of loss for the debt in respect of which such Partner Nonrecourse Deductions are attributable (as determined under Section 1.704-2(b)(4) and (i)(1) of the Regulations).

          4.4.6 Curative Allocations. The Regulatory Allocations shall be taken into account in allocating other items of income, gain, loss, and deduction among the Partners so that, to the extent possible, the cumulative net amount of allocations of Company items under Sections 4.3 and 4.4 shall be equal to the net amount that would have been allocated to each Partner if the Regulatory Allocations had not occurred. This Section 4.4.6 is intended to minimize to the extent possible and to the extent necessary any economic distortions which may result from application of the Regulatory Allocations and shall be interpreted in a manner consistent therewith. For purposes hereof, “Regulatory Allocations” shall mean the allocations provided under this Section 4.4 (other than this Section 4.4.6.)

     4.5 Tax Allocations.

          4.5.1 Generally. Subject to Section 4.5.2 and 4.5.3 hereof, items of income, gain, loss, deduction and credit to be allocated for income tax purposes (collectively, “Tax Items”) shall be allocated among the Partners on the same basis as their respective book items.

          4.5.2 Sections 1245/1250 Recapture. If any portion of gain from the sale of property is treated as gain which is ordinary income by virtue of the application of Code Sections 1245 or 1250 (“Affected Gain”), then (A) such Affected Gain shall be allocated among the Partners in the same proportion that the depreciation and amortization deductions giving rise to the Affected Gain were allocated and (B) other Tax Items of gain of the same character that would have been recognized, but for the application of Sections 1245 and/or 1250 of the Code, shall be allocated away from those Partners who are allocated Affected Gain pursuant to clause (A) so that, to the extent possible, the other Partners are allocated the same amount, and type, of capital gain that would have been allocated to them had Sections 1245 and/or 1250 of the Code not applied. For purposes of the prior sentence, each Partner shall be treated as having been allocated depreciation and amortization in the same proportion as such Partner (before, on or after the date of this Agreement), has been allocated any deductions, directly or indirectly, giving rise to the Affected Gain.

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          4.5.3 Allocations Respecting Section 704(c) and Revaluations. Notwithstanding Section 4.5.1 hereof, Tax Items with respect to all Company property that is subject to Section 704(c) of the Code and/or Sections 1.704-1(b)(2)(iv)(d) and/or (f) of the Regulations (collectively “Section 704(c) Tax Items”) shall be allocated in accordance with Regulation Section 1.704-3(b).

     4.6 Net Gains from Sales. Net Gains from Sales shall be allocated as follows: A percentage of the Net Gains from Sales shall be allocated to the Advanta Partners and the balance shall be allocated to the Fleet Partners. The percentage referred to in the immediately preceding sentence shall be determined by dividing the amount by which the Company Transferred Liabilities exceeds the federal income tax adjusted basis of the Company Transferred Assets (as such terms are defined in the Contribution Agreement) by the outstanding Company “excess nonrecourse liabilities” (within the meaning of Section 1.752-3(a)(3) of the Regulations) at the end of the fiscal year or at other applicable times (including immediately before a disposition giving rise to Net Gains from Sales) and expressing the resulting decimal as a percentage. The percentage of the Net Gains from Sales allocated to the Advanta Partners, as a group, shall be allocated among them in the same proportion that: (x) the amount by which the Company Transferred Liabilities attributable to the Partner exceeds the federal income tax adjusted basis of the Company Contributed Assets attributable to that Partner bears to (y) the total of such amounts for all Advanta Partners.

     4.7 General.

          4.7.1 If an Interest in the Company is transferred and/or modified in accordance with the provisions of this Agreement, there shall be allocated to each Partner who held the transferred and/or modified Interest in the Company during the fiscal year of the transfer and/or modification the product of (a) the Company’s Net Income or Net Loss allocable to such transferred and/or modified Interest for such fiscal year, and (b) a fraction, the numerator of which is the number of days such Partner held the transferred and/or modified Interest during such fiscal year, and the denominator of which is the total number of days in such fiscal year; provided, however, that if a Partner requests, such Net Income or Net Loss shall be allocated by closing the books of the Company immediately after the transfer and/or modification of an Interest in the Company. Such allocation shall be made without regard to the date, amount or recipient of any distributions which may have been made with respect to such transferred Interest.

          4.7.2 The “excess nonrecourse liabilities” of the Company (within the meaning of Section 1.752-3(a)(3) of the Regulations) shall be allocated to the Partners consistent with their percentages in the Company’s Net Gains from Sales determined under Section 4.6. The Company shall compute the amount of non-recourse liabilities allocable to the Advanta Partners in such manner, and utilizing such convention, so as to maximize the amount of non-recourse liabilities allocable to the Advanta Partners under Section 1.752-3(a)(2) of the Regulations. The Company may rely upon the opinion of recognized tax counsel in making any such allocation, the cost of such tax counsel being borne solely by Advanta.

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          4.7.3 The Company shall use commercially reasonable efforts to send a notice to the Advanta Partners on October 30 of each fiscal year (or if the fiscal year does not end on December 31, the last day of the first month of the fourth fiscal quarter), setting forth the amount of the liabilities of the Company that the Company expects will be includible in the income tax basis of each of the Advanta Partners at the close of the current fiscal year of the Company, taking into account the transactions of the Company that occurred or are anticipated to occur, and the liabilities of the Company that were incurred or are anticipated to be incurred, on or before the close of the Company’s current fiscal year. Such notice shall specify the relevant tax character of the liabilities, e.g., nonrecourse liabilities, partner nonrecourse liabilities under Section 752 and the Regulations thereunder, and the provision of the Section 752 Regulations that result in the allocation of such liability or liabilities, or portion thereof, to the Advanta Partners. The Company agrees that, if requested by any Advanta Partner from time to time, the Company will permit the Advanta Partners to guarantee or otherwise assume the risk of loss with respect to indebtedness of the Company, in such amount and pursuant to a guarantee or other agreement in form and substance satisfactory to Advanta, and shall deliver any such guarantees or other agreements to lenders to the Company, as requested by Advanta and upon receipt thereof by the Company, and shall use its reasonable best efforts to cause any such lender to acknowledge such guarantee or other agreement prior to the close of the Company’s taxable year in which any such guarantee is presented to the Company. Advanta agrees to bear any costs incurred by the Company in carrying out its obligations under this Section 4.7.3.

5. SECTION 5 — MANAGEMENT: RIGHTS, POWERS, AND DUTIES

     5.1 General Partner . The Company shall be managed by the General Partner. The General Partner shall have all power and authority to manage the Company for and on behalf of the Partners and shall do all lawful acts and things as are not directed or required to be exercised or done by the Partners under the Act or this Agreement. Approval by or action taken by the General Partner, in accordance with this Agreement, shall constitute approval or action by the Company and shall be binding upon the Partners.

     5.2 Authority of the General Partner. Subject to Section 5.7 hereof, the General Partner shall, in addition to any other power granted to it in this Agreement, have the right, power and authority to take all actions with respect to the operations of the Company.

     5.3 Committees. The General Partner may designate one or more committees. Each committee shall be composed of such number of members as the General Partner may determine. Any committee, to the extent provided by the General Partner, shall have and may exercise all of the power and authority of the General Partner.

     5.4 Meetings and Voting. Any action required or permitted to be taken by the Partners, either at a meeting or otherwise, may be taken without a meeting if the Partners having the requisite numbers of votes to take such action consent thereto in writing. Written notice of any such action taken by written consent of the Partners will be given by the Chief Executive Officer or Secretary of the Company to all Partners promptly after such action has been taken.

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     5.5 Executive Officers. The General Partner may appoint employees from nominees of the Fleet Partners to hold the positions of chief executive officer (the “Chief Executive Officer”), chief financial officer, secretary, and one or more vice presidents (each an “Executive Officer”), with such duties as may be established by the General Partner. The Chief Executive Officer, if any, appointed by the General Partner shall conduct the day-to-day affairs of the Company. The General Partner may also appoint officers of the Company and designate the duties to be performed by such officers in accordance herewith.

     5.6 Personal Services. No Partner shall be required to perform services for the Company solely by virtue of being a Partner. Unless approved by the General Partner, no Partner shall be entitled to compensation for services performed for the Company. However, upon substantiation of the amount and purpose thereof, a Partner shall be entitled to reimbursement for expenses reasonably incurred in connection with the activities of the Company.

     5.7 Voting Rights of Partners . Notwithstanding any other provisions of this Agreement, each of the following actions by a Partner or by the Company requires the affirmative vote of a majority of the Interests owned by the Advanta Partners, excluding any such action (other than as set forth in Section 5.7.7) with respect to which the Company requests and has received (i) from counsel mutually acceptable to Fleet and Advanta a written opinion that such action will not have an adverse tax effect upon the Advanta Partners and, (ii) from Advanta’s regularly employed accountants, a written opinion that such action will not give rise to any requirement that the Advanta Partners create or increase any reserve (other than a reserve relating to the Book/Tax Differential) for income taxes for financial reporting purposes.

            5.7.1 approving (i) any Additional Capital Contributions, (ii) the admission of any other Partners or (iii) any other act, if any such action would reduce the Percentage owned by the Advanta Partners below one percent in the aggregate;

            5.7.2 reducing the amount of indebtedness of the Company which can be allocated to any Advanta Partner below the amount of such Advanta Partner’s deficit balance in its capital account (as calculated for federal income tax purposes);

            5.7.3 approving any sale, transfer or other disposition of the goodwill, going concern value, or the value attributable to the workforce in place contributed to the LLC (and assumed by the Company) by Advanta or any of its Affiliates (the “Restricted Sale Assets”); provided, however, that the parties agree the Company is permitted to sell, transfer or otherwise dispose of portions of the Restricted Sale Assets if such sales, transfers or other dispositions are in the ordinary course of the Company’s business and would not result in the recognition of gain or income to the Advanta Partners under Section 704(c) of the Code;

            5.7.4 discontinuing the operation of the Advanta Credit Card Business or cause the dissolution of the Company unless prior thereto, the Advanta Partners are offered an

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opportunity to acquire such Advanta Credit Card Business on terms mutually acceptable to the parties;

            5.7.5 making any election that would result in the Company being taxed as other than a “partnership” for federal income tax purposes, including (but not limited to) electing to be taxed as other than a “partnership” by filing Form 8832, “Entity Classification Election” or making any election inconsistent with Section 4.5.3 hereof;

            5.7.6 for seven years after the Closing Date, making any distribution of Company property (other than money) to any Advanta Partner other than pursuant to the provisions of Section 5.7.4; or

            5.7.7 approving any activities of the Company that are not part of, or incidental to, the business of banking or are not permissible for an operating subsidiary of a national bank.

     5.8 Duties of Parties.

            5.8.1 Each Partner shall devote such time to the business and affairs of the Company as is necessary to carry out the Partner’s duties set forth in this Agreement.

            5.8.2 No Partner shall provide, disclose, or otherwise make available to the Company any Non-Public Information. The Company shall not provide, disclose, or otherwise make available to any Partner any Company Non-Public Information. No Partner shall make available to any other Partner any of its Non-Public Information. The parties hereto each acknowledge and agree that the covenants and restrictions set forth in this Section 5.8.2 are specifically intended to limit the rights of the Partners under Section 7-13-5 of the Act, to the extent allowed by the Act.

            5.8.3 The Partners shall take any action that may be required to ensure that the activities of the Company are limited to activities that are part of, or incidental to, the business of banking and are permissible for an operating subsidiary of a national bank.

6. SECTION 6 — LIABILITY AND INDEMNIFICATION

     6.1 Liability of Partners.

         (a) Except as otherwise provided by the Act, this Agreement or any Transaction Document, Partners shall not be liable, responsible or otherwise accountable for damages to the Company or to any Partner for any action taken or failure to act on behalf of the Company, unless such acts or omissions were fraudulent, in bad faith or a result of wanton or willful misconduct or gross negligence by such Partner. No Limited Partner shall be liable for any of the debts, liabilities or obligations of the Company.

         (b) Except as otherwise expressly required by law, a Partner, in its capacity as such, shall have no liability in respect of any distributions wrongfully distributed to it.

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     6.2 Indemnification of Partners. To the extent permitted by law, the Company shall indemnify, defend and hold harmless each Covered Person from and against any and all debts, losses, claims, damages, costs, demands, fines, judgments, contracts (implied and expressed, written and unwritten), penalties, obligations, payments, liabilities of every type and nature (whether known or unknown, fixed or contingent), including, without limitation, those arising out of any lawsuit, action or proceeding (whether brought by a party to this Agreement or by any third party), together with any reasonable costs and expenses (including, without limitation, reasonable attorneys’ fees and out-of-pocket expenses) incurred in connection with the foregoing (including, without limitation, reasonable costs and expenses (collectively “Damages”) incurred in investigating, preparing or defending any pending or threatened lawsuit, action or proceeding) suffered or sustained by him/her by reason of any act, omission or alleged act or omission by him/her arising out of his/her activities on behalf of the Company or in furtherance of the interests of the Company; provided, however, that the acts, omissions or alleged acts or omissions upon which such actual or threatened actions, proceedings or claims are based were performed or omitted in good faith and were not fraudulent, in bad faith or a result of wanton and willful misconduct or gross negligence by such Covered Person; provided, further, that any indemnification for Tax liabilities of the Company or any Partner arising as a result of the transactions set forth in by the Contribution Agreement (and the defense of any such claims) shall be governed solely by Sections 6.4 and 6.5 of this Agreement.

     6.3 Company Indemnity. The Company shall indemnify and hold harmless Fleet, its successors and assigns, from, against and in respect of any and all Damages resulting from or arising out of the liabilities and obligations of the Advanta Credit Card Business assumed by Fleet, the Company and the LLC in connection with the Contribution Agreement. The Company hereby expressly waives any defense to its obligations under this indemnity to the maximum extent permitted by law.

     6.4 Tax Indemnification.

            6.4.1 Except as provided in Section 6.4.2, Advanta and the Advanta Partners shall indemnify, defend and hold harmless each of the Company, Fleet and Fleet’s Affiliates from and against any and all Damages for any Taxes owed by the LLC, the Company, Fleet or Fleet’s Affiliates as a result of taxable income or gain recognized by the LLC, the Company, Fleet or any of Fleet’s Affiliates and produced by the contribution of the Fleet Contributed Assets, the Fleet Transferred Liabilities, the Company Contributed Assets and the Company Transferred Liabilities (as those terms are defined in the Contribution Agreement) to the LLC (or assumed by the Company) regardless of when such Tax is actually assessed.

            6.4.2 Fleet and the Fleet Partners shall indemnify, defend and hold harmless each of the Company, Advanta and Advanta’s Affiliates from and against any and all Damages for any Taxes owed by the LLC, the Company, Advanta or any of Advanta’s Affiliates if Fleet, Fleet’s Affiliates, the LLC, the Company or any other Partner takes any action in violation of Section 5.7 or the last sentence of Section 9.5.3 of this Agreement; provided, however, that the

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indemnification provided for in this Section 6.4.2 shall not include an indemnification for Damages for Taxes relating to the Book/Tax Differential. The amount of the Taxes for purposes of this Section 6.4.2 shall be computed in the manner set forth in Section 7.2.6, to the extent that such section specifies the procedure for identifying the person that computes the amount of Taxes.

            6.4.3 Payments to any party under Section 6.4 shall be “grossed-up” to take into account the fact that the amounts payable under Section 6.4.1 and 6.4.2, including “grossed-up” payments, are themselves subject to income taxation, so that the net amount remaining after the deduction for all applicable Taxes equals the amount payable under Section 6.4.1 or 6.4.2, as the case may be. The amount of the “gross-up” shall be determined by utilizing the highest statutory marginal income tax rate (federal, state and local, taking into account the deductibility of state and local income taxes for federal income tax purposes) applicable to corporations under the law in effect at the time such payment is includible in the taxable income of the Indemnified Partner (or its Affiliate) without regard to any other items of income, gain, loss, deduction or credit of such Indemnified Partner (or its Affiliate).

     6.5 Indemnification Procedure.

            6.5.1 A party seeking indemnification pursuant to Section 6 (an “Indemnified Partner”) shall give prompt notice to the party from whom such indemnification is sought (the “Indemnifying Party”) of the assertion of any claim, including any claim brought by a third party, in respect of which indemnity may be sought hereunder (a “Claim”) and shall give the Indemnifying Party such information with respect thereto as the Indemnifying Party may reasonably request, but no failure to give such notice shall relieve the Indemnifying Party of any liability hereunder (except to the extent the Indemnifying Party has suffered actual prejudice thereby). If the Indemnifying Party establishes to the reasonable satisfaction of the Indemnified Partner that the Indemnifying Party has (and will continue to have) adequate financial resources to satisfy and discharge such Claim, the Indemnifying Party shall have the right, exercisable by written notice (the “Notice”) to the Indemnified Partner (which notice shall state that the Indemnifying Party expressly agrees that as between the Indemnifying Party and the Indemnified Partner, the Indemnifying Party shall be solely obligated to satisfy and discharge the Claim) within thirty (30) days of receipt of notice from the Indemnified Partner of the commencement of or assertion of any Claim, to assume the defense of such Claim, using counsel selected by the Indemnifying Party and reasonably acceptable to the Indemnified Partner, provided that the Indemnifying Party shall not have the right to assume the defense of a Claim (A) seeking an injunction, restraining order, declaratory relief or other non-monetary relief against the Indemnified Partner (whether or not the Indemnifying Party is also named as a party) or (B) if the named parties to any such action (including any impleaded parties) includes both the Indemnified Partner and the Indemnifying Party and the Indemnified Partner shall have been advised by counsel that there are one or more legal or equitable defenses available to the Indemnified Partner which are different from those available to the Indemnifying Party; in which case such Indemnified Partner shall have the right to participate in the defense of a Claim of the type set forth in clause (A) and/or (B) above and all Damages in connection therewith shall be reimbursed by the Indemnifying Party. In addition, if the Indemnifying Party fails to give the

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Indemnified Partner the Notice complying with the provisions stated above within the stated time period, the Indemnified Partner shall have the right to assume control of the defense of the Claim and all Damages in connection therewith shall be reimbursed by the Indemnifying Party upon demand of the Indemnified Partner.

            6.5.2 If at any time after the Indemnifying Party assumes the defense of a Claim any of the conditions set forth above are no longer satisfied, the Indemnified Partner shall have the same rights as if clause (A) or (B) above had been satisfied and the Indemnifying Party never assumed the defense of such Claim.

            6.5.3 The Indemnifying Party or the Indemnified Partner, as the case may be, shall in any event have the right to participate, at its own expense, in the defense of any Claim which the other is defending.

            6.5.4 The Indemnifying Party, if it has assumed the defense of any Claim in accordance with the terms hereof, shall have the right, upon five (5) business days prior written notice to the Indemnified Partner, to consent to the entry of judgment with respect to, or otherwise settle such Claim unless (i) the Claim involves equitable or other non-monetary damages or (ii) in the reasonable judgment of the Indemnified Partner such settlement would have a continuing material adverse effect on the Indemnified Partner’s business (including any material impairment of its relationships with customers and suppliers). In the case of (i) and (ii) above, such settlement only may be made with the written consent of the Indemnified Partner, which consent shall not be unreasonably withheld or delayed. If the Indemnified Partner otherwise assumes the defense of a Claim, it shall have the right to settle such Claim with the consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed.

      6.5.5 Whether or not the Indemnifying Party chooses to defend or prosecute any Claim involving a third party, all the parties hereto shall cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested in connection therewith.

7. SECTION 7 — TRANSFER OF INTERESTS AND WITHDRAWAL OF PARTNERS

     7.1 Transfer of Partnership Interests Permitted. Subject to any applicable provisions of the Contribution Agreement, a Partner may effect a Transfer of all or any part of its Partnership Rights or any interest in such Partnership Rights to any other Person provided that the Person acquiring such Partnership Rights assumes such Partner’s obligations under this Agreement.

     7.2 Retirement of a Partner. The Company may elect to cause the retirement and withdrawal of the Advanta Partners as Partners of the Company only in accordance with the provisions of this Section 7.2.

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      7.2.1 Notice. If the Company elects to cause the retirement and withdrawal of the Advanta Partners as Partners of the Company, the Company shall deliver to Advanta a written notice thereof, specifying that the Company has elected to redeem all (but not less than all) of the Partnership Rights of each of the Advanta Partners in the Company in accordance with the terms hereof. A notice specifying that the Company has elected to redeem the Partnership Rights of the Advanta Partners by distributing the Cash Withdrawal Consideration (as hereinafter defined) may be given by the Company at any time. A notice specifying that the Company has elected to redeem the Partnership Rights of the Advanta Partners by distributing the Property Withdrawal Consideration (as hereinafter defined) may be given to Advanta only after the sixth anniversary of the Closing Date.

      7.2.2 Content of Notice. The notice delivered to Advanta pursuant to Section 7.2.1 shall specify: (i) whether the Company has elected to deliver the Cash Withdrawal Consideration or the Property Withdrawal Consideration; (ii) the value (as of the expected date of the redemption) that the Company has determined for all (but not less than all) of the Partnership Rights of the Advanta Partners (the “Stipulated Value”), provided that only one Stipulated Value shall be specified in the notice; (iii) the date (which may not be fewer than thirty (30) days nor, with respect to a notice in which the Company has elected to deliver the Cash Withdrawal Consideration, more than ninety (90) days after the date that the notice is delivered to Advanta), on which the redemption of the Partnership Rights of the Advanta Partners shall occur (the “Redemption Date”), provided that in no event shall the date on which the redemption of the Partnership Rights of the Advanta Partners occur be less than seven years and one day after the Closing Date in the event the Company has elected to deliver the Property Withdrawal Consideration; and (iv) if the Company has elected to deliver the Property Withdrawal Consideration, the assets and liabilities of the Company proposed to be distributed in redemption of the Partnership Rights of the Advanta Partners. In the case where the Company has elected to distribute the Property Withdrawal Consideration, Advanta shall deliver a notice to the Company within 15 days of receiving the above notice that either (i) the Property Withdrawal Consideration in the above specified notice will satisfy the Tax Requirements (as defined in Section 7.2.5), or (ii) such Property Withdrawal Consideration does not satisfy the Tax Requirements and that an alternative is available (such notice must describe such alternative, in which case, clauses (a) and (b) of Section 7.2.5 shall apply) or (iii) no Property Withdrawal Consideration satisfies the Tax Requirements (in such case, Section 7.2.7 shall apply). For purposes of clause (ii) of the preceding sentence, Advanta may rely on its own tax counsel to make its response under clause (ii) above; provided, however, that if Fleet objects to such tax counsel’s opinion (and written notice of any such objection is provided to the Advanta Partners within 5 days of receiving the Advanta notice in clause (ii) above), the parties shall choose tax counsel mutually acceptable to them (chosen in conformity with the principles governing the selection of the independent firm under Section 7.2.6 hereof) to render the final opinion. If no such notice is delivered within the aforementioned 15-day period, Advanta will be deemed to have delivered the notice described in clause (i) above.

      7.2.3 Determination of Stipulated Value. In the event that Advanta does not agree with the Stipulated Value, Advanta shall deliver a notice to the Company stating its disagreement with the Stipulated Value, in which case the Company and Advanta shall jointly

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select and retain a mutually acceptable independent nationally recognized investment banking firm for the purpose of determining a fair amount for the Advanta Partners’ Partnership Rights at the expected date of distribution. If the Company and Advanta are not able to agree upon such an investment banking firm within ten (10) days after the delivery of such notice by Advanta, then the independent firm shall be selected by lot after Advanta has eliminated two (2) of the three (3) such firms selected by Fleet and Fleet has eliminated two (2) of the three (3) such firms selected by Advanta; provided, however, Advanta’s regular auditor shall not be one of the three firms selected by Advanta and neither Fleet’s regular auditor nor the Company’s regular auditor shall be one of the three firms selected by Fleet. The Partners and the Company shall use their reasonable best efforts to cause the independent firm to render its decision as soon as is reasonably practicable. All decisions of the independent firm with respect to the value of the Interests shall be final and binding upon the Company and all the Partners and the period within which the redemption must occur shall be extended by the number of days that elapse from the date that Advanta gives its notice hereunder to the date that a decision as to the value is determined, plus ten (10) days. Each of the Advanta Partners, on the one hand, and the Fleet Partners, on the other hand, shall bear 50% of the fees, costs, disbursements and other expenses of the independent firm.

      7.2.4 Conveyance. The Advanta Partners’ Partnership Rights shall be assigned, transferred and conveyed to the Company free and clear of all liens, charges, security interests and other encumbrances whatsoever by the transferring party and the redemption price thereof shall be delivered to the Advanta Partners in proportion to the Advanta Partners’ Percentages.

      7.2.5 Property Withdrawal Consideration. In the event that the Company elects to distribute the Property Withdrawal Consideration, the Company shall distribute property having a value, taking into account liabilities that are transferred to Advanta in connection with the redemption of its Partnership Rights, equal to the Stipulated Value on or about the date of the distribution (determined using the valuation methodology used to set the Stipulated Value in the notice, or under Section 7.2.3, as the case may be). The Property Withdrawal Consideration distributed to the Advanta Partners must consist of assets, subject to liabilities, in such form and amount such that the receipt of the Property Withdrawal Consideration by the Advanta Partners in liquidation of their Partnership Rights will not, as determined in the opinion of tax counsel mutually acceptable to Fleet and Advanta and in the opinion of the accountants regularly employed by Advanta: (i) result in the recognition of taxable gain or gross income by Advanta or its Affiliates (except for taxable gain or gross income relating to the Book/Tax Differential), or (ii) give rise to any requirement to create or increase any reserve for income taxes for financial reporting purposes (other than a reserve relating to the Book/Tax Differential), attributable to the Partnership Rights of the Advanta Partners or the property received in the liquidation of their Interests (clauses (i) and (ii) being referred to as the “Tax Requirements”). The determinations pursuant to the immediately foregoing sentence shall be based on the law and financial reporting requirements in effect on the Closing Date and Advanta shall bear the costs incurred by the Company in securing such opinions. In the case where the Company elects to distribute the Property Withdrawal Consideration, if the applicable provisions of the Code, any successor federal tax statute, or Treasury Regulations thereunder or financial reporting requirements in effect at the time of the redemption are not identical to the law or financial reporting

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requirements in effect on the Closing Date, then the Company may still distribute the same Property Withdrawal Consideration or distribute the alternative property proposed by Advanta; provided, however, that:

         (a) if a distribution in redemption of the Partnership Rights of the Advanta Partners in the Company could satisfy the Tax Requirements if such redemption occurred more than seven years but less than ten years and one month after the Closing Date (the earliest date on which such distribution could satisfy the Tax Requirements being referred to as the “New Date”), the date on which the Company may make the Property Withdrawal Distribution in redemption of the Advanta Partners’ Partnership Rights may not occur prior to the New Date; or,

         (b) the Company shall structure the redemption so as to satisfy the Tax Requirements on the date of the redemption provided that any such restructuring or alternative distribution shall not have a material adverse effect on the assets, liabilities, financial position, business or results of operations of the Company and its Subsidiaries, taken as a whole, and Advanta shall be liable for the costs of the Company incurred in restructuring the redemption or providing such alternative distribution.

      7.2.6 Cash Withdrawal Consideration. Except as provided in 7.2.7, in the event that the Company elects to deliver the Cash Withdrawal Consideration, the amount payable by the Company shall be equal to (i) the Stipulated Value and (ii) the amount of Taxes required to be paid in respect of income or gain arising out of or attributable to the redemption of the Partnership Rights of the Advanta Partners (computed (A) as if the total Cash Withdrawal Consideration were an amount of cash equal to the Initial Capital Contributions of the Advanta Partners, (B) as if the federal income tax adjusted basis of the Partnership Rights were increased by the Book Tax Differential and (C) by “grossing-up” the payment on account of Taxes to provide for Taxes on the total amount payable hereunder, computed under the principles of Section 6.4.3). The computation of the amount of Taxes required to be paid in respect of income or gain arising out of or attributable to the redemption of the Partnership Rights of the Advanta Partners in the Company shall be determined initially by the accountants regularly employed by Advanta. Advanta shall deliver a description of the accountant’s computation to the Company at least twenty (20) days prior to the Redemption Date. In the event that the Company does not agree with the computation of the amount of Taxes, the Company shall deliver a notice to Advanta stating its disagreement with the computation of the amount of Taxes, in which case the Company and Advanta shall jointly select and retain a mutually acceptable independent nationally recognized accounting firm for the purpose of determining the amount of Taxes. If the Company and Advanta are not able to agree upon such a firm within ten (10) days after the delivery of such notice by the Company, then the independent firm shall be selected by lot after the Company has eliminated two (2) of the three (3) such firms selected by Advanta and Advanta has eliminated two (2) of the three (3) such firms selected by the Company; provided, however, that Advanta’s regular auditor shall not be one of the three firms selected by Advanta and neither Fleet’s regular auditor nor the Company’s regular auditor shall be one of the three firms selected by the Company. Advanta and the Company shall use their reasonable best efforts to cause the independent firm to render its decision as soon as is

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reasonably practicable. All decisions of the independent firm with respect to the computation of Taxes shall be final and binding upon the Company and Advanta and the period within which the redemption must occur shall be extended by the number of days that elapse from the date that the Company gives its notice hereunder to the date that a decision as to the amount of Taxes is determined, plus ten (10) days. Each of the Advanta Partners, on the one hand, and the Fleet Partners, on the other hand, shall bear 50% of the fees, costs, disbursements and other expenses of the independent firm.

            7.2.7 Inability to Meet Tax Requirements. If, as a result of a change of law occurring after the Closing Date, it would not be possible to meet the Tax Requirements upon delivery of the Property Withdrawal Consideration within ten years and one month after the Closing Date (taking into account clauses (a) and (b) of Section 7.2.5 of this Agreement), then, the Company may, at any time after the seventh anniversary date of the Closing Date, distribute either the Property Withdrawal Consideration or the Cash Withdrawal Consideration. In the event that the Company elects to deliver the Cash Withdrawal Consideration under this Section 7.2.7, the amount payable by the Company shall equal the Stipulated Value on or about the date of distribution (without any adjustment for any Taxes payable by the Advanta Partners with respect to the receipt of the Cash Withdrawal Consideration). For purposes of Section 7.2.7, a change of law shall mean an amendment to the Code or the adoption or amendment of a successor federal tax statute, or the adoption of Treasury Regulations, which change in law would be effective so as to apply to the distribution of the Property Withdrawal Consideration hereunder.

     7.3 Transfers are Void. Any Transfer attempted in violation of the provisions contained in this Section 7 shall be deemed null and void and of no effect, the Company being hereby authorized not to acknowledge and, to the extent applicable, not register the Transfer in the relevant books of the Company. Any Transfer attempted in violation of this Section 7 shall cause the immediate withdrawal of the Partner who attempted to make such Transfer.

8.   SECTION 8 — DISSOLUTION, LIQUIDATION AND TERMINATION OF THE COMPANY

     8.1 Events of Dissolution. The business of the Company shall be continued by the Partners pursuant to this Agreement and no Partner shall be released or relieved of any duty or obligation hereunder by reason thereof; provided, however, that the business of the Company shall be terminated, its affairs wound up and its property and assets distributed if any of the following occur:

            8.1.1 upon the unanimous written agreement of the Partners;

            8.1.2 upon written notice from any non-defaulting Partner to a defaulting Partner and the other Partners, if any Partner fails to perform any other of its obligations under this Agreement and such failure is not cured within 30 days after such non-defaulting Partner gives written notice thereof to the defaulting Partner;

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            8.1.3 upon the occurrence of an Involuntary Withdrawal, unless the remaining Partners, within ninety (90) days after the event or occurrence of the Involuntary Withdrawal, unanimously elect to continue the business of the Company pursuant to the terms of this Agreement and elect a new General Partner which accepts such election;

            8.1.4 upon the expiration of the period fixed for the Company’s duration in Section 2.4 hereof;

            8.1.5 upon the entry of a decree of judicial dissolution under Section 7-16-40 of the Act; or

            8.1.6 upon the sale of all or substantially all of the assets of the Company.

     8.2 Wind-up of Affairs. As expeditiously as possible following the occurrence of an event giving rise to a termination of the business of the Company pursuant to Section 8.1, the General Partner shall wind up the affairs of the Company, liquidate the assets of the Company, and distribute to the Partners all the proceeds of such liquidation in accordance with Section 8.4.

     8.3 Filing of Articles of Dissolution. If the Company is dissolved, the Partners shall promptly file a Certificate of Cancellation of Limited Partnership with the office of the Rhode Island Secretary of State.

     8.4 Distributions in Liquidation. Distributions in connection with the liquidation of the Company shall be made, after establishing a reserve for any contingent liabilities of the Company and after payment of the reasonable expenses incurred in dissolution and termination and payment to creditors of the company (excluding secured creditors whose obligations will be assumed or otherwise transferred on the liquidation of the Company’s property or assets), to the Partners in accordance with the positive balances of their Capital Accounts after Capital Accounts have been adjusted for all contributions, allocations and distributions for all periods.

     8.5 Claims of the Partners. The Partners shall look solely to the Company’s assets for the return of their Capital Contributions, and if the assets of the Company remaining after payment of or due provision for all debts, liabilities and obligations of the Company are insufficient to return such Capital Contributions, the Partners shall have no recourse against the Company or any other Partner or Person. No Partner with a negative balance in such Partner’s Capital Account shall have any obligation to the Company or to the other Partners or to any creditor or other Person to restore such negative balance upon dissolution or termination of the Company or otherwise.

9. SECTION 9 — BOOKS, RECORDS, ACCOUNTING AND CERTAIN OTHER TAX MATTERS.

     9.1 Bank Accounts. All funds of the Company shall be deposited in a bank account or accounts opened in the Company’s name. The General Partner shall determine the institution

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or institutions at which the accounts will be opened and maintained, the types of accounts, and the Persons who will have authority with respect to the accounts and the funds therein.

     9.2 Books and Records. During the term of existence of the Company, the General Partner shall keep or cause to be kept complete and accurate books and records of the Company and supporting documentation of the transactions with respect to the conduct of the Company’s business. Notwithstanding any provision to the contrary in Section 7-13-5 of the Act, the books and records shall be maintained in accordance with generally accepted accounting principles and shall be available at the Company’s principal office for examination by any Partner or the Partner’s duly authorized representative for any purpose reasonably related to such Partner’s Interest in the Company at any and all reasonable times during normal business hours.

     9.3 Annual Accounting Period. The annual accounting period of the Company shall be selected by the General Partner, subject to the requirements and limitations of applicable law.

     9.4 Reports. The Company shall make available to the Partners within 60 days of the end of each quarter, quarterly unaudited financial statements, and as soon as practicable after the end of the fiscal year of the Company, but in no event later than 120 days thereafter, audited financial statements.

     9.5 Tax Matters.

           9.5.1 The General Partner shall serve as the tax matters partner (the “Tax Matters Partner”) within the meaning of Section 6231 of the Code. Other than as provided in Section 9.5.4, the Tax Matters Partner shall represent the Company on behalf of the Partners in connection with all administrative and judicial proceedings with respect to Company affairs involving or resulting from examinations by any and all federal, state or other tax authorities (including, but not limited to, examinations by the Internal Revenue Service), and may expend Company funds for reasonable professional services and costs in connection therewith as it deems advisable and necessary; provided, however, that, except as otherwise provided in this Agreement or by law, the Tax Matters Partner does not assume any obligations or responsibilities with respect to the foregoing. Any Partner other than the Tax Matters Partner who wishes to participate in the administrative proceedings at the partnership level may do so, but any legal, accounting or other expenses incurred by such Partner in connection therewith shall be borne by such Partner. The Tax Matters Partner shall promptly take such action as may be necessary to cause each Partner to become a “notice partner” within the meaning of Section 6231(a)(8) of the Code. The Tax Matters Partner shall furnish to each Partner a copy of all notices or other written communications received by the Tax Matters Partner from the Internal Revenue Service (except such notices or communications as are sent directly to the Partner by the Internal Revenue Service). The Tax Matters Partner shall give to Partners prompt written notice upon receipt of advice that the Internal Revenue Service or any other taxing authority intends to examine any Company tax return or the books and records of the Company. In acting in its capacity as Tax Matters Partner, Fleet shall at all times act reasonably and in good faith, taking into account the interests of all Partners. The Company and the Partners hereby severally agree to indemnify and hold harmless the Tax Matters Partner from and against any claim, loss, expense, liability, action

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or damage resulting from its acting or failing to take any action in its capacity as the Tax Matters Partner, provided that any such action or failure to act was not willful misconduct.

          9.5.2 Each of the Partners, on the one hand, and the Company, on the other hand, agree to furnish or cause to be furnished to each other, as promptly as practicable, such information and assistance as is reasonably necessary for the preparation and filing of any return, claim for refund or other required or optional filings relating to Tax matters, for the preparation for and proof of facts during any Tax audit, for the preparation for any Tax protest, for the prosecution or defense of any suit or other proceeding relating to Tax matters and for the answer to any governmental or regulatory inquiry relating to Tax matters.

          9.5.3 Each tax return and any other statement to be filed by the Company with the Internal Revenue Service or any other taxing authority shall be prepared by the accountants (including outside accountants) for the Company, whose expenses shall be borne by the Company. Draft copies of each such return and statement shall be distributed to the Partners not later than thirty (30) days before the date on which the same is required to be filed. The transactions described in the Contribution Agreement shall be reported by the Company and each Partner in a manner consistent with that agreement and the Company and each Partner shall perform their obligations under Section 6.09 of the Contribution Agreement.

          9.5.4 Except where Fleet and the Fleet Partners are indemnifying Advanta and the Advanta Partners pursuant to the terms of this Agreement or the Contribution Agreement, Advanta shall represent the Company on behalf of the Partners in connection with all administrative and judicial proceedings against the Company involving or resulting from examinations by any and all federal, state or other tax authorities including, but not limited to, examinations by the Internal Revenue Service, produced by the transactions effected by the Contribution Agreement (a “Tax Examination”); provided, however, that all expenses of the Company (including any expense for professional services) relating directly to a Tax Examination in which Advanta is representing the Company shall be borne by Advanta. To the extent that Fleet and the Fleet Partners desire to participate in such examination or proceeding, Fleet and the Fleet Partners shall cooperate fully with Advanta and shall execute any and all consents, waivers or agreements as are reasonably requested by Advanta in connection with any such examination; provided, however, that all expenses (including any expense for professional services) incurred by Fleet relating directly to the Tax Examination shall be borne by Advanta. Advanta shall reimburse the Company and Fleet for any amounts expended by such parties at the time the expenditure is made. Advanta shall have the right to select its professional advisers in connection with any examination involving or relating to the transactions involving the Contribution Agreement.

     9.6 Contingent Distributions.

          (a) Notwithstanding Sections 4 or 8 or any other provision of this Agreement, if (1) the Adjusted Base Operating Earnings (as that term is defined in Section 9.6 (b)), for the years ended December 31, 1998, 1999, 2000, 2001 or 2002 exceed the Target Base Operating Earnings for such year shown in the table set forth below, pro rated for 1998 if the Closing under

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the Contribution Agreement takes place in 1998 (each such amount, a “Target Earnings”) and (2) the Adjusted Base Operating Earnings for such year equal or exceed the percentage of the Average Managed Assets (as that term is defined below) for such year shown in the table set forth below, then promptly, but in no event later than sixty days after each such December 31, an amount of Distributable Cash Flow shall be paid to the Advanta Partners, in proportion to their respective Percentages, in an aggregate amount equal to the lesser of (i) the excess of the Adjusted Base Operating Earnings for such year over the Target Earnings for such year or (ii) one-third of the sum referred to below in this paragraph (the amount referred to in this clause (ii) is referred to herein as the “Specified Amount”); provided, however, that in no event shall the total amount payable to the Advanta Partners pursuant to this Section 9.6 exceed the sum of (x) one hundred million dollars ($100,000,000) plus (y) any amount by which the Agreed Deficit (as that term is defined in the Contribution Agreement) is reduced pursuant to Section 1.06 of the Contribution Agreement. At any time that any amount payable to the Advanta Partners pursuant ‘ to this Section 9.6 has not been paid in full, no other payments or distributions of Distributable Cash Flow pursuant to Section 4 hereof or distributions under Section 8 hereof shall be made to any other Partner. Any amount not paid to the Advanta Partners when due pursuant to this paragraph shall bear interest until paid at the announced prime rate from time to time of Fleet National Bank (or any successor thereto). Average Managed Assets shall mean (i) the assets of the Company shown on its balance sheet, plus (ii) the average dollar balance of the securitized consumer credit card receivables managed by the Company plus (iii) the average dollar balance of (A) the consumer credit card receivables owned by Fleet or any of its Subsidiaries (excluding the Company) to the extent not shown on the Company’s balance sheet and (B) the securitized consumer credit card receivables managed by Fleet or any of its Subsidiaries. For these purposes, the assets and operations of the Company shall include the assets and operations of the LLC.

     The Target Base Operating Earnings and percentages of Average Managed Assets for each year shall be as follows:

	Target Base		Percentge of Average
	Operating Earnings		Managed Assets
	(in millions)
1998	$	303		1.67	%
1999	$	363		1.87	%
2000	$	418		2.00	%
2001	$	427		1.85	%
2002	$	452		1.80	%

          (b) Adjusted Base Operating Earnings shall mean for any particular year the pre-tax Base Operating Earnings for such year and the pre-tax operating earnings of Fleet and its Subsidiaries (other than the Company) from their consumer credit card business, as adjusted pursuant to the following provisions:

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               (i) any allocation of overhead expenses and related items shall be made in accordance with allocations made by Fleet to its other Subsidiaries, consistent with past practice, and, in any event, all of such allocations shall be reasonable;

               (ii) the Company shall be deemed to have interest costs on debt for money borrowed, (or the financial equivalent thereof) at the same per annum rate as the borrowing costs charged to Fleet’s Subsidiaries (other than the Company), consistent with past practices; provided, however, that with respect to any FNB Liabilities, CCB Liabilities and Company Transferred Liabilities (as such terms are defined in the Contribution Agreement), the Company shall be deemed to have interest costs equal to the amount of interest actually paid unless such liabilities are refinanced, in which case, the interest costs on such refinanced indebtedness shall be deemed to equal the borrowing costs charged to Fleet’s Subsidiaries (other than the Company), consistent with past practices;

               (iii) in no event shall extraordinary income or losses be included;

               (iv) no additions to, or changes of, loan loss reserves shall be included in the computation;

               (v) no amortization of goodwill or other intangibles shall be included in the computation of Adjusted Base Operating Earnings, except for existing intangible amortization related to Fleet’s credit card business, which existing intangible amortization shall for purposes of this calculation be included in Adjusted Base Operating Earnings;

               (vi) Adjusted Base Operating Earnings will reflect actual charge-offs based on the Company’s charge-off policies in effect from time to time; and

               (vii) securitization income shall be computed on the basis of tax accounting (i.e., debt for tax).

          (c) As promptly as practicable, but in no event later than March 15 of each of the years 1999 through 2003, the Company shall prepare and deliver to Advanta a calculation in reasonable detail of the Adjusted Base Operating Earnings and the Average Managed Assets (the “Calculation”) for the immediately preceding year.

          (d) The Company, Fleet and its Subsidiaries shall permit Advanta and its independent certified public accountants reasonable access upon reasonable notice and during normal business hours to their books, records and employees relating to the consumer credit card business. Advanta shall, within forty-five (45) days after its receipt of the Calculation, advise the Company in writing (an “Objection Notice”) in reasonable detail of the amounts and descriptions of adjustments, if any, which Advanta believes are necessary to be made to the Calculation. In the event that Advanta fails to deliver an Objection Notice within such time period, the Calculation delivered by the Company shall be deemed to be the final Calculation for all purposes of this Agreement.

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          (e) In the event that Advanta shall deliver an Objection Notice pursuant to Section 9.6(d), Advanta and the Company shall attempt, in good faith, to resolve their differences within the thirty day period following the receipt by the Company of the Objection Notice. In the event Advanta and the Company are not able to resolve their differences within such thirty day period, but the differences are less than $250,000 in the aggregate, then such differences shall be deemed to be the average of the amounts specified by the Company and Advanta, respectively, and the differences shall be deemed to be resolved. In the event that the Company and Advanta are able to resolve their differences within such thirty day period (including any resolution pursuant to the immediately preceding sentence), the Calculation agreed to by Advanta and the Company pursuant to this Section 9.6(e) shall be deemed to be the final Calculation for all purposes of this Agreement.

          (f) In the event that the Company and Advanta are unable to resolve any differences with respect to a Calculation within such thirty day period, including in the manner set forth in Section 9.6(e) hereof, then the issues remaining unresolved shall be determined by Coopers & Lybrand L.L.P. or another independent accounting firm mutually agreeable to the Company and Advanta if Coopers & Lybrand L.L.P., or its successor, at such time serves as the regular auditor of Fleet, the Company or Advanta (the “Independent Firm”) as follows:

               (1) Within fifteen (15) days following retention of the Independent Firm, the Company and Advanta shall present or cause to be presented the disputed issue or issues that must be resolved with respect to the Calculation.

               (2) The Company and Advanta shall use their commercially reasonable efforts to cause the Independent Firm to render its decision as soon as is reasonably practicable, including, without limitation, prompt compliance with all reasonable requests by the Independent Firm for information, papers, books, records and the like; provided that (i) the Company and Advanta agree that the scope of the retention of the Independent Firm shall be limited to resolving the disputed issues presented to it and matters related thereto and (ii) in no event shall the resolution of any issue be outside the parameters or amounts within which the issues were determined by the Company and Advanta, respectively. All decisions of the Independent Firm with respect to the Calculation shall be final and binding upon Advanta, the Company and the Partners.

          (g) With respect to the performance of their respective functions pursuant to this Section 9.6, (i) the Company shall bear all of the fees, costs, disbursements and other expenses of the preparation of the Calculation pursuant to Section 9.6(c) hereof; (ii) Advanta shall bear all of the fees, costs, disbursements and other expenses of its auditor, and (iii) the Company, on the one hand, and Advanta, on the other hand, shall bear equally all fees, costs, disbursements and other expenses of the Independent Firm.

10. SECTION 10 — MISCELLANEOUS TERMS AND CONDITIONS

     10.1 Dispute Resolution. If a dispute arises between the parties in connection with this Agreement or any document or instrument delivered in connection herewith (except any

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Transaction Document, when such agreements contain separate dispute resolution provisions), including, without limitation, an alleged breach of any representation, warranty or covenant herein or therein, or a disagreement regarding the interpretation of any provision hereof or thereof (a “Dispute”), the parties shall use the procedure set forth herein in good faith prior to any party pursuing other available judicial or non-judicial remedies. A meeting shall be held between the parties within ten (10) business days after any party gives written notice of a Dispute to the other party. The meeting shall be attended by a representative of each party having decision making authority regarding the Dispute (subject to Board of Directors, or equivalent approval, if required), to attempt in good faith to negotiate a resolution of the Dispute.

     10.2 Appraisal. Subject to Section 7.2.3, in the event that a determination of the fair market value of the Company’s assets is required for purposes of this Agreement, such value, if not otherwise agreed upon by the Partners, shall be determined by a firm of recognized national standing in appraising chosen by the General Partner in its sole discretion; provided, however; that, without the prior written consent of the Advanta Partners, the firm shall not have been engaged by any Person to do any material work on behalf of the Company, Fleet or any other Affiliate of Fleet for at least twelve months prior to the engagement with respect to the appraisal. Any valuation made pursuant to this Section 10.1 shall be at the sole expense of the Company and shall be submitted to the Partners as promptly as reasonably practicable.

     10.3 Confidentiality. Except as the parties otherwise agree or as set forth in this Agreement or as otherwise required by law or any national securities exchange, each of the Partners agrees to maintain this Agreement, the Transaction Documents and the terms and conditions thereof as confidential for the term of this Agreement and for a period of one year thereafter.

     10.4 Public Announcements. The Partners will consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement or the transactions contemplated hereby and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by law or any national securities exchange.

     10.5 Governing Law. This Agreement shall be governed by the laws of the State of Rhode Island, without regard to principles of conflicts of laws applicable therein.

     10.6 Entire Agreement. This Agreement, together with the Schedules hereto and the Transaction Documents, constitutes the entire Agreement between the parties with respect to the subject matter hereof, and it supersedes all prior agreements and understandings between them with respect to such matters.

     10.7 Notices. Any notice, demand, election or communication required, permitted or desired to be given hereunder shall be sent by prepaid registered or certified mail, return receipt requested, or by commercial courier service, or by electronic facsimile (but in the latter instance, also by US mail or by commercial courier service). Notices, demands, elections or communications shall be deemed received on the first to occur of the following: (i) when

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personally delivered; (ii) when actually delivered by a nationally recognized courier service such as FedEx; or (iii) two (2) business days following the deposit thereof with the US mail. Notices, demands, elections or communication’s sent to any Partners shall be sent to the address given for that Partner on Schedule A, (or to any other address which that Partner may designate to the other Partners and the Company by written notice to the Company). Notices, demands, elections or communications sent to the Company shall be sent to the Company’s principal office.

     10.8 Successors and Assigns. All the terms, covenants and conditions of this Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns.

     10.9 Expenses. Except as otherwise agreed to in writing by the Partners, each of the Partners will bear its own costs and expenses, including brokers’ or finders’ fees, if any, incurred in connection with the preparation and execution of this Agreement and the Transaction Documents.

     10.10 Further Assurances. The Partners will execute and deliver such further instruments and do such further acts and things as may be required to carry out the intent and purpose of this Agreement.

     10.11 No Third Party Beneficiaries. This Agreement shall not confer any rights or remedies upon any Person other than the parties and their respective successors and permitted assigns, except as set forth in Section 6.2 herein.

     10.12 Amendments. This Agreement shall not be amended or modified except by an instrument in writing signed by all Partners; provided however, that Schedule A to this Agreement shall be deemed amended from time to time to reflect the admission of a new Partner, the withdrawal or resignation of a Partner and the adjustment of the Partnership Interests resulting from any sale, transfer or other disposition of a Partner’s Interest, in each case that is made in accordance with the provisions of this Agreement.

     10.13 Headings. All headings and captions herein are inserted for convenience and identification only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision hereof.

     10.14 No Waiver. No waiver of a breach or default hereunder shall be considered valid unless in writing and signed by the party giving such waiver, and no such waiver shall be deemed a waiver of any subsequent bleach of default of the same or similar nature. No failure or delay by any party in exercising any right, power or privilege hereunder (other than a failure or delay beyond a period of time specified herein) shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

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     10.15 Counterparts. This Agreement may be executed and delivered (including by facsimile transmission) in any number of counterparts, and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, and such counterparts taken together shall constitute one and the same Agreement.

     10.16 Severability. Should any part or provision of this Agreement be held unenforceable or in conflict with the applicable laws or regulations of any jurisdiction, the invalid or unenforceable part or provision shall be replaced with a revision which accomplishes, to the extent possible, the original business purpose of such part or provision in a valid and enforceable manner, and the balance of this Agreement shall remain in full force and effect and be binding upon the parties hereto.

     10.17 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDINGS ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

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     IN WITNESS WHEREOF, the Initial Partners of the Company have executed this Agreement as of the day, month and year first above written.

ADVANTA CORP.
By:	/s/ Elizabeth H. Mai
	Name:	Elizabeth H. Mai
	Title:	SVP, Secretary and General Counsel

ADVANTA NATIONAL BANK
By:	/s/ Elizabeth H. Mai
	Name:	Elizabeth H. Mai
	Title:	SVP, Secretary and General Counsel

ADVANTA SERVICE CORP.
By:	/s/ Elizabeth H. Mai
	Name:	Elizabeth H. Mai
	Title:	VP and Secretary

COLORADO CREDIT CARD SERVICE, LLC
By: SERVICE PARTNERS I CORP.
By:	/s/ Elizabeth H. Mai
	Name:  Elizabeth H. Mai Title:    VP and Secretary
By: SERVICE PARTNERS II CORP.
By:	/s/ Elizabeth H. Mai
	Name:  Elizabeth H. Mai Title:    VP and Secretary

FLEET CREDIT CARD HOLDINGS, INC.
By:	/s/ Joseph Saunders
	Name:	Joseph Saunders
	Title:	President

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     And solely for purposes of the Tax Indemnification provided in Section 6.4.2 of this Agreement, Fleet Financial Group, Inc. has executed this Agreement as of the day, month and year first written above.

FLEET FINANCIAL GROUP, INC.
By:	/s/ Brian T. Moynihan
	Name:	Brian T. Moynihan
	Title:	Senior Vice President

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SCHEDULE A

Limited Partners	Mailing Address For Each	Initial Capital Contribution
Advanta Corp.	P.O. Box 844
Advanta National Bank	Welsh & McKean Roads
Advanta Service Corp.	Springhouse, PA 19477
Colorado Credit Card       Services, LLC

EX-10.CC

Exhibit 10-cc

ADVANTA CORP.
OFFICE OF THE CHAIRMAN
SUPPLEMENTAL COMPENSATION PROGRAM

SECTION 1. PURPOSE

     On May 22, 1997, the Board of Directors of Advanta Corp. (the “Company”) approved the adoption of a plan to provide supplemental compensation arrangements for the members of the Office of the Chairman in the event of a Change in Control of the Company. Accordingly, the Company has adopted this Office of the Chairman Supplemental Compensation Program (this “Program”) in accordance with the resolutions (the “Resolutions”) adopted by the Board of Directors.

SECTION 2. ELIGIBILITY

     2.1 Each of Dennis Alter, Alex W. Hart and William A. Rosoff (each an “Employee”) shall be eligible to receive Supplemental Compensation if and only if all of the following conditions are met (and the Employee is not disqualified from eligibility pursuant to Section 2.2):

          (a) The Employee is an employee of the Company at the time a Change of Control occurs; and

          (b) The Employee is terminated from employment within three (3) years after the Change of Control occurs; unless such termination is: (1) because of the Employee’s Disability or Extended Leave of Absence or death, (2) because of the Employee’s Willful Misconduct, or (3) by the Employee other than for Good Reason. In the event an Employee’s employment is terminated for any reason prior to the occurrence of a Change of Control, he shall not be entitled to any benefits under this Program by virtue of said Change of Control.

               (i) If, as a result of an Employee’s incapacity due to physical or mental illness, or as a result of any other leave of absence, the Employee shall have been absent from the full-time performance of his duties for twelve (12) consecutive months after the date of a Change of Control, the Employee may be terminated and shall not be entitled to any benefits under this Program.

               (ii) If the employment of the Employee is terminated for the Willful Misconduct of the Employee, the Employee shall not be entitled to any benefits under this Program. Termination of the Employee’s employment for Willful Misconduct shall mean termination:

                    (A) Upon the willful and continued failure by the Employee to perform a material and substantial part of his duties which the Employee fails to cure (other than any such failure resulting from incapacity due to physical or mental illness or an Extended Leave of Absence or the Employee’s termination of his

employment for Good Reason), after thirty (30) days from a written demand for substantial performance is delivered to the Employee by the Company, which demand specifically identifies the manner in which the Company believes that the Employee has not substantially performed his duties; or

                    (B) Upon the commission by the Employee of a felony or of any act of willful fraud, misappropriation or dishonesty, in any case, provided that such act is materially injurious to the Company.

               (iii) The Employee shall be entitled to terminate his employment for Good Reason and receive Supplemental Compensation. The Employee’s right to terminate his own employment pursuant to this Subsection shall not be affected by his or incapacity due to physical or mental illness. The Employee’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason. “Good Reason” shall mean, without the Employee’s express prior written consent, the occurrence after a Change of Control of any of the following circumstances:

                    (A) The Employee is assigned any responsibilities less significant than, or duties inconsistent with the status or the position that, the Employee held immediately prior to the Change of Control or an adverse alteration in the nature or status of the Employee’s responsibilities or in the quality or function of office accommodations, amenities or assistance provided to the Employee, from those in effect immediately prior to such Change of Control;

                    (B) A reduction in any of the Employee’s compensation as in effect on the date immediately prior to the Change of Control, or as the same may be increased from time to time thereafter, including, without limitation, the Employee’s annual base salary;

                    (C) The Company’s requirement that the Employee’s site of principal employment be more than 50 miles from the offices at which the Employee was principally employed immediately prior to the date of the Change of Control, except for required travel on the Company’s business to an extent substantially consistent with the Employee’s business travel obligations immediately prior to such Change of Control;

                    (D) The failure by the Company to pay to the Employee any portion of his compensation or compensation under any deferred compensation program of the Company within fifteen (15) days of the date such compensation is due;

                    (E) The failure by the Company to continue in effect for the benefit of the Employee any benefit plan or perquisites in which the Employee participates immediately prior to the Change of Control, unless an equitable arrangement satisfactory to the Employee (embodied in an ongoing substitute or alternative plan) has been made in writing with and executed by the Employee with

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respect to such plan, or the failure by the Company to continue the Employee’s participation therein (or in such substitute or alternative plan) on a basis not less favorable, both in terms of the amount of benefits provided and the level of the Employee’s participation relative to other participants, than existed at the time of the Change of Control;

                    (F) The failure by the Company to continue to provide the Employee with benefits substantially similar to those enjoyed by him under any of the life insurance, medical, dental, accident or disability plans provided by the Company in which the Employee was participating at the time of the Change of Control, the taking of any action by the Company which would directly or indirectly reduce any of such benefits to the Employee, or the failure by the Company to provide the Employee with the number of paid vacation days or Paid Time Off days to which the Employee is entitled on the basis of his years of service and position with the Company in accordance with the vacation or Paid Time Off policy applicable and in effect at the time of the Change of Control;

                    (G) The failure of the Company to obtain the unqualified agreement from any successor to assume this Program pursuant to the provisions of Section 5.1 below; or

                    (H) Any material breach by the Company of the terms of this Program or any other employment, compensation or other similar agreement between the Employee and the Company;

          (c) For purposes of this Program, 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 assets of the Company (including, without limitation, stock of any of its wholly owned or majority-owned subsidiaries) which assets have an aggregate market value equal to 50% or more of the aggregate market value of either of (y) the total owned assets of the Company or (z) the total managed assets of the Company, in each such case, determined on a consolidated basis, or (iii) the date the stockholders of the Company (or the Board of Directors, if stockholder action is not required) approve a definitive agreement pursuant to which the Company would cease to have the exclusive power to manage assets of the Company or control all material decisions with respect to assets of the Company which assets, in either such case, have an aggregate market value equal to 50% or more of the aggregate market value of either of (y) the total owned assets of the Company or (z) the total managed assets of the Company, in each such case, determined on a consolidated basis, or (iv) 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

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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 (v) 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 (x) the Company or any of its subsidiaries or any trustee or other fiduciary holding securities under an employee benefit plan or related trust sponsored or maintained by the Company or any of its subsidiaries or any person acting on behalf of the Company as an underwriter pursuant to an offering who is temporarily holding securities in connection with such offering or (y) any person who, on the date this Program is effective, shall have been the beneficial owner of or have voting control over shares of Common Stock of the Company 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 (vi) the first day after the date this Program 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.

     2.2 An Employee may not receive Supplemental Compensation if, at the time of the Change of Control, the Employee is party to an agreement with the Company pursuant to which the Employee has agreed that his employment will terminate in the future on a date certain which is less than three years after the date of the Change of Control.

SECTION 3. SUPPLEMENTAL COMPENSATION AMOUNT

     3.1 The Supplemental Compensation to be paid to an eligible Employee shall be determined by the Compensation Committee of the Board of Directors of the Company (or if no such committee exists, the non-employee members of the Board of Directors); provided, however, that, subject to the terms of the Resolutions, the Supplemental Compensation to be paid to an eligible Employee shall in no event exceed five million dollars ($5,000,000.00) and shall be no less than three million dollars ($3,000,000.00). In making a determination with respect to the amount of Supplemental Compensation to be paid to an eligible Employee, all facts and circumstances surrounding the Change of Control shall be considered, including, without limitation, the economic value realized by the Company or its stockholders in the Change of Control, the efforts of the Employee in effecting the transaction resulting in the Change of Control and the leadership demonstrated by the Employee during the period between the effective date of this Program and the date of the Change of Control. The amount of Supplemental Compensation shall be determined prior to the date of the Change of Control; provided, however, that if because of the nature of the Change of Control the Compensation

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Committee of the Board does not have sufficient notice to determine the amount of the Supplemental Compensation prior to the Change of Control, then the amount of the Supplemental Compensation shall be determined by majority vote of the non-employee members of the Board of Directors of the Company who were members of the Board of Directors of the Company immediately prior to the Change of Control. Notwithstanding the foregoing, the Employee shall have the right, in his sole discretion, by notice to the Company, to reduce the amount of Supplemental Compensation (determined in the manner set forth above) which is payable to him.

     3.2 To the extent that a federal, state or local law requires the Company to make a payment to an Employee because of that Employee’s involuntary termination of employment and such payment is made to the Employee, the amount payable under this Program shall be correspondingly reduced by the net amount paid to the Employee. No other compensation, benefits or other amounts payable to an Employee shall reduce the amount payable under this Program, whether such amounts payable result from salary, bonus, deferred compensation, stock awards or other compensation during the term of his employment or unemployment compensation, short-term disability, worker’s compensation or long-term disability payments, if any, which may be paid to Employee after the Employee’s employment with the Company ceases. For the avoidance of doubt, to the extent that an Employee receives severance pay in connection with the cessation of his employment other than pursuant to this Program (whether pursuant to a contract or other severance plan or policy or any other benefit plan which is not a severance plan), the amount payable under this Program shall not be affected by any such payments.

SECTION 4. DISTRIBUTION OF PAYMENTS

     4.1 Payments will be made in a single lump sum payment or as may otherwise be specified by the Employee in his sole discretion. Such payment shall be made on the date upon which the Employee’s employment with the Company ceases and shall be made as designated by the Employee until all amounts due are paid in full.

     4.2 If any portion of the Supplemental Compensation to which an Employee is eligible pursuant to Section 2.1 has not been paid in full prior to the death of such Employee, the balance of such Supplemental Compensation shall be paid to the estate of such Employee.

     4.3 Prior to the date of the Change of Control, the Company will deposit in a “rabbi trust” established for the sole benefit of the Employees and in form and substance reasonably satisfactory to the Employees, the full amount of Supplemental Compensation which may become due to all Employees pursuant to this Program. If because of the nature of the Change of Control the Compensation Committee of the Board of Directors of the Company does not have sufficient notice to determine the amount of the Supplemental Compensation prior to the Change of Control, then as promptly after the Change of Control as practicable, the Company will deposit in the “rabbi trust” the full amount of Supplemental Compensation which may become due to all Employees pursuant to this Program. The amount of funds in the “rabbi trust” may be reduced by one dollar for each dollar of Supplemental Compensation paid to an Employee pursuant

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to the terms of this Program. Any funds remaining in the “rabbi trust” on the three year anniversary of the Change of Control which are not payable to an eligible Employee or his estate pursuant to the terms of this Program may be returned to the Company at any time after such anniversary.

SECTION 5. GENERAL PROVISIONS

     5.1 The effective date of this Program is May 22, 1997. If a Change of Control occurs, this Program may not be modified, amended or terminated until three (3) years after the Change of Control occurs. This Program shall be assumed by, and the obligations hereunder shall become the obligations of, any successor to the business and/or assets of Advanta Corp., whether by operation of law, or otherwise, and the term “Company” shall be deemed to mean such successor (other than in the definition of Change of Control set forth in Subsection 2.1(c)).

     5.2 To the extent not preempted by federal law, this Program and any and all disputes relating thereto shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania without giving effect to the principles of conflicts of law thereof.

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EX-10.DD

Exhibit 10-dd

ADVANTA SENIOR MANAGEMENT
CHANGE OF CONTROL SEVERANCE PLAN
RESTATED DECEMBER 21, 2000

SECTION 1. PURPOSE

     Advanta Corp. (the “Company”) considers it essential to its best interests to foster the optimum performance of senior management and professional personnel. The Company recognizes that the possibility of a Change in Control of the Company or any of its Subsidiaries may exist and that such possibility, and the uncertainty and questions which it may raise, may result in the distraction of management or professional personnel to the detriment of the Company and/or its Subsidiaries.

     In order to encourage senior management and professional personnel to maintain their continued attention and dedication to their duties and responsibilities, the Company and its Subsidiaries have adopted the Advanta Corp. Senior Management Change of Control Severance Plan.

SECTION 2. DEFINITIONS

     As hereinafter used:

     2.1 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

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is effective, shall have been the beneficial owner of or have voting control over shares of Common Stock of the Company 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.

     2.2(a) A “Subsidiary Change of Control” shall be deemed to have occurred if the Company or one of its wholly-owned or majority-owned subsidiaries (said subsidiary not necessarily being a “Subsidiary” as defined under Section 2.4 of this Plan) no longer hold any shares of the Subsidiary, or if substantially all of the assets of a particular Subsidiary are sold to an entity that is not owned or controlled, in whole or in part, by the Company or one of its wholly-owned or majority-owned subsidiaries.

          (b) A “ Subsidiary Change of Control” shall also be deemed to have occurred as of the Closing Date with respect to all Employees who either (i) are Buyer Employees, or (ii) are determined by the Company’s head of Human Resources to have been terminated by Advanta Corp. or a Subsidiary on the Closing Date or after the Closing Date as a direct result of a Subsidiary Change of Control.

     2.3 “Company” means Advanta Corp., and any successor to its business and/or assets which assumes and agrees or is otherwise obligated to provide benefits under the Plan by operation of law, or otherwise. Notwithstanding the foregoing, for purposes of Section 2.1 (“Change of Control”) or Section 2.2 (“Subsidiary Change of Control”), the “Company” shall mean “Advanta Corp.” The “Company” does not mean a Buyer.

     2.4 “Subsidiary” means Advanta National Bank; Advanta National Bank USA; Advanta Bank Corp.; Advanta Service Corp.; Advanta Mortgage Corp. USA; Advanta Auto Finance Corp.; Advanta Finance Corp.; Advanta Business Services Corp.; Advanta Financial Corp.; Advanta Life Insurance Company; Advanta Information Services, Inc.; Advanta Partners, LP; Colorado Credit Card Service, LLP; Advanta Mortgage Conduit Services, Inc.; Advanta Mortgage Corp., Midwest or any successor to any particular Subsidiary’s business and/or assets, due to a Change of Control or Subsidiary Change of Control, which assumes and agrees or is otherwise obligated to provide benefits under the Plan, by operation of law, or otherwise. A “Subsidiary” does not mean a Buyer. An Employee is employed by a specific Subsidiary if he or she: (a) is on the payroll of the specific Subsidiary or, in the case of Advanta National Bank or Advanta National Bank, USA is on the payroll of Advanta Service Corp. and performs services on a full-time basis for such bank; or (b) is an officer of the specific Subsidiary and exercises direct supervisory responsibility over employees of that specific Subsidiary and performs virtually all of his or her business duties on behalf of that specific Subsidiary.

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2.5	The “Effective Date” of the Plan is March 17, 1997.
2.6	The “Board of Directors” is the Board of Directors of the Company.
2.7	An “Employee” means a person

          (a) who has been selected by the Company’s Compensation Committee to participate in the Advanta Management Incentive Plan or who is otherwise selected to participate in this Plan; and

          (b) whose name is listed in Exhibits “A” or “B” hereto, as such Exhibits may be amended or supplemented from time to time; and

          (c) who is employed by the Company or a Subsidiary at the time of a change of a Change of Control or by a specific Subsidiary at the time it undergoes a Subsidiary Change of Control.

     The term “Employee” specifically excludes any person (a) who is receiving severance pay from the Company or any Subsidiary or (b) who signed an agreement pursuant to which his or her employment will terminate in the future on a date certain.

     2.8 “Pay” means the base salary of an eligible Employee at his or her stated weekly, monthly or annual rate as of the Employee’s Termination Date or at the time of the Change of Control or Subsidiary Change of Control pursuant to which the Employee becomes eligible for Severance Pay, whichever is higher. “Pay” does not include overtime pay, bonuses of any kind, incentive pay or any other remuneration. For Employees listed in Exhibit “A,” a “Week of Pay” shall be calculated in accordance with the regular payroll practices and procedures applicable immediately preceding the Change of Control of Subsidiary Change of Control. Notwithstanding the foregoing, for Employees listed in Exhibit “B,” a “Week of Pay” shall be calculated in the same manner as Employees listed in Exhibit “A”, multiplied by 200%.

     2.9 The “Plan” means the Advanta Corp. Senior Management Change of Control Severance Pay Plan as set forth herein as amended from time to time.

     2.10 “Termination Date” means the date upon which the Employee’s employment with the Company, Subsidiary or a Buyer ceases.

     2.11 The “Benefits Committee” means a committee composed of the Company’s head of Human Resources; head of Compensation and Benefits; and head of Employee Relations . Any two (2) such persons shall constitute a quorum. All members of the Benefits Committee must be employed by Advanta Corp. prior to the time a Change of Control occurs.

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     2.12 “Severance Pay” is a payment made to an eligible Employee pursuant to Section 3.1 hereof. All Severance Pay due to an eligible Employee must be paid to the eligible Employee within two (2) years of the date that the first Severance Pay is paid to that Employee and shall not exceed two (2) years’ of Pay.

     2.13 The “Compensation Committee” means the Compensation Committee of the Board of Directors of Advanta Corp.

     2.14 A “Buyer Employee” means an Employee who is designated in writing by the Company’s head of Human Resources as having become an employee of a Buyer pursuant to a Subsidiary Change of Control.

     2.15 A “Buyer” means an entity that: (a) is designated in writing by the Compensation Committee as having purchased substantially all of the assets of a Subsidiary; (b) is not owned or controlled, in whole or in part, by the Company or one of its wholly-owned or majority-owned Subsidiaries; and (c) does not adopt this Plan.

     2.16 The “Closing Date” means the date the transactions that are contemplated by an agreement with a Buyer and constitute a Subsidiary Change of Control close.

SECTION 3. ELIGIBILITY

     3.1 An Employee shall be eligible to receive Severance Pay if and only if all of the following conditions are met (and the Employee is not disqualified from eligibility pursuant to Section 3.2):

          (a) The Employee is an Employee of the Company or a Subsidiary after the Effective Date of the Plan; and

          (b) The Employee is a Buyer Employee or is employed by:

               (i) Advanta Corp. at the time a Change of Control occurs;

               (ii) Advanta National Bank, Advanta National Bank USA, Advanta Bank Corp.:Advanta Service Corp, Advanta Mortgage Corp. USA, Advanta Auto Finance Corp., Advanta Finance Corp., Advanta Business Services Corp., Advanta Financial Corp., Advanta Life Insurance Company, Advanta Information Services, Inc., Advanta Partners, LP, Colorado Credit Card Service, LLP, Advanta Mortgage Conduit Services, Inc., or Advanta Mortgage Corp., Midwest at the time a Change of Control occurs; provided that Advanta Corp. continues to hold at such time (directly or indirectly) more than fifty percent (50%) of the outstanding capital stock of the applicable entity; or

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               (iii) Advanta National Bank, Advanta National Bank USA; Advanta Bank Corp.; Advanta Service Corp., Advanta Mortgage Corp. USA, Advanta Auto Finance Corp., Advanta Finance Corp., Advanta Business Services Corp., Advanta Financial Corp., Advanta Life Insurance Company, Advanta Information Services, Inc., Advanta Partners, LP, Colorado Credit Card Service, LLP, Advanta Mortgage Conduit Services, Inc., or Advanta Mortgage Corp., Midwest at the time it undergoes a Subsidiary Change of Control; and

          (c) The Employee is terminated from employment by a Buyer within one (1) year after the Change of Control or Subsidiary Change of Control described in Section 2.1, 2.2(a) or 2.2(b) occurs, or by the Company or Subsidiary as a direct result of said Change of Control or Subsidiary Change of Control; unless such termination is: (1) because of the Employee’s death, disability, or Extended Leave of Absence, (2) because of the Employee’s Willful Misconduct, or (3) by the Employee other than for Good Reason. In the event a person’s employment is terminated for any reason prior to the occurrence of a Change of Control or a Subsidiary Change of Control, he or she shall not be entitled to any benefits under the Plan by virtue of said Change of Control or Subsidiary Change of Control. In the case of a termination by the Company or Subsidiary, eligibility will be established by a written designation of the Company’s head of Human Resources that the termination is a result of the Change of Control or Subsidiary Change of Control.

               (i) Disability or Extended Leave of Absence. If, as a result of an Employee’s incapacity due to physical or mental illness, or as a result of any other leave of absence, the Employee shall have been absent from the full-time performance of his or her duties for twelve (12) consecutive months, the Employee may be terminated and shall not be entitled to any benefits under the Plan.

               (ii) Willful Misconduct. Termination of the Employee’s employment for Willful Misconduct shall mean termination:

                    (a) Upon the willful and continued failure by the Employee to substantially perform his or her duties which the Employee fails to cure (other than any such failure resulting from incapacity due to physical or mental illness or an Extended Leave of Absence or the Employee’s termination of his or her employment for Good Reason (as defined in Subsection 3.1(c)(iii))), after ten (10) days from a written demand for substantial performance is delivered to the Employee by the Company or Subsidiary, by which he or she is employed, which demand specifically identifies the manner in which the Company or Subsidiary believes that the Employee has not substantially performed his or her duties; or

                    (b) The willful engaging by the Employee in conduct which is clearly and materially injurious to a Buyer, the Company and/or Subsidiary, monetarily or otherwise, as determined by the Benefits Committee, in its sole discretion under this Plan.

               (iii) Good Reason. The Employee shall be entitled to terminate his or her employment for Good Reason and receive Severance Pay, if the Employee provides written

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notice to the Benefits Committee no later than two weeks after the Employee’s termination date of the election to resign and the circumstances constituting the Good Reason to resign. The Employee’s right to terminate his or her own employment pursuant to this Subsection shall not be affected by his or her incapacity due to physical or mental illness. The Employee’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason. “Good Reason” shall mean, without the Employee’s express written consent, the occurrence after a Change in Control of the Company or a Subsidiary Change of Control with respect to the Subsidiary by which he or she was employed of any of the following circumstances:

                    (a) The Employee is demoted to a lower position;

                    (b) The Employee is assigned any duties inconsistent with the status of the position that the Employee held immediately prior to the Change of Control or Subsidiary Change of Control or an adverse alteration in the nature or status of the Employee’s responsibilities or in the quality or amount of office accommodations or assistance provided to the Employee, from those in effect immediately prior to such Subsidiary or Company Change of Control, which shall constitute a constructive demotion;

                    (c) A reduction in the Employee’s annual base salary as in effect on the date immediately prior to the Change of Control or Subsidiary Change of Control, or as the same may be increased from time to time thereafter;

                    (d) A Buyer’s, the Company’s or Subsidiary’s requirement that the Employee’s site of principal employment be more than 50 miles from the offices at which the Employee was principally employed immediately prior to the date of the Change of Control or Subsidiary Change of Control, except for required travel on a Buyer’s, the Company’s or Subsidiary’s business to an extent substantially consistent with the Employee’s business travel obligations immediately prior to such Change of Control or Subsidiary Change of Control;

                    (e) The failure by the Company or Subsidiary to pay the Employee any portion of his or her compensation or compensation under any deferred compensation program of the Company or Subsidiary within fifteen (15) days of the date such compensation is due;

                    (f) The failure by a Buyer, the Company or Subsidiary to continue in effect any compensation or benefit plan or perquisites in which the Employee participates immediately prior to the Change of Control or Subsidiary Change of Control, which is material to his or her total compensation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan or the failure by the Company or Subsidiary which experienced the Change in Control to continue the Employee’s participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of the Employee’s participation relative to other participants, than existed at the time of the Change of Control;

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                    (g) The failure by a Buyer, the Company or Subsidiary to continue to provide the Employee with benefits substantially similar to those enjoyed by him or her under any of the Company’s or Subsidiary’s life insurance, medical, dental, accident or disability plans in which the Employee was participating at the time of the Change of Control or Subsidiary Change of Control, the taking of any action by a Buyer, Company or Subsidiary which would directly or indirectly materially reduce any of such benefits, or the failure by a Buyer, Company or Subsidiary to provide the Employee with a reasonable amount of paid vacation or paid time off.

          (d) The Employee submits an application for benefits to the Company’s head of Human Resources within 15 business days of the cessation of his or her employment, stating the date of termination, describing the circumstances of the termination and the reasons he or she believes benefits are payable under the Plan and submits in a timely manner any additional information requested by the head of Human Resources, the Benefits Committee or either of their designees that is reasonably related to consideration of the Employee’s claim for benefits under the Plan; and

          (e) The Employee takes all actions required in a timely manner to apply for and receive severance or other termination benefits as may be available in connection with his or her employment after the Change of Control or Subsidiary Change of Control, including benefits from a Buyer; and

          (f) The Employee duly executes and provides to the Company within the time period specified by the Company a General Release satisfactory to the Company, which the Employee does not revoke in a timely manner, if a revocation provision is included in the Company’s sole discretion.

     3.2 An Employee may not receive Severance Pay if any of the following disqualifying events occur:

          (a) The Employee is receiving severance pay at the time the Change of Control or Subsidiary Change of Control occurs;

          (b) The Employee has previously received severance pay under this Plan in connection with a Subsidiary Change of Control resulting from an agreement or agreements between the Company and a Buyer or has received from a Buyer amounts equal to or greater than the amounts which would have been received under this Plan; or

          (c) The Employee has signed an agreement pursuant to which his or her employment will terminate in the future on a date certain.

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          (d) In the case of an Employee laid off or scheduled to be laid off by the Company or Subsidiary, the Employee posts for and receives a written offer for any position with the Company or Subsidiary without regard for the terms of the offer; or

          (e) In the case of an Employer laid off or scheduled to be laid off by the Company or Subsidiary, the Employee accepts employment (regardless of the terms of employment) with the Company or any Subsidiary or any Buyer.

SECTION 4. SEVERANCE BENEFIT AMOUNT

     4.1 Except as otherwise provided in this Section 4, the Severance Pay to be paid to an eligible Employee shall be based upon the Employee’s AMIP Level as follows: (a) Employees who are AMIP Level A will receive one hundred and four (104) Weeks of Pay; (b) Employees who are AMIP Level B shall receive one hundred and four (104) Weeks of Pay; (c) Employees who are AMIP Level C shall receive fifty-two (52) Weeks of Pay; and (d) Employees who are AMIP Level D shall receive thirty-nine (39) Weeks of Pay. An Employee’s AMIP Level is to be determined under AMIP as of the date the Change of Control occurs, as shown in Exhibit “A.”

     4.2 The Company, in its sole discretion, may increase the Severance Pay to an amount in excess of that specified in Section 4.1, subject to the limitations of Sections 2.12 and 4.6. Any increase in severance pay must be expressly authorized in writing by the head of Human Resources for the Company.

     4.3 If an Employee applies for and receives unemployment compensation payments for any period of time during or for which Severance Pay is being paid, any Severance Pay remaining to be paid shall not be reduced by the amount of any such unemployment compensation payments.

     4.4 If an Employee due to sickness or injury receives short-term disability payments, worker’s compensation or long-term disability payments after the Employee’s Termination Date, the Employee shall not receive any Severance Pay until the cessation of said payments. Once said payments cease, the amount of Severance Pay to which the Employee is entitled shall be reduced by the amount of any such short-term disability, worker’s compensation or long-term disability payments.

     4.5 The severance benefit provided for in the Plan is the maximum benefit that the Company or Subsidiary will pay for severance. To the extent that a federal, state or local law might require the Company or Subsidiary to make a payment to an Employee because of that Employee’s involuntary termination, the benefit payable under the Plan shall be correspondingly reduced. To the extent that an Employee receives, or with the exercise of reasonable diligence would be eligible to receive, severance pay or any other payment (excluding unemployment compensation) in connection with the cessation of his or her employment other than pursuant to this Plan (whether pursuant to a contract or other severance plan, policy or practice), the benefit

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payable under this Plan shall be correspondingly reduced. Any overpayments made under the Plan shall be promptly repaid after written request. Severance pay that will be offset does not include payments received by an Employee due to his or her participation in the Employee Savings Plan, Executive Deferral Plan, or any other Company or Subsidiary benefit plan which is not a severance plan, or payments made to an Employee for his or her accrued, but unused vacation or Paid Time Off days.

     4.6 If, at the time the Change of Control or Subsidiary Change of Control occurs, Section 280G(b) of the Internal Revenue Code of 1986, as amended (the “Code”) is applicable to the Employee, notwithstanding any other provision of this Plan, if the aggregate present value of the “parachute payments” to the Employee, determined under Section 280G(b) is at least three times the “base amount” determined under such Section 280G, then the compensation otherwise payable under this Plan (and any other amount payable hereunder or any other severance plan, program, policy or obligation of the Company, Subsidiary or any other affiliate thereof) shall be reduced so that the aggregate present value of the parachute payments to the Employee determined under Section 280G, does not exceed 2.99 times the base amount. In no event, however, shall any benefit provided hereunder be reduced to the extent such benefit is specifically excluded by Section 280G(b) of the Code as a “parachute payment” or as an “excess parachute payment.” Any decisions regarding the requirement or implementation of such reductions shall be made by the tax counsel and accounting firm retained by the Company at the time the Plan is adopted.

     4.7 The Company and each Subsidiary shall have the right to take such action as it deems necessary or appropriate to satisfy any requirements under federal, state or other laws to withhold or to make deductions from any benefits payable under the Plan.

SECTION 5. DISTRIBUTION OF BENEFITS

     5.1 The Company and any other entity adopting the Plan shall have exclusive liability for the payments of any benefits under the Plan with respect to all employees of the Company or any Subsidiary. No Buyer shall assume any liability under this Plan.

     5.2 The Company and each Subsidiary responsible for making the payments under the Plan will pay Severance Pay to each eligible Employee it employed, except as otherwise provided above, directly out of the general assets of the Company or Subsidiary. Payments will be made in a single lump sum payment or in installments in accordance with normal payroll practices, as elected by the Employee. Such payments shall commence as soon as practicable following the Employee’s Termination Date and continue until the benefit due is paid.

     5.3 Any and all payment of Severance Pay shall immediately cease to an Employee who is disqualified for benefits by reason of Section 3.2(d) or 3.2(e) of the Plan.

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     5.4 Severance Pay shall be paid to the estate of any eligible Employee who dies before the entire amount due hereunder is paid.

SECTION 6. PLAN ADMINISTRATION

     6.1 The Plan shall be administered by the Benefits Committee, which shall have complete authority to prescribe, amend and rescind rules and regulations relating to the Plan.

     6.2 The determinations by the Benefits Committee on the matters referred to such Committee shall be conclusive. The Benefits Committee shall have full discretionary authority, the maximum discretion allowed by law, to administer, interpret and apply the terms of this Plan, and determine any and all questions or disputes hereunder, including but not limited to eligibility for benefits and the amount of benefits due. Subsequent to a Change of Control, but not a Subsidiary Change of Control, the Benefits Committee shall not have full discretionary authority; its determinations shall be made strictly in accordance with the terms of the Plan and shall be subject to de novo review by a court of competent jurisdiction.

     6.3 In the event of a claim by any person including but not limited to any Employee (the “Claimant”) as to whether he is entitled to any benefit under the Plan, the amount of any distribution or its method of payment, such Claimant shall present the reason for his or her claim in writing to the Benefits Committee. The claim must be filed within forty-five (45) days following the date upon which the Claimant first learns of his claim. All claims shall be in writing, signed and dated and shall briefly explain the basis for the claim. The claim shall be mailed to the Benefits Committee by certified mail at the following address: Advanta Corp., Welsh and McKean Roads, Spring House, PA 19477. The Benefits Committee shall, within ninety (90) days after receipt of such written claim, decide the claim and send written notification to the Claimant as to its disposition; provided that the Benefits Committee may elect to extend said period for an additional ninety (90) days if special circumstances so warrant and the Claimant is so notified in writing prior to the expiration of the original ninety (90) day period. In the event the claim is wholly or partially denied, such written notification shall (a) state the specific reason or reasons for the denial; (b) make specific reference to pertinent Plan provisions on which the denial is based; (c) provide a description of any additional material or information necessary for the Claimant to perfect the claim and an explanation of why such material or information is necessary; and (d) set forth the procedure by which the Claimant may appeal the denial of his or her claim. The Claimant may request a review of such denial by making application in writing to the Benefits Committee within sixty (60) days after receipt of such denial. Said application must be via certified mail. Such Claimant (or his or her duly authorized representative) may, upon written request to the Benefits Committee, review any documents pertinent to his or her claim, and submit in writing issues and comments in support of his or her claim or position. Within sixty (60) days after receipt of a written appeal, the Benefits Committee shall decide the appeal and notify the Claimant of the final decision; provided that the Benefits Committee may elect to extend said sixty (60) day period to up to one hundred twenty (120) days after receipt of the written appeal. The final decision shall be in writing and shall

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include specific reasons for the decision, written in a manner calculated to be understood by the Claimant, and specific references to the pertinent Plan provisions on which the decision is based.

SECTION 7. PLAN MODIFICATION OR TERMINATION

     7.1 The Plan may be modified, amended or terminated at any time by the Compensation Committee of the Board of Directors, the Board of Directors, or its designee, with or without notice. Any such modification, amendment or termination shall be effective at such date as the Compensation Committee, the Board of Directors or its designee may determine. If a Change of Control occurs, the Plan may not be modified, amended or terminated until one (1) year after the Change of Control occurs.

     7.2 All claims for benefits hereunder, even if raised after termination of the Plan, shall be determined pursuant to Section 6.3, and when acting pursuant thereto, the Benefits Committee shall retain the authority provided in Section 6. Notwithstanding any termination of the Plan, all Employees who are eligible before the date of termination to receive Severance Pay pursuant to this Plan shall remain entitled to receive said benefit under the terms and conditions of this Plan.

     7.3 On January 1, 2003, the terms of the Plan as amended and restated on December 21, 2000 shall cease to be in effect and shall automatically revert to the terms in the Plan as originally adopted effective March 17, 1997, except for sections 6 and 7, which shall remain as amended and restated on December 21, 2000.

SECTION 8. GENERAL PROVISIONS

     8.1 Nothing herein contained shall be deemed to give any Employee the right to be retained in the employ of the Company and/or any Subsidiary or to interfere with the right of the Company and/or Subsidiary to discharge him or her at any time, with or without cause.

     8.2 If any of the positions on the Benefits Committee becomes vacant, either the Chairman of the Board or President may appoint such person or persons as he or she determines, to carry out the responsibilities assigned to such position under this Plan, so long as such person was employed by Advanta Corp. prior to a Change of Control.

     8.3 Except as otherwise provided by law, no right or interest of any Employee under the Plan shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including without limitation by execution, levy, garnishment, attachment, pledge or in any other manner, but excluding adjudication of incompetency; no attempted assignment or transfer thereof shall be effective; and no right or interest of any Employee under the Plan shall be liable for, or subject to, any obligation or liability of such Employee, except to the extent specifically provided for herein.

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     8.4 The Plan is unfunded. All benefits payable under the Plan shall be paid out of the general assets of the entity which employed the Employee at the time the Change of Control or Subsidiary Change of Control pursuant to which he or she is eligible for benefits hereunder.

     8.5 The Plan shall be governed by and construed in accordance with the Employee Retirement Income Security Act of 1974, as amended, and to the extent not preempted, the laws of the Commonwealth of Pennsylvania.

     8.6 The Plan is intended to constitute a “welfare plan” under the Employee Retirement Income Security Act of 1974, as amended, and any ambiguities in the Plan shall be construed to effect that intent.

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EX-10.EE

Exhibit 10-ee

ADVANTA
SENIOR MANAGEMENT CHANGE OF CONTROL SEVERANCE PLAN

SECTION 1. PURPOSE

     Advanta Corp. (the “Company”) considers it essential to its best interests to foster the optimum performance of senior management and professional personnel. The Company recognizes that the possibility of a Change in Control of the Company or any of its Subsidiaries may exist and that such possibility, and the uncertainty and questions which it may raise, may result in the distraction of management or professional personnel to the detriment of the Company and/or its Subsidiaries.

     In order to encourage senior management and professional personnel to maintain their continued attention and dedication to their duties and responsibilities, the Company and its Subsidiaries have adopted the Advanta Corp. Senior Management Change of Control Severance Plan.

SECTION 2. DEFINITIONS

     As hereinafter used:

     2.1 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 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.

     2.2 A “Subsidiary Change of Control” shall be deemed to have occurred if the Company or one of its wholly-owned or majority-owned subsidiaries (said subsidiary not necessarily being a “Subsidiary” as defined under Section 2.4 of this Plan) no longer hold any shares of the Subsidiary, or if substantially all of the assets of a particular Subsidiary are sold to an entity that is not owned or controlled, in whole or in part, by the Company or one of its wholly-owned or majority-owned subsidiaries.

     2.3 “Company” means Advanta Corp., and any successor to its business and/or assets which assumes and agrees or is otherwise obligated to provide benefits under the Plan by operation of law, or otherwise. Notwithstanding the foregoing, for purposes of Section 2.1 (“Change of Control”) or Section 2.2 (“Subsidiary Change of Control”), the “Company” shall mean “Advanta Corp.”

     2.4 Subsidiary means Advanta National Bank; Advanta National Bank USA; Advanta Service Corp.; Advanta Mortgage Corp. USA; Advanta Auto Finance Corp.; Advanta Finance Corp.; Advanta Business Services Corp.; Advanta Financial Corp.; Advanta Life Insurance Company; Advanta Information Services, Inc.; Advanta Partners, LP; Colorado Credit Card Service, LLP; Advanta Mortgage Conduit Services, Inc.; Advanta Mortgage Corp., Midwest or any successor to any particular Subsidiary’s business and/or assets, due to a Change of Control or Subsidiary Change of Control, which assumes and agrees or is otherwise obligated to provide benefits under the Plan, by operation of law, or otherwise. An Employee is employed by a specific Subsidiary if he or she: (a) is on the payroll of the specific Subsidiary or, in the case of Advanta National Bank or Advanta National Bank, USA is on the payroll of Advanta Service Corp. and performs services on a full-time basis for such bank; or (b) is an officer of the

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specific Subsidiary and exercises direct supervisory responsibility over employees of that specific Subsidiary and performs virtually all of his or her business duties on behalf of that specific Subsidiary.

     2.5 The “Effective Date” of the Plan is March 17, 1997.

     2.6 The “Board of Directors” is the Board of Directors of the Company.

     2.7 An “Employee” means a person

          (a) who has been selected by the Company’s Compensation Committee to participate in the Advanta Management Incentive Plan or who is otherwise selected to participate in this Plan; and

          (b) whose name is listed in Exhibits “A” or “B” hereto, as such Exhibits may be amended or supplemented from time to time; and

          (c) who is employed by the Company or a Subsidiary at the time of a change of a Change of Control or by a specific Subsidiary at the time it undergoes a Subsidiary Change of Control.

     The term “Employee” specifically excludes any person (a) who is receiving severance pay or (b) who signed an agreement pursuant to which his or her employment will terminate in the future on a date certain.

     2.8 “Pay” means the base salary of an eligible Employee at his or her stated weekly, monthly or annual rate as of the Employee’s Termination Date. “Pay” does not include overtime pay, bonuses of any kind, incentive pay or any other remuneration. For Employees listed in Exhibit “A,” a “Week of Pay” shall be calculated in accordance with the regular payroll practices and procedures applicable immediately preceding the Change of Control of Subsidiary Change of Control. Notwithstanding the foregoing, for Employees listed in Exhibit “B,” a Week of Pay shall be calculated by multiplying by 75% the base salary plus the incentive pay the Employee has earned while in the employ of the Company during the twelve months immediately preceding the Employee’s termination and dividing the resulting amount by thirty-nine. If said Employee has been employed by the Company for less than 12 months, the average base salary plus incentive pay the Employee has earned per month of employment will be multiplied by 12. The sum will be multiplied by 75% and then divided by 39 in order to determine a “Week of Pay.”

     2.9 The “Plan” means the Advanta Corp. Senior Management Change of Control Severance Pay Plan as set forth herein as amended from time to time.

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     2.10 “Termination Date” means the date upon which the Employee’s employment with the Company or Subsidiary ceases.

     2.11 The “Benefits Committee” means a committee composed of the Company’s Senior Vice President of Human Resources; Director of Compensation; and Director of Benefits. Any two (2) such persons shall constitute a quorum. All members of the Benefits Committee must be employed by Advanta Corp. prior to the time a Change of Control occurs.

     2.12 “Severance Pay” is a payment made to an eligible Employee pursuant to Section 3.1 hereof. All Severance Pay due to an eligible Employee must be paid to the eligible Employee within two (2) years of the date that the first Severance Pay is paid to that Employee and shall not exceed two (2) years’ of Pay.

SECTION 3. ELIGIBILITY

     3.1 An Employee shall be eligible to receive Severance Pay if and only if all of the following conditions are met (and the Employee is not disqualified from eligibility pursuant to Section 3.2):

          (a) The Employee is an Employee of the Company or a Subsidiary after the Effective Date of the Plan; and

          (b) The Employee is employed by:

               (i) Advanta Corp. at the time a Change of Control occurs;

               (ii) Advanta National Bank, Advanta National Bank USA, Advanta Service Corp, Advanta Mortgage Corp. USA, Advanta Auto Finance Corp., Advanta Finance Corp., Advanta Business Services Corp., Advanta Financial Corp., Advanta Life Insurance Company, Advanta Information Services, Inc., Advanta Partners, LP, Colorado Credit Card Service, LLP, Advanta Mortgage Conduit Services, Inc., or Advanta Mortgage Corp., Midwest at the time a Change of Control occurs; provided that Advanta Corp. continues to hold at such time (directly or indirectly) more than fifty percent (50%) of the outstanding capital stock of the applicable entity; or

               (iii) Advanta National Bank, Advanta National Bank USA; Advanta Service Corp., Advanta Mortgage Corp. USA, Advanta Auto Finance Corp., Advanta Finance Corp., Advanta Business Services Corp., Advanta Financial Corp., Advanta Life Insurance Company, Advanta Information

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Services, Inc., Advanta Partners, LP, Colorado Credit Card Service, LLP, Advanta Mortgage Conduit Services, Inc., or Advanta Mortgage Corp., Midwest at the time it undergoes a Subsidiary Change of Control; and

          (c) The Employee is terminated from employment within one (1) year after the Change of Control or Subsidiary Change of Control described in Section 3.1(b) occurs; unless such termination is: (1) because of the Employee’s death, disability, or Extended Leave of Absence, (2) because of the Employee’s Willful Misconduct, or (3) by the Employee other than for Good Reason. In the event a person’s employment is terminated for any reason prior to the occurrence of a Change of Control or a Subsidiary Change of Control, he or she shall not be entitled to any benefits under the Plan by virtue of said Change of Control or Subsidiary Change of Control.

               (i) Disability or Extended Leave of Absence. If, as a result of an Employee’s incapacity due to physical or mental illness, or as a result of any other leave of absence, the Employee shall have been absent from the full-time performance of his or her duties for twelve (12) consecutive months, the Employee may be terminated and shall not be entitled to any benefits under the Plan.

               (ii) Willful Misconduct. Termination of the Employee’s employment for Willful Misconduct shall mean termination:

                    (a) Upon the willful and continued failure by the Employee to substantially perform his or her duties which the Employee fails to cure (other than any such failure resulting from incapacity due to physical or mental illness or an Extended Leave of Absence or the Employee’s termination of his or her employment for Good Reason (as defined in Subsection 3.1(c)(iii))), after ten (10) days from a written demand for substantial performance is delivered to the Employee by the Company or Subsidiary, by which he or she is employed, which demand specifically identifies the manner in which the Company or Subsidiary believes that the Employee has not substantially performed his or her duties; or

                    (b) The willful engaging by the Employee in conduct which is clearly and materially injurious to the Company and/or Subsidiary, monetarily or otherwise. For purposes of this subsection, no act, or failure to act, on the Employee’s part shall be deemed “willful” unless done, or omitted to be done, by the Employee in bad faith and without reasonable belief that his or her action or omission was in or not opposed to the best interest of the Company and/or Subsidiary.

                    (c) Notwithstanding the foregoing, the Employee shall not be deemed to have been terminated for Willful Misconduct

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unless and until there shall have been delivered to the Employee a copy of a written determination of the Benefits Committee issued pursuant to a meeting of the Benefits Committee (after reasonable notice to the Employee and an opportunity for the Employee, together with his or her counsel, to be heard before the Benefits Committee) finding that in the good faith opinion of the Benefits Committee the Employee was guilty of conduct set forth above in this Subsection 3.1(c)(ii) and specifying the particulars thereof in detail.

               (iii) Good Reason. The Employee shall be entitled to terminate his or her employment for Good Reason and receive Severance Pay, if the Employee provides written notice to the Benefits Committee no later than two weeks after the Employee’s termination date of the election to resign and the circumstances constituting the Good Reason to resign. The Employee’s right to terminate his or her own employment pursuant to this Subsection shall not be affected by his or her incapacity due to physical or mental illness. The Employee’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason. “Good Reason” shall mean, without the Employee’s express written consent, the occurrence after a Change in Control of the Company or a Subsidiary Change of Control with respect to the Subsidiary by which he or she was employed of any of the following circumstances:

                    (a) The Employee is demoted to a lower position;

                    (b) The Employee is assigned any duties inconsistent with the status of the position that the Employee held immediately prior to the Change of Control or Subsidiary Change of Control or an adverse alteration in the nature or status of the Employee’s responsibilities or in the quality or amount of office accommodations or assistance provided to the Employee, from those in effect immediately prior to such Subsidiary or Company Change of Control, which shall constitute a constructive demotion;

                    (c) A reduction in the Employee’s annual base salary as in effect on the date immediately prior to the Change of Control or Subsidiary Change of Control, or as the same may be increased from time to time thereafter;

                    (d) The Company’s or Subsidiary’s requirement that the Employee’s site of principal employment be more than 50 miles from the offices at which the Employee was principally employed immediately prior to the date of the Change of Control or Subsidiary Change of Control, except for required travel on the Company’s or Subsidiary’s business to an extent substantially consistent with the Employee’s business travel obligations immediately prior to such Change of Control or Subsidiary Change of Control;

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                    (e) The failure by the Company or Subsidiary to pay to the Employee any portion of his or her compensation or compensation under any deferred compensation program of the Company or Subsidiary within fifteen (15) days of the date such compensation is due;

                    (f) The failure by the Company or Subsidiary to continue in effect any compensation or benefit plan or perquisites in which the Employee participates immediately prior to the Change of Control or Subsidiary Change of Control, which is material to his or her total compensation, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company or Subsidiary which experienced the Change in Control to continue the Employee’s participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of the Employee’s participation relative to other participants, than existed at the time of the Change of Control;

                    (g) The failure by the Company or Subsidiary to continue to provide the Employee with benefits substantially similar to those enjoyed by him or her under any of the Company’s or Subsidiary’s life insurance, medical, dental, accident or disability plans in which the Employee was participating at the time of the Change of Control or Subsidiary Change of Control, the taking of any action by the Company or Subsidiary which would directly or indirectly materially reduce any of such benefits, or the failure by the Company or Subsidiary to provide the Employee with the number of paid vacation days or Paid Time Off days to which the Employee is entitled on the basis of his or her years of service and position with the Company or Subsidiary in accordance with the vacation or Paid Time Off policy applicable and in effect at the time of the Change of Control or Subsidiary Change of Control;

                    (h) The failure of the Company or Subsidiary to obtain the unqualified agreement from any successor to assume or adopt this Plan; or

                    (i) Any termination of the Employee’s employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Subsection 3.1(c)(iv) hereof (and, if applicable, the requirements of Subsection 3.1(c)(ii) hereof);

               (iv) Any purported termination of Employee’s employment by the Company or the Subsidiary or by the Employee shall be communicated by written Notice of Termination to the other party. “Notice of Termination” shall mean a notice that shall indicate the specific termination provision in the Plan relied upon and shall set forth in reasonable detail the facts

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and circumstances claimed to provide a basis for termination of Employee’s employment under the provision so indicated. The Notice to the Company or the Subsidiary (if only the Subsidiary has experienced a Change of Control) shall be to the Benefits Committee. All such notices shall be sent (i) by certified or registered mail and shall be deemed received three (3) business days after the date of mailing; (ii) by Federal Express or similar overnight courier and shall be deemed received one (1) business day after delivery to Federal Express or similar overnight courier; or (iii) by personal service and shall be deemed received on the same day as service.

     3.2 An Employee may not receive Severance Pay if any of the following disqualifying events occur:

          (a) The Employee is receiving severance pay at the time the Change of Control or Subsidiary Change of Control occurs or has previously received severance pay under this Plan;

          (b) The Employee has signed an agreement pursuant to which his or her employment will terminate in the future on a date certain; or

          (c) The Employee is not employed by the specific Subsidiary at the time it undergoes a Subsidiary Change of Control and neither the Company nor the Specific Subsidiary that he or she is employed by undergoes a Change of Control prior to the termination of his or her employment.

SECTION 4. SEVERANCE BENEFIT AMOUNT

     4.1 Except as otherwise provided in this Section 4, the Severance Pay to be paid to an eligible Employee shall be based upon the Employee’s AMIP Level as follows: (a) Employees who are AMIP Level A will receive one hundred and four (104) Weeks of Pay; (b) Employees who are AMIP Level B shall receive one hundred and four (104) Weeks of Pay; (c) Employees who are AMIP Level C shall receive fifty-two (52) Weeks of Pay; and (d) Employees who are AMIP Level D shall receive thirty-nine (39) Weeks of Pay. An Employee’s AMIP Level is to be determined under AMIP as of the date the Change of Control occurs, as shown in Exhibit “A.”

     4.2 The Company, in its sole discretion, may increase the Severance Pay to an amount in excess of that specified in Section 4.1, subject to the limitations of Sections 2.12 and 4.6. Any increase in severance pay must be expressly authorized in writing by the Senior Vice President, Human Resources.

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     4.3 If an Employee applies for and receives unemployment compensation payments for any period of time during or for which Severance Pay is being paid, any Severance Pay remaining to be paid shall not be reduced by the amount of any such unemployment compensation payments.

     4.4 If an Employee due to sickness or injury receives short-term disability payments, worker’s compensation or long-term disability payments after the Employee’s Termination Date, the Employee shall not receive any Severance Pay until the cessation of said payments. Once said payments cease, the amount of Severance Pay to which the Employee is entitled shall be reduced by the amount of any such short-term disability, worker’s compensation or long-term disability payments.

     4.5 The severance benefit provided for in the Plan is the maximum benefit that the Company or Subsidiary will pay for severance. To the extent that a federal, state or local law might require the Company or Subsidiary to make a payment to an Employee because of that Employee’s involuntary termination, the benefit payable under the Plan shall be correspondingly reduced. To the extent that an Employee receives severance pay in connection with the cessation of his or her employment other than pursuant to this Plan (whether pursuant to a contract or other severance plan or policy), the benefit payable under this Plan shall be correspondingly reduced. Any overpayments made under the Plan shall be promptly repaid after written request. Severance pay that will be offset does not include payments received by an Employee due to his or her participation in the Employee Savings Plan, Executive Deferral Plan, or any other benefit plan which is not a severance plan, or payments made to an Employee for his or her accrued, but unused vacation or Paid Time Off days.

     4.6 If, at the time the Change of Control or Subsidiary Change of Control occurs, Section 280G(b) of the Internal Revenue Code of 1986, as amended (the “Code”) is applicable to the Employee, notwithstanding any other provision of this Plan, if the aggregate present value of the “parachute payments” to the Employee, determined under Section 280G(b) is at least three times the “base amount” determined under such Section 280G, then the compensation otherwise payable under this Plan (and any other amount payable hereunder or any other severance plan, program, policy or obligation of the Company, Subsidiary or any other affiliate thereof) shall be reduced so that the aggregate present value of the parachute payments to the Employee determined under Section 280G, does not exceed 2.99 times the base amount. In no event, however, shall any benefit provided hereunder be reduced to the extent such benefit is specifically excluded by Section 280G(b) of the Code as a “parachute payment” or as an “excess parachute payment.” Any decisions regarding the requirement or implementation of such reductions shall be made by the tax

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counsel and accounting firm retained by the Company at the time the Plan is adopted.

     4.7 The Company and each Subsidiary shall have the right to take such action as it deems necessary or appropriate to satisfy any requirements under federal, state or other laws to withhold or to make deductions from any benefits payable under the Plan.

SECTION 5. DISTRIBUTION OF BENEFITS

     5.1 The Company and each Subsidiary will pay Severance Pay to each eligible Employee it employed directly out of the general assets of the Company or Subsidiary. Payments will be made in a single lump sum payment or in installments in accordance with normal payroll practices, as elected by the Employee. Such payments shall commence as soon as practicable following the Employee’s Termination Date and continue until the benefit due is paid.

     5.2 Severance Pay shall be paid to the estate of any eligible Employee who dies before the entire amount due hereunder is paid.

SECTION 6. PLAN ADMINISTRATION

     6.1 The Plan shall be administered by the Benefits Committee, which shall have complete authority to prescribe, amend and rescind rules and regulations relating to the Plan.

     6.2 The determinations by the Benefit Committee prior to a Change of Control on the matters referred to such Committee shall be conclusive. Prior to a Change of Control, the Benefits Committee shall have full discretionary authority, the maximum discretion allowed by law, to administer, interpret and apply the terms of this Plan, and determine any and all questions or disputes hereunder, including but not limited to eligibility for benefits and the amount of benefits due. Subsequent to a Change of Control the Benefits Committee shall not have full discretionary authority; its determinations shall be made strictly in accordance with the terms of the Plan and shall be subject to de novo review by a court of competent jurisdiction.

     6.3 In the event of a claim by any person including but not limited to any Employee (the “Claimant”) as to whether he is entitled to any benefit under the Plan, the amount of any distribution or its method of payment, such Claimant shall present the reason for his or her claim in writing to the Benefits Committee. The claim must be filed within forty-five (45) days following the date upon which the Claimant first learns of his claim. All claims shall be in

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writing, signed and dated and shall briefly explain the basis for the claim. The claim shall be mailed to the Benefits Committee by certified mail at the following address: Advanta Corp., Welsh and McKean Roads, Spring House, PA 19477. The Benefits Committee shall, within ninety (90) days after receipt of such written claim, decide the claim and send written notification to the Claimant as to its disposition; provided that the Benefits Committee may elect to extend said period for an additional ninety (90) days if special circumstances so warrant and the Claimant is so notified in writing prior to the expiration of the original ninety (90) day period. In the event the claim is wholly or partially denied, such written notification shall (a) state the specific reason or reasons for the denial; (b) make specific reference to pertinent Plan provisions on which the denial is based; (c) provide a description of any additional material or information necessary for the Claimant to perfect the claim and an explanation of why such material or information is necessary; and (d) set forth the procedure by which the Claimant may appeal the denial of his or her claim. The Claimant may request a review of such denial by making application in writing to the Benefits Committee within sixty (60) days after receipt of such denial. Said application must be via certified mail. Such Claimant (or his or her duly authorized representative) may, upon written request to the Benefits Committee, review any documents pertinent to his or her claim, and submit in writing issues and comments in support of his or her claim or position. Within sixty (60) days after receipt of a written appeal, the Benefits Committee shall decide the appeal and notify the Claimant of the final decision; provided that the Benefits Committee may elect to extend said sixty (60) day period to up to one hundred twenty (120) days after receipt of the written appeal. The final decision shall be in writing and shall include specific reasons for the decision, written in a manner calculated to be understood by the Claimant, and specific references to the pertinent Plan provisions on which the decision is based.

SECTION 7. PLAN MODIFICATION OR TERMINATION

     7.1 Prior to a Change of Control or Subsidiary Change of Control, the Plan may be modified, amended or terminated at any time by the Compensation Committee of the Board of Directors, the Board of Directors, or its designee, with or without notice. Any such modification, amendment or termination shall be effective at such date as the Compensation Committee, the Board of Directors or its designee may determine.

     7.2 If a Change of Control occurs, the Plan may not be modified, amended or terminated until one (1) year after the Change of Control occurs. If a Subsidiary Change of Control occurs, the Plan may not be modified, amended or terminated with respect to the Employees employed by the specific Subsidiary with respect to which the Subsidiary Change of Control has occurred, until one (1) year thereafter.

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     7.3 All claims for benefits hereunder, even if raised after termination of the Plan, shall be determined pursuant to Section 6.3, and when acting pursuant thereto, the Benefits Committee shall retain the authority provided in Section 6. Notwithstanding any termination of the Plan, all Employees who are eligible before the date of termination to receive Severance Pay pursuant to this Plan shall remain entitled to receive said benefit under the terms and conditions of this Plan.

SECTION 8. GENERAL PROVISIONS

     8.1 Nothing herein contained shall be deemed to give any Employee the right to be retained in the employ of the Company and/or any Subsidiary or to interfere with the right of the Company and/or Subsidiary to discharge him or her at any time, with or without cause.

     8.2 If any of the positions on the Benefits Committee becomes vacant, either the Chairman of the Board or President may appoint such person or persons as he or she determines, to carry out the responsibilities assigned to such position under this Plan, so long as such person was employed by Advanta Corp. prior to a Change of Control.

     8.3 Except as otherwise provided by law, no right or interest of any Employee under the Plan shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including without limitation by execution, levy, garnishment, attachment, pledge or in any other manner, but excluding adjudication of incompetency; no attempted assignment or transfer thereof shall be effective; and no right or interest of any Employee under the Plan shall be liable for, or subject to, any obligation or liability of such Employee, except to the extent specifically provided for herein.

     8.4 The Plan is unfunded. All benefits payable under the Plan shall be paid out of the general assets of the entity which employed the Employee at the time the Change of Control or Subsidiary Change of Control pursuant to which he or she is eligible for benefits hereunder.

     8.5 The Plan shall be governed by and construed in accordance with the Employee Retirement Income Security Act of 1974, as amended, and to the extent not preempted, the laws of the Commonwealth of Pennsylvania.

     8.6 The Plan is intended to constitute a “welfare plan” under the Employee Retirement Income Security Act of 1974, as amended, and any ambiguities in the Plan shall be construed to effect that intent.

-12-

EX-12

Exhibit 12

ADVANTA CORP. AND SUBSIDIARIES

Statement setting forth details of computation of ratio
of earnings to fixed charges

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

($ in thousands)	For the years Ended December 31,
	2004			2003			2002			2001			2000
Income (loss) from continuing operations	$	44,273		$	30,213		$	(15,572	)	$	(30,456	)	$	11,192
Income tax expense (benefit)		28,034			18,913			17,170			(11,995	)		0
Earnings (loss) before income tax expense (benefit)		72,307			49,126			1,598	(1)		(42,451	) (2)		11,192
Fixed charges:
Interest on debt, deposits and other borrowings		36,419			48,308			47,580			82,470			86,508
Interest on subordinated debt payable to preferred securities trust (3)		9,158			0			0			0			0
One-third of all rentals		1,827			2,136			1,822			1,736			1,853
Preferred stock dividend of subsidiary trust (3)		0			8,990			8,990			8,990			8,990
Total fixed charges		47,404			59,434			58,392			93,196			97,351
Earnings before income tax expense (benefit) and fixed charges	$	119,711		$	108,560		$	59,990		$	50,745		$	108,543
Ratio of earnings to fixed charges (4)		2.53	x		1.83	x		1.03	x		N/M	(5)		1.11	x

(1)	Earnings before income taxes in 2002 included a charge of $43.0 million related to a ruling in the litigation associated with the transfer of our consumer credit card business in 1998.
(2)	Earnings before income taxes in 2001 included $41.8 million of unusual charges. Unusual charges included severance, outplacement and other compensation costs associated with restructuring our corporate functions commensurate with the ongoing businesses as well as expenses associated with exited businesses and asset impairments.
(3)	Our adoption of FIN 46, as revised, resulted in the deconsolidation of the subsidiary trust that issued our trust preferred securities effective December 31, 2003. As a result of the deconsolidation of that trust, the consolidated income statement includes interest expense on subordinated debt payable to preferred securities trust beginning January 1, 2004, as compared to periods through December 31, 2003 that included payments on the trust preferred securities classified as minority interest in income of consolidated subsidiary.
(4)	For purposes of computing these ratios, “earnings” represent income (loss) from continuing operations before income taxes plus fixed charges. “Fixed charges” consist of interest expense, one-third (the portion deemed representative of the interest factor) of rental expense on operating leases, and preferred stock dividends of subsidiary trust.
(5)	The ratio calculated in the year ended December 31, 2001 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 $42,451 for the year ended December 31, 2001.

EX-21

EXHIBIT 21

CURRENT LIST OF SUBSIDIARIES OF REGISTRANT

Advanta Corp. (DE)

Advanta National Corp. (DE)

Advanta National Bank

Advanta Bank Corp. (UT)

Advanta Business Receivables Corp. (NV)

Advanta GP Corp. (DE)

Advanta Partners LP (PA)
Advanta 101 GP Corp. (DE)
Advanta Partners 101 LP (PA)

Advanta GP II Corp. (DE)
Advanta GCF GP Corp. (DE)

Advanta Growth Capital Fund LP (DE)

Advanta Investment Corp. (DE)
Advanta Investment Corp. II (DE)

E-Commerce Investments, Inc.

Advanta Information Services, Inc. (DE)
Advanta International Corporation I (DE)
Advanta International Corporation II (DE)
Advanta Business Services Holding Corp. (DE)

Advanta Business Services Corp. (DE)

Advanta Leasing Receivables Corp. (DE)
Advanta Leasing Receivables Corp. II (DE)
Advanta Leasing Receivables Corp. III (NV)
Advanta Leasing Receivables Corp. IV (NV)
Advanta Leasing Receivables Corp. VI (NV)
Advanta Leasing Receivables Corp. VIII (NV)
Advanta Commercial Credit Corp. (NV)
Mt. Vernon Leasing, Inc. (NJ)

Advanta Service Corp. (DE)
Advanta Shared Services Corp. (DE)
Advanta Capital LLC (DE)
Coltex Leverage Lease Corporation I (DE)
TSLL Jedobert Cal, Inc. (DE)
Advanta Properties I Corp. (PA)
Advanta Properties II Corp. (PA)
Advanta Insurance Company (AZ)

Advanta Life Insurance Company (AZ)
Advanta Insurance Agency Inc. (DE)
First Advanta Insurance Agency Inc. (PA)

Advanta Advertising, Inc. (DE)

ADVANTENNIS Corp. (DE)

Advanta Residual Holding Corp. (DE)
Advanta Mortgage Holding Company (DE)

Advanta Auto Finance Corporation (NV)

Advanta Auto Receivables Corp. I (NV)

Advanta Mortgage Corp. USA (DE)

Advanta Finance Corp. (NV)

Advanta Finance Residential Mortgage Corp. (NV)
Advanta Finance Residual Corporation (DE)

Advanta Mortgage Corp. Midatlantic (PA)
Advanta Mortgage Corp. Midatlantic II (PA)
Advanta Mortgage Corp. New Jersey (NJ)
Advanta Mortgage Corp. Northeast (NY)
Advanta Mortgage Corp. Midwest (PA)
Advanta Nominee Services, Inc. (DE)
Advanta Mortgage Conduit Services, Inc. (DE)

Advanta Conduit Receivables, Inc. (NV)
Advanta Mortgage Receivables Inc. (DE)
Advanta Mortgage Funding Corp. (DE)

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of
Advanta Corp.:

We consent to the incorporation by reference in the registration statements (No. 33-32969, No. 33-53205, No. 33-53475, No. 33-59219, No. 33-60419, No. 333-05701, No. 333-18993, No. 333-71995, No. 333-74575, No. 333-92151, No. 333-33136, No. 333-49116, No. 333-90642, No. 333-104031, and No. 333-104014)) on Form 10-K of Advanta Corp. of our reports dated March 8, 2005, with respect to the consolidated balance sheets of Advanta Corp. and subsidiaries as of December 31, 2004 and 2003, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2004, and all related financial statement schedules, management’s assessment of the effectiveness of internal control over financial reporting as of December 31, 2004 and the effectiveness of internal control over financial reporting as of December 31, 2004, which reports appear in the December 31, 2004 annual report on Form 10-K of Advanta Corp.

/s/ KPMG LLP

Philadelphia, PA
March 8, 2005

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Dennis Alter, certify that:

     1. I have reviewed this annual report on Form 10-K of Advanta Corp.;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the

audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Dennis Alter  

Dennis Alter 

Chief Executive Officer 

March 9, 2005

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

I, Philip M. Browne, certify that:

     1. I have reviewed this annual report on Form 10-K of Advanta Corp.;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the

audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Philip M. Browne  

Philip M. Browne 

Chief Financial Officer 

March 9, 2005

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report on Form 10-K of Advanta Corp. (the “Company”) for the fiscal year ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dennis Alter, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Dennis Alter
Dennis Alter
Chief Executive Officer
March 9, 2005

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Annual Report on Form 10-K of Advanta Corp. (the “Company”) for the fiscal year ended December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Philip M. Browne, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Philip M. Browne
Philip M. Browne
Chief Financial Officer
March 9, 2005