-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HnUL8+ePbhztnC7YkZkNt8ignU351U2mTg7pQMvirMsZVvne9ZsrHIZlDtliDNlw hfjv4zU3fTOKhOoSVrnBnQ== 0000950133-96-001557.txt : 19960814 0000950133-96-001557.hdr.sgml : 19960814 ACCESSION NUMBER: 0000950133-96-001557 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANTA CORP CENTRAL INDEX KEY: 0000096638 STANDARD INDUSTRIAL CLASSIFICATION: PERSONAL CREDIT INSTITUTIONS [6141] IRS NUMBER: 231462070 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14120 FILM NUMBER: 96610887 BUSINESS ADDRESS: STREET 1: 650 NAAMANS RD STREET 2: BRANDYWINE CORP CTR CITY: CLAYMONT STATE: DE ZIP: 19703 BUSINESS PHONE: 2156574000 MAIL ADDRESS: STREET 1: BRANDYWINE CORPORATE CENTER STREET 2: 650 NAAMANS ROAD CITY: CLAYMONT STATE: DE ZIP: 19703 FORMER COMPANY: FORMER CONFORMED NAME: TSO FINANCIAL CORP DATE OF NAME CHANGE: 19880306 FORMER COMPANY: FORMER CONFORMED NAME: TEACHERS SERVICE ORGANIZATION INC DATE OF NAME CHANGE: 19850812 10-Q 1 ADVANTA CORPORATION QUARTERLY PERIOD ENDED 6/30/96 1 Form 10Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 /X/ Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 1996 or / / Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ______ to _______ Commission File Number 0-14120 Advanta Corp. (Exact name of registrant as specified in its charter) Delaware 23-1462070 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Five Horsham Business Center, 300 Welsh Road, Horsham, PA 19044 (Address of Principal Executive Offices) (Zip Code) (215) 657-4000 (Registrant's telephone number, including area code) Brandywine Corporate Center, 650 Naamans Road, Claymont, DE 19703 (Former name, former address and former fiscal year, if changed since last report) 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 ____ * Applicable only to issuers involved in bankruptcy proceedings during the preceding five years: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ____ No ____ * Applicable only to corporate issuers: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class A Outstanding at August 1, 1996 Common Stock, $.01 par value 17,633,295 shares Class B Outstanding at August 1, 1996 Common Stock, $.01 par value 24,810,609 shares 1 2 Table of Contents
Page ---- Part I - Financial Information Item 1. Financial Statements Consolidated Condensed Balance Sheets ...................................... 3 Consolidated Condensed Income Statements.................................... 4 Consolidated Statements of Cash Flows....................................... 5 Notes to Consolidated Condensed Financial Statements................................................................. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................................................ 13 Part II - Other Information.......................................................... 24
2 3 ADVANTA CORP. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars in thousands)
June 30, December 31, 1996 1995 ------------- ------------ ASSETS (Unaudited) Cash $ 122,570 $ 45,714 Federal funds sold and interest-bearing deposits with banks 527,571 557,084 Investments available for sale 1,060,687 532,963 Loan and lease receivables, net: Available for sale 1,616,589 1,079,478 Other loan and lease receivables, net 1,306,110 1,699,771 ---------- ---------- Total loan and lease receivables, net 2,922,699 2,779,249 Premises and equipment, net 63,609 43,453 Amounts due from credit card securitizations 474,170 190,819 Other assets 536,838 374,977 ---------- ---------- Total assets $5,708,144 $4,524,259 ========== ========== LIABILITIES Deposits $2,110,707 $1,906,601 Debt and other borrowings 2,545,546 1,804,004 Other liabilities 297,069 140,690 ---------- ---------- Total liabilities 4,953,322 3,851,295 STOCKHOLDERS' EQUITY Class A preferred stock, $1,000 par value: authorized, issued and outstanding -- 1,010 shares in 1996 and 1995 1,010 1,010 Class B preferred stock, $.01 par value: authorized -- 1,000,000 shares in 1996 and 1995; issued -- 25,000 shares in 1996 and 1995 0 0 Class A common stock, $.01 par value: authorized -- 200,000,000 shares; issued -- 17,619,545 shares in 1996 and 17,481,022 shares in 1995 176 175 Class B common stock, $.01 par value: authorized -- 200,000,000 shares; issued -- 24,804,502 shares in 1996 and 24,007,352 shares in 1995 248 240 Additional paid-in capital, net 288,977 280,294 Retained earnings, net 464,411 391,245 ---------- ---------- Total stockholders' equity 754,822 672,964 ---------- ---------- Total liabilities and stockholders' equity $5,708,144 $4,524,259 ========== ==========
See Notes to Consolidated Condensed Financial Statements 3 4 ADVANTA CORP. AND SUBSIDIARIES CONSOLIDATED CONDENSED INCOME STATEMENTS (In thousands, except per share data)
Three Months Ended Six Months Ended June 30, June 30, ---------------------------- ---------------------------- 1996 1995 1996 1995 ------------ ----------- ----------- ------------ (Unaudited) (Unaudited) Interest income: Loans and leases $ 66,893 $ 38,044 $ 125,395 $ 86,569 Investments 16,554 10,513 30,698 21,394 --------- -------- --------- -------- Total interest income 83,447 48,557 156,093 107,963 Interest expense: Deposits 28,087 14,650 55,833 29,306 Other debt 39,245 20,921 67,434 44,375 --------- -------- --------- -------- Total interest expense 67,332 35,571 123,267 73,681 Net interest income 16,115 12,986 32,826 34,282 Provision for credit losses 27,651 8,583 42,733 17,508 --------- -------- --------- -------- Net interest income after provision for credit losses (11,536) 4,403 (9,907) 16,774 Noninterest revenues: Gain on sale of credit 33,820 0 33,820 0 cards Other noninterest revenues 173,513 130,849 344,542 245,072 --------- -------- --------- -------- Total noninterest revenues 207,333 130,849 378,362 245,072 Operating expenses: Amortization of credit card deferred origination costs, net 24,487 16,717 44,980 32,118 Other operating expenses 102,958 67,154 192,960 129,894 --------- -------- --------- -------- Total operating expenses 127,445 83,871 237,940 162,012 Income before income taxes 68,352 51,381 130,515 99,834 Provision for income taxes 23,232 17,981 44,365 35,651 --------- -------- --------- -------- Net income $ 45,120 $ 33,400 $ 86,150 $ 64,183 ========= ======== ========= ======== Earnings per common share $ 1.00 $ .80 $ 1.91 $ 1.54 ========= ======== ========= ======== Weighted average common shares outstanding 45,239 41,772 45,076 41,594 ========= ======== ========= ========
See Notes to Consolidated Condensed Financial Statements 4 5 ADVANTA CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
Six Months Ended June 30, ----------------------------------- 1996 1995 ----------------------------------- OPERATING ACTIVITIES (Unaudited) Net income $ 86,150 $ 64,183 Adjustments to reconcile net income to net cash provided by operating activities: Equity securities gains (3,450) (3,469) Depreciation and amortization of intangibles 7,603 4,955 Provision for credit losses 42,733 17,508 Change in other assets and amounts due from credit card securitizations (310,962) (46,479) Change in other liabilities 96,984 18,379 Gain on securitization of mortgages/business loans (44,621) (15,550) ---------- ----------- Net cash (used)/provided by operating activities (125,563) 39,527 INVESTING ACTIVITIES Purchase of investments available for sale (9,387,736) (257,393) Proceeds from sales of investments available for sale 762,985 251,096 Proceeds from maturing investments available for sale 8,083,623 36,709 Change in fed funds sold and interest-bearing deposits 92,236 1,984 Change in credit card receivables, excluding sales (3,299,239) (1,260,810) Proceeds from sales/securitizations of receivables 3,874,731 1,767,791 Purchase of mortgage/business loan portfolios (28,661) (149,166) Principal collected on mortgages 18,191 12,794 Mortgages made to customers (530,318) (203,574) Purchases of premises and equipment (27,667) (6,067) Proceeds from sale of premises and equipment 109 20 Excess of cash collections over income recognized on direct financing leases 34,986 9,397 Equipment purchased for direct financing leases (174,303) (107,732) Change in business card receivables,excluding sales (89,843) (14,001) Net change in other loans (2,463) 135 ---------- ----------- Net cash (used)/provided by investing activities (673,369) 81,183 FINANCING ACTIVITIES Change in demand and savings deposits 110,203 (9,597) Proceeds from deposits sold 0 30,018 Proceeds from sales of time deposits 714,747 256,655 Payments for maturing time deposits (620,844) (338,853) Change in repurchase agreements and term fed funds (333,000) (118,374) Proceeds from issuance of subordinated/senior debt 17,344 23,224 Payments on redemption of subordinated/senior debt (18,396) (25,354) Proceeds from issuance of medium-term notes 209,511 185,026 Payments on maturity of medium-term notes (52,500) 0 Change in notes payable 855,861 (119,978) Proceeds from issuance of stock 4,663 3,023 Cash dividends paid (11,801) (6,253) ----------- ----------- Net cash provided/(used) by financing activities 875,788 (120,463) ----------- ----------- Net increase in cash 76,856 247 Cash at beginning of period 45,714 43,706 Cash at end of period $ 122,570 $ 43,953
See Notes to Consolidated Financial Statements 5 6 ADVANTA CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Dollars in thousands) June 30, 1996 1) In the opinion of management, the accompanying unaudited and audited consolidated condensed financial statements contain all adjustments necessary to present fairly the financial position of Advanta Corp. and subsidiaries as of June 30, 1996 and December 31, 1995, the results of their operations for the three and six month periods ended June 30, 1996 and 1995, and their cash flows for the six month periods ended June 30, 1996 and 1995. The results of operations for the three and six month periods ended June 30, 1996 are not necessarily indicative of the results to be expected for the full year. Certain prior period amounts have been reclassified to conform with current year classifications. 2) The preparation of financial statements in accordance with generally accepted accounting principles 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 period. Actual results could differ from those estimates. 3) Investments available for sale include securities that the Company sells 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 market value. Unrealized gains and losses on these securities (except those held by the Company' s venture capital unit, Advanta Partners LP) are reported as a separate component of stockholders' equity and included in retained earnings. Changes in the fair value of Advanta Partners LP investments are reported in noninterest revenues as equity securities gains or losses. 4) Loan and lease receivables available for sale represent receivables currently on the balance sheet that the Company generally intends to sell or securitize within the next six months. These receivables are reported at the lower of book or fair market value. 5) Loan and lease receivables on the balance sheet, including those available for sale, consisted of the following:
June 30, December 31, 1996 1995 ------------- ------------ Gross loan and lease receivables $ 2,916,971 $ 2,762,927 Add: Deferred origination costs, net of deferred fees 76,657 69,816 Less: Reserve for credit losses (70,929) (53,494) ----------- ----------- Loan and lease receivables, net $ 2,922,699 $ 2,779,249 =========== =========== Number of Accounts: Credit cards 556,552 500,729 Other loans and leases 38,248 12,662 ----------- ----------- Total 594,800 513,391 =========== ===========
6 7 Receivables and accounts serviced for others consisted of the following:
June 30, December 31, 1996 1995 ----------- ---------- Receivables: Credit cards $10,166,686 $7,692,463 Mortgage loans* 1,847,375 1,475,871 Business loans 461,817 284,094 ----------- ---------- Total $12,475,878 $9,452,428 =========== ========== Number of accounts: Credit cards 5,041,393 4,366,362 Mortgage loans* 32,529 27,731 Business loans 96,554 59,511 ----------- ---------- Total 5,170,476 4,453,604 =========== ==========
* Excludes mortgage loans which were not originated by the Company, but which the Company services for a fee ("contract servicing"). Contract servicing receivables were $1.5 billion and $.6 billion at June 30, 1996 and December 31, 1995, respectively. 6) The Company accounts for credit card origination costs under Statement of Financial Accounting Standards No. 91, "Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases" ("SFAS 91"). This accounting standard requires certain loan and lease origination fees and costs to be deferred and amortized over the life of a loan or lease as an adjustment to interest income. Origination costs are defined under this standard to include costs of loan origination associated with transactions with independent third parties and certain costs relating to underwriting activities and preparing and processing loan documents. The Company engages third parties to solicit and originate credit card account relationships. Amounts deferred under these arrangements were $44.8 million and $36.3 million in the first six months of 1996 and 1995, respectively. The Company amortizes deferred credit card origination costs under Issue 93-1 of the Emerging Issues Task Force ("EITF Issue 93-1") of the Financial Accounting Standards Board regarding the acquisition of individual credit card accounts from independent third parties. EITF Issue 93-1 stated that credit card accounts acquired individually should be accounted for as originations under SFAS 91 and EITF Issue 92-5. Amounts paid to a third party to acquire individual credit card accounts should be deferred and netted against the related credit card fee, if any, and the net amount should be amortized on a straight line basis over the privilege period. If a significant fee is charged, the privilege period is the period that the fee entitles the cardholder to use the card. If there is no significant fee, the privilege period should be one year. Direct origination costs incurred related to credit card account originations initiated after EITF Issue 93-1 are deferred and amortized over 12 months. Costs incurred for originations which were initiated prior to EITF Issue 93-1 will continue to be amortized over a 60 month period as was the practice prior to the EITF 93-1 consensus. 7 8 The Company records excess servicing income on credit card securitizations representing additional cash flow from the receivables initially sold based on the repayment term, including prepayments. Prior to the EITF Issue 93-1 consensus, net gains were not recorded at the time each transaction was completed as excess servicing income was offset by the write-off of deferred origination costs and the establishment of recourse reserves. Subsequent to the prospective adoption discussed above, excess servicing income has been recorded at a lower level at the time of each transaction, and is predominantly offset by the establishment of recourse reserves. The lower level of excess servicing income corresponds with the discontinuance of deferred origination cost write-offs upon securitization of receivables as discussed above. During the "revolving period" of each securitization, income is recorded based on additional cash flows from the new receivables which are sold to the trusts on a continual basis to replenish the investors' interest in trust receivables which have been repaid by the credit cardholders. 7) The following table shows the changes in the reserve for credit losses for the periods presented:
Six Months Ended Year Ended June 30, December 31, 1996 1995 ----------- ---------- Balance, beginning of period $ 53,494 $ 41,617 Current provision 42,733 53,326 Transfer of recourse reserves to on-balance sheet reserves 3,026 1,100 Net charge-offs (28,324) (42,549) -------- -------- Balance, end of period $ 70,929 $ 53,494 ======== ========
8) At June 30, 1996 and December 31, 1995, the Company had $474.2 million and $190.8 million, respectively, of amounts due from credit card securitizations. These amounts include excess servicing, accrued interest receivable and other amounts related to these securitizations and are net of recourse reserves established. A portion of these amounts is subject to liens held by the providers of credit enhancement facilities for the respective securitizations. 8 9 9) Selected Balance Sheet Information OTHER ASSETS
June 30, December 31, 1996 1995 ---------- ------------ Excess mortgage servicing rights $121,950 $ 96,194 Prepaid assets 97,114 69,170 Accrued interest receivable 75,146 67,681 Current and deferred federal income taxes 54,917 15,823 Deferred costs 27,646 20,670 Investments in operating leases 19,299 11,928 Excess servicing-business loans 12,750 11,813 Due from trustees-mortgage 10,469 8,095 Goodwill 4,823 4,983 Other real estate owned 2,953 3,333 Due from trustees-business loans 1,728 2,941 Other 108,043 62,346 -------- -------- Total other assets $536,838 $374,977 ======== ========
OTHER LIABILITIES
June 30, December 31, 1996 1995 ---------- ------------ Deferred fees and other reserves $ 91,946 $ 46,058 Accrued interest payable 52,070 29,012 Current and deferred income state taxes 41,028 9,026 Accounts payable and accrued expenses 38,002 32,831 Other 74,023 23,763 -------- -------- Total other liabilities $297,069 $140,690 ======== ========
10) Income tax expense reflects an effective tax rate of approximately 34% for both the three and six month periods ended June 30, 1996, compared to 35% and 36%, for the comparable 1995 periods. The Company accounts for income taxes under the Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). Income tax expense consisted of the following components:
Three Months Ended Six Months Ended June 30, June 30, ------------------------- -------------------------- 1996 1995 1996 1995 --------- --------- ---------- ---------- Current: Federal $ 27,446 $ 17,518 $ 28,417 $ 32,087 State 1,189 392 4,266 3,518 -------- -------- -------- -------- Total current 28,635 17,910 32,683 35,605 Deferred: Federal (5,672) (623) 12,039 (529) State 269 694 (357) 575 -------- -------- -------- -------- Total deferred (5,403) 71 11,682 46 Total tax expense $ 23,232 $ 17,981 $ 44,365 $ 35,651 ======== ======== ======== ========
9 10 The reconciliation of the statutory federal income tax to the consolidated tax expense is as follows:
Three Months Ended Six Months Ended June 30, June 30, ------------------------- -------------------------- 1996 1995 1996 1995 --------- ---------- --------- ---------- Statutory federal income tax $ 23,914 $ 17,983 $ 45,671 $ 34,942 State income taxes 948 706 2,541 2,660 Tax-free income (96) (315) (224) (594) Other (1,534) (393) (3,623) (1,357) -------- -------- -------- -------- Consolidated tax expense $ 23,232 $ 17,981 $ 44,365 $ 35,651 ======== ======== ======== ========
The net deferred tax asset is comprised of the following:
June 30, December 31, 1996 1995 --------- ------------ Deferred taxes: Gross assets $ 133,509 $ 75,851 Gross liabilities (78,592) (59,445) --------- -------- Total deferred taxes $ 54,917 $ 16,406 ========= ========
The Company did not record any valuation allowances against deferred tax assets at June 30, 1996 and December 31, 1995. The tax effect of significant temporary differences representing deferred tax assets and liabilities is as follows:
June 30, December 31, 1996 1995 SFAS 91 $(27,169) $(23,899) Loan losses 26,297 20,197 Mortgage banking income 18,114 9,767 Securitization income (35,337) (35,546) Business loan income 74,612 41,901 Other (1,600) 3,986 -------- -------- Net deferred tax asset $ 54,917 $ 16,406 ======== ========
10 11 11) The Company has adopted several management incentive plans designed to provide incentives to participating employees to remain in the employ of the Company and devote themselves to its success. Under these plans, certain eligible employees were required and others were 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 common stock. The restricted shares are subject to forfeiture should the employee terminate employment with the Company prior to vesting. The shares become unrestricted over time if certain performance criteria are met. At June 30, 1996, a total of 1,555,609 shares issued under these plans were subject to restrictions and were included in the number of shares outstanding. These shares are considered common stock equivalents in the calculation of earnings per common share. Deferred compensation of $39.2 million and $21.6 million related to these shares of restricted stock is reflected as a reduction of equity at June 30, 1996 and December 31, 1995, respectively. 12) On August 21, 1995, in a public offering, the Company sold 2,500,000 depositary shares each representing a one-hundredth interest in a share of Stock Appreciation Income Linked Securities ("SAILS"). The SAILS constitute a series of the Company's Class B Preferred Stock, designated as 6 3/4% Convertible Class B Preferred Stock, Series 1995 (SAILS). On September 15, 1999, unless either previously redeemed by the Company or converted at the option of the holder, each share of the SAILS will automatically convert into 100 shares of Class B Common Stock. Proceeds from the offering, net of underwriting discount, were approximately $90 million. The Company used the proceeds of the offering for general corporate purposes, including financing the growth of its subsidiaries. 13) In June 1996, the Company through its subsidiary Advanta National Bank USA, sold certain credit card customer relationships and the related receivables balance to another domestic bank. The receivables associated with these relationships represented less than 2% of the Company's managed credit card portfolio as of June 30, 1996. The Company recorded a $33.8 million net gain related to this transaction. 11 12 14) The following table shows the calculation of earnings per common share:
Three Months Ended Six Months Ended June 30, June 30, ---------------------- -------------------------- 1996 1995 1996 1995 -------- -------- ---------- ----------- Net income $45,120 $33,400 $ 86,150 $ 64,183 less: preferred dividends 0 0 (141) (141) ------- ------- -------- -------- Net income available to common shares $45,120 $33,400 $ 86,009 $ 64,042 Average common shares outstanding 40,725 39,676 40,609 39,585 Common stock equivalents 4,514 2,096 4,467 2,009 ------- ------- -------- -------- Weighted average common shares outstanding (in thousands) 45,239 41,772 45,076 41,594 ------- ------- -------- -------- Earnings per common share $ 1.00 $ .80 $ 1.91 $ 1.54 ======= ======= ======== ========
12 13 ADVANTA CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW Net income for the three months ended June 30, 1996 was $45.1 million, an $11.7 million or 35% increase from the $33.4 million reported for the second quarter of 1995. Earnings per share for the second quarter of 1996 were $1.00, a 25% increase from $.80 per share for the same period last year. Earnings increased in the second quarter of 1996 primarily as a result of a $33.8 million gain on the sale of credit card customer relationships and a 70% increase in average managed receivables. The receivables associated with the customer relationships represented less than 2% of the Company's managed credit card portfolio. This transaction allowed the Company to make additional investments for future growth, as well as to strengthen the balance sheet. The 70% increase in average managed receivables resulted in a $42.7 million or 33% rise in other noninterest revenues (excluding the credit card sale) to $173.5 million in 1996, from $130.8 million in 1995. Noninterest revenues and earnings also reflected an increase in the managed charge-off rate from 2.1% for the second quarter of 1995 to 2.9% for the second quarter of 1996. The operating expense ratio improved to 2.8% of average managed receivables in the second quarter of 1996, compared to 3.0% in the second quarter of 1995. For the six months ended June 30, 1996, net income was $86.2 million, a 34% increase over the $64.2 million for the comparable year earlier period. Earnings per share increased 24% to $1.91 in 1996 compared to $1.54 in 1995. NET INTEREST INCOME Net interest income for the second quarter of 1996 increased to $16.1 million from $13.0 million for the same period of 1995. This increase resulted from a $2.1 billion growth in average interest earning assets partially offset by an 89 basis point decline in the owned net interest margin. The lower owned net interest margin resulted from the significant growth in lower-yielding introductory rate credit card receivables combined with the Company's ongoing securitization activity which reduces the level of higher-yielding receivables on the balance sheet while proportionately increasing the balance sheet levels of lower-yielding introductory rate receivables and money market assets. The following tables provide an analysis of both owned and managed interest income and expense data, average balance sheet data, net interest spread (the difference between the yield on interest earning assets and the average rate paid on interest-bearing liabilities), and net interest margin (the difference between the yield on interest earning assets and the average rate paid to fund interest earning assets) for the three and six month periods ended June 30, 1996 and 1995. Average owned loan and lease receivables and the related interest revenues include certain loan fees. 13 14 INTEREST RATE ANALYSIS
Three Months Ended June 30, --------------------------------------------------------------------------------- 1996 1995 ---------------------------------------- ----------- -------- ------ Average Yield/ Average Yield/ Balance (1) Interest Rate Balance (1) Interest Rate ------------ -------- ------ ----------- -------- ------ On-balance sheet Credit cards $ 2,899,228 $ 56,305 7.81% $1,280,210 $ 31,246 9.76% Mortgage loans 190,636 4,887 10.31 188,465 4,319 9.19 Business loans (2) 214,549 6,365 11.90 89,538 2,785 12.44 Other loans 9,764 203 8.36 5,096 92 7.24 ---------- ------- ----------- -------- Gross receivables 3,314,177 67,760 8.22 1,563,309 38,442 9.84 Investments (3) 1,111,435 16,567 5.80 741,625 10,917 5.89 ---------- ------- ---------- -------- Total interest earning assets $ 4,425,612 $ 84,327 7.61% $2,304,934 $ 49,359 8.57% Interest-bearing liabilities $ 4,359,090 $ 67,332 6.14% $2,182,913 $ 35,571 6.47% Net interest spread 1.47% 2.10% Net interest margin 1.49% 2.38% Off-balance sheet Credit cards $ 9,517,383 $5,752,617 Mortgage loans 1,810,733 1,300,537 Business loans 329,539 213,475 ----------- ---------- Total average securitized receivables $11,657,655 $7,266,629 =========== ========== Total average managed receivables $14,971,832 $8,829,938 =========== ========== Managed credit cards $12,416,611 $378,506 12.26% $7,032,827 $232,893 13.25% Managed Net Interest Analysis (4): Interest earning assets $13,942,995 $406,528 11.71% $8,057,551 $251,006 12.46% Interest-bearing liabilities $13,876,473 $203,335 5.88% $7,935,530 $130,723 6.58% Net interest spread 5.83% 5.88% Net interest margin 5.84% 5.96%
(1) Includes assets held and available for sale and nonaccrual loans and leases. (2) Includes leases and business credit cards beginning in 1996. (3) Interest and average rate for tax-free securities computed on a tax equivalent basis using a statutory rate of 35%. (4) Combination of owned interest earning assets/owned interest-bearing liabilities and securitized credit card assets/liabilities. 14 15 INTEREST RATE ANALYSIS
Six Months Ended June 30, ---------------------------------------------------------------------------- 1996 1995 ----------------------------------- ------------------------------------ Average Yield/ Average Yield/ Balance (1) Interest Rate Balance (1) Interest Rate ----------- -------- ------ ------------ --------- ------ On-balance sheet Credit cards $2,655,427 $104,973 7.95% $1,399,131 $ 74,135 10.60% Mortgage loans 207,330 10,520 10.20 162,497 7,240 8.98 Business loans (2) 183,141 11,123 12.18 88,203 5,854 13.27 Other loans 9,558 388 8.16 5,115 180 7.10 ---------- -------- ---------- --------- Gross receivables 3,055,456 127,004 8.36 1,654,946 87,409 10.57 Investments (3) 1,094,021 30,820 5.48 755,738 22,206 5.90 ---------- -------- ---------- -------- Total interest earning assets $4,149,477 $157,824 7.60% $2,410,684 $109,615 9.11% Interest-bearing liabilities $4,012,741 $123,267 6.10% $2,308,170 $ 73,681 6.36% Net interest spread 1.50% 2.75% Net interest margin 1.63% 2.95% Off-balance sheet Credit cards $8,831,589 $5,466,776 Mortgage loans 1,718,737 1,260,784 Business loans 311,437 201,523 ----------- ---------- Total average securitized receivables $10,861,763 $6,929,083 =========== ========== Total average managed receivables $13,917,219 $8,584,029 =========== ========== Managed credit cards $11,487,016 $714,781 12.51% $6,865,907 $454,079 13.23% Managed Net Interest Analysis (4): Interest earning assets $12,981,066 $767,632 11.88% $7,877,460 $489,559 12.43% Interest-bearing liabilities $12,844,330 $377,681 5.91% $7,774,946 $254,678 6.54% Net interest spread 5.97% 5.89% Net interest margin 6.03% 5.95%
(1) Includes assets held and available for sale and nonaccrual loans and leases. (2) Includes leases and business credit cards beginning in 1996. (3) Interest and average rate for tax-free securities computed on a tax equivalent basis using a statutory rate of 35%. (4) Combination of owned interest earning assets/owned interest-bearing liabilities and securitized credit card assets/liabilities. 15 16 MANAGED PORTFOLIO DATA The Company analyzes its financial results on a managed assets basis in addition to analyzing data as reported under generally accepted accounting principles. The following table provides selected information on a managed basis (excluding mortgage contract servicing assets), as well as a summary of the effects of credit card securitizations on selected line items of the Company's Consolidated Condensed Income Statements as of and for the six months ended June 30, 1996 and 1995.
Six Months Ended June 30, ---------------------------------- 1996 1995 ------------ --------------- Balance sheet data: Average managed receivables $13,917,219 $ 8,584,029 Managed receivables 15,392,849 9,370,626 Total managed assets 18,184,022 10,560,924 Managed net interest margin (on a fully tax equivalent basis) 6.03% 5.95% As a percentage of gross managed receivables: Total loans 30 days or more delinquent 3.4% 2.7% Net charge-offs 2.9% 2.1% Effects of credit card securitizations on: Net interest income $ (355,394) $ (198,947) Provision for credit losses 161,480 65,632
With respect to the above information on the effects of credit card securitizations, net interest income represents the amount by which net interest income would have been higher had the securitized receivables remained on the balance sheet. In addition, the provision for credit losses represents the amount by which the provision for credit losses would have been higher had the securitized receivables remained as owned and the provision for credit losses been equal to charge-offs. Both net interest income and the provision for credit losses described above are netted and included in other noninterest revenues in the Consolidated Condensed Income Statements. PROVISION FOR CREDIT LOSSES The provision for credit losses for the second quarter of 1996 was $27.7 million compared to $8.6 million for the comparable period of 1995. This increase was primarily due to the strengthening of reserves on a larger portfolio, and in response to the higher charge-off, impaired asset and delinquency levels. Charge-offs on owned receivables increased to $13.4 million for the second quarter of 1996 from $8.5 million for the second quarter of 1995. 16 17 ASSET QUALITY The reserve for credit losses is maintained for on-balance sheet receivables. This reserve is intended to cover credit losses inherent in the owned loan portfolio. With regard to securitized assets, anticipated losses and related recourse reserves are reflected in the calculations of securitization income, amounts due from credit card securitizations and other assets. Recourse reserves are intended to cover all probable credit losses over the life of the securitized receivables. The Company periodically evaluates its on-balance sheet and recourse reserve requirements and, as appropriate, effects transfers between these accounts. The reserve for credit losses on a consolidated owned basis was $70.9 million or 2.4% of receivables at June 30, 1996 compared to $53.5 million or 1.9% of receivables at December 31, 1995 and $39.8 million or 2.1% of receivables at June 30, 1995. On the total managed portfolio, impaired assets were $234.4 million or 1.5% of receivables at June 30, 1996, compared to $167.1 million or 1.4% of receivables at December 31, 1995 and $113.9 million or 1.2% of receivables at June 30, 1995. The 30 day and over delinquency rate on managed credit cards rose to 2.9% at June 30, 1996 from 2.0% a year ago. The total managed charge-off rate for the first six months of 1996 was 2.9%, up from 2.2% for the full year of 1995 and 2.1% for the first six months of 1995. The charge-off rate on managed credit cards was 3.2% for the first six months of 1996, up from 2.5% for the full year of 1995 and 2.4% for the comparable 1995 period. The charge-off rate on managed mortgage loans was .7% for the first six months of 1996, compared to .9% for the full year of 1995 and 1.0% for the comparable 1995 period. 17 18 The following table provides a summary of managed impaired assets, delinquencies and charge-offs, as of and for the year-to-date periods indicated.
June December June 30, 31, 30, 1996 1995 1995 --------- -------- -------- CONSOLIDATED Nonperforming assets $119,637 $ 82,171 $ 66,489 Accruing loans past due 90 days or more 114,781 84,892 47,365 Impaired assets 234,418 167,063 113,854 Total loans 30 days or more delinquent 516,936 404,072 248,358 As a percentage of gross receivables: Nonperforming assets .8% .7% .7% Accruing loans past due 90 days or more .7 .7 .5 Impaired assets 1.5 1.4 1.2 Total loans 30 days or more delinquent 3.4 3.3 2.7 Net charge-offs: Amount $198,590 $212,865 $ 90,496 As a percentage of average gross receivables(annualized) 2.9% 2.2% 2.1% CREDIT CARDS Nonperforming assets $ 43,796 $ 20,516 $ 18,052 Accruing loans past due 90 days or more 114,767 84,878 47,206 Impaired assets 158,563 105,394 65,258 Total loans 30 days or more delinquent 364,446 262,299 152,441 As a percentage of gross receivables: Nonperforming assets .3% .2% .2% Accruing loans past due 90 days or more .9 .8 .6 Impaired assets 1.3 1.1 .9 Total loans 30 days or more delinquent 2.9 2.6 2.0 Net charge-offs: Amount $186,459 $193,160 $ 80,959 As a percentage of average gross receivables(annualized) 3.2% 2.5% 2.4% MORTGAGE LOANS Nonperforming assets $ 69,633 $ 56,743 $ 45,881 Total loans 30 days or more delinquent 111,066 106,223 73,945 As a percentage of gross receivables: Nonperforming assets 3.3% 3.2% 3.0% Total loans 30 days or more delinquent 5.3 5.9 4.8 Net charge-offs: Amount $ 6,671 $ 13,836 $ 6,895 As a percentage of average gross receivables(annualized) .7% .9% 1.0% BUSINESS LOANS Nonperforming assets $ 6,208 $ 4,912 $ 2,556 Total loans 30 days or more delinquent 41,318 35,274 21,538 As a percentage of receivables: Nonperforming assets 1.0% 1.3% .8% Total loans 30 days or more delinquent 6.8 9.3 6.8 Net charge-offs: Amount $ 5,467 $ 5,846 $ 2,651 As a percentage of average receivables(annualized) 2.2% 1.9% 1.8%
18 19 NONINTEREST REVENUES
Three Months Ended Six Months Ended June 30, June 30, ---------------------------- ----------------------------- 1996 1995 1996 1995 -------- -------- -------- -------- Gain on sale of credit cards $ 33,820 $ 0 $ 33,820 $ 0 Other noninterest revenues: Credit card securitization income 51,735 45,666 117,600 86,735 Credit card servicing income 43,584 27,927 82,612 52,799 Credit card interchange income 27,237 22,052 49,199 41,550 Income from mortgage banking activities 24,132 11,929 46,127 22,147 Business loan other revenues 13,886 8,301 24,761 17,895 Insurance revenues, net 7,237 6,117 13,149 12,275 Equity securities gain 2,855 3,803 5,928 3,803 Other 2,847 5,054 5,166 7,868 -------- -------- -------- -------- Total other noninterest revenues $173,513 $130,849 $344,542 $245,072 -------- -------- -------- -------- Total noninterest revenues $207,333 $130,849 $378,362 $245,072 ======== ======== ======== ========
For the second quarter of 1996, noninterest revenues increased 58% to $207.3 million from $130.8 million for the same period of 1995. The Company recorded a $33.8 million gain on the sale of credit card customer relationships and the related receivables balance. The receivables associated with these relationships represented less than 2% of the Company's managed credit card portfolio at June 30, 1996. Other noninterest revenues, excluding this gain, increased $42.7 million or 33% to $173.5 million. Credit card securitization income increased $6.1 million or 13% to $51.7 million as a result of a 65% increase in average securitized credit card receivables partially offset by higher securitized charge-offs as well as a contraction in the net interest margin. Credit card servicing income increased $15.7 million due to higher securitized balances. Income from mortgage banking activities increased $12.2 million primarily due to the gain on the sale of $300 million in mortgages in a REMIC transaction during the second quarter of 1996. Credit card interchange income, which represents approximately 1.4% of credit card purchases, increased $5.2 million to $27.2 million. Business loan other revenues increased $5.6 million to $13.9 million due to a 49% growth in average securitized business loans from the comparable quarter of 1995. Equity securities gains included both a $1.2 million realized gain and a $1.6 million market valuation gain on an investment held by the Company's venture capital unit. For the six month period ended June 30, 1996 total noninterest revenues rose to $378.4 million from $245.1 million for the comparable period of 1995, a 54% increase. This improvement resulted primarily from the $33.8 million gain on the sale of credit card customer relationships, a 62% growth in average securitized credit card receivables and higher mortgage income associated with a $300 million REMIC transaction in each of the first and second quarters of 1996. 19 20 OPERATING EXPENSES
Three Months Ended Six Months Ended June 30, June 30, ----------------------------- ---------------------------- 1996 1995 1996 1995 -------- -------- -------- -------- Amortization of credit card deferred origination costs, net $ 24,487 $16,717 $44,980 $ 32,118 Other operating expenses: Salaries and employee benefits 43,769 27,074 81,188 51,062 External processing 9,972 6,552 19,805 12,279 Professional fees 9,544 3,293 16,374 5,565 Postage 6,873 4,339 12,679 8,730 Credit card fraud losses 6,413 4,464 8,762 8,526 Marketing 5,347 6,665 16,469 14,283 Equipment expense 4,842 2,953 9,178 5,707 Telephone expense 4,653 2,499 8,620 5,354 Occupancy expense 3,453 2,249 6,029 4,265 Credit and collection expense 3,040 2,332 5,625 4,476 Other 5,052 4,734 8,231 9,647 -------- --------- -------- -------- Total other operating expenses $102,958 $67,154 $192,960 $129,894 -------- ------- -------- -------- Total operating expenses $127,445 $83,871 $237,940 $162,012 ======== ======= ======== ========
The amortization of credit card deferred origination costs, net, increased from $16.7 million for the three months ended June 30, 1995 to $24.5 million for the comparable period of 1996. This increase resulted primarily from amortization related to the $92 million of credit card origination costs that have been deferred since the second quarter of 1995. Total other operating expenses of $103.0 million for the three months ended June 30, 1996 increased 53% from $67.2 million for the same period of 1995. Operating expenses as a percentage of average managed receivables were 2.8% for the second quarter of 1996, down from 3.0% in the comparable 1995 period. The increase in total other operating expenses is attributable, in part, to a $16.7 million or 62% increase in salaries and employee benefits as a result of an increase in the number of employees from 2,094 at June 30, 1995 to 2,897 at June 30, 1996, including the addition of senior management to assist in the strategic growth of the various business units. Professional fees also increased, as a result of corporate strategic initiatives. Other expenses, including external processing, postage and telephone expense showed increases consistent with the increase in the number of managed customer accounts. For the first six months of 1996, total operating expenses increased 47% to $237.9 million from $162.0 million for the same 1995 period mainly due to the reasons stated above. Average managed receivables grew 62% over the same period of time. Other operating expenses as a percentage of average managed receivables were 2.8% for the six months ended June 30, 1996, down from 3.0% for the six months ended June 30, 1995. 20 21 LIQUIDITY AND CAPITAL RESOURCES The Company's goal is to maintain an adequate level of liquidity, both long- and short-term, through active management of both assets and liabilities. During the first six months of 1996, the Company, through its subsidiaries, securitized $2.8 billion of credit card receivables, $600 million of mortgage loans and $169 million of business loans. Cash generated from these transactions was temporarily invested in short-term, high quality investments at money market rates awaiting redeployment to pay down borrowings and to fund future credit card, mortgage and business loan growth. At June 30, 1996, the Company had approximately $1.6 billion of loan and lease receivables and $1.1 billion of investments available for sale which could be sold to generate additional liquidity. In February 1995, the Company's wholly owned subsidiary, Advanta National Bank ("Advanta National"), a Delaware based credit card bank, commenced operations. The Company's initial capitalization of Advanta National was $50 million, consisting of $25 million in common stock and $25 million of additional paid in capital. Additional capital totaling $39 million and $114 million was contributed to Advanta National during 1995 and the first six months of 1996, respectively, in order to maintain Advanta National as a "well capitalized" bank under applicable regulations. As a credit card bank, Advanta National is limited to one office, can engage only in consumer credit card operations and cannot accept deposits other than savings and time deposits of $100,000 or more. Advanta National had total assets of $2.6 billion at June 30, 1996. In August 1995, in a public offering, the Company sold 2,500,000 depositary shares each representing a one-hundredth interest in a share of Stock Appreciation Income Linked Securities ("SAILS"). The SAILS constitute a series of the Company's Class B Preferred Stock, designated as 6 3/4% Convertible Class B Preferred Stock, Series 1995 (SAILS). On September 15, 1999, unless either previously redeemed by the Company or converted at the option of the holder, each share of the SAILS will automatically convert into 100 shares of Class B Common Stock. Proceeds from the offering, net of underwriting discount, were approximately $90 million. The Company used the proceeds of the offering for general corporate purposes, including financing the growth of its subsidiaries. In September 1995, Colonial National Bank USA (which in May 1996 changed its name to Advanta National Bank USA) and Advanta National (together the "Banks") established a $2.25 billion bank note program. These notes may have maturities ranging from seven days to fifteen years from date of issuance. At June 30, 1996 Advanta National had $1.2 billion of senior bank notes outstanding. Subsequent to quarter end, the Company replaced its existing $510 million revolving credit facility with a new $1.0 billion facility and filed a shelf registration statement with the Securities and Exchange Commission for $1.6 billion of debt securities. 21 22 INTEREST RATE SENSITIVITY Interest rate sensitivity refers to managed net interest income variability resulting from mismatches between asset and liability indices (basis risk) and the effects changes in market interest rates have on asset and liability repricing mismatches (gap risk). The Company attempts to minimize the impact of market interest rate fluctuations on net interest income and net income by regularly evaluating the risk inherent in its asset and liability structure, including securitized assets. This risk arises from continuous changes in the Company's asset/liability mix, market interest rates, the yield curve, prepayment trends and the timing of cash flows. Computer simulations are used to evaluate net interest income volatility under varying rate, spread and volume projections over monthly time periods of up to two years. In managing its interest rate sensitivity position, the Company periodically securitizes receivables, sells and purchases assets, alters the mix and term structure of its funding base, changes its investment portfolio and short-term investment position, and uses derivative financial instruments. Derivative financial instruments are used for the express purpose of managing exposure to changes in interest rates and foreign exchange rates. Derivative financial instruments, by policy, are not used for any speculative purposes (see discussion under "Derivatives Activities"). The Company has primarily utilized variable rate funding in pricing its credit card securitization transactions in an attempt to match the variable rate pricing dynamics of the underlying receivables sold to the trusts. Variable rate funding is used on the balance sheet as well, in support of unsecuritized receivables which carry variable rates. Although credit card receivable rates are generally set at a spread over a floating rate index, they often contain interest rate floors. These floors have the impact of converting the credit card receivables to fixed rate receivables in a low interest rate environment. In addition, the Company at times offers fixed rate pricing to consumers for the introductory rate period of its credit cards. In instances when a significant portion of credit card receivables carry fixed rate introductory pricing or are at their floors, the Company may convert part of the underlying funding to a fixed rate by using interest rate hedges and fixed rate securitizations. In pricing mortgage and business loan securitizations, both fixed rate and variable rate funding are used depending upon the characteristics of the underlying receivables. Additionally, basis risk exists in on-balance sheet funding as well as in securitizing credit card receivables at a spread over LIBOR when the rate on the underlying assets is indexed to the prime rate. The Company measures the basis risk resulting from potential variability in the spread between prime and LIBOR and incorporates such risk into the asset and liability management process. During the first six months of 1996 substantially all new credit cards were issued using LIBOR as the repricing index. The effect of this change will be the reduction of prime/LIBOR basis risk over time. The Company continues to seek cost-effective alternatives for minimizing this risk. Interest rate fluctuations affect net interest income at virtually all financial institutions. While interest rate volatility does have an effect on net interest income, other factors also contribute significantly to changes in net interest income. Specifically, within the credit card portfolio, pricing decisions and customer behavior regarding convenience usage affect the yield on the portfolio. These 22 23 factors may counteract or exacerbate income changes due to fluctuating interest rates. The Company closely monitors interest rate movements, competitor pricing and consumer behavioral changes in its ongoing analysis of net interest income sensitivity. DERIVATIVES ACTIVITIES The Company utilizes derivative financial instruments for the purpose of managing its exposure to interest rate and foreign currency risks. The Company has a number of mechanisms in place that enable it to monitor and control both market and credit risk from these derivatives activities. At the broader level, all derivatives strategies are managed under a hedging policy approved by the Board of Directors that details the use of such derivatives and the individuals authorized to execute derivatives transactions. All derivatives strategies must be approved by the Company's senior management (Chief Executive Officer, President, Chief Financial Officer and Treasurer). As part of this approval process, a market risk analysis is completed to determine the potential impact on the Company from severe negative (stressed) movements in the market. By policy, derivatives transactions may only be used to manage the Company's exposure to interest rate and foreign currency risks or for cost reduction and may not be used for speculative purposes. As such, the impact of any derivatives transaction is calculated using the Company's asset/liability model to determine its suitability. Procedures and processes are in place to provide reasonable assurance that prior to and after the execution of any derivatives strategy, market, credit and liquidity risks are fully analyzed and incorporated into the Company's asset/liability and risk measurement models and the proper accounting treatment for the transaction is identified and executed. At June 30, 1996 and December 31, 1995, all of the Company's derivatives were designated as hedges or synthetic alterations and were accounted for as such. The following table summarizes by notional amounts the Company's derivative instruments:
June 30, December 31, 1996 1995 ----------------------- ----------------------- Interest rate swaps $1,073,222 $ 867,835 Interest rate options: Caps written 1,428,000 1,360,000 Caps purchased 338,000 270,000 Corridors/Collars 900,000 575,000 Forward contracts 213,458 190,652 ---------- ---------- Total notional amount $3,952,680 $3,263,487 ========== ==========
The notional amounts of derivatives do not represent amounts exchanged by the counterparties and, thus, are not a measure of the Company's exposure through its use of derivatives. The amounts exchanged are determined by reference to the notional amounts and the other terms of the derivatives contracts. 23 24 PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders: At the Company's Annual Meeting of Stockholders held on May 21, 1996, the following nominees for reelection as directors of the Company were elected by the votes indicated below:
Directors Votes for Votes Withheld Max Botel 13,449,457 13,410 Richard J. Braemer 13,449,357 13,510 Anthony P. Brenner 13,450,418 12,449 James E. Ksansnak 13,449,854 13,013 Phillip A. Turberg 13,450,957 11,910
In addition, at the Annual Meeting the stockholders approved the proposal to approve the Amended and Restated 1992 Stock Option Plan by the following votes: votes for - 9,252,232; votes against - 3,070,115; abstentions - 16,091; and broker non-votes - 1,124,442. The stockholders also approved the proposal to approve the Amendments to the Advanta Management Incentive Plan With Stock Election III by the following votes: votes for - 9,769,980; votes against - 2,556,909; abstentions - 18,599; and broker non-votes - 1,117,379. Finally, the stockholders approved the proposal to approve the Amendments to the Advanta Management Incentive Plan With Stock Election IV by the following votes: votes for - 9,769,662; votes against - 2,556,974; abstentions - 18,952; and broker non-votes - 1,117,279. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits The following exhibits are being filed with this report on Form 10-Q:
Exhibit Number Description of Document 1.3* Distribution Agreement, dated as of July 8, 1996, among Advanta Corp. and Salomon Brothers Inc, CS First Boston Corporation, Donaldson, Lufkin & Jenrette Securities Corporation and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated.
24 25
4.1* Form of Fixed Rate Global Medium- Term Note, Series C. 4.2* Form of Floating Rate Global Medium- Term Note, Series C. 10.1 Advanta Management Incentive Plan With Stock Election III, as amended. 10.2 Advanta Management Incentive Plan With Stock Election IV, as amended. 10.3 Advanta Corp. 1992 Stock Option Plan, as amended and restated. 10.4 Revolving Credit and Competitive Loan Agreement, dated as of July 26, 1996, by and among Advanta Corp., Advanta National Bank and Advanta National Bank USA (the "Borrowers"), The Chase Manhattan Bank, as Agent for the Banks (as defined in the Agreement), Nationsbanc Capital Markets, Inc., as syndication agent and PNC Bank, National Association, as documentation agent. 27 Financial data schedule(incorporated by reference to Exhibit 27 to the Company's Current Report on Form 8-K dated July 18, 1996, filed the same date).
*Each of these Exhibits is incorporated by reference to the Exhibit of the same number filed with the Company's Current Report on Form 8-K dated July 8, 1996. (b) Reports on Form 8-K. (i) A Current Report on Form 8-K, dated July 8, 1996, was filed by the Company for the purpose of incorporating by reference certain exhibits into the Company's Registration Statement on Form S-3 (No. 333-05701). No Financial Statements were included as exhibits in this 8-K. (ii) A Current Report on Form 8-K, dated July 18, 1996, was filed by the Company setting forth the financial highlights of the Company's results of operations for the period ended June 30, 1996. A Financial Data Schedule was included as an exhibit in this Form 8-K. 25 26 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized. Advanta Corp. (Registrant) August 12, 1996 By /s/Gene S. Schneyer --------------------------------------- Vice President, Secretary & General Counsel August 12, 1996 By /s/John J. Calamari --------------------------------------- Vice President, Finance and Principal Accounting Officer 26 27 EXHIBIT INDEX
Exhibit Description 1.3* Distribution Agreement, dated as of July 8, 1996, among Advanta Corp. and Salomon Brothers Inc, CS First Boston Corporation, Donaldson, Lufkin & Jenrette Securities Corporation and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated. 2 Inapplicable. 3 Inapplicable. 4.1* Form of Fixed Rate Global Medium- Term Note, Series C. 4.2* Form of Floating Rate Global Medium- Term Note, Series C. 10.1 Advanta Management Incentive Plan With Stock Election III, as amended. 10.2 Advanta Management Incentive Plan With Stock Election IV, as amended. 10.3 Advanta Corp. 1992 Stock Option Plan, as amended and restated. 10.4 Revolving Credit and Competitive Loan Agreement, dated as of July 26, 1996, by and among Advanta Corp., Advanta National Bank and Advanta National Bank USA (the "Borrowers"), The Chase Manhattan Bank, as Agent for the Banks (as defined in the Agreement), Nationsbanc Capital Markets, Inc., as syndication agent and PNC Bank, National Association, as documentation agent. 11 Inapplicable. 15 Inapplicable. 18 Inapplicable. 19 Inapplicable 22 Inapplicable. 23 Inapplicable. 24 Inapplicable.
27 28
27 Financial data schedule (incorporated by reference to Exhibit 27 to the Company' s Current Report on Form 8-K dated July 18, 1996, filed the same date). 99 Inapplicable.
*Each of these Exhibits is incorporated by reference to the Exhibit of the same number filed with the Company's Current Report on Form 8-K dated July 8, 1996. 28 EX-10.1 2 ADVANTA MANAGEMENT INCENTIVE PLAN 1 (as amended 10/26/95 and 3/7/96) ADVANTA CORP. ADVANTA MANAGEMENT INCENTIVE PLAN WITH STOCK ELECTION III 1. Purpose. This Plan is intended as an additional incentive to employees to enter into or remain in the employ of Advanta Corp., a Delaware corporation (the "Company"), or a subsidiary thereof and to devote themselves to the Company's success. This Plan provides selected employees with an opportunity to acquire the Company's Class B Common Stock, par value $0.01 per share (the "Common Stock"). 2. Administration. This Plan shall be administered by the Board of Directors of the Company; however, the Board of Directors may (i) designate a committee composed of two or more of its Non-employee Directors to operate and administer the Plan in its stead, (ii) designate two committees to operate and administer the Plan in its stead, one of such committees composed of two or more of its Non-employee Directors to operate and administer the Plan with respect to the Company's "Principal Officers" (as defined below), and the other such committee composed of two or more directors (whether or not Non-employee Directors) to operate and administer the Plan with respect to persons other than Principal Officers or (iii) designate only one of the two committees referred to in subparagraph (ii) and itself operate and administer the Plan with respect to persons not within the jurisdiction of such committee. Any of such committees designated by the Board of Directors, and the Board of Directors itself in its administrative capacity with respect to the Plan, is referred to as the "Committee." As used herein, the term "Principal Officers" means any person who is an "officer" within the meaning of Rule 16a-1(f) promulgated under the Securities Exchange Act of 1934, as amended, or any successor rule. The Committee shall hold meetings at such times and places as it may determine. Acts approved at a meeting by a majority of the members of the Committee or acts approved in writing by the unanimous consent of the members of the Committee shall be valid acts of the Committee. The interpretation and construction by the Committee of any provision of the Plan or of any Restricted Stock Award awarded hereunder shall be final, binding and conclusive. 3. Eligibility. All employees of the Company or a subsidiary thereof who are selected by the Company's Compensation Committee to be eligible to receive a bonus pursuant to the Advanta Management Incentive Plan shall be eligible to receive shares (the "Restricted Shares") of the Company's Class B Common Stock (the "Restricted Stock Awards") pursuant to this Plan. For purposes of this Plan, "subsidiary" shall include any corporation , partnership, joint venture or other entity in which the Company, directly or 2 indirectly, has an equity interest of at least twenty percent (20%) or a significant financial interest, provided the Committee has determined that such entity shall be deemed a "subsidiary" for purposes of this Plan. The aggregate maximum number of shares of Class B Common Stock for which Restricted Stock Awards may be awarded under this Plan is 1,200,000 shares. 4. Restricted Stock Awards. (a) Elective Participation. Each eligible employee other than an employee to whom Section 4(b) applies shall be permitted to elect (which election shall be irrevocable) a portion of such employee's annual bonus for services performed during 1996, 1997, and 1998 to be received in the form of Class B Common Stock. The portion of each such bonus which may be elected in stock is an amount up to the employee's anticipated 1993 "target" bonus, calculated on the basis of the employee's base salary as of December 1, 1992, subject to modification as described in Section 4(f). The election shall be performed by the employee's execution of such forms as may be determined by the Committee. (b) Mandatory Participation by Section 16 Officers. Each eligible employee who is an "officer" of the Company as defined for purposes of the Rule (an "Officer") as of the date the Plan is adopted (subject to stockholder approval) by the Board of Directors, shall be granted a Restricted Stock Award based upon the employee's anticipated 1993 "target" bonus, calculated on the basis of the employee's base salary as of December 1, 1992. The number of shares so awarded shall be determined by applying the formula set forth in Section 4(c), using a percentage factor of 100% in clause (ii) of such formula. (c) Number of Restricted Shares. Subject to the provisions of this Plan, the Committee shall award a Restricted Stock Award to an eligible employee ("Award Recipient") equal to the number of shares (rounded down to the nearest whole number divisible by three) calculated by (i) multiplying the employee's anticipated 1993 "target" bonus (calculated on the basis of the employee's base salary as of December 1, 1992) by three, (ii) multiplying this product times the percentage factor (25%, 50%, 75% or 100%) irrevocably elected by the employee, and (iii) dividing the product thereof by the market price of the Class B Common Stock as of the close of business on December 1, 1992 (the "Base Price"). (d) Documents. Restricted Shares awarded pursuant to this Plan shall be evidenced by the stock certificates described in Section 13 and such other written documents (the "Restricted Stock Award Documents") in such form as the Committee shall approve from time to time. Such Restricted Stock Award Documents shall comply with and be subject to the terms and conditions of this Plan and such other terms and conditions which the Committee shall require from time to time which are not inconsistent with the terms of this Plan. The Committee shall have the right to amend the Restricted Stock Award Documents issued to an Award Recipient subject to his or her consent. 3 (e) New Participants. In the event an individual becomes eligible to participate in the Plan for any reason (including promotion or being newly hired) subsequent to the time at which initial awards are made hereunder in 1992, (i) if such individual is an Officer, such individual shall automatically become a participant in the Plan, or (ii) if such individual is not an Officer, he or she shall be entitled to elect to participate in the Plan, provided that such election must be made within thirty days after the person first becomes eligible to participate. Except as provided under Section 4(f)(2), the number of shares included in such new participant's Restricted Stock Award shall be based on the participant's annualized target bonus for the then current calendar year and the average of the closing market prices of the Class B Common Stock for each trading day in the ninety day period ending on the day before the date the recipient became eligible to participate in the Plan. Any such Restricted Stock Awards shall be made otherwise in accordance with the terms of this Plan, with such modifications as may be appropriate to implement the intended operation of the Plan. (f) Modification for Increases in Target Bonus Percentage. If a participant's prospective target bonus is increased to a higher percentage of his or her base salary (whether as a consequence of such participant receiving a promotion, or of other action by the Committee), then (a) if such participant is an Officer or as the result of such promotion the participant has become an Officer, then the participant shall receive additional Restricted Shares reflecting the full amount of the increase in target bonus as applied to the years 1996-1998, or (b) if the participant is not an Officer, to the extent that the participant previously elected to receive a percentage of 1996-1998 bonuses in stock, that election shall be likewise applied to the additional target bonus resulting from the increase in the participant's target bonus percentage. In either event, the number of additional shares of Restricted Stock awarded to the participant in such a case shall be based on the average of the closing market prices of the Class B Common Stock for each trading day in the ninety day period ending on the day before the effective date of the promotion or other action by the Committee. For example, suppose a participant's target bonus percentage is 15% of her $70,000 salary (resulting in a $10,500 target bonus) at the time she makes an irrevocable election in 1992 to take 100% of her target bonuses in stock. The closing price of the Class B Common Stock on December 1, 1992 (i.e., the Base Price) was $25.50 per share. Consequently, she is awarded 1,233 restricted shares ($70,000 X 15% - $25.50 per share = 411 shares X 3 years = 1,233). In 1994, she receives a promotion, as the result of which her salary is increased to $90,000 per year and her target bonus percentage is increased to 25%. Consequently, her new target bonus is 25% of $90,000 or $22,500. This represents an incremental $12,000 over her previous target bonus of $10,500. If at the time she receives such promotion the market price of the stock (using the 90 day average) is $30 per share, she will be awarded an additional 1,200 restricted shares ($12,000 X 3 years - $30 per share = 1,200). If the participant is awarded her target bonus in each of 1996, 1997 and 1998, she will have 811 shares vested each year (411 of the $25.50 shares and 400 of the $30 shares, for a total grant date value of $22,480.50, with the $19.50 balance paid in cash). If the promotion occurred on January 1, 1997 and the 90 day average market price of the stock was $30 per share at 4 that time, she would be awarded an additional 800 shares rather than 1200, as the first bonus year, 1996, will at that point have already passed. 5. Vesting. (a) General. Restricted Shares shall fully vest upon the lapse of ten years from the date they are awarded as Restricted Stock Awards. However, the Committee may accelerate the vesting of the Restricted Shares, and to the extent that both the Award Recipient and the Company meet their respective annual target performance goals for the applicable years so that the Committee or the Board of Directors approves payment of bonuses under the Advanta Management Incentive Plan, vesting will be accelerated annually with respect to one-third of the Restricted Shares on such date that the Company elects to pay bonuses for services performed during the years 1996, 1997, and 1998, respectively. The portion of any bonus award which exceeds the 1993 "target" level will be paid in cash. Bonus awards which fall short of the 1993 "target" bonus awards, as determined by the Compensation Committee or the Board of Directors, in their discretion, will be paid by reducing both the cash component and the number of shares of stock to be vested, on a pro rata basis. All Restricted Shares shall be valued at the Base Price (or, if applicable, the average price utilized under Section 4(e) or 4(f) to determine the number of Restricted Shares in a Restricted Stock Award) for purposes of determining the value of that portion of any bonus award to be paid by accelerating the vesting of Restricted Shares. (b) Examples. The following examples are designed to clarify the operation of the Plan. The Base Price (which is the closing price of the Class B Common Stock on December 1, 1992) is $25.50 per share. (1) If, in connection with services performed during any one of the years 1996, 1997 or 1998, the Compensation Committee grants an annual bonus to an Award Recipient in an amount equal to or greater than such Award Recipient's "target" bonus for 1993, such bonus shall be paid by (i) the acceleration of the vesting of Restricted Shares representing one-third of the number of Restricted Shares previously awarded under this Plan, and (ii) payment of cash in the amount of the excess, if any, of such bonus over the product of the number of vested shares times the Base Price. For example, an Award Recipient (not an Officer) whose 1993 "target" bonus was $8,000 and who had elected to receive 75% of such bonus in Class B Common Stock and who therefore received a Restricted Stock Award of 705 Restricted Shares shall, upon the Company's granting of any bonus equal to or greater than $8,000 in any year, receive 235 vested shares (one-third of the Restricted Stock Award) and cash in the amount of the balance. (2) If, in connection with services performed during any of the years 1996, 1997 or 1998 the Compensation Committee awards a bonus to an Award Recipient in an amount less than such Award Recipient's "target" bonus for 1993, such bonus shall be paid in cash and vested shares, each of which shall be reduced on a pro-rata basis in relation to the shortfall from the 1993 "target" award. 5 (3) A participant in the Plan ("Employee") has made a 50% irrevocable election. For 1993 his "target" bonus is $8,000. Employee would be granted 468 Restricted Shares (($8,000 x 3) x 50% divided by $25.50, rounded down to the nearest whole number divisible by three). Assume that in 1996 Employee exceeded all his goals for 1996 and the Company prospered. Employee is awarded a 1996 bonus of $10,000. He would have all restrictions removed from 156 shares of stock (1/3 of 468) and would receive $6022.00 in cash ($10,000 - (156 x $25.50)). Assume that in 1997 Employee did not perform as well. He is awarded a 1997 bonus of $4,000. Employee would have the restrictions removed on 78 shares ($2,000 divided by $25.50, rounded down to the nearest whole share), and would receive $2,011.00 in cash ($4,000 - (78 x $25.50)). In 1998, Employee again does well and receives a bonus for 1998 of $11,000. He would have the restrictions removed on 156 shares and would receive $7,022.00 in cash ($11,000 - - (156 x $25.50)). The remaining 78 Restricted Shares would vest in the year 2002 (ten years after grant) unless the Committee, in its discretion, caused them to vest at an earlier date. (c) Pro Rata Acceleration of Vesting of Restricted Shares in the Event of the Award Recipient's Death, Disability or Retirement. In the event of the death, disability (within the meaning of section 22(e)(3) of the Internal Revenue Code) or retirement of the Award Recipient after December 31, 1995, the Committee may, after considering any recommendation of the President with respect to the performance of such Award Recipient and of the Company for the portion of the then current year prior to such death, disability or retirement, direct that the vesting with respect to a pro rata portion of the Restricted Shares which would have become vested had the employee worked the entire year shall be accelerated and such Restricted Shares shall become fully vested. For example, assume that in the example in the last paragraph of Section 5(b)(3), Employee died on July 1, 1998, and the Compensation Committee in its discretion determined to award him a partial-year 1998 bonus of $5,500, on the basis that had he worked the full year his bonus would have been $11,000.00. His estate or, in the event Employee had named a beneficiary under the Plan, his beneficiary would receive 78 unrestricted shares and $3,511.00 in cash ($5,500 - (78 x $25.50)). (d) Pro Rata Acceleration of Vesting of Restricted Shares in the Event of a Change of Control. After December 31, 1995, in the event of, or upon the date set by the Committee to be 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 such Award Recipient and of the Company for the portion of the then current year prior to such actual or anticipated Change of Control, direct that the vesting with respect to a pro rata portion of the Restricted Shares which would have become vested had the employee worked the entire year shall be accelerated and such Restricted Shares shall become fully vested. A "Change of Control" shall be 6 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. 6. Forfeiture of Restricted Shares. All nonvested Restricted Shares shall be forfeited without the receipt of any payment by the Award Recipient upon the last day of the Award Recipient's employment with the Company or a subsidiary thereof, except to the extent that the provisions of Sections 5(c) or 5(d) are applicable. Restricted Shares which are forfeited may be cancelled by the Company without any action by the Award Recipient. 7. Transfer of Restricted Shares. No Restricted Shares awarded under this Plan may be transferred, pledged, or encumbered until such time as any such shares become vested. 7 8. Amendment of the Plan. The non-employee members of the Board of Directors of the Company may amend this Plan from time to time in such manner as they may deem advisable. No amendment to this Plan shall adversely affect any outstanding Restricted Stock Award, however, without the consent of the Award Recipient. 9. No Continued Employment. The award of a Restricted Stock Award pursuant to this Plan shall not be construed to imply or to constitute evidence of any agreement, express or implied, on the part of the Company or any subsidiary thereof to retain the Award Recipient in the employ of the Company or any subsidiary thereof, and each such Award Recipient shall remain subject to discharge to the same extent as if this Plan had not been adopted. 10. Withholding of Taxes. Whenever Restricted Shares vest or, if sooner, whenever an Award Recipient must include the Restricted Shares in income for federal income tax purposes, the Company shall have the right to (a) require the recipient to remit or otherwise make available to the Company an amount sufficient to satisfy all federal, state and/or local withholding tax requirements prior to the delivery or transfer of any certificate or certificates for such Restricted Shares or (b) take whatever action it deems necessary to protect its interests with respect to tax liabilities, including, without limitation, redeeming a portion of any Restricted Shares otherwise deliverable pursuant to this Plan with a then fair market value equal to such tax liabilities. The Company's obligation to make any delivery or transfer of vested Restricted Shares shall be conditioned on the Award Recipient's compliance with any withholding requirement to the Company's satisfaction. 11. Establishment of Rules by the Committee. The Committee shall have the authority to establish rules with respect to the Company's obligations in connection with the withholding requirements described in Section 10 so as to insure compliance with Rule 16b-3(e) of the Securities Exchange Act of 1934. 12. Dividend and Other Rights. During the period from the date a Restricted Stock Award is granted to the date Restricted Shares are vested, the Award Recipient will be entitled to all rights of a holder of the Class B Common Stock of the Company, including the right to receive dividends declared on such shares, as paid. 13. Stock Certificates. 8 The stock certificate(s) evidencing a Restricted Stock Award shall be registered in the name of the Award Recipient and shall bear a legend referring to the terms, conditions and restrictions applicable to such shares. The Committee shall direct the Company to either retain physical possession or custody of or place into escrow the certificate(s) evidencing the Restricted Shares until such time as such shares are vested. EX-10.2 3 ADVANTA MANAGEMENT INCENTIVE PLAN STOCK ELECTION 4 1 (as amended 10/26/95 and 3/7/96) ADVANTA MANAGEMENT INCENTIVE PLAN WITH STOCK ELECTION IV 1. Purpose. This Plan is intended as an additional incentive to employees to enter into or remain in the employ of Advanta Corp., a Delaware corporation (the "Company"), or a subsidiary thereof and to devote themselves to the Company's success. This Plan provides selected employees with an opportunity to acquire the Company's Class B Common Stock, par value $0.01 per share (the "Common Stock"). 2. Administration. This Plan shall be administered by the Board of Directors of the Company; however, the Board of Directors may (i) designate a committee composed of two or more of its Non-employee Directors to operate and administer the Plan in its stead, (ii) designate two committees to operate and administer the Plan in its stead, one of such committees composed of two or more of its Non-employee Directors to operate and administer the Plan with respect to the Company's "Principal Officers" (as defined below), and the other such committee composed of two or more directors (whether or not Non-employee Directors) to operate and administer the Plan with respect to persons other than Principal Officers or (iii) designate only one of the two committees referred to in subparagraph (ii) and itself operate and administer the Plan with respect to persons not within the jurisdiction of such committee. Any of such committees designated by the Board of Directors, and the Board of Directors itself in its administrative capacity with respect to the Plan, is referred to as the "Committee." As used herein, the term "Principal Officers" means any person who is an "officer" within the meaning of Rule 16a-1(f) promulgated under the Securities Exchange Act of 1934, as amended, or any successor rule. The Committee shall hold meetings at such times and places as it may determine. Acts approved at a meeting by a majority of the members of the Committee or acts approved in writing by the unanimous consent of the members of the Committee shall be valid acts of the Committee. The interpretation and construction by the Committee of any provision of the Plan or of any Restricted Stock Award awarded hereunder shall be final, binding and conclusive. 3. Eligibility. All employees of the Company or a subsidiary thereof who are selected by the Company's Compensation Committee to be eligible to receive a bonus pursuant to the Advanta Management Incentive Plan shall be eligible to receive shares (the "Restricted Shares") of the Company's Class B Common Stock (the "Restricted Stock Awards") pursuant to this Plan. For purposes of this Plan, "subsidiary" shall include any corporation, partnership, joint venture or other entity in which the Company, directly or indirectly, has an equity interest of at least twenty percent (20%) or a significant financial interest, provided that the Committee has determined that such entity shall be deemed a "subsidiary" for purposes of this Plan. The aggregate maximum 2 number of shares of Class B Common Stock for which Restricted Stock Awards may be awarded under this Plan is 1,500,000 shares. 4. Restricted Stock Awards. (a) Elective Participation. Each eligible employee other than an employee to whom Section 4(b) applies shall be permitted to elect (which election shall be irrevocable) a portion of such employee's annual bonus for services performed during 1999, 2000 and 2001 to be received in the form of Class B Common Stock. The portion of each such bonus which may be elected in stock is an amount up to the employee's anticipated 1995 "target" bonus, calculated on the basis of the employee's base salary as of December 2, 1994 subject to modification as described in Section 4(f). The election shall be performed by the employee's execution of such forms as may be determined by the Committee. (b) Mandatory Participation by Section 16 Officers. Each eligible employee who is an "officer" of the Company as defined for purposes of the Rule (an "Officer") as of the date the Plan is adopted (subject to stockholder approval) by the Board of Directors, shall be granted a Restricted Stock Award based upon the employee's anticipated 1995 "target" bonus, calculated on the basis of the employee's base salary as of December 2, 1994. The number of shares so awarded shall be determined by applying the formula set forth in Section 4(c), using a percentage factor of 100% in clause (ii) of such formula. Plan provisions providing for Plan participation by Officers, and the terms of such participation, shall not be amended more than once every six months, other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules thereunder. (c) Number of Restricted Shares. Subject to the provisions of this Plan, the Committee shall award a Restricted Stock Award to an eligible employee ("Award Recipient") equal to the number of shares (rounded down to the nearest whole number divisible by three) calculated by (i) multiplying the employee's anticipated 1995 "target" bonus, calculated on the basis of the employee's base salary as of December 2, 1994 by three, (ii) multiplying this product times the percentage factor (25%, 50%, 75% or 100%) irrevocably elected by the employee, and (iii) dividing the product thereof by the market price of the Class B Common Stock as of the close of business on December 2, 1994 (the "Base Price"). (d) Documents. Restricted Shares awarded pursuant to this Plan shall be evidenced by the stock certificates described in Section 13 and such other written documents (the "Restricted Stock Award Documents") in such form as the Committee shall approve from time to time. Such Restricted Stock Award Documents shall comply with and be subject to the terms and conditions of this Plan and such other terms and conditions which the Committee shall require from time to time which are not inconsistent with the terms of this Plan. The Committee shall have the right to amend the Restricted Stock Award Documents issued to an Award Recipient subject to his or her consent. (e) New Participants. In the event an individual becomes eligible to participate in the Plan for any reason (including promotion or being newly hired) subsequent to the time as of which initial awards are made hereunder, (i) if such individual is an Officer, such individual shall -2- 3 automatically become a participant in the Plan, or (ii) if such individual is not an Officer, he or she shall be entitled to elect to participate in the Plan, provided that such election must be made within thirty days after the person first becomes eligible to participate. Except as provided under Section 4(f)(2), the number of shares included in such new participant's Restricted Stock Award shall be based on the participant's annualized target bonus for the then current calendar year and the average of the closing market prices of the Class B Common Stock for each trading day in the ninety day period ending on the day before the date the recipient became eligible to participate in the Plan. Any such Restricted Stock Awards shall be made otherwise in accordance with the terms of this Plan, with such modifications as may be appropriate to implement the intended operation of the Plan. (f) Modification for Increases in Target Bonus Percentage. If a participant's prospective target bonus is increased to a higher percentage of his or her base salary (whether as a consequence of such participant receiving a promotion, or of other action by the Committee), then (a) if such participant is an Officer or as the result of such promotion the participant has become an Officer, then the participant shall receive additional Restricted Shares reflecting the full amount of the increase in target bonus as applied to the years 1999-2001, or (b) if the participant is not an Officer, to the extent that the participant previously elected to receive a percentage of 1999-2001 bonuses in stock, that election shall be likewise applied to the additional target bonus resulting from the increase in the participant's target bonus percentage. In either event, the number of additional shares of Restricted Stock awarded to the participant in such a case shall be based on the average of the closing market prices of the Class B Common Stock for each trading day in the ninety day period ending on the day before the effective date of the promotion or other action by the Committee . For example, suppose a participant's target bonus percentage is 15% of her $70,000 salary (resulting in a $10,500 target bonus) at the time she makes an irrevocable election in 1994 to take 100% of her target bonuses in stock, and assume that the Base Price, as defined in Section 4(e), is $25.00 per share. Consequently, she is awarded 1,260 restricted shares ($70,000 X 15% divided by $25.00 per share = 420 shares X 3 years = 1,260). In 1996, she receives a promotion, as the result of which her salary is increased to $90,000 per year and her target bonus percentage is increased to 25%. Consequently, her new target bonus is 25% of $90,000 or $22,500. This represents an incremental $12,000 over her previous target bonus of $10,500. If at the time she receives such promotion the market price of the stock (using the 90 day average) is $40.00 per share, she will be awarded an additional 900 restricted shares ($12,000 X 3 years divided by $40.00 per share = 900). If the participant is awarded her target bonus in each of 1999, 2000 and 2001, she will have 720 shares vested each year (420 of the $25.00 shares and 300 of the $40.00 shares, for a total grant date value of $22,500.00). If the promotion occurred on January 1, 2000 and the 90 day average market price of the stock was $40.00 per share at that time, she would be awarded an additional 600 shares rather than 900, as the first bonus year, 1999, will at that point have already passed. 5. Vesting. (a) General. Restricted Shares shall fully vest upon the lapse of ten years from the date they are awarded as Restricted Stock Awards. However, the Committee may accelerate the vesting of the Restricted Shares, and to the extent that both the Award Recipient and the Company meet their respective annual target performance goals for the applicable years so that -3- 4 the Committee or the Board of Directors approves payment of bonuses under the Advanta Management Incentive Plan, vesting will be accelerated annually with respect to one-third of the Restricted Shares on such date that the Company elects to pay bonuses for services performed during the years 1999, 2000 and 2001, respectively. The portion of any bonus award which exceeds the 1995 "target" level will be paid in cash. Bonus awards which fall short of the 1995 "target" bonus awards, as determined by the Compensation Committee or the Board of Directors, in their discretion, will be paid by reducing both the cash component and the number of shares of stock to be vested, on a pro rata basis. All Restricted Shares shall be valued at the Base Price (or, if applicable, the average price utilized under Section 4(e) or 4(f) to determine the number of Restricted Shares in a Restricted Stock Award) for purposes of determining the value of that portion of any bonus award to be paid by accelerating the vesting of Restricted Shares. (b) Examples. The following examples are designed to clarify the operation of the Plan. For the purposes of these examples, the Base Price (which is the market price of the Class B Common Stock as of the close of business on December 2, 1994) is assumed to be $25.00 per share. (1) If, in connection with services performed during any one of the years 1999, 2000 or 2001, the Compensation Committee grants an annual bonus to an Award Recipient in an amount equal to or greater than such Award Recipient's "target" bonus for 1995, such bonus shall be paid by (i) the acceleration of the vesting of Restricted Shares representing one-third of the number of Restricted Shares previously awarded under this Plan, and (ii) payment of cash in the amount of the excess, if any, of such bonus over the product of the number of vested shares times the Base Price. For example, an Award Recipient (not an Officer) whose 1995 "target" bonus was $8,000 and who had elected to receive 75% of such bonus in Class B Common Stock and who therefore received a Restricted Stock Award of 720 Restricted Shares shall, upon the Company's granting of any bonus equal to or greater than $8,000 in any year, receive 240 vested shares (one-third of the Restricted Stock Award) and cash in the amount of the balance. (2) If, in connection with services performed during any of the years 1999, 2000 or 2001 the Compensation Committee awards a bonus to an Award Recipient in an amount less than such Award Recipient's "target" bonus for 1995, such bonus shall be paid in cash and vested shares, each of which shall be reduced on a pro-rata basis in relation to the shortfall from the 1995 "target" award. (3) A participant in the Plan ("Employee") has made a 50% irrevocable election. For 1995 his "target" bonus is $8,000. Employee would be granted 480 Restricted Shares (($8,000 x 3) x 50% divided by $25.00). Assume that in 1999 Employee exceeded all his goals for 1999 and the Company prospered. Employee is awarded a 1999 bonus of $10,000. He would have all restrictions removed from 160 shares of stock (1/3 of 480) and would receive $6000.00 in cash ($10,000 - (160 x $25.00)). Assume that in 2000 Employee did not perform as well. He is awarded a 2000 bonus of $4,000. Employee would have the restrictions removed on 80 shares ($2,000 divided by $25.00), -4- 5 and would receive $2,000 in cash ($4,000 - (80 x $25.00)). In 2001, Employee again does well and receives a bonus for 2001 of $11,000. He would have the restrictions removed on 160 shares and would receive $7,000 in cash ($11,000 - (160 x $25.00)). The remaining 80 Restricted Shares would vest in the year 2004 (ten years after grant) unless the Committee, in its discretion, caused them to vest at an earlier date. (c) Pro Rata Acceleration of Vesting of Restricted Shares in the Event of the Award Recipient's Death, Disability or Retirement. In the event of the death, disability (within the meaning of section 22(e)(3) of the Internal Revenue Code) or retirement of the Award Recipient after December 31, 1998, the Committee may, after considering any recommendation of the President with respect to the performance of such Award Recipient and of the Company for the portion of the then current year prior to such death, disability or retirement, direct that the vesting with respect to a pro rata portion of the Restricted Shares which would have become vested had the employee worked the entire year shall be accelerated and such Restricted Shares shall become fully vested. For example, assume that in the example in the last paragraph of Section 5(b)(3), Employee died on July 1, 1999, and the Compensation Committee in its discretion determined to award him a partial-year 1999 bonus of $5,500, on the basis that had he worked the full year his bonus would have been $11,000.00. His estate or, in the event Employee had named a beneficiary under the Plan, his beneficiary would receive 80 unrestricted shares and $3,500 in cash ($5,500 - (80 x $25.00)). (d) Pro Rata Acceleration of Vesting of Restricted Shares in the Event of a Change of Control. After December 31, 1998, in the event of, or upon the date set by the Committee to be 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 such Award Recipient and of the Company for the portion of the then current year prior to such actual or anticipated Change of Control, direct that the vesting with respect to a pro rata portion of the Restricted Shares which would have become vested had the employee worked the entire year shall be accelerated and such Restricted Shares shall become fully vested. 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 -5- 6 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. 6. Forfeiture of Restricted Shares. All nonvested Restricted Shares shall be forfeited without the receipt of any payment by the Award Recipient upon the last day of the Award Recipient's employment or service with the Company or a subsidiary thereof, except to the extent that the provisions of Sections 5(c) or 5(d) are applicable. Restricted Shares which are forfeited may be cancelled by the Company without any action by the Award Recipient. 7. Transfer of Restricted Shares. No Restricted Shares awarded under this Plan may be transferred, pledged, or encumbered until such time as any such shares become vested. 8. Amendment of the Plan. The non-employee members of the Board of Directors of the Company may amend this Plan from time to time in such manner as they may deem advisable. No amendment to this Plan shall adversely affect any outstanding Restricted Stock Award, however, without the consent of the Award Recipient. 9. No Continued Employment. The award of a Restricted Stock Award pursuant to this Plan shall not be construed to imply or to constitute evidence of any agreement, express or implied, on the part of the Company or any subsidiary thereof to retain the Award Recipient in the employ or service of the Company or any subsidiary thereof, and each such Award Recipient shall remain subject to discharge to the same extent as if this Plan had not been adopted. 10. Withholding of Taxes. Whenever Restricted Shares vest or, if sooner, whenever an Award Recipient must include the Restricted Shares in income for federal income tax purposes, the Company shall have the right to (a) require the recipient to remit or otherwise make available to the Company an -6- 7 amount sufficient to satisfy all federal, state and/or local withholding tax requirements prior to the delivery or transfer of any certificate or certificates for such Restricted Shares or (b) take whatever action it deems necessary to protect its interests with respect to tax liabilities, including, without limitation, redeeming a portion of any Restricted Shares otherwise deliverable pursuant to this Plan with a then fair market value equal to such tax liabilities. The Company's obligation to make any delivery or transfer of vested Restricted Shares shall be conditioned on the Award Recipient's compliance with any withholding requirement to the Company's satisfaction. 11. Establishment of Rules by the Committee. The Committee shall have the authority to establish rules with respect to the Company's obligations in connection with the withholding requirements described in Section 10 so as to insure compliance with Rule 16b-3(e) of the Securities Exchange Act of 1934. 12. Dividend and Other Rights. During the period from the date a Restricted Stock Award is granted to the date Restricted Shares are vested, the Award Recipient will be entitled to all rights of a holder of the Class B Common Stock of the Company, including the right to receive dividends declared on such shares, as paid. 13. Stock Certificates. The stock certificate(s) evidencing a Restricted Stock Award shall be registered in the name of the Award Recipient and shall bear a legend referring to the terms, conditions and restrictions applicable to such shares. The Committee may direct the Company to either retain physical possession or custody of or place into escrow the certificate(s) evidencing the Restricted Shares until such time as such shares are vested. -7- EX-10.3 4 ADVANTA CORP. 1992 STOCK OPTION PLAN 1 ADVANTA CORP. 1992 STOCK OPTION PLAN (as amended and restated through March 7, 1996) 1. Purpose. Advanta Corp. hereby adopts the Advanta Corp. 1992 Stock Option Plan (the "Plan"). The Plan is intended to recognize the contributions made to the Company by employees (including employees who are members of the Board of Directors) of the Company or any Affiliate, to provide such persons with additional incentive to devote themselves to the future success of the Company or an Affiliate, and to improve the ability of the Company or an Affiliate to attract, retain, and motivate individuals upon whom the Company's sustained growth and financial success depend, by providing such persons with an opportunity to acquire or increase their proprietary interest in the Company through receipt of rights to acquire the Company's Class A Common Stock, par value $.01 per share (the "Class A Common Stock") and/or Class B Common Stock, par value $.01 per share (the "Class B Common Stock") (the Class A Common Stock and Class B Common Stock are hereinafter collectively referred to as the "Common Stock"). In addition, the Plan is intended as an additional incentive to directors of the Company who are not employees of the Company or an Affiliate to serve on the Board of Directors and to devote themselves to the future success of the Company by providing them with an opportunity to acquire or increase their proprietary interest in the Company through the receipt of Options to acquire Class B Common Stock. 2. Definitions. Unless the context clearly indicates otherwise, the following terms shall have the following meanings: 2 (a) "Affiliate" means a corporation which is a parent corporation or a subsidiary corporation with respect to the Company within the meaning of section 424(e) or (f) of the Code and, solely with respect to the granting of Non-qualified Stock Options, it shall also mean any corporation, partnership, joint venture or other entity in which the Company, directly or indirectly, has an equity interest of at least twenty percent (20%) or a significant financial interest, provided the Committee has determined that such entity shall be deemed an Affiliate for purposes of Non-qualified Stock Options. (b) "Board of Directors" means the Board of Directors of the Company. (c) "Change of Control" shall have the meaning as set forth in Section 10 of the Plan. (d) "Code" means the Internal Revenue Code of 1986, as amended. (e) "Committee" shall have the meaning set forth in Section 3 of the Plan. (f) "Company" means Advanta Corp., a Delaware corporation. (g) "Disability" shall have the meaning set forth in section 22(e)(3) of the Code. -2- 3 (h) "Expiration Date" shall mean the expiration date set forth in the Option Document, which shall be subject to the limitations set forth in Subsection 8(e)(i)(A) of the Plan. (i) "Fair Market Value" shall have the meaning set forth in Subsection 8(b) of the Plan. (j) "Family Transfer" shall have the meaning set forth in Subsection 8(f) of the Plan. (k) "ISO" means an Option granted under the Plan which is intended to qualify as an "incentive stock option" within the meaning of section 422(b) of the Code. (l) "Non-employee Director" means a member of the Board of Directors who is not an employee of the Company or an Affiliate. (m) "Non-qualified Stock Option" means an Option granted under the Plan which is not intended to qualify, or otherwise does not qualify, as an "incentive stock option" within the meaning of section 422(b) of the Code. (n) "Option" means either an ISO or a Non-qualified Stock Option granted under the Plan. (o) "Optionee" means a person to whom an Option has been granted under the Plan, which Option has not been exercised and has not expired or terminated. -3- 4 (p) "Option Document" means the document described in Section 8 or Section 9 of the Plan, as applicable, which sets forth the terms and conditions of each grant of Options. (q) "Option Price" means the price at which Shares may be purchased upon exercise of an Option, as calculated pursuant to Subsection 8(b) of the Plan. (r) "Rule 16b-3" means Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended. (s) "Shares" means the shares of Common Stock of the Company which are the subject of Options. 3. Administration of the Plan. The Plan shall be administered by the Board of Directors of the Company; however, the Board of Directors may (i) designate a committee composed of two or more of its Non-employee Directors to operate and administer the Plan in its stead, (ii) designate two committees to operate and administer the Plan in its stead, one of such committees composed of two or more of its Non-employee Directors to operate and administer the Plan with respect to the Company's "Principal Officers" (as defined below), and the other such committee composed of two or more directors (whether or not Non-employee Directors) to operate and administer the Plan with respect to persons other than Principal Officers and Non-employee Directors or (iii) designate only one of the two committees referred to in subparagraph (ii) and itself operate and administer the Plan with respect to persons not within the jurisdiction of such committee. Any of such committees designated by the Board of Directors, and the Board -4- 5 of Directors itself in its administrative capacity with respect to the Plan, is referred to as the "Committee." With respect to Non-employee Directors, who are to be granted Options in accordance with the provisions of Section 9, the directors to whom Options will be granted, the timing of grants of Options, the price at which Shares may be purchased and the number of Shares covered by Options granted to each Optionee shall be as specifically set forth herein, and subject to the foregoing and the other provisions set forth herein, the Plan, as it pertains to Non-employee Directors, shall be administered by the Board of Directors. As used herein, the term "Principal Officers" means any person who is an "officer" within the meaning of Rule 16a-1(f) promulgated under the Securities Exchange Act of 1934, as amended, or any successor rule. (a) Meetings. The Committee shall hold meetings at such times and places as it may determine. Acts approved at a meeting by a majority of the members of the Committee or acts approved in writing by the unanimous consent of the members of the Committee shall be the valid acts of the Committee. (b) Grants. Except with respect to Options granted to Non-employee Directors pursuant to Section 9, the Committee shall from time to time at its discretion direct the Company to grant Options pursuant to the terms of the Plan. The Committee shall have plenary authority to (i) determine the Optionees to whom, the times at which, and the price at which Options shall be granted, (ii) determine the type of Option to be granted and the number and class of Shares subject thereto, and (iii) approve the form and terms and conditions of the Option Documents; all subject, however, to the express provisions of the Plan. In making such -5- 6 determinations, the Committee may take into account the nature of the Optionee's services and responsibilities, the Optionee's present and potential contribution to the Company's success and such other factors as it may deem relevant. Notwithstanding the foregoing, grants of Options to Non-employee Directors shall be made in accordance with Section 9. The interpretation and construction by the Committee of any provisions of the Plan or of any Option granted under it shall be final, binding and conclusive. (c) Exculpation. No member of the Board of Directors shall be personally liable for monetary damages for any action taken or any failure to take any action in connection with the administration of the Plan or the granting of Options under the Plan, provided that this Subsection 3(c) shall not apply to (i) any breach of such member's duty of loyalty to the Company or its stockholders, (ii) acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law, (iii) acts or omissions that would result in liability under Section 174 of the General Corporation Law of the State of Delaware, as amended, and (iv) any transaction from which the member derived an improper personal benefit. (d) Indemnification. Service on the Committee shall constitute service as a member of the Board of Directors of the Company. Each member of the Committee shall be entitled without further action on his part to indemnity from the Company to the fullest extent provided by applicable law and the Company's Certificate of Incorporation and/or By-laws in connection with or arising out of any action, suit or proceeding with respect to the administration of the Plan or the granting of Options thereunder in which he or she may be involved by reason -6- 7 of his or her being or having been a member of the Committee, whether or not he or she continues to be such member of the Committee at the time of the action, suit or proceeding. 4. Grants under the Plan. Grants under the Plan may be in the form of a Non-qualified Stock Option, an ISO or a combination thereof, at the discretion of the Committee. 5. Eligibility. All employees and members of the Board of Directors shall be eligible to receive Options hereunder. However, Non-employee Directors may receive options only pursuant to Section 9. The Committee, in its sole discretion, shall determine whether an individual qualifies as an employee eligible to receive an ISO, a Non-qualified Stock Option or both an ISO and a Non-qualified Stock Option. 6. Shares Subject to Plan. The aggregate maximum number of Shares for which Options may be granted pursuant to the Plan is Three Million Six Hundred Thousand (3,600,000), subject to adjustment as provided in Section 11 of the Plan. Subject to the provisions of Subsection 9(a), such Shares may be either Class A Common Stock or Class B Common Stock, or any combination of such classes, so long as the aggregate number of shares of both classes for which options are granted pursuant to this Plan does not exceed Three Million Six Hundred Thousand (3,600,000) Shares, subject to adjustment as provided in Section 11 of the Plan. Effective March 7, 1996, the 3,600,000 Share limits described in this Section shall each be increased to Ten Million (10,000,000) Shares, subject to stockholder approval. The Share limits referred to in this Section 6 reflect the October 15, 1993 stock dividend effecting a three-for-two spilt-up of both the Class A Common Stock and the Class B Common Stock. The -7- 8 Shares shall be issued from authorized and unissued Common Stock or Common Stock held in or hereafter acquired for the treasury of the Company. If an Option terminates or expires without having been fully exercised for any reason, the Shares for which the Option was not exercised may again be the subject of one or more Options granted pursuant to the Plan, provided that some or all of the Shares that are again the subject of Options need not be of the same class as the Shares for which the Option was not exercised. 7. Term of the Plan. The Plan was initially effective as of January 30, 1992, the date on which it was adopted by the Board of Directors. The amendments incorporated in this Plan amendment and restatement are effective March 7, 1996, however, the amendments to Sections 2(a), 5, 6, 8(a) and 9(a) are subject to stockholder approval. No Option may be granted under the Plan after January 29, 2002. 8. Option Documents and Terms. Each Option granted under the Plan shall be a Non-qualified Stock Option unless the Option shall be specifically designated at the time of grant to be an ISO for Federal income tax purposes. Options granted pursuant to the Plan shall be evidenced by the Option Documents in such form as the Committee shall from time to time approve, which Option Documents shall comply with and be subject to the following terms and conditions and such other terms and conditions as the Committee shall from time to time require which are not inconsistent with the terms of the Plan. However, the provisions of this Section 8 shall not be applicable to Options granted to Non-employee Directors, except as otherwise provided in Subsection 9(c). -8- 9 (a) Number of Option Shares. Each Option Document shall state the number of Shares to which it pertains. An Optionee may receive more than one Option, which may include Options which are intended to be ISOs and Options which are not intended to be ISOs, but only on the terms and subject to the conditions and restrictions of the Plan. Notwithstanding anything herein to the contrary, no employee shall be granted Options to acquire more than Five Hundred Thousand (500,000) Shares during any calendar year. (b) Option Price. Each Option Document shall state the Option Price which, for a Non-qualified Stock Option, may be less than, equal to, or greater than the Fair Market Value of the Shares on the date the Option is granted and, for an ISO, shall be at least 100% of the Fair Market Value of the Shares on the date the Option is granted as determined by the Committee in accordance with this Subsection 8(b); provided, however, that if an ISO is granted to an Optionee who then owns, directly or by attribution under section 424(d) of the Code, shares possessing more than ten percent of the total combined voting power of all classes of stock of the Company or an Affiliate, then the Option Price shall be at least 110% of the Fair Market Value of the Shares on the date the Option is granted. If the Common Stock is traded in a public market, then the Fair Market Value per share shall be, if the Shares are listed on a national securities exchange or included in the NASDAQ National Market System, the last reported sale price thereof on the date of grant (for the purposes of Subsection 8(b) and 9(a)) or on the last trading day prior to the date of delivery of Company Common Stock certificates (for the purposes of Subsection 8(d)), or, if the Shares are not so listed or included, the mean between -9- 10 the last reported "bid" and "asked" prices thereof, as reported on NASDAQ or, if not so reported, as reported by the National Daily Quotation Bureau, Inc. or as reported in a customary financial reporting service, as applicable and as the Committee determines. -10- 11 (c) Exercise. No Option shall be deemed to have been exercised prior to the receipt by the Company of written notice of such exercise and of either (i) payment in full of the Option Price for the Shares to be purchased or (ii) receipt of the commitment of a registered securities brokerage firm to forward such payment to the Company after the date of exercise. Each such notice shall specify the number and, if applicable, class of Shares to be purchased and shall (unless the Shares are covered by a then current registration statement or a Notification under Regulation A under the Securities Act of 1933, as amended (the "Act")), contain the Optionee's acknowledgment in form and substance satisfactory to the Company that (a) such 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), (b) the Optionee has been advised and understands that (i) the 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 (ii) the Company is under no obligation to register the Shares under the Act or to take any action which would make available to the Optionee any exemption from such registration, (c) such Shares may not be transferred without compliance with all applicable federal and state securities laws, and (d) an appropriate legend referring to the foregoing restrictions on transfer and any other restrictions imposed under the Option Documents may be endorsed on the certificates. Notwithstanding the foregoing, if the Company determines that -11- 12 issuance of 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 laws, (C) the listing or inclusion of the Shares on any securities exchange or an automataed 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 8(c) has occurred. -12- 13 (d) Medium of Payment. An Optionee shall pay for Shares (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, including payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board. Furthermore, the Committee may provide in an Option Document that payment may be made in whole or in part in shares of the Company's Common Stock held by the Optionee, provided that shares of one class of the Company's Common Stock may not be utilized to purchase Option Shares of the other class of Common Stock if such method of payment would cause the Optionee to incur liability under Section 16(b) of the Securities Exchange Act of 1934, as amended. If payment is made in whole or in part in shares of the Company's Common Stock, then the Optionee shall deliver to the Company certificates registered in the name of such Optionee representing the shares owned by such Optionee, free of all liens, claims and encumbrances of every kind and having an aggregate Fair Market Value on the date of delivery that is at least as great as the Option Price of the Shares (or relevant portion thereof) with respect to which such Option is to be exercised by the payment in shares of Common Stock, accompanied by stock powers duly endorsed in blank by the Optionee. In the event that certificates for shares of the Company's Common Stock delivered to the Company represent a number of shares in excess of the number of shares required to make payment for the Option Price of the Shares (or relevant portion thereof) with respect to which such Option is to be exercised by payment in shares of Common Stock, the stock certificate issued to the Optionee shall represent (i) the Shares in respect of -13- 14 which payment is made, and (ii) such excess number of shares. Notwithstanding the foregoing, the Committee may impose from time to time such limitations and prohibitions on the use of shares of the Common Stock to exercise an Option as it deems appropriate. (e) Termination of Options. (i) No Option shall be exerciseable after the first to occur of the following: (A) The Expiration Date, which shall not occur after (1) ten years from the date of grant, or (2) five years from the date of grant of an ISO if the Optionee on the date of grant owns, directly or by attribution under section 424(d) of the Code, shares possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of an Affiliate; (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 or has not resulted from the Optionee's retirement. (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 or death or as otherwise specified in Subsection 8(e)(i)(B) above or 8(e)(i)(E) or 8(e)(i)(F) below; -14- 15 (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 or death; (E) A finding by the Committee, after full consideration of the facts presented on behalf of both the Company and the Optionee, that the Optionee has breached his employment or service contract with the Company or an Affiliate, or has been engaged in any sort of disloyalty to the Company or an Affiliate, including, without limitation, fraud, embezzlement, theft, commission of a felony or proven dishonesty in the course of his employment or service, or has disclosed trade secrets or confidential information of the Company or an Affiliate. In such event, in addition to immediate termination of the Option, the Optionee shall automatically forfeit all 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. (F) The date, if any, set by the Board of Directors as an accelerated expiration date pursuant to Section 10 hereof. (ii) Notwithstanding the foregoing, the Committee may extend the period during which all or any portion of an Option may be exercised to a date no later than -15- 16 the Expiration Date, provided that any change pursuant to this Subsection 8(e)(ii) which would cause an ISO to become a Non-qualified Stock Option may be made only with the consent of the Optionee. (f) Transfers. No Option granted under the Plan may be transferred, except by will or by the laws of descent and distribution. During the lifetime of the person to whom an Option is granted, such Option may be exercised only by him. Notwithstanding the foregoing, (i) a Non-qualified Stock Option 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 Committee may provide, in an Option Document, that an Optionee may transfer Options to his or her children, grandchildren or spouse or to one or more trusts for the benefit of such family members or to partnerships in which such family members are the only partners (a "Family Transfer"), provided that the Optionee receives no consideration for a Family Transfer and the Option Documents relating to Options transferred in a Family Transfer continue to be subject to the same terms and conditions that were applicable to such Options immediately prior to the Family Transfer. (g) Limitation on ISO Grants. In no event shall the aggregate fair market value of the shares of Common Stock (determined at the time the ISO is granted) with respect to which incentive stock options under all incentive stock option plans of the Company or -16- 17 its Affiliates are exerciseable for the first time by the Optionee during any calendar year exceed $100,000. (h) Other Provisions. Subject to the provisions of the Plan, the Option Documents shall contain such other provisions including, without limitation, provisions authorizing the Committee to accelerate the exerciseability of all or any portion of an Option granted pursuant to the Plan, additional restrictions upon the exercise of the Option or additional limitations upon the term of the Option, as the Committee shall deem advisable. (i) Amendment. Subject to the provisions of the Plan, the Committee shall have the right to amend Option Documents issued to an Optionee, subject to the Optionee's consent if such amendment is not favorable to the Optionee, except that the consent of the Optionee shall not be required for any amendment made under Section 10 of the Plan. 9. Special Provisions Relating to Grants of Options to Non-employee Directors. Options granted pursuant to the Plan to Non-employee Directors shall be granted, without any further action by the Committee, in accordance with the terms and conditions set forth in this Section 9. Options granted pursuant to this Section 9 shall be evidenced by Option Documents in such form as the Committee shall from time to time approve, which Option Documents shall comply with and be subject to the following terms and conditions and such other terms and conditions as the Committee shall from time to time require which are not inconsistent with the terms of the Plan. -17- 18 (a) Timing of Grants; Number of Shares Subject of Options; Exercisability of Options; Option Price. Each Non-employee Director shall be granted annually, (i) on the fourth Wednesday of each January which follows March 7, 1996, an Option to purchase seven thousand five hundred (7,500) shares of Class B Common Stock. However, notwithstanding the foregoing, effective March 7, 1996, each newly elected Non-employee Director, upon the date such Non-employee Director is first elected to the Board of Directors, shall be granted an Option to purchase fifteen thousand (15,000) shares of Class B Common Stock, and shall receive no additional grants of Options during the calendar year in which such Non-employee Director is first elected to the Board of Directors. Each Option granted pursuant to this Section 9 shall be a Non-qualified Stock Option vesting over a period of four (4) years, so that the Optionee shall have the right to exercise the Option with respect to twenty five percent (25%) of the Shares covered thereby on the first anniversary of the date of grant, and the right to exercise the Option with respect to an additional 25% of such Shares on each of the next three anniversaries of the date of grant. The Option Price shall be equal to the Fair Market Value of the Shares on the date the Option is granted. The number of shares of Class B Common Stock referred to in this Subsection 9(a) reflects the October 15, 1993 stock dividend effecting a three-for-two split-up of both the Class A Common Stock and the Class B Common Stock. (b) Termination of Options Granted Pursuant to Section 9. (i) All Options granted pursuant to this Section 9 shall be exerciseable until the first to occur of the following: -18- 19 (A) Expiration of ten (10) years from the date of grant; (B) Expiration of ninety (90) days from the date the Optionee's service as a Non-employee Director terminates for any reason other than Disability or death; (C) Expiration of one hundred eighty (180) days from the date the Optionee's service with the Company as a Non-employee Director terminates due to the Optionee's Disability or death; (c) Applicability of Provisions of Section 8 to Options Granted Pursuant to Section 9. The following provisions of Section 8 shall be applicable to Options granted pursuant to this Section 9: Subsection 8(a)(provided that all Options granted pursuant to this Section 9 shall be Non-qualified Stock Options); the last sentence of Subsection 8(b); Subsection 8(c); Subsection 8(d) (provided, that Option Documents relating to Options granted pursuant to this Section 9 shall provide that payment may be made (i) in cash, (ii) by certified or cashier's check payable to the order of the Company, (iii) by payment through a broker in accordance with procedures permitted by Regulation T of the Federal Reserve Board, (iv) in shares of Class A Common Stock or Class B Common Stock held by the Optionee for at least six months, or (v) by any combination of the foregoing; provided further, that shares of Class A Common Stock may not be utilized to purchase Option Shares if such method of payment would cause the Optionee to incur liability under Section 16(b) of the Securities Exchange Act of 1934, as amended); Subsection 8(f); and Subsection 8(i). -19- 20 10. 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 Options outstanding (other than Options granted pursuant to Section 9), including, without limitation, accelerating the expiration or termination date in the respective Option Documents to a date no earlier than thirty (30) days after notice of such acceleration is given to the Optionees. In addition to the foregoing, in the event of a Change of Control, Options granted pursuant to the Plan shall become immediately exerciseable in full. 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 -20- 21 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. 11. Adjustments on Changes in Capitalization. The aggregate number of Shares and class of shares as to which Options may be granted hereunder, the number and class or classes of shares covered by each outstanding Option and the Option Price thereof shall be appropriately adjusted in the event of a stock dividend, stock split, recapitalization or other -21- 22 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 (not including the issuance of Common Stock on the conversion of other securities of the Company which are convertible into Common Stock) affecting the Common Stock which is effected without receipt of consideration by the Company. The Committee shall have authority to determine the adjustments to be made under this Section, and any such determination by the Committee shall be final, binding and conclusive; provided, however, that no adjustment shall be made which will cause an ISO to lose its status as such without the consent of the Optionee, except for adjustments made pursuant to Section 10 hereof. 12. Amendment of the Plan. The Board of Directors of the Company may amend the Plan from time to time in such manner as it may deem advisable. Nevertheless, the Board of Directors of the Company may not change the class of individuals eligible to receive an ISO or increase the maximum number of shares as to which Options may be granted without obtaining approval, within twelve months before or after such action, by vote of a majority of the votes cast at a duly called meeting of the stockholders at which a quorum representing a majority of all outstanding voting stock of the Company is, either in person or by proxy, present and voting on the matter. In addition, the provisions of Section 9 that determine (i) which directors shall be granted Options pursuant to Section 9; (ii) the amount of Shares subject to Options granted pursuant to Section 9; (iii) the price at which shares subject to Options granted pursuant -22- 23 to Section 9 may be purchased; and (iv) the timing of grants of Options pursuant to Section 9 shall not be amended more than once every six months, other than to comport with changes in the Code or the Employee Retirement Income Security Act of 1974, as amended. No amendment to the Plan shall adversely affect any outstanding Option, however, without the consent of the Optionee. 13. No Commitment to Retain. The grant of an Option pursuant to the Plan shall not be construed to imply or to constitute evidence of any agreement, express or implied, on the part of the Company or any Affiliate to retain the Optionee in the employ of the Company or an Affiliate and/or as a member of the Company's Board of Directors or in any other capacity. 14. Withholding of Taxes. Whenever the Company proposes or is required to deliver or transfer Shares in connection with the exercise of an Option, the Company shall have the right to (a) require the recipient 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 such Shares or (b) take whatever other action it deems necessary to protect its interests with respect to tax liabilities. The Company's obligation to make any delivery or transfer of Shares shall be conditioned on the Optionee's compliance, to the Company's satisfaction, with any withholding requirement. 15. Interpretation. The Plan is intended to enable transactions under the Plan with respect to directors and officers (within the meaning of Section 16(a) under the Securities Exchange Act of 1934, as amended) to satisfy the conditions of Rule 16b-3; to the extent that any -23- 24 provision of the Plan would cause a conflict with such conditions or would cause the administration of the Plan as provided in Section 3 to fail to satisfy the conditions of Rule 16b-3, such provision shall be deemed null and void to the extent permitted by applicable law and in the discretion of the Board of Directors. Notwithstanding the foregoing, the provision in Option Documents for Family Transfers pursuant to Subsection 8(f) is expressly permitted, even though Options evidenced by such Option Documents may not be deemed to satisfy the conditions of Rule 16b-3 as a result of such provision. -24- EX-10.4 5 REVOLVING CREDIT AND COMPETITIVE LOAN AGREEMENT 1 CONFORMED COPY ================================================================================ ADVANTA CORP. ADVANTA NATIONAL BANK ADVANTA NATIONAL BANK USA _________________________________________ REVOLVING CREDIT AND COMPETITIVE LOAN AGREEMENT Dated as of July 26, 1996 __________________________________________ NATIONSBANC CAPITAL MARKETS, INC., as Syndication Agent, PNC BANK, NATIONAL ASSOCIATION, as Documentation Agent and THE CHASE MANHATTAN BANK, as Agent ================================================================================ 2 TABLE OF CONTENTS
Page ---- ARTICLE I Definitions; Construction ------------------------- SECTION 1.01. Certain Definitions . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.02. Construction . . . . . . . . . . . . . . . . . . . . . . . 28 SECTION 1.03. GAAP/RAP . . . . . . . . . . . . . . . . . . . . . . . . . 29 ARTICLE II The Credits ----------- SECTION 2.01. Revolving Loans . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 2.02. Extension of Expiration Date . . . . . . . . . . . . . . . 30 SECTION 2.03. Competitive Loans . . . . . . . . . . . . . . . . . . . . . 33 SECTION 2.04. The Notes . . . . . . . . . . . . . . . . . . . . . . . . . 37 SECTION 2.05. Making of Revolving Loans . . . . . . . . . . . . . . . . . 38 SECTION 2.06. Facility Fee; Utilization Fee . . . . . . . . . . . . . . . 39 SECTION 2.07. Termination; Reduction or Increase . . . . . . . . . . . . 40 SECTION 2.08. Interest Rates; Maturity Periods; Transactional Amounts . . 44 SECTION 2.09. Prepayments . . . . . . . . . . . . . . . . . . . . . . . . 48 SECTION 2.10. Interest Payment Dates . . . . . . . . . . . . . . . . . . 48 SECTION 2.11. Pro Rata Treatment; Payments Generally . . . . . . . . . . 49 SECTION 2.12. Additional Compensation in Certain Circumstances . . . . . 50 SECTION 2.13. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 SECTION 2.14. Funding by Branch, Subsidiary or Affiliate . . . . . . . . 57
3 ARTICLE III Letters of Credit
Page ---- SECTION 3.01. Committed L/C Commitment . . . . . . . . . . . . . . . . . 58 SECTION 3.02. Procedure for Issuance of Committed L/C . . . . . . . . . . 58 SECTION 3.03. Committed L/C Participations . . . . . . . . . . . . . . . 59 SECTION 3.04. Competitive L/C's . . . . . . . . . . . . . . . . . . . . . 60 SECTION 3.05. Procedure for Competitive L/C Issuance . . . . . . . . . . 61 SECTION 3.06. Fees, Commissions and Other Charges . . . . . . . . . . . . 64 SECTION 3.07. Reimbursement Obligation . . . . . . . . . . . . . . . . . 64 SECTION 3.08. Obligations Absolute . . . . . . . . . . . . . . . . . . . 65 SECTION 3.09. L/C Payments . . . . . . . . . . . . . . . . . . . . . . . 66 SECTION 3.10. Applications; Uniform Customs; Securities Affiliates of Banks . . . . . . . . . . . . . 66 ARTICLE IV Representations and Warranties ------------------------------ SECTION 4.01. Organization and Qualification . . . . . . . . . . . . . . 67 SECTION 4.02. Corporate Power and Authorization . . . . . . . . . . . . . 67 SECTION 4.03. Audited Annual Financial Statements . . . . . . . . . . . . 67 SECTION 4.04. Consolidating Financial Statements . . . . . . . . . . . . 68 SECTION 4.05. Bank Financial Statements . . . . . . . . . . . . . . . . . 68 SECTION 4.06. Absence of Material Adverse Changes . . . . . . . . . . . . 68 SECTION 4.07. Litigation and Regulatory Proceedings . . . . . . . . . . . 68
4 3
Page ---- SECTION 4.08. No Conflicting Laws or Agreements; Consents and Approvals . . . . . . . . . . . . . . . . . 69 SECTION 4.09. Execution and Binding Effect . . . . . . . . . . . . . . . 69 SECTION 4.10. Employee Benefits . . . . . . . . . . . . . . . . . . . . . 70 SECTION 4.11. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 SECTION 4.12. Regulation U . . . . . . . . . . . . . . . . . . . . . . . 71 SECTION 4.13. Environmental Matters . . . . . . . . . . . . . . . . . . . 71 SECTION 4.14. Investment Company; Bank Holding Company; Public Utility Holding Company . . . . . . . . . 72 SECTION 4.15. Capitalization of Insured Subsidiaries . . . . . . . . . . 72 SECTION 4.16. Absence of Undisclosed Liabilities . . . . . . . . . . . . 73 SECTION 4.17. Absence of Events of Default . . . . . . . . . . . . . . . 73 SECTION 4.18. Title to Property . . . . . . . . . . . . . . . . . . . . . 73 SECTION 4.19. Subsidiaries and Other Investments . . . . . . . . . . . . 73 SECTION 4.20. Compliance with Laws . . . . . . . . . . . . . . . . . . . 74 SECTION 4.21. Accurate and Complete Disclosure . . . . . . . . . . . . . 74 ARTICLE V Conditions of Lending --------------------- SECTION 5.01. Closing Date . . . . . . . . . . . . . . . . . . . . . . . 75 SECTION 5.02. Conditions to All Credit Extensions . . . . . . . . . . . . 77 ARTICLE VI Affirmative Covenants --------------------- SECTION 6.01. Basic Reporting Requirements . . . . . . . . . . . . . . . 78 SECTION 6.02. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . 84
5 4
Page ---- SECTION 6.03. Payment of Taxes and Other Potential Charges and Priority Claims . . . . . . . . . . 84 SECTION 6.04. Preservation of Existence and Franchises . . . . . . . . . 85 SECTION 6.05. Maintenance of Properties/Business . . . . . . . . . . . . 85 SECTION 6.06. Avoidance of Other Conflicts . . . . . . . . . . . . . . . 86 SECTION 6.07. Capitalization of Insured Subsidiaries . . . . . . . . . . 86 SECTION 6.08. Financial Accounting Practices . . . . . . . . . . . . . . 86 SECTION 6.09. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . 86 SECTION 6.10. Continuation of or Change in Business . . . . . . . . . . . 87 SECTION 6.11. Consolidated Tax-Return . . . . . . . . . . . . . . . . . . 87 SECTION 6.12. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . 87 ARTICLE VII Negative Covenants ------------------ SECTION 7.01. Financial Covenants . . . . . . . . . . . . . . . . . . . . 88 SECTION 7.02. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 SECTION 7.03. Mergers, Acquisitions, etc. . . . . . . . . . . . . . . . . 92 SECTION 7.04. Dispositions of Properties . . . . . . . . . . . . . . . . 94 SECTION 7.05. Dealings with Affiliates . . . . . . . . . . . . . . . . . 94 SECTION 7.06. Limitation on other Restrictions on Dividends by Subsidiaries, etc. . . . . . . . . . . . . . 96
6 5 ARTICLE VIII Events of Default
Page ---- SECTION 8.01. Events of Default . . . . . . . . . . . . . . . . . . . . . 98 ARTICLE IX The Agent --------- SECTION 9.01. Appointment . . . . . . . . . . . . . . . . . . . . . . . . 102 SECTION 9.02. Exercise of Powers . . . . . . . . . . . . . . . . . . . . 103 SECTION 9.03. Delegation of Duties . . . . . . . . . . . . . . . . . . . 103 SECTION 9.04. Exculpatory Provisions . . . . . . . . . . . . . . . . . . 103 SECTION 9.05. Reliance by Agent . . . . . . . . . . . . . . . . . . . . . 104 SECTION 9.06. Notice of Default . . . . . . . . . . . . . . . . . . . . . 105 SECTION 9.07. Non-Reliance on Agent and Other Banks . . . . . . . . . . . 105 SECTION 9.08. Indemnification . . . . . . . . . . . . . . . . . . . . . . 106 SECTION 9.09. Agent In Its Individual Capacity . . . . . . . . . . . . . 107 SECTION 9.10. Successor Agent . . . . . . . . . . . . . . . . . . . . . . 107 SECTION 9.11. Calculations . . . . . . . . . . . . . . . . . . . . . . . 108 SECTION 9.12. Holders of Notes . . . . . . . . . . . . . . . . . . . . . 108 SECTION 9.13. Agent's Fee . . . . . . . . . . . . . . . . . . . . . . . . 109 SECTION 9.14. Funding by Agent . . . . . . . . . . . . . . . . . . . . . 109 SECTION 9.15. The Syndication Agent and the Documentation Agent . . . . . 109
7 6 ARTICLE X Miscellaneous
Page ---- SECTION 10.01. Holidays . . . . . . . . . . . . . . . . . . . . . . . . . 110 SECTION 10.02. Records . . . . . . . . . . . . . . . . . . . . . . . . . . 110 SECTION 10.03. Amendments and Waivers . . . . . . . . . . . . . . . . . . 112 SECTION 10.04. No Implied Waiver; Cumulative Remedies . . . . . . . . . . 112 SECTION 10.05. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 112 SECTION 10.06. Expenses; Taxes; Indemnity . . . . . . . . . . . . . . . . 113 SECTION 10.07. Severability . . . . . . . . . . . . . . . . . . . . . . . 115 SECTION 10.08. Prior Understandings . . . . . . . . . . . . . . . . . . . 115 SECTION 10.09. Duration; Survival . . . . . . . . . . . . . . . . . . . . 115 SECTION 10.10. Counterparts . . . . . . . . . . . . . . . . . . . . . . . 116 SECTION 10.11. Limitation on Payments . . . . . . . . . . . . . . . . . . 116 SECTION 10.12. Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . 116 SECTION 10.13. Sharing of Collections . . . . . . . . . . . . . . . . . . 117 SECTION 10.14. Successors and Assigns; Participations; Assignments . . . . 118 SECTION 10.15. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial; Limitation of Liability . . . . . . 124
EXHIBITS AND SCHEDULES Exhibit A Form of Revolving Credit Note Exhibit B Form of Competitive Note Exhibit C Form of Loan Request Exhibit D-1 Form of Competitive Bid Request Exhibit D-2 Form of Competitive Bid Exhibit D-3 Form of Competitive Bid Confirmation Exhibit E-1 Form of Competitive L/C Request Exhibit E-2 Form of Competitive L/C Offer
8 7 Exhibit E-3 Form of Competitive L/C Confirmation Exhibit F Guaranty and Suretyship Agreement Exhibit G Form of Assignment Supplement Exhibit H Form of Commitment Assumption Exhibit I Administrative Questionnaire Schedule 2.01 Bank Commitments Schedule 4.06 Material Adverse Changes Schedule 4.10 Plan Information Schedule 4.13(d) Environmental Matters Schedule 4.16 Liabilities Disclosures Schedule 4.19 Subsidiaries and Other Investments Schedule 7.02(a) Existing Liens
9 REVOLVING CREDIT AND COMPETITIVE LOAN AGREEMENT This CREDIT AGREEMENT, dated as of July 26, 1996, by and among ADVANTA CORP., a Delaware corporation (hereinafter called the "Company"), ADVANTA NATIONAL BANK, a national banking association ("ANB"), ADVANTA NATIONAL BANK USA, a national banking association ("AUS", and, together with the Company and ANB, the "Borrowers"), the lenders parties hereto from time to time (hereinafter each called a "Bank" and collectively called the "Banks," as further defined below), THE CHASE MANHATTAN BANK, as agent for the Banks under this Agreement (hereinafter in such capacity called the "Agent"), NATIONSBANC CAPITAL MARKETS, INC., as syndication agent and PNC BANK, NATIONAL ASSOCIATION, as documentation agent. Preliminary Statement WHEREAS, the Borrowers have requested and the Banks and the Agent are willing to make available to the Borrowers, upon all of the terms and conditions herein set forth, a revolving credit and competitive loan facility; NOW THEREFORE, in consideration of their mutual agreements hereinafter set forth and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I Definitions; Construction SECTION 1.01. Certain definitions. In addition to other words and terms defined elsewhere in this Agreement, as used herein the following words and terms shall have the following meanings, respectively, unless the context hereof otherwise clearly requires: "Active Subsidiary" shall mean any Subsidiary of the Company which has, at the time of determination, engaged in any business activity or operations whatsoever (except for any activity related exclusively to the continuation or 10 2 preservation of its corporate existence), either directly or indirectly and either individually or together with one or more other such Subsidiaries, for or at any time during the Rolling Period immediately preceding the date of determination. "Administrative Questionnaire" shall mean an Administrative Questionnaire in the form of Exhibit I hereto. "Affected Bank" shall have the meaning set forth in Section 2.08(e) hereof. "Affiliate" of a Person (the "Specified Person") shall mean (a) any Person which directly or indirectly controls, or is controlled by, or is under common control with, the Specified Person or (b) any director or executive officer (or, in the case of a Person which is not a corporation, any individual having analogous powers) of the Specified Person or of a Person which is an Affiliate of the Specified Person within the meaning of the preceding clause (a). For purposes of the preceding sentence, "control" of a Person includes the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Agreement" shall mean this Credit Agreement as amended, modified or supplemented from time to time. "Applicable Facility Fee Percentage" shall mean, in respect of either Tranche for any day, (i) .085% for any such day during which the Applicable Rating Level is 1; (ii) .10% for any such day during which the Applicable Rating Level is 2; (iii) .125% for any such day during which the Applicable Rating Level is 3; (iv) .15% for any such day during which the Applicable Rating Level is 4; (v) .225% for any such day during which the Applicable Rating Level is 5; and (vi) .35% for any such day during which the Applicable Rating Level is 6. Each change in the Applicable Facility Fee Percentage resulting from a change of the Applicable Rating Level shall become effective on the effective date of such change in the Applicable Rating Level. "Applicable Margin" for a Borrower shall mean, for any day, the percentage set forth below which corresponds to such Borrower's Rating Level in effect on any such day. 11 3 Each change in a Borrower's Applicable Margin for any Revolving Loan which results from a change in such Borrower's Rating Level shall become effective on the effective date of such change in the Borrower's Rating Level.
Rating Level Percentage ------------ ---------- 1 .165% 2 .20% 3 .225% 4 .25% 5 .375% 6 .75%
"Applicable Rating Level" shall mean, in respect of either Tranche on any day, the Rating Level of the Borrower under such Tranche that has the lowest (i.e., numerically highest) Rating Level on such day. "Applicable Utilization Fee Percentage" of a Borrower shall mean, for any day, (i) .05% for any such day during which such Borrower's Rating Level is 1, 2 or 3; (ii) .10% for any such day during which such Borrower's Rating Level is 4 or 5; and (iii) .25% for any such day during which such Borrower's Rating Level is 6. Each change in a Borrower's Applicable Utilization Fee Percentage resulting from a change of such Borrower's Rating Level shall become effective on the effective date of such change in the Borrower's Rating Level. "Application" shall mean, with respect to each Letter of Credit, an application in such form as the relevant L/C Issuer may specify from time to time requesting such L/C Issuer to issue such Letter of Credit. "Assignment Supplement" shall have the meaning assigned to such term in Section 10.14(c) hereof. "Assets" of any Person at any time shall mean the assets of such Person at such time, determined and consolidated in accordance with GAAP. 12 4 "Bank" shall mean any of the lenders listed on the signature pages hereof, subject to the provisions of Section 2.07 and Section 10.14 hereof pertaining to Persons becoming or ceasing to be "Banks" hereunder. "Base Rate" shall mean, for any day, the interest rate per annum equal to the higher of: (A) the Prime Rate for such day and (B) the Federal Funds Effective Rate for such day plus 1/2 of l%. As used herein "Prime Rate" shall mean that rate of interest per annum publicly announced from time to time by The Chase Manhattan Bank as its Prime Rate in effect at its principal office in New York City; each change in the Prime Rate shall be effective on the date such change is publicly announced as being effective. "Federal Funds Effective Rate" for any day, as used herein, shall mean the rate per annum (rounded upward to the nearest 1/100 of l%) determined by the Agent (which determination shall, in the absence of manifest error, be conclusive) to be the rate per annum announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight Federal funds transactions arranged by Federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the "Federal Funds Effective Rate" as of the date of this Agreement; provided, if such Federal Reserve Bank (or its successor) does not announce such rate on any day under circumstances that are temporary, the "Federal Funds Effective Rate" for such day shall be the Federal Funds Effective Rate for the last day on which such rate was announced. Each change in the Base Rate due to a change in the Prime Rate or in the Federal Funds Effective Rate shall be effective on the effective date of such change in the Prime Rate or Federal Funds Effective Rate. "Base Rate Borrowing" shall mean a Borrowing comprised of Base Rate Loans. "Base Rate Loan" shall mean any Loan bearing interest at the Base Rate in accordance with the provisions of Article II. "Base Rate Option" shall mean the option of a Borrower hereunder to have Revolving Loans bear interest at the Base Rate. 13 5 "Borrowing" shall mean a group of Loans within a single Tranche of a single Type made by the Banks within such Tranche (or, in the case of a Competitive Borrowing, by the Bank or Banks within a Tranche whose Competitive Bids have been accepted pursuant to Section 2.03(d)) on a single date and as to which a single Interest Period is in effect. "Borrowing Date" shall mean any day (which shall be a Business Day) on which Loans are to be made hereunder. "Business Day" shall mean any day other than a Saturday, Sunday, public holiday under the laws of the State of New York or other day on which banking institutions are authorized or obligated to close in New York. "Call Reports" shall mean Consolidated Reports of Condition and Income prepared in accordance with rules prescribed by the Federal Financial Institutions Examination Council or any successor thereto. "CERCLIS" shall mean the Comprehensive Environmental Response, Compensation and Liability Information System List, as the same may be amended from time to time. "Change of Control" shall mean that (a) any person or group (within the meaning of Rule 13d-5 of the Securities Exchange Act of 1934 as in effect on the date hereof) other than Dennis Alter or his estate shall own directly or indirectly, beneficially or of record, shares representing more than 25% of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Company or (b) a majority of the seats (other than vacant seats) on the board of directors of the Company shall at any time be occupied by persons who were neither (i) members of the board of directors of the Company on the Closing Date, nor (ii) appointed as, or nominated for election as, directors by a majority of the directors who are (x) referred to in clause (i) and (y) other directors who are appointed or nominated in accordance with this clause (ii). "Closing Date" shall mean July 26, 1996. "Code" shall mean the Internal Revenue Code of 1986, as amended and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. References to sections of the 14 6 Code shall be construed to also refer to any successor sections. "Commitment" and "Current Commitment" shall mean, with respect to each Bank, such Bank's Tranche A Commitment and Tranche B Commitment, as in effect from time to time hereunder. "Commitment Assumption" shall mean an instrument substantially in the form of Exhibit H executed by a Bank and accepted by the Tranche A or Tranche B Borrowers and the Agent, pursuant to which such Bank assumes an incremental Tranche A or Tranche B Commitment as contemplated by Section 2.07(c). "Commitment Percentage" of a Bank at any time shall mean the Current Commitment of such Bank divided by the Total Current Commitment, computed to eleven decimal places (i.e., one one-billionth of one percent), subject to transfer to another Bank as provided in Section 10.14 hereof. When used with reference to either Tranche, "Commitment Percentage" of a Bank shall mean the Current Commitment of such Bank under such Tranche divided by the Total Current Commitment under such Tranche, computed in such manner. "Committed L/C's" shall mean Letters of Credit issued pursuant to Section 3.01. "Committed L/C Commitment" shall mean $100,000,000. "Committed L/C Issuer" shall mean The Chase Manhattan Bank in its capacity as issuer of any Committed L/C and each other Bank that may from time to time, with its consent, be designated by the Borrowers and the Agent as a Committed L/C Issuer hereunder. "Committed L/C Obligation" shall mean, at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Committed L/C's and (b) the aggregate amount of drawings under Committed L/C's which have not then been reimbursed pursuant to Section 3.03. "Committed L/C Participants" shall mean, with respect to any Tranche, all the Banks having Commitments under such Tranche other than the Committed L/C Issuer. 15 7 "Competitive Bid" shall mean an offer by a Bank to make a Competitive Loan pursuant to Section 2.03(b) or 2.03(c) in the form of Exhibit D-2. "Competitive Bid Confirmation" shall mean a notification made by a Borrower of its acceptance of a Competitive Bid pursuant to Section 2.03(d), which notification shall be in the form of Exhibit D-3. "Competitive Bid Rate" shall mean, as to any Competitive Bid, (i) in the case of a Euro-Rate Loan, the Margin, and (ii) in the case of a Fixed Rate Loan, the fixed rate of interest offered by the Bank making such Competitive Bid. "Competitive Bid Request" shall mean a request made by a Borrower for Competitive Bids pursuant to Section 2.03(a), which request shall be in the form of Exhibit D-1. "Competitive Borrowing" shall mean a Borrowing under a Tranche consisting of a Competitive Loan or concurrent Competitive Loans from the Bank or Banks whose Competitive Bids for such Borrowing have been accepted by a Borrower under the bidding procedure described in Section 2.03. "Competitive L/C's" shall mean Letters of Credit issued pursuant to the bidding procedures described in Section 3.05. "Competitive L/C Confirmation" shall mean a confirmation by a Borrower of its acceptance of a Competitive L/C Offer in the form of Exhibit E-3. "Competitive L/C Issuer" shall mean any Bank which acts as the issuer of a Competitive L/C pursuant to the provisions of Section 3.04. "Competitive L/C Obligations" shall mean, as to any Competitive L/C Issuer at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Competitive L/C's issued by such Competitive L/C Issuer and (b) the aggregate amount of drawings under any such Competitive L/C's which have not then been reimbursed pursuant to Section 3.07. 16 8 "Competitive L/C Offer" shall mean an offer by a Competitive L/C Issuer to issue a Competitive L/C pursuant to Section 3.05(b), which offer shall be in the form of Exhibit E-2. "Competitive L/C Request" shall mean a request by a Borrower for the Competitive L/C Issuers under a Tranche to submit bids to issue a Competitive L/C pursuant to Section 3.05(a), which request shall be in the form of Exhibit E-1. "Competitive Loan" shall mean a Loan from a Bank to a Borrower pursuant to the bidding procedure described in Section 2.03. Each Competitive Loan shall be a Euro-Rate Competitive Loan or a Fixed Rate Loan. "Competitive Note" shall mean a Tranche A Competitive Note or a Tranche B Competitive Note. "Consolidated Assets" shall mean the Assets of the Company and its Consolidated Subsidiaries, determined and consolidated in accordance with GAAP. "Consolidated EBIT" for any period, with respect to the Company and its Consolidated Subsidiaries shall mean the sum of (a) Consolidated Net Income for such period, (b) Consolidated Interest Expense for such period, (c) charges against income for foreign, federal, state and local income taxes for such period, (d) extraordinary losses to the extent included in determining such Consolidated Net Income, minus (e) extraordinary gains to the extent included in determining such Consolidated Net Income, all as determined on a consolidated basis in accordance with GAAP. "Consolidated Interest Coverage Ratio" for any period shall mean the ratio of Consolidated EBIT for such period to Consolidated Interest Expense for such period. "Consolidated Interest Expense" for any period shall mean the total interest expense of the Company and its Consolidated Subsidiaries for such period determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income" shall mean the net income from continuing operations (after taxes) of the Company and its Consolidated Subsidiaries, determined and consolidated in accordance with GAAP, excluding, however, noncash extraordinary items. 17 9 "Consolidated Net Worth" shall mean the consolidated stockholder's equity of the Company and its Consolidated Subsidiaries, determined and consolidated in accordance with GAAP. "Consolidated Subsidiaries" at any particular time shall mean those Subsidiaries of the Company whose accounts are, or should be, consolidated with those of the Company in accordance with GAAP. "Consolidated Tangible Net Worth" shall mean the consolidated stockholders' equity of the Company and its Consolidated Subsidiaries, determined and consolidated in accordance with GAAP, except that there shall be deducted therefrom all treasury stock and all Intangibles of the Company and its Consolidated Subsidiaries. "Contingent Obligation" shall mean any and all obligations of the Company for Indebtedness (other than fully collateralized nonrecourse Indebtedness) of the Company or of any Person, the liability for which is not absolute but is instead dependent upon the occurrence of some event or events including, without limitation, any Guaranty of or by the Company and all undrawn letters of credit issued for the account of the Company for which the Company is otherwise directly or indirectly obligated to make reimbursement upon any drawing thereunder, provided, however, that the term "Contingent Obligation" shall not include the obligations of the Company under the Guaranty Agreement or under undrawn Letters of Credit issued under this Agreement. "Controlled Group Member" shall mean each trade or business (whether or not incorporated) which together with either Borrower is treated as a single employer under Sections 4001(a)(14) or 4001(b)(1) of ERISA or Sections 414(b), (c), (m) or (o) of the Code. "Corresponding Source of Funds" shall mean in the case of any Euro-Rate Loan, the proceeds of hypothetical receipts by a Notional Euro-Rate Funding Office or by a Bank through a Notional Euro-Rate Funding Office of one or more Dollar deposits in the interbank eurodollar market at the beginning of the Euro-Rate Interest Period applicable to such Loan, having maturities approximately equal to such Interest Period and in an aggregate amount approximately equal to such Loan. 18 10 "Credit Extension" shall mean any Borrowing hereunder and any issuance of a Letter of Credit hereunder. "Dollar", "Dollars" and the symbol "$" shall mean lawful money of the United States of America. "Double Leverage Ratio" shall mean at any time the ratio of (a) the Company's aggregate investment in the capital stock of its Subsidiaries (including the Company's interest in undistributed earnings of its Subsidiaries) plus goodwill of the Company and its Consolidated Subsidiaries as determined in accordance with GAAP to (b) Consolidated Net Worth. "Environment" shall mean (without limitation) all air, surface water, water vapor, groundwater, drinking water supply, soil or land, including land surface or subsurface, and includes all fish, wildlife and all other natural resources. "Environmental Affiliate" shall mean, with respect to any Person, any other Person whose liability (contingent or otherwise) for any Environmental Claim such Person has retained, assumed or otherwise is liable for (by Law, agreement or otherwise). "Environmental Approvals" shall mean any Governmental Action pursuant to or required under any federal, state or local Environmental Law. "Environmental Claim" shall mean, with respect to any Person, any action, suit, proceeding, notice, claim, complaint, lien, demand, request for information or other communication (written or oral) by any other Person (including but not limited to any governmental authority, citizens' group or present or former employee of such Person) based upon, alleging, asserting or claiming any actual or potential (a) violation of any Environmental Law, (b) liability under any Environmental Law or (c) liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, material personal injuries, fines or penalties arising out of, based on or resulting from the presence, or release into the Environment, of any Environmental Concern Materials at any location, whether or not owned by such Person. "Environmental Cleanup Site" shall mean any location which is listed or proposed for listing on the 19 11 National Priorities List (as defined in 40 C.F.R. Section 300.5), on CERCLIS or on any similar state list of sites requiring investigation or cleanup. "Environmental Concern Materials" shall mean (a) any flammable substance, explosive, radioactive material, hazardous material, hazardous waste, toxic substance, solid waste, pollutant, contaminant or any related material, raw material, substance, product or by-product or any substance specified in or regulated by any Environmental Law, (b) any toxic chemical or other substance from or related to industrial, commercial or institutional activities, and (c) asbestos, gasoline, diesel fuel, motor oil, waste and used oil, heating oil and other petroleum products or compounds, polycholorinated biphenyls, radon, urea formaldehyde, lead containing materials, radiation, heat, noise, and other physical agents. "Environmental Law" shall mean any Law, domestic or foreign, whether now existing or subsequently enacted or amended, relating to (a) pollution or protection of the Environment, including natural resources, (b) exposure of Persons, including but not limited to employees, to Environmental Concern Materials, (c) protection of the public safety, health or welfare from the effects of products, by-products, wastes, emissions, discharges or releases of Environmental Concern Materials or (d) regulation of the use or introduction into commerce of Environmental Concern Materials including their manufacture, formulation, packaging, labeling, distribution, transportation, handling, storage or disposal. Without limitation, "Environmental Law" shall also include any Environmental Approval and the terms and conditions thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute of similar import, and regulations thereunder, in each case as in effect from time to time. References to sections of ERISA shall be construed to also refer to any successor sections. "Euro-Rate" shall mean, with respect to any Euro-Rate Borrowing for any Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on any successor or substitute page of such Service, or any successor to or substitute for such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Agent (and notified to the 20 12 Borrowers and the Banks) from time to time for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, as the rate for dollar deposits with a maturity comparable to such Interest Period. In the event that such rate is not so available at such time for any reason, then the "Euro-Rate" with respect to such Euro-Rate Borrowing for such Interest Period shall be the arithmetic average of the rates, determined in good faith by the Agent, at which dollar deposits of $5,000,000 and for a maturity comparable to such Interest Period are offered to the principal London office of each of the Agent, Barclays Bank PLC and Lloyds Bank PLC in immediately available funds in the London interbank market at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period. "Euro-Rate Borrowing" shall mean a Borrowing comprised of Euro-Rate Loans. "Euro-Rate Competitive Borrowing" shall mean a Borrowing comprised of Euro-Rate Competitive Loans. "Euro-Rate Competitive Loan" shall mean any Competitive Loan bearing interest at a rate determined by reference to the Euro- Rate in accordance with the provisions of Article II. "Euro-Rate Loan" shall mean any Euro-Rate Revolving Loan or Euro-Rate Competitive Loan. "Euro-Rate Option" shall mean the option of a Borrower hereunder to have Revolving Loans bear interest at the Euro-Rate plus the Applicable Margin. "Euro-Rate Revolving Credit Borrowing" shall mean a Borrowing comprised of Euro-Rate Revolving Loans. "Euro-Rate Revolving Loan" shall mean any Revolving Loan bearing interest at a rate determined by reference to the Euro-Rate in accordance with the provisions of Article II. "Event of Default" shall mean any of the Events of Default described in Article VIII hereof. 21 13 "Existing Credit Facility" shall mean the Revolving Credit Agreement dated as of May 4, 1995, as amended, of the Company and ANB. "Expiration Date" shall mean the Tranche A Expiration Date or the Tranche B Expiration Date, as the context may require. "Facility Exposure" shall mean, as to any Bank at any time, an amount equal to the sum of (a) the Revolving Credit Exposure of such Bank at such time, (b) the aggregate principal amount of any Competitive Loans made by such Bank then outstanding and (c) the aggregate Competitive L/C Obligations then outstanding with respect to any Competitive L/C's issued by such Bank. Facility Exposure of a Bank under Tranche A or Tranche B shall mean the foregoing amounts arising under the Tranche A Facility or the Tranche B Facility, respectively. "Facility Fee" shall have the meaning provided in Section 2.06(a). "FDIC" shall mean the Federal Deposit Insurance Corporation. "Federal Reserve Board" shall mean the Board of Governors of the Federal Reserve System. "Fee Letter" shall mean the Fee Letter dated June 14, 1996, between the Company and the Agent. "Fitch" shall mean Fitch Investors' Services, Inc. "Fixed Rate Borrowing" shall mean a Borrowing comprised of Fixed Rate Loans. "Fixed Rate Loan" shall mean any Competitive Loan bearing interest at a fixed percentage rate per annum (expressed in the form of a decimal to no more than four decimal places) specified by the Bank making such Loan in its Competitive Bid. "GAAP" shall mean generally accepted accounting principles in the United States of America (as such principles may change from time to time) applied on a consistent basis (except for changes in application with which the Company's independent certified public accountants 22 14 concur), applied both to classification of items and amounts. "Governmental Action" shall have the meaning set forth in Section 4.08(b) hereof. "Guaranty" shall mean, with respect to any Person, any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Indebtedness other than fully collateralized nonrecourse Indebtedness or other payment obligation of any other Person or in any manner providing for the payment of any Indebtedness of any other Person or otherwise protecting the holder of such Indebtedness or other payment obligation against loss (whether by virtue of partnership arrangements, by agreement to indemnify, or purchase assets, goods, securities or services, or to take-or-pay or otherwise), provided that the term "Guaranty" does not include endorsements for collection or deposit in the ordinary course of business. "Guaranty Agreement" shall mean the Guaranty and Suretyship Agreement to be delivered by the Company pursuant to Section 5.01(b) hereof, as amended, modified or supplemented from time to time. "Indebtedness" of a Person shall mean: (i) all indebtedness or liability for or on account of money borrowed by, or for or on account of deposits with or advances to, such Person; (ii) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments; (iii) all indebtedness or liability for or on account of property or services purchased or acquired by such Person except trade accounts that arise in the ordinary course of business but only so long as such trade accounts are payable on customary trade terms; (iv) any amount secured by a Lien on property owned by such Person (whether or not assumed) and capitalized lease obligations of such person (without regard to any limitation of the rights and remedies of the holder of such Lien or the lessor under such capitalized lease to repossession or sale of such property); 23 15 (v) the face amount of all letters of credit issued for the account of such Person and, without duplication, the unreimbursed amount of all drafts drawn thereunder, and all other obligations of such Person associated with such letters of credit or draws thereon; (vi) all obligations of such Person in respect of acceptances or similar obligations issued for the account of such Person; and (vii) all obligations of such Person due and owing under any interest rate or currency protection agreement, interest rate or currency future, interest rate or currency option, interest rate or currency swap or cap or other interest rate or currency hedge agreement. "Indemnified Parties" shall have the meaning assigned to such term in Section 10.06(c) hereof. "Insured Subsidiary" shall mean a Subsidiary of the Company which is an "insured depository institution" under and as defined in the Federal Deposit Insurance Act (12 U.S.C. Section 1813(c)(3)) or any successor statute, provided, however, that the term "Insured Subsidiary" shall not include Advanta Financial Corp. until such time as its shareholders' equity first exceeds $50,000,000. "Intangibles" shall mean all intangible Assets determined in accordance with GAAP, including but not limited to goodwill, organization costs, patents, copyrights, trademarks, trade names, franchises, licenses, research and development expenses, deferred charges (except deferred acquisition costs), leasehold improvements not recoverable at the expiration of leases, and 11% of excess mortgage servicing rights as defined in and determined in accordance with GAAP (it being understood for purposes hereof that 89% of such excess mortgage servicing rights shall be deemed to be tangible Assets) and further including but not limited to write-ups after the date hereof in the value of Assets above historical cost less depreciation or amortization required by GAAP, except for write-ups in the value of (i) marketable securities to the extent permitted by the GAAP valuation principle of "lower of cost or market", and (ii) investments in common stock accounted for by the equity method, to the extent permitted by GAAP. 24 16 "Interest Period" shall mean, with respect to any Loan or Borrowing, the term of such Loan or Borrowing, selected by the relevant Borrower in accordance with the limitations set forth in the chart below:
Type of Loan Available Interest Periods ------------ -------------------------- Base Rate Loan Any number of days not exceeding the number of days remaining until the Expiration Date ("Base Rate Interest Period") Euro-Rate Loan One, two, three or six months ("Euro-Rate Interest Period") Fixed Rate Loan Seven days to 360 days ("Fixed Rate Interest Period")
provided, that: (i) Each Base Rate Interest Period in any Tranche beginning before such Tranche's Expiration Date, which would otherwise end after such Expiration Date, shall instead end on the Expiration Date; (ii) Each Base Rate Interest Period and Fixed Rate Interest Period in any Tranche which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day is after the Expiration Date for such Tranche in which event such Interest Period shall end on the immediately preceding Business Day; (iii) Each Euro-Rate Interest Period shall begin on a London Business Day, and the duration of each Euro-Rate Interest Period shall be determined in accordance with the definition of the term "month" herein; and (iv) Notwithstanding any other provision of this Agreement, a Borrower may not fix an Interest Period for a Borrowing in any Tranche which would end after the Expiration Date for such Tranche. "Interest Rate Option" shall mean, with respect to any Revolving Credit Borrowing, the Euro-Rate Option or the Base Rate Option. 25 17 "Law" shall mean any law (including common law), constitution, statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or award of any Official Body. "L/C Fee Payment Date" shall mean (a) with respect to any Committed L/C, the last day of each March, June, September and December and the Expiration Date for the Tranche under which such Committed L/C was issued and (b) with respect to any Competitive L/C, each date specified in the relevant Competitive L/C Offer as an L/C Fee Payment Date. "L/C Issuers" shall mean the Committed L/C Issuers and the Competitive L/C Issuers. "L/C Obligations" shall mean at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit and (b) the aggregate amount of drawings under Letters of Credit which have not then been reimbursed pursuant to Section 3.07. "Letters of Credit" shall mean the Committed L/C's and the Competitive L/C's. "Lien" shall mean any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of any nature whatsoever, including but not limited to any conditional sale or title retention arrangement, and any assignment, deposit arrangement or lease intended as, or having the effect of, security. "Loan" shall mean any Revolving Loan and any Competitive Loan made by a Bank to a Borrower under this Agreement, and "Loans" shall mean all Revolving Loans and all Competitive Loans made by the Banks under this Agreement. "Loan Documents" shall mean this Agreement, the Notes, the Assignment Supplements, the Guaranty Agreement, the Applications, the Fee Letter and all other ancillary agreements, instruments, certificates and/or documents which are required to be or are otherwise executed and delivered by a Borrower to the Agent and/or to any Bank in connection with this Agreement, and all other agreements extending, renewing, refinancing or refunding any indebtedness, obligation or liability arising under any of the foregoing, 26 18 in each case as the same may be amended, supplemented or modified from time to time hereafter. "Loan Request" shall have the meaning assigned to such term in Section 2.05 hereof. "London Business Day" shall mean a Business Day (as herein defined) which is also a day for dealing in deposits in Dollars by and among banks in the London interbank market. "Margin" shall mean, as to any Euro-Rate Competitive Loan, the margin (expressed as a percentage rate per annum in the form of a decimal to no more than four decimal places) to be added to or subtracted from the Euro-Rate in order to determine the interest rate applicable to such Loan, as specified in the Competitive Bid relating to such Loan. "Material Subsidiary" shall mean: (i) ANB, (ii) AUS and (iii) any Subsidiary of the Company which at the time of determination has or had Assets constituting 10% or more of Consolidated Assets at any time during the Rolling Period immediately preceding the date of determination or accounts for 10% or more of Consolidated Net Income for the Rolling Period immediately preceding the date of determination. When used with respect to any transaction or series of related transactions, the term "Material Subsidiary" shall include any Person which, after giving effect thereto, would be a Material Subsidiary. "Maturity Date" shall mean, with respect to any Loan, the last day of the Interest Period applicable to such Loan. "Moody's" shall mean Moody's Investors Service, Inc. "month", with respect to a Euro-Rate Interest Period, means the interval between Fixed Dates in consecutive calendar months as to such Euro-Rate Interest Period. The "Fixed Date" in a calendar month at the end of any Euro-Rate Interest Period shall mean the day in such 27 19 calendar month numerically corresponding to the first day of such Euro-Rate Interest Period, except: (i) if there is no such numerically corresponding day in a calendar month, the Fixed Date for such calendar month shall mean the last London Business Day of such calendar month; (ii) if the first day of such Euro-Rate Interest Period is the last day of a calendar month, the Fixed Date for any later calendar month shall mean the last London Business Day of such calendar month; and (iii) otherwise, if a numerically corresponding day in a given calendar month is not a London Business Day, the Fixed Date for such calendar month shall mean the next following day that is a London Business Day but not later than the last London Business Day of such calendar month. "Multiemployer Plan" shall mean at any time any employee benefit plan which is a "multiemployer plan" within the meaning of Section 4001(a)(3) of ERISA and to which either Borrower or any Controlled Group Member has or had an obligation to contribute within the preceding six years. "Note" shall mean a Revolving Credit Note or a Competitive Note of a Borrower executed and delivered under this Agreement, or any note executed and delivered pursuant to Section 2.04 or 2.14 hereof, together with all extensions, renewals, refinancings or refundings in whole or part, all of which are collectively referred to as the "Notes". "Notional Euro-Rate Funding Office" shall have the meaning given to that term in Section 2.14(a) hereof. "Office", when used in connection with the Agent, shall mean its office located at 270 Park Avenue, New York, New York 10017, or at such other office or offices within the United States of the Agent or a branch, Subsidiary or Affiliate thereof as may be designated in writing from time to time by the Agent to the Company and the Banks. "Official Body" shall mean any government or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality of 28 20 either, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic. "Option" or "Interest Rate Option" shall mean the Base Rate Option or the Euro-Rate Option, as the case may be. "Participant" shall have the meaning assigned to such term in Section 10.14(b) hereof. "PBGC" means the Pension Benefit Guaranty Corporation established under Title IV of ERISA or any other governmental agency, department or instrumentality succeeding to the functions of said corporation. "Pension-Related Event" shall mean any of the following events or conditions: (a) Any action is taken by any Person (i) to terminate, or which would result in the termination of, a Plan, either pursuant to its terms or by operation of law (including, without limitation, any amendment of a Plan which would result in a termination under Section 4041(e) of ERISA), other than in a "standard termination" under Section 4041(b) of ERISA or (ii) to have a trustee appointed for a Plan pursuant to Section 4042 of ERISA; (b) PBGC notifies any Person of its determination that an event described in Section 4042 of ERISA has occurred with respect to a Plan, that a Plan should be terminated, or that a trustee should be appointed for a Plan; (c) Any Reportable Event occurs with respect to a Plan; (d) Any action occurs or is taken which could result in any Borrower becoming subject to liability for a complete or partial withdrawal by any Person from a Multiemployer Plan (including, without limitation, seller liability incurred under Section 4204(a)(2) of ERISA), or a Borrower or any Controlled Group Member receives from any Person a notice or demand for payment on account of any such alleged or asserted liability; or 29 21 (e) (i) There occurs any failure to meet the minimum funding standard under Section 302 of ERISA or Section 412 of the Code with respect to a Plan, or any tax return is filed showing any tax payable under Section 4971(a) of the Code with respect to any such failure, or any Borrower or any Controlled Group Member receives a notice of deficiency from the Internal Revenue Service with respect to any alleged or asserted such failure, and the aggregate amount of unpaid or delinquent contributions exceeds $100,000 and continues uncured for 30 days after the Company has knowledge or receives notice thereof from the Internal Revenue Service or the Agent or (ii) any request is made by any Person for a variance from the minimum funding standard, or an extension of the period for amortizing unfunded liabilities, with respect to a Plan. "Permitted Lien" shall mean a Lien permitted by Section 7.02 hereof. "Person" or "person" shall mean an individual, corporation, partnership, trust, unincorporated association, joint venture, joint-stock company, government (including political subdivisions), governmental authority or agency, or any other entity. "Plan" means any employee pension benefit plan within the meaning of Section 3(2) of ERISA (other than a Multiemployer Plan) covered by Title IV of ERISA by reason of Section 4021 of ERISA, of which any Borrower or any Controlled Group Member is or has been within the preceding five years a "contributing sponsor" within the meaning of Section 4001(a)(13) of ERISA, or which is or has been within the preceding five years maintained for employees of any Borrower or any Controlled Group Member. "Postretirement Benefits" shall mean any benefits, other than retirement income or benefits under the Consolidated Omnibus Budget Reconciliation Act of 1986, provided by the Company and its Subsidiaries to retired employees, or to their spouses, dependents or beneficiaries, including, without limitation, group medical insurance or benefits, or group life insurance or death benefits. "Postretirement Benefit Obligation" shall mean that portion of the actuarial present value of all Postretirement Benefits expected to be provided by the Company and its Subsidiaries which is attributable to 30 22 employees, service rendered to the date of determination (assuming that such liability accrues ratably over an employee's working life to the earlier of his date of retirement or the date on which the employee would first become eligible for full benefits), reduced by the fair market value as of the date of determination of any Assets which are segregated from the Assets of the Company or a Subsidiary and which have been restricted so that they cannot be used for any purpose other than to provide Postretirement Benefits or to defray related expenses. "Potential Default" shall mean any event or condition which with notice, passage of time or a determination by the Agent, or any combination of the foregoing, would constitute an Event of Default. "Primary Federal Regulator," when used with respect to an Insured Subsidiary, shall mean the "appropriate Federal banking agency" for such insured Subsidiary under and as defined in the Federal Deposit Insurance Act, as amended (12 U.S.C. Section 1813(q)), or any successor statute. "Pro Rata" shall mean from or to each Bank in proportion to its Commitment Percentage or, as applicable, its Commitment Percentage with respect to a Tranche. "Purchasing Bank" shall have the meaning assigned to such term in Section 10.14(c) hereof. "RAP" shall mean regulatory accounting principles as in effect from time to time. "Rating Level" of a Borrower shall mean the number set forth below in the column entitled "Rating Level" which corresponds to the ratings assigned to the senior long-term unsecured debt of such Borrower by Moody's, S&P or Fitch. If a Borrower is rated by two or more agencies and different Rating Levels result, then the Rating Level shall be that which corresponds to the lower of the two highest ratings. Each change in a Borrower's Rating Level shall take effect on the effective date of any change in such Borrower's long-term senior unsecured debt rating. 31 23 Senior Debt Ratings of Borrower
Rating Level Moody's S&P Fitch ------------ ------- --- ----- 1 A3 or above A- or above A- or above 2 Baa1 BBB+ BBB+ 3 Baa2 BBB BBB 4 Baa3 BBB- BBB- 5 Ba1 BB+ BB+ 6 Below Ba1 or Not Rated Below BB+ or Not Rated Below BB+ or Not Rated
"Register" shall have the meaning provided in Section 10.14(d). "Reimbursement Obligation" shall mean the obligation of a Borrower to reimburse the L/C Issuers pursuant to Section 3.07 for amounts drawn under Letters of Credit issued at the request of such Borrower. "Reportable Event" means (i) a reportable event described in Section 4043 of ERISA and regulations thereunder for which the thirty-day notice period has not been waived, (ii) a withdrawal by a substantial employer from a Plan to which more than one employer contributes, as referred to in Section 4063(b) of ERISA, (iii) a cessation of operations at a facility causing more than twenty percent (20%) of Plan participants to be separated from employment, as referred to in Section 4068(f) of ERISA or (iv) a failure to make a required installment or other payment with respect to a Plan when due in accordance with Section 412 of the Code or Section 302 of ERISA which causes the total unpaid balance of missed installments and payments (including unpaid interest) to exceed $750,000. "Required Banks" shall mean, at any time, Banks having Commitments representing at least 66-2/3% of the Total Commitments at such time or, for purposes of acceleration pursuant to Article VIII or if the Total Commitments have been terminated, Banks having aggregate Facility Exposure representing at least 66-2/3% of the total aggregate Facility Exposure of all Banks. "Responsible Officer" of a Borrower shall mean the Chief Executive Officer, Chief Financial Officer, President, Treasurer or Controller of such Borrower, or such other 32 24 officer or officers of such Borrower as such Borrower may designate from time to time and otherwise acceptable to the Agent. "Revolving Credit Borrowing" shall mean a Borrowing comprised of Revolving Loans. "Revolving Credit Exposure" shall mean, as to any Bank at any time, an amount equal to the sum of (a) the aggregate principal amount of all Revolving Loans made by such Bank then outstanding and (b) such Bank's Commitment Percentage of the aggregate Committed L/C Obligations then outstanding. Revolving Credit Exposure of a Bank under Tranche A or Tranche B shall mean the foregoing amounts arising under the Tranche A Facility or the Tranche B Facility, respectively. "Revolving Credit Note" shall mean a Tranche A Revolving Credit Note or a Tranche B Revolving Credit Note. "Revolving Loans" shall mean the revolving loans made by the Banks to any Borrower pursuant to Section 2.01. Each Revolving Loan shall be a Euro-Rate Revolving Loan or a Base Rate Loan. "Rolling Period" shall mean with respect to any fiscal quarter, such fiscal quarter and the three immediately preceding fiscal quarters considered as a single accounting period. "S&P" shall mean Standard & Poor's Ratings Group. "Standard Notice" shall mean an irrevocable notice provided to the Agent on a Business Day which is (i) the same Business Day in the case of any Borrowing of Base Rate Loans; (ii) at least three London Business Days in advance in the case of any Borrowing of Euro-Rate Revolving Loans. Standard Notice must be provided on or before 12:00 o'clock noon, New York City time, on the last day permitted for such notice. "Stock Payment" by any Person shall mean any dividend, distribution or payment of any nature (whether in 33 25 cash, securities, or other property) on account of or in respect of any shares of the capital stock (or warrants, options or rights therefor) of such Person, including but not limited to any payment on account of the purchase, redemption, retirement, defeasance or acquisition of any shares of the capital stock (or warrants, options or rights therefor) of such Person, in each case regardless of whether required by the terms of such capital stock (or warrants, options or rights) or any other agreement or instrument. "Subsidiary" with respect to any Person shall mean any corporation, association, joint venture, partnership or other business entity (whether now existing or hereafter organized) of which a majority (by number of shares or number of votes) of any class of outstanding capital stock normally entitled to vote or other ownership interest having ordinary voting power is at the time as of which any determination is being made, owned or controlled directly or indirectly by such Person or by such Person and one or more Subsidiaries of such Person, provided, however, that any entity in which a Person has made any equity investment which qualifies as an equity investment under venture capital accounting principles is specifically excluded for all purposes of this definition. "Total Commitments" or "Total Current Commitments" shall mean the aggregate Current Commitments of all the Banks at any time. When used with respect to either Tranche, "Total Commitments" or "Total Current Commitments" shall mean the aggregate of the Tranche A Commitments of the Tranche A Banks or of the Tranche B Commitments of the Tranche B Banks, as the case may be. "Total Liabilities" at any time shall mean the "total liabilities" of the Company and all Uninsured Subsidiaries at such time, determined in accordance with GAAP, and all undrawn Letters of Credit issued under this Agreement. "Tranche" shall mean the Tranche A Facility or the Tranche B Facility. "Tranche A" shall mean the Tranche A Facility and, when used to modify any other term defined herein in a reference not otherwise specifically defined, shall mean such term insofar as it pertains to, or arises under or in connection with, the Tranche A Facility. For example, "Tranche A Committed L/C's" means Committed L/C's issued 34 26 under the Tranche A Facility and "Tranche A Borrowings" means Borrowings under the Tranche A Facility. "Tranche A Bank" shall mean a Bank having a Tranche A Commitment. "Tranche A Borrower" shall mean each of the Borrowers. "Tranche A Commitment" shall, mean as to any Bank, the commitment of such Bank to make Tranche A Revolving Loans to, and issue or participate in Tranche A Committed L/C's issued on behalf of, Tranche A Borrowers in an aggregate principal and face amount at any one time outstanding not to exceed (a) in the case of any Bank that is a Bank on the date hereof, the amount set forth opposite such Bank's name on Schedule 2.01 as such Bank's Tranche A Commitment, as such amount may be changed from time to time in accordance with this Agreement, and (b) in the case of any Bank that becomes a Bank after the date hereof, the amount specified as such Bank's Tranche A Commitment in the Assignment Supplement or Commitment Assumption pursuant to which such Bank initially assumed a portion of the Tranche A Commitments, as such amount may be changed from time to time in accordance with this Agreement. "Tranche A Competitive Note" shall mean a promissory note of a Borrower, substantially in the form of Exhibit B, evidencing Tranche A Competitive Loans made to such Borrower. "Tranche A Expiration Date" shall mean the Business Day immediately preceding the fourth anniversary of the Closing Date, as the same may be extended from time to time pursuant to Section 2.02, provided that the Tranche A Expiration Date shall not in any event be later than three years after the initial Tranche A Expiration Date hereunder. "Tranche A Facility" shall mean the credit facility provided pursuant to the Tranche A Commitments of the Tranche A Banks. "Tranche A Revolving Credit Note" shall mean a promissory note of a Borrower, substantially in the form of Exhibit A, evidencing Tranche A Revolving Loans made to such Borrower. 35 27 "Tranche B" shall mean the Tranche B Facility and, when used to modify any other term defined herein in a reference not otherwise specifically defined, shall mean such term insofar as it pertains to or arises under or in connection with, the Tranche B Facility. For example, "Tranche B Committed L/C's" means Committed L/C's issued under the Tranche B Facility and "Tranche B Borrowings" means Borrowings under the Tranche B Facility. "Tranche B Bank" shall mean a Bank having a Tranche B Commitment. "Tranche B Borrower" shall mean each of ANB and AUS. "Tranche B Commitment" shall, mean as to any Bank, the commitment of such Bank to make Tranche B Revolving Loans to, and issue or participate in Tranche B Committed L/C's issued on behalf of, Tranche B Borrowers in an aggregate principal and face amount at any one time outstanding not to exceed (a) in the case of any Bank that is a Bank on the date hereof, the amount set forth opposite such Bank's name on Schedule 2.01 as such Bank's Tranche B Commitment, as such amount may be changed from time to time in accordance with this Agreement, and (b) in the case of any Bank that becomes a Bank after the date hereof, the amount specified as such Bank's Tranche B Commitment in the Assignment Supplement or Commitment Assumption pursuant to which such Bank initially assumed a portion of the Tranche B Commitments, as such amount may be changed from time to time in accordance with this Agreement. "Tranche B Competitive Note" shall mean a promissory note of a Tranche B Borrower, substantially in the form of Exhibit B, evidencing Tranche B Competitive Loans made to such Tranche B Borrower. "Tranche B Expiration Date" shall mean the Business Day immediately preceding the fourth anniversary of the Closing Date, as the same may be extended from time to time pursuant to Section 2.02, provided that the Tranche B Expiration Date shall not in any event be later than three years after the initial Tranche B Expiration Date hereunder. "Tranche B Facility" shall mean the credit facility provided pursuant to the Tranche B Commitments of the Tranche B Banks. 36 28 "Tranche B Revolving Credit Note" shall mean a promissory note of a Tranche B Borrower, substantially in the form of Exhibit A, evidencing Tranche B Revolving Loans made to such Tranche B Borrower. "Transferor Bank" shall have the meaning assigned to such term in Section 10.14(c) hereof. "Type", when used in respect of any Loan or Borrowing, shall refer to the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, the term "Rate" shall include the Euro-Rate, the Base Rate and any fixed rate applicable to a Fixed Rate Loan. "Uniform Customs" shall mean the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, as the same may be amended from time to time. "Uninsured Subsidiaries" of the Company shall mean all Subsidiaries of the Company which are not Insured Subsidiaries. "Utilization Fee" shall have the meaning provided in Section 2.06(b). SECTION 1.02. Construction. Unless the context of this Agreement otherwise clearly requires, references to the plural include the singular, the singular the plural and the part the whole, and "or" has the inclusive meaning represented by the phrase "and/or". References in this Agreement to "determination" by the Agent or the Banks or any Bank include good faith estimates by the Agent or the Banks or any Bank (in the case of quantitative determinations) and good faith beliefs by the Agent or the Banks or any Bank (in the case of qualitative determinations). The words "hereof", "herein", "hereunder" and similar terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. The section and other headings contained in this Agreement and the Table of Contents preceding this Agreement are for reference purposes only and shall not control or affect the construction of this Agreement or the interpretation thereof in any respect. Section, subsection and exhibit references are to this Agreement unless otherwise specified. All of the times set forth herein 37 29 shall, unless otherwise expressly noted, refer to the time in New York, New York. SECTION 1.03. GAAP/RAP. Notwithstanding the definitions of GAAP and RAP contained herein, if any change in GAAP or RAP, as the case may be, after the date of this Agreement is or shall be required to be applied to transactions then or thereafter in existence, and (a) a violation of one or more provisions of this Agreement shall have occurred (or in the opinion of the Agent or the Company would be likely to occur) which would not have occurred or be likely to occur if no change in accounting principles had taken place or (b) the effect of such change is or shall likely be to distort materially the effect of any of the definitions of financial terms in Article I hereof or any of the covenants of the Borrowers so that the intended economic effect thereof will not in fact be accomplished, the Borrowers and the Banks agree in such event to negotiate in good faith an amendment of this Agreement which shall approximate to the extent possible the economic effect of the original provisions after taking into account such change in GAAP or RAP, as the case may be. If in the event of any such change in GAAP or RAP the Borrowers and the Banks shall be unable to agree on an amendment of this Agreement as provided in the preceding sentence, then for purposes of the provision or provisions so affected, GAAP or RAP, as the case may be, shall mean GAAP or RAP as in effect prior to such change. ARTICLE II The Credits SECTION 2.01. Revolving Loans. Subject to the terms and conditions and relying upon the representations and warranties herein set forth: (a) each Tranche A Bank severally agrees to make Loans to the Company, ANB or AUS at any time and from time to time on or after the Closing Date and to but not including the earlier of the Tranche A Expiration Date and the termination of the Tranche A Commitment of such Bank, in a combined aggregate principal amount for all Tranche A Borrowers at any time outstanding that will not result in (i) such Bank's Tranche A Revolving Credit Exposure exceeding (ii) such Bank's Tranche A Current Commitment minus the amount by which the outstanding Tranche A 38 30 Competitive Borrowings and Tranche A Competitive L/C's shall be deemed to have utilized such Tranche A Current Commitment in accordance with Section 2.11(a); and (b) each Tranche B Bank severally agrees to make Loans to ANB or AUS at any time and from time to time on or after the Closing Date and to but not including the earlier of the Tranche B Expiration Date or the termination of the Tranche B Commitment of such Bank, in a combined aggregate principal amount for both Tranche B Borrowers at any time outstanding that will not result in (i) such Bank's Tranche B Revolving Credit Exposure exceeding (ii) such Bank's Tranche B Current Commitment minus the amount by which the outstanding Tranche B Competitive Borrowings and Tranche B Competitive L/C's shall be deemed to have utilized such Tranche B Current Commitment in accordance with Section 2.11(a). Within the limits of time and amount set forth above and subject to the provisions of this Agreement, the Company, ANB and AUS may borrow, repay and reborrow hereunder. Revolving Loans comprising each Tranche A Borrowing and each Tranche B Borrowing shall be made Pro Rata by the Tranche A Banks and Tranche B Banks, respectively, in accordance with the Tranche A Commitment Percentage or Tranche B Commitment Percentage, respectively, of each such Bank. SECTION 2.02. Extension of Expiration Date. (a) Provided that no Potential Default or Event of Default shall have occurred and be continuing, the Tranche A Borrowers and the Tranche B Borrowers, respectively, may, prior to the date of each of the first, second and third anniversaries of the Closing Date hereof (each an "Anniversary Date"), request that the then effective Expiration Date for such Tranche be extended (in each case) for one additional year by providing written notice to the Agent requesting such extension not earlier than 90 days nor later than 60 days before each such Anniversary Date (each an "Extension Request"). The Borrowers may, at their option, make simultaneous Extension Requests in respect of the Tranche A and Tranche B Facilities which specify that Banks must either approve both requested extensions or deny both requested extensions, but may not approve one Extension Request and deny the other Extension Request (herein referred to as "Linked Extension Requests"). Any Extension Request shall be accompanied by a certificate of a Responsible Officer of the Company (an "Extension Certificate"), dated the date of such Extension Request, to 39 31 the effects that (1) the representations and warranties of the Company contained in Article IV hereof (except for Sections 4.06, 4.15 and 4.19 hereof, which are made solely as of the Closing Date) are true and correct in all material respects on and as of the date of such Extension Request and (2) no Potential Default or Event of Default has occurred and is continuing. The Agent shall, promptly upon its receipt of any Extension Request or Extension Requests with respect to either or both Tranches, notify the Banks having Commitments under such Tranche or Tranches of such request and specify whether any simultaneous Extension Requests are Linked Extension Requests. Not later than 30 days after receiving such notification, each such Bank shall provide the Agent with written notice of its approval or denial of the Extension Request with respect to such Tranche (or both Tranches, in the case of Linked Extension Requests), which approval or denial shall be in the sole and absolute discretion of each Bank (it being understood that the failure of any Bank to provide such notice (or any purported approval of an Extension Request in respect of only one Tranche in response to a Linked Extension Request) shall be deemed a rejection of the Extension Request). Promptly upon receipt of such notice (or deemed notice) from each such Bank, the Agent shall notify the Company of the approval or denial by such Bank of the Extension Request. (b) Any extension of the Expiration Date for either Tranche shall be effective only if approved by Banks holding on the date of the relevant Extension Request 66-2/3% of the Total Commitments under such Tranche (or of the Total Commitments, in the case of a Linked Extension Request) (in either case, the "Necessary Banks") and shall be binding only upon the Banks approving such Extension Request. Upon such approval of any Extension Request with respect to a Tranche, but effective as of the Anniversary Date next following the date of the Extension Request, and provided that no Potential Default or Event of Default shall then have occurred and be continuing, the Expiration Date for such Tranche shall be automatically extended for a period of one year from the then effective Expiration Date to the extent of the Current Commitments under such Tranche of the Banks approving such extension. Failure of the Agent to receive notice from the Company to the contrary before the Anniversary Date on which such extension is to become effective shall constitute a representation and warranty by the Company to the same effects as the Extension Certificate but as of the effective date of such extension. In the event any Bank denies (or is deemed to have denied) an 40 32 Extension Request for either or both Tranches (each a "Non-Extending Bank") which is otherwise approved by the Necessary Banks under such Tranche, then on the then scheduled Expiration Date or on such earlier date as the Borrowers under such Tranche may request, (i) such Non- Extending Bank's Commitment under such Tranche (or under both Tranches in the case of a Non-Extending Bank in connection with a Linked Extension Request) shall terminate and taking into account any purchase of the Revolving Credit Notes under such Tranche or Tranches of such Non-Extending Bank by a Replacement Bank as provided below, the Borrowers under such Tranche or Tranches shall pay to the Agent for distribution to such Non-Extending Bank, the unpaid principal balance of the Revolving Loans of such Non-Extending Bank under such Tranche or Tranches together with accrued and unpaid interest, fees or other amounts (including compensation, if any, required by subsection (b) of Section 2.12) due such Non-Extending Bank in respect of such Tranche or Tranches pursuant to this Agreement; and (ii) the Borrowers under such Tranche or Tranches may request another Bank or Banks (each a "Replacement Bank") or, with the prior consent of the Agent (which consent shall not be unreasonably withheld), other bank or banks (each, also a "Replacement Bank") to assume all or part of the Commitment of such Non-Extending Bank under such Tranche or Tranches. Upon any part of the Commitment of a Non-Extending Bank being assumed by a Replacement Bank, such Replacement Bank shall, to the extent of the Commitment it has so assumed, purchase the Revolving Credit Notes of such Non-Extending Bank under the relevant Tranche or Tranches, which shall sell the same without recourse or warranty (except as to the amount due thereon, its title to such Notes and its right to sell the same) to such Replacement Bank at a price in immediately available funds equal to the outstanding principal amount of the Revolving Loans of the Non-Extending Bank assumed whereupon (a) the then effective Expiration Date under the relevant Tranche or Tranches with respect to the Commitment assumed shall be extended for the period requested by the Borrowers under such Tranche or Tranches (effective and subject to the conditions as aforesaid), (b) each Replacement Bank, if applicable, shall be deemed to be a "Bank" for purposes of this Agreement, (c) the Borrowers under the relevant Tranche or Tranches shall pay to the Non-Extending Bank accrued and unpaid interest, fees and any other amounts due such Non-Extending Bank hereunder with respect to its Revolving Credit Notes and Commitment under the relevant Tranche or Tranches (except with respect to any portion thereof retained by the 41 33 Non-Extending Bank) and (d) if such Non-Extending Bank has ceased to have any Tranche A Commitment or Tranche B Commitment, it shall cease to be a "Bank" for purposes of this Agreement (except with respect to any outstanding Competitive Loans and Competitive Notes retained by it and except with respect to its rights hereunder to be reimbursed for costs and expenses, and to indemnification with respect to matters attributable to events, acts or conditions occurring prior to such assumption and purchase) and shall no longer have any other obligations hereunder. SECTION 2.03. Competitive Loans. (a) Subject to the terms and conditions of this Agreement, each Borrower under either Tranche may borrow Competitive Loans from time to time on any Business Day prior to the date that is seven days prior to the Expiration Date for such Tranche. A Borrower shall request Competitive Loans by delivering a Competitive Bid Request to the Agent, not later than 12:00 Noon (New York City time) four Business Days prior to the proposed Borrowing Date (in the case of an Euro-Rate Competitive Bid Request), and not later than 10:00 a.m. (New York City time) one Business Day prior to the proposed Borrowing Date (in the case of a Fixed Rate Competitive Bid Request); provided that no Competitive Bid Request shall be given under either Tranche specifying a Borrowing Date within five Business Days after the Borrowing Date in respect of any Competitive Loan under either Tranche. Each Competitive Bid Request may solicit bids for Competitive Loans in an aggregate principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof and having not more than three alternative Maturity Dates. The Interest Period for each Fixed Rate Loan shall be not less than one day or more than 360 days and the Interest Period for each Euro-Rate Competitive Loan shall be one, two, three or six months, in each case as selected by the relevant Borrower, but shall not in any event extend beyond the Expiration Date for the relevant Tranche. The Agent shall notify each Bank under a Tranche promptly by facsimile transmission of the contents of each Competitive Bid Request under such Tranche received by the Agent. (b) In the case of a Euro-Rate Competitive Bid Request, upon receipt of notice from the Agent of the contents of such Competitive Bid Request, each Bank under the relevant Tranche may elect, in its sole discretion, to offer irrevocably, subject to satisfaction of the conditions precedent set forth in Article V, to make one or more Competitive Loans at the Euro-Rate plus or minus a Margin 42 34 determined by such Bank in its sole discretion for each such Competitive Loan. Any such irrevocable offer shall be made by delivering a Competitive Bid to the Agent, before 10:30 a.m. (New York City time) on the day that is three Business Days before the proposed Borrowing Date, setting forth: (i) the maximum amount of Competitive Loans for each Interest Period and the aggregate maximum amount of Competitive Loans for all Interest Periods which such Bank would be willing to make (which amounts may exceed such Bank's Commitment and such Bank's Commitment under the relevant Tranche); and (ii) the Margin above or below the Euro-Rate at which such Bank is willing to make each such Competitive Loan. The Agent shall advise the requesting Borrower before 11:00 a.m. (New York City time) on the date which is three Business Days before the proposed Borrowing Date of the contents of each such Competitive Bid received by it. If the Agent, in its capacity as a Bank, shall elect, in its sole discretion, to make any such Competitive Bid, it shall advise the requesting Borrower of the contents of its Competitive Bid before 10:15 a.m. (New York City time) on the date which is three Business Days before the proposed Borrowing Date. (c) In the case of a Fixed Rate Competitive Bid Request, upon receipt of notice from the Agent of the contents of such Competitive Bid Request, each Bank under the relevant Tranche may elect, in its sole discretion, to offer irrevocably, subject to satisfaction of the conditions precedent set forth in Article V, to make one or more Competitive Loans at a rate of interest determined by such Bank in its sole discretion for each such Competitive Loan. Any such irrevocable offer shall be made by delivering a Competitive Bid to the Agent before 9:30 a.m. (New York City time) on the proposed Borrowing Date, setting forth: (i) the maximum amount of Competitive Loans for each Interest Period, and the aggregate maximum amount for all Interest Periods, which such Bank would be willing to make (which amounts may exceed such Bank's Commitment and such Bank's Commitment under the relevant Tranche); and 43 35 (ii) the rate of interest at which such Bank is willing to make each such Competitive Loan. The Agent shall advise the requesting Borrower before 10:00 a.m. (New York City time) on the proposed Borrowing Date of the contents of each such Competitive Bid received by it. If the Agent, in its capacity as a Bank, shall elect in its sole discretion, to make any such Competitive Bid, it shall advise the requesting Borrower of the contents of its Competitive Bid before 9:15 a.m. (New York City time) on the proposed Borrowing Date. (d) Before 11:30 a.m. (New York City time) three Business Days before the proposed Borrowing Date (in the case of Euro-Rate Competitive Loans) and before 10:30 a.m. (New York City time) on the proposed Borrowing Date (in the case of Fixed Rate Loans), the Borrower making a Competitive Bid Request, in its absolute discretion, shall: (i) cancel such Competitive Bid Request by giving the Agent telephone notice to that effect, or (ii) by giving telephone notice to the Agent (immediately confirmed by delivery to the Agent of a Competitive Bid Confirmation in writing or by facsimile transmission) (A) subject to the provisions of Section 2.03(e), accept one or more of the offers made by any Bank or Banks pursuant to Section 2.03(b) or (c), as the case may be, of the amount of Competitive Loans for each relevant Interest Period and (B) reject any remaining offers made by Banks pursuant to Section 2.03(b) or (c), as the case may be. In the event that no notice of the type described above is received by the Agent by the time specified above for such notice, the relevant Competitive Bid Request shall be deemed to have been cancelled. (e) A requesting Borrower's acceptance of Competitive Bids in response to any Competitive Bid Request shall be subject to the following limitations: (i) the amount of Competitive Loans accepted from any Bank for each Interest Period specified by such Bank in its Competitive Bid shall not exceed the maximum amount for such Interest Period specified by such Bank in such Competitive Bid; 44 36 (ii) the aggregate amount of Competitive Loans accepted from any Bank for all Interest Periods specified by such Bank in its Competitive Bid shall not exceed the aggregate maximum amount specified by such Bank in such Competitive Bid for all such Interest Periods; (iii) such Borrower may not accept offers for Competitive Loans for any Interest Period in an aggregate principal amount in excess of the maximum principal amount requested in the related Competitive Bid Request; and (iv) if such Borrower accepts any of such offers, (1) it must accept such offers based solely upon pricing for such relevant Interest Period and upon no other criteria whatsoever and (2) if (x) two or more Banks submit offers for any Interest Period at identical pricing and such Borrower accepts any of such offers but does not wish to (or by reason of the limitations set forth herein, cannot) borrow the total amount offered by such Banks with such identical pricing, the Borrower shall accept offers from all such Banks in amounts allocated among them pro rata according to the amounts offered by such Banks (or as nearly pro rata as shall be practicable after giving effect to the requirement that Competitive Loans made by a Bank on a Borrowing Date for each relevant Interest Period shall be in a principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof; provided that if the number of Banks that submit offers for any Interest Period at identical pricing is such that, after the requesting Borrower accepts such offers pro rata in accordance with the foregoing, the Competitive Loans to be made by such Banks would be less than $5,000,000 principal amount, the number of such Banks shall be reduced by the Agent by lot until the Competitive Loans to be made by such remaining Banks would be in a principal amount of $5,000,000 or an integral multiple of 1,000,000 in excess thereof) or (y) a Bank submits offers for multiple Interest Periods specifying a maximum aggregate principal amount for all Interest Periods, and the requesting Borrower accepts offers from such Bank for more than one Interest Period, then such Borrower shall instruct the Agent how to apportion the Borrower's acceptances among such offers for different Interest Periods to the extent, if any, necessary to 45 37 provide for acceptance of offers from such Bank equal to but not exceeding such specified maximum aggregate amount. (f) If a requesting Borrower notifies the Agent that a Competitive Bid Request is cancelled pursuant to Section 2.03(d)(i), the Agent shall give prompt telephone notice thereof to the Banks under the relevant Tranche. (g) If a Borrower accepts pursuant to Section 2.03(d)(ii) one or more of the offers made by any one or more Banks in a Competitive Bid, the Agent promptly shall notify each Bank which has made such a Competitive Bid of (i) the aggregate amount of such Competitive Loans to be made on such Borrowing Date for each Interest Period, (ii) the acceptance or rejection of any offers to make such Competitive Loans made by such Bank and (iii) in the case of Euro-Rate Competitive Loans, the Euro-Rate in respect thereof. Before 12:00 Noon (New York City time) on the Borrowing Date specified in the applicable Competitive Bid Request, each Bank whose Competitive Bid has been accepted in whole or part shall make available to the Agent at its Office the amount of Competitive Loans to be made by such Bank, in immediately available funds. The Agent will make such funds available to the relevant Borrower as soon as practicable on such date at the Agent's Office. As soon as practicable after each Competitive Loan Borrowing Date under a Tranche, the Agent shall notify each Bank under such Tranche of the aggregate amount of Competitive Loans under such Tranche advanced on such Borrowing Date, the respective Interest Periods thereof and the respective interest rates applicable thereto. SECTION 2.04. The Notes. The obligations of each Borrower under each Tranche to repay the aggregate unpaid principal amount of the Revolving Loans and Competitive Loans made by each Bank under such Tranche to such Borrower hereunder and to pay interest thereon shall be evidenced by a Tranche A Revolving Credit Note and a Tranche A Competitive Note, in the case of Tranche A Loans, and by a Tranche B Revolving Credit Note and a Tranche B Competitive Note, in the case of Tranche B Loans, in each case of such Borrower (provided that the Company shall not execute Tranche B Notes) for each Bank having a Tranche A Commitment or a Tranche B Commitment, as the case may be. Each such Note shall be dated on or prior to the Closing Date and shall be in substantially the form attached hereto as Exhibit A or Exhibit B, as the case may be, with the blanks 46 38 appropriately filled and payable to the order of such Bank in the amount of (i) the lesser of such Bank's Commitment under such Tranche or the unpaid principal amount of all Revolving Loans under such Tranche made to such Borrower by such Bank, in the case of each such Revolving Credit Note, and (ii) the unpaid principal amount of all Competitive Loans made to such Borrower by such Bank under such Tranche, in the case of each such Competitive Note. The outstanding principal amount of each Note and of each Loan, the unpaid interest accrued thereon, the interest rate or rates applicable and the Interest Period applicable to each Loan shall be determined from the Agent's records, which shall be presumed correct absent manifest error. The executed Notes shall be delivered by the Borrowers to the Agent on or prior to the Closing Date, and the Agent shall promptly furnish such Notes to the respective Banks. The outstanding principal balance of each Loan, as evidenced by such a Note, shall be payable on the Maturity Date applicable to such Loan or, if earlier, on the Expiration Date for the Tranche to which such Loan relates. SECTION 2.05. Making of Revolving Loans. (a) In order to request a Revolving Credit Borrowing hereunder, a Borrower shall give Standard Notice thereof to the Agent setting forth the following information in a Loan Request substantially in the form of Exhibit C attached hereto (a "Loan Request"): (i) whether such Borrowing is to be a Tranche A Borrowing or a Tranche B Borrowing (it being understood that the Company may not request Tranche B Borrowings); (ii) the date, which shall be a Business Day, on which such Borrowing is to be made; (iii) the Interest Rate Option applicable to such Borrowing, selected in accordance with Section 2.08(a) hereof; (iv) the Interest Period to apply to such Borrowing, selected in accordance with Section 2.08(b) hereof; and (v) the total principal amount of such Borrowing, selected in accordance with Section 2.08(c) hereof. Standard Notice having been so given, the Agent shall promptly advise each Bank under the relevant Tranche of the 47 39 information set forth therein and of the amount of such Bank's Revolving Loan. On the Borrowing Date specified in such Loan Request each Bank having a Commitment under the relevant Tranche shall make the proceeds of its Revolving Loan under such Tranche available to the Borrower so requesting at the Agent's Office no later than 2:30 p.m., in funds immediately available at such Office. The failure of any Bank to fund any Revolving Loan required of such Bank under this Section shall not impose any increases in the obligations of the other Banks hereunder, but such failure shall not relieve the other Banks of their obligations to lend hereunder. The proceeds of each Borrowing may be applied by the Agent in whole or in part ratably against amounts then due and payable by such Borrower to the Agent or any Bank hereunder. (b) Absent contrary notice from the Borrower by 12:00 noon, three Business Days prior to any Maturity Date of a Revolving Borrowing under any Tranche of such Borrower, such Borrower shall, at the Agent's option, be deemed to have given the Agent notice at such time pursuant to Section 2.05(a) hereof to the effect that such Borrower requests a Revolving Borrowing under such Tranche on such Maturity Date at the Base Rate Option (1) in an aggregate principal amount equal to the aggregate principal amount of the Revolving Loans of such Borrower under such Tranche becoming due and payable on such Maturity Date and (2) having an Interest Period of seven days or, if less, equal to the number of days remaining until the Expiration Date for such Tranche. SECTION 2.06. Facility Fee; Utilization Fee. (a) Facility Fee. The Company agrees, as a consideration for the Commitments of the Banks under each Tranche hereunder, to pay to the Agent for the Pro Rata account of the Tranche A Banks and Tranche B Banks, as applicable, a facility fee in respect of each Tranche (the "Facility Fee") for the period from the Closing Date to and including the Expiration Date for such Tranche calculated (based on a year of 360 days and actual days elapsed) at a rate per annum equal to (and in the amount of) the Applicable Facility Fee Percentage of the daily average aggregate Tranche A Current Commitments and Tranche B Current Commitments, as the case may be, in effect during the calendar quarter (or other period, if shorter than a calendar quarter) for which the Facility Fee in respect of such Tranche is to be determined. The Facility Fee shall be payable quarterly in arrears beginning on October 1, 1996 (for the period from the 48 40 Closing Date through September 30, 1996) and on the first day of each October, January, April and July thereafter, and on the Expiration Date for the relevant Tranche or the date of complete termination of the Commitments of the Banks under such Tranche, in each case for the immediately preceding calendar quarter or other period for which such fee has not been paid. (b) Utilization Fee. Each Borrower under each Tranche agrees, as a consideration for the Commitments of the Banks under such Tranche hereunder and in addition to any other fees payable by the Borrowers pursuant hereto, to pay to the Agent in respect of each Tranche for the Pro Rata account of the Banks under such Tranche, for each day from the Closing Date to and including the Expiration Date for such Tranche on which the aggregate principal amount of all Loans to Borrowers outstanding under such Tranche exceeds 50% of the Total Current Commitments under such Tranche on such day, a utilization fee (the "Utilization Fee") equal to (and in the amount of) (i) one three hundred sixtieth (1/360) times (ii) the product of (A) such Borrower's Applicable Utilization Fee Percentage for such day times (B) the aggregate principal amount of all Revolving Loans to such Borrower outstanding under such Tranche on such day, provided, however, that no Utilization Fee under a Tranche shall be payable for, and there shall be excluded from the calculation of the Utilization Fee for such Tranche, any day on which the aggregate principal amount of all Revolving Loans to Borrowers outstanding under such Tranche is 50% or less of the Total Current Commitments under such Tranche on such day. The Utilization Fee shall be payable quarterly in arrears beginning on October 1, 1996 (for the period from the Closing Date through September 30, 1996) and on the first day of each October, January, April and July thereafter, and on the Expiration Date for a Tranche or the date of complete termination of the Commitments of the Banks under such Tranche, in each case for the immediately preceding calendar quarter or other period for which such Utilization Fee has not been paid. (c) The Company agrees to pay the Agent, for its own account, the administrative fees set forth in the Fee Letter at the times and in the amounts specified therein. SECTION 2.07. Termination; Reduction or Increase. (a) The Total Commitments under each Tranche shall automatically terminate on the Expiration Date for such Tranche. The Committed L/C Commitment available for usage 49 41 in respect of a Tranche shall automatically terminate upon any termination of the Total Commitments under such Tranche. (b) Upon at least three Business Days' prior irrevocable written or telecopy notice or telephonic notice confirmed in writing to the Agent, the Borrowers under either Tranche, acting jointly, may at any time in whole permanently terminate, or from time to time in part permanently reduce, the Total Commitments under such Tranche; provided, however, that (i) each partial reduction of the Total Commitments under a Tranche shall be in an integral multiple of $1,000,000 and in a minimum amount of $10,000,000 and (ii) in the case of any partial reduction, the Total Commitment under a Tranche shall not be reduced to an amount that is less than the greater of (x) $250,000,000 and (y) the sum of the aggregate Facility Exposure of all the Banks under such Tranche at the time. Each reduction in the Commitments under either Tranche pursuant to this paragraph shall be made Pro Rata among the Banks in accordance with their respective Commitment Percentages under such Tranche. In respect of periods after each such partial reduction of Commitments under a Tranche, the Facility Fee for such Tranche shall be calculated upon the amount of the Total Commitments of the Banks under such Tranche as so reduced. Any partial or complete termination of the Current Commitments pursuant hereto shall be permanent and irrevocable and may not thereafter be reinstated at the option of the Borrowers, provided that the foregoing shall not affect the Borrowers' ability to increase the Total Commitments pursuant to Section 2.07(c). (c) (i) Subject to the conditions set forth below, the Tranche A Borrowers and the Tranche B Borrowers may, at any time and from time to time after the Closing Date, increase the Total Current Commitments under the Tranche A Facility and the Tranche B Facility by entering into a Commitment Assumption with an existing Bank (an "Increasing Bank") or another lender reasonably acceptable to the Agent which initially becomes a Bank pursuant to such Commitment Assumption (an "Assuming Bank"), pursuant to which such Increasing Bank or Assuming Bank assumes an additional Tranche A Commitment and Tranche B Commitment ("Additional Commitment") in an amount specified in such Commitment Assumption, effective as of a Business Day (an "Increase Date") specified in such Commitment Assumption occurring on or after the date of execution thereof and prior to the earliest Expiration Date for either Tranche to which the Additional Commitment relates. The Borrowers' ability to 50 42 increase the Total Current Commitments pursuant to this Section 2.07(c), and the effectiveness of any Commitment Assumption and Additional Commitment, shall be subject to the following conditions: (A) on the relevant Increase Date, no Potential Default and no Event of Default shall have occurred and be continuing; (B) the aggregate Additional Commitments of the Increasing Banks and Assuming Banks in respect of any Tranche shall be in a minimum amount of $15,000,000 and in an integral multiple of $1,000,000; (C) the Additional Commitment of an Increasing Bank or Assuming Bank shall be allocated pro rata between the two Tranches in accordance with the Total Current Commitments applicable to each Tranche; (D) prior to the second anniversary of the Closing Date, the Total Current Commitments may not at any time exceed $1,500,000,000 and the Tranche A Total Current Commitments may not exceed $750,000,000; (E) on and after the second anniversary of the Closing Date, the Total Current Commitments may not at any time exceed $2,000,000,000 and the Tranche A Total Current Commitments may not at any time exceed $1,000,000,000; (F) at no time shall any Bank, after giving effect to a Commitment Assumption, hold more than 25% of the Total Current Commitments under either the Tranche A Facility or the Tranche B Facility; (G) the Agent shall have received (with copies for each Bank, including each such Assuming Bank) by no later than 10:00 a.m. (New York City time) on the applicable Increase Date (1) a certificate of each Borrower signed on its behalf by a Responsible Officer of such Borrower, attaching and certifying to resolutions adopted by the board of directors of such Borrower authorizing such Borrower to borrow hereunder in an aggregate principal amount at any one time outstanding up to $2,000,000,000 (or, in the case of the Company, to borrow hereunder in an aggregate principal amount up to $1,000,000,000 and to guarantee borrowings of ANB and AUS hereunder in an aggregate 51 43 principal amount up to $2,000,000,000 and to guarantee the other obligations of ANB and AUS hereunder) and stating that such resolutions remain in full force and effect and have not been modified or rescinded or attaching and certifying, if applicable, any amendments to such resolutions or supplemental borrowing resolutions and (2) a favorable opinion of counsel for the relevant Borrower (which such Borrower hereby instructs such counsel to deliver), addressed to the Agent and the Banks and dated on or prior to the Increase Date, and satisfactory to the Agent and its counsel, as to the due authorization, execution and delivery of this Agreement by such Borrower and the binding and valid nature of, and enforceability against such Borrower of, its obligations hereunder (and in the case of the Company, under the Guaranty Agreement), in each case after giving effect to all Commitment Assumptions on or prior to the Increase Date; (H) each such Increasing Bank and Assuming Bank shall have delivered to the Agent, by no later than 10:00 a.m. (New York City time) on such Increase Date, an appropriate Commitment Assumption duly executed by such Increasing Bank or Assuming Bank and the Borrowers, and the Agent shall have accepted the same; and (I) each such Increasing Bank shall have delivered to the Agent by no later than 10:00 a.m. (New York City time) on such Increase Date its existing Revolving Credit Notes for the Tranche or Tranches to which its Additional Commitment relates. (ii) In the event that each of the conditions set forth in clauses (A) through (I) above shall have been satisfied in respect of one or more Commitment Assumptions relating to a single Increase Date prior to 10:00 a.m. (New York City time) on such Increase Date to the satisfaction of the Agent, the Agent shall notify the Banks (including any Assuming Banks) and the Borrowers of the occurrence of the related increase of Commitments no later than 1:00 p.m. (New York City time) on such Increase Date, and shall record in the Register the relevant information with respect to each Increasing Bank and Assuming Bank. Each Increasing Bank and Assuming Bank shall, before 2:00 p.m. (New York City time) on the applicable Increase Date, make available to the Agent at the Agent's Office, in same day funds, in the case of an Assuming Bank, an amount 52 44 equal to such Assuming Bank's Pro Rata portion of the Revolving Credit Borrowings then outstanding under each Tranche (calculated based on its Commitment Percentage of the aggregate Commitments outstanding under such Tranche after giving effect to the relevant Additional Commitments on the Increase Date) and, in the case of an Increasing Bank, an amount equal to the excess of (i) such Increasing Bank's Pro Rata portion of the Revolving Credit Borrowings then outstanding under each Tranche (calculated based on its Commitment Percentage of the aggregate Commitments outstanding under such Tranche after giving effect to the relevant Additional Commitments on the Increase Date) over (ii) such Increasing Bank's Pro Rata share of the Revolving Credit Borrowings under such Tranche then outstanding (calculated based on its Commitment under such Tranche (without giving effect to the relevant Additional Commitments) as a percentage of the aggregate Commitments under such Tranche (without giving effect to the relevant Additional Commitments). After the Agent's receipt of such funds from each such Increasing Bank and Assuming Bank, the Agent will promptly thereafter cause to be distributed like funds to the other Banks under the relevant Tranche in an amount to each other Bank such that the aggregate amount of the outstanding Revolving Loans under the relevant Tranche owing to each Bank after giving effect to such distribution equals such Bank's Pro Rata share of the Revolving Credit Borrowings then outstanding under such Tranche (after giving effect to the relevant Additional Commitments). Within five Business Days after the Increase Date, the relevant Borrowers, at their own expense, shall execute and deliver to the Agent, Revolving Credit Notes (and, in the case of Assuming Banks, Competitive Notes) for the relevant Tranche or Tranches, payable to the order of each such Bank, in each case in accordance with the provisions of Section 2.04. The Agent, upon receipt of such Notes, shall promptly deliver such Notes to the proper Banks. (iii) Notwithstanding any provision of this Agreement to the contrary, no Bank shall have any obligation hereunder to enter into a Commitment Assumption and any decision of a Bank to increase its Tranche A Current Commitment or Tranche B Current Commitment shall be in such Bank's sole discretion. SECTION 2.08. Interest Rates; Maturity Periods; Transactional Amounts. (a) Bases of Borrowing. (i) Each Revolving Loan shall bear interest for each day until due on a single basis selected by the respective Borrower from 53 45 among the Base Rate Option and the Euro-Rate Option, it being understood that subject to the provisions of this Agreement all Revolving Loans within a single Borrowing shall be subject to the same option, but the Borrowers may select different options to apply simultaneously to different Revolving Borrowings. Without limiting the effect of Sections 5.02(c) and 2.08(d) hereof, a Borrower may not select the Euro-Rate Option during the continuance of any Event of Default. (ii) Subject to the provisions of Section 2.08(d), the Loans comprising each Base Rate Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be, or 360 days in the case of the Federal Funds Effective Rate), at a rate per annum equal to the Base Rate. (iii) Subject to the provisions of Section 2.08(d), the Loans comprising each Euro-Rate Borrowing shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to (x) in the case of each Revolving Loan, the Euro-Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin in effect from time to time and (y) in the case of each Competitive Loan, the Euro-Rate for the Interest Period in effect for such Borrowing plus (or minus, if applicable) the Margin offered by the Bank making such Loan and accepted by the Borrower pursuant to Section 2.03. (iv) Subject to the provisions of Section 2.08(d), each Fixed Rate Loan shall bear interest (computed on the basis of the actual number of days elapsed over a year of 360 days) at a rate per annum equal to the fixed rate of interest offered by the Bank making such Loan and accepted by the relevant Borrower pursuant to Section 2.03. (v) The applicable Base Rate or Euro-Rate for each Interest Period or day within an Interest Period, as the case may be, shall be determined in good faith by the Agent, and such determination shall be conclusive absent manifest error. (b) Interest Periods. At any time when a Borrower shall request a Revolving Credit Borrowing, such 54 46 Borrower shall specify the Interest Period applicable to such Borrowing in accordance with the definition of such term herein. (c) Transactional Amounts. Every request for a Revolving Credit Borrowing and every prepayment of a Revolving Credit Borrowing shall be in a principal amount such that after giving effect thereto the principal amount of such Borrowing shall be as set forth in the table below:
Type of Loan Allowable Principal Amounts ------------ --------------------------- Base Rate Loan $10,000,000 plus an integral multiple of $1,000,000 Euro-Rate Loan $20,000,000 plus an integral multiple of $1,000,000
(d) Interest After Maturity. After the principal amount of any Loan shall have become due (on a Maturity Date, the applicable Expiration Date, by acceleration or otherwise), such Loan shall bear interest for each day until paid (before and after judgment) at a rate per annum (based on a year of 365 or 366 days, as the case may be) which shall be 2% above the then current Base Rate, such interest rate to change automatically from time to time effective as of the effective date of each change in such Base Rate. (e) Euro-Rate Unascertainable; Impracticability. If (i) on any date on which a Euro-Rate would otherwise be set the Agent (in the case of A or B below) or any Bank (in the case of C below) shall have in good faith determined (which determination shall be conclusive) that: (A) adequate and reasonable means do not exist for ascertaining such Euro-Rate, (B) a contingency has occurred which materially and adversely affects the London interbank market, or (C) the effective cost to such Bank of funding a proposed Euro-Rate Loan from a Corresponding Source of Funds shall exceed the Euro-Rate applicable to such Loan, or 55 47 (ii) at any time any Bank shall have determined in good faith (which determination shall be conclusive) that the making, maintenance or funding of any Euro-Rate Loan has been made impracticable or unlawful by compliance by such Bank or a Notional Euro-Rate Funding Office of such Bank in good faith with any Law or guideline or interpretation or administration thereof by an Official Body charged with the interpretation or administration thereof or with any request or directive of any such Official Body (whether or not having the force of law); then, and in any such event, such Bank, if other than the Agent, may notify the Agent and the Agent shall notify the Company of such determination. Upon such date as shall be specified in such notice (which shall not be earlier than the date such notice is given to the Company) (x) the obligation of the Banks to allow the Borrowers to select the Euro-Rate Option shall be suspended and (y) any request by a Borrower for a Euro-Rate Competitive Borrowing pursuant to Section 2.03 shall, in the case of any determination under Section 2.08(e)(i)(A) or (B), be of no force or effect and shall be denied by the Agent, in each case until the Agent shall have later notified the Company of the Agent's or such Bank's determination, as the case may be (which determination shall be conclusive), that the circumstances giving rise to such previous determination no longer exist. If a Bank notifies the Agent of a determination under subsection (ii) of this Section 2.08(e), all Euro-Rate Loans of such Bank (the "Affected Bank") then outstanding shall automatically be converted to Base Rate Loans as of the date specified in such notice, and accrued interest thereon shall be due and payable on such date. If at the time the Agent or a Bank makes a determination under this Section 2.08(e) a Borrower has previously notified the Agent of a request for a Euro-Rate Revolving Borrowing or for Competitive Bids for a Euro-Rate Competitive Borrowing but such Borrowing has not yet been made, such notifications shall be deemed (x) in the case of a request for a Revolving Credit Borrowing, to request the making of Base Rate Loans instead of Euro-Rate Loans with respect to such Borrowing or, in the case of a determination under Section 2.08(e)(i) (C) or 2.08(e)(ii), the Loan of the Affected Bank and (y) in the case of a Competitive Bid Request, to be of no force or effect, or, in the case of a 56 48 determination under Section 2.08(e) (i) (C) or 2.08 (e) (ii), to be of no force or effect with respect to the Affected Bank. SECTION 2.09. Prepayments. Each Borrower shall have the right at its option from time to time to prepay any Borrowing in whole or in part upon at least: (i) one Business Day's prior written notice to the Agent in the case of any Base Rate Borrowing; and (ii) subject to the provisions of Section 2.12(b) hereof, three Business Days, prior written notice to the Agent in the case of any Euro-Rate Borrowing or Fixed Rate Borrowing. Whenever a Borrower desires to prepay any part of any Borrowing, it shall provide the foregoing notice, which shall be irrevocable, to the Agent setting forth the following information: (a) The date, which shall be a Business Day, on which the proposed prepayment is to be made; (b) The Maturity Date, principal amount of, and Type of, the Borrowing to be prepaid; and (c) The principal amount to be prepaid, which shall be in accordance with Section 2.08(c) hereof in the case of Revolving Credit Borrowings and shall be in a minimum principal amount of $5,000,000 and an integral multiple of $1,000,000 in the case of Competitive Borrowings. Such notice must be provided no later than 12:00 noon on the last day permitted for such notice. Upon receiving the foregoing notice, the Agent shall promptly advise each affected Bank under the relevant Tranche of the information set forth therein and on the date specified in such notice the principal amount of the Borrowing specified in such notice, together with interest on such principal amount to such date, shall be due and payable. Notwithstanding the foregoing, a Competitive Borrowing may not be prepaid in whole or part at the option of a Borrower if the Competitive Bid Request in respect thereof specified that optional prepayments of such Borrowing would not be permitted. SECTION 2.10. Interest Payment Dates. Interest on each Base Rate Loan shall be due and payable on the Maturity Date thereof and on each March 31, June 30, September 30 and December 31 during the applicable Interest Period. Interest on each Euro-Rate Loan shall be due and payable on the Maturity Date thereof and, if the corresponding Euro-Rate Interest Period is longer than three 57 49 months, also every third month during such Interest Period or, in the case of any prepayment, on the date specified for such prepayment pursuant to Section 2.09(a) hereof (in the case of Euro-Rate Revolving Loans) or specified for a required prepayment of Euro-Rate Loans in a notice to be provided pursuant to Section 2.08(e) hereof. After maturity of any Loans (on a Maturity Date, Expiration Date, by acceleration or otherwise), interest on such Loans shall be due and payable on demand. SECTION 2.11. Pro Rata Treatment; Payments Generally. (a) Pro Rata Treatment. Except as provided below in this Section 2.11 with respect to Competitive Borrowings, and except for payments of interest involving an Affected Bank as provided in Section 2.08(e) hereof and payments to a Bank subject to a withholding deduction under Section 2.13(c) hereof, each Borrowing within a Tranche, each payment or prepayment of principal of any Borrowing, each payment of interest on the Loans within a Tranche, each payment of the Facility Fees relating to a Tranche and each reduction of the Commitments under a Tranche shall be allocated Pro Rata among the Banks under such Tranche in accordance with their respective Commitments under such Tranche (or, if such Commitments shall have expired or been terminated, in accordance with the respective principal amounts of their outstanding Revolving Loans under such Tranche). Each payment of principal of any Competitive Borrowing shall be allocated pro rata among the Banks participating in such Borrowing in accordance with the respective principal amounts of their outstanding Competitive Loans comprising such Borrowing. Each payment of interest on any Competitive Borrowing shall be allocated pro rata among the Banks participating in such Borrowing in accordance with the respective amounts of accrued and unpaid interest on their outstanding Competitive Loans comprising such Borrowing. For purposes of determining the available Commitments under any Tranche at any time, each outstanding Competitive Borrowing and Competitive L/C under such Tranche shall be deemed to have utilized the Commitments of the Banks under such Tranche (including those Banks which shall not have made Loans as part of such Competitive Borrowing or issued such Competitive L/C) Pro Rata in accordance with such respective Commitments. (b) Payments Generally. All payments and prepayments to be made by the Borrowers in respect of principal, interest, fees, indemnity, expenses or other amounts due from the Borrowers hereunder or under any Loan 58 50 Document shall be payable in Dollars at 12:00 noon, New York City time, on the day when due without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, and an action therefor shall immediately accrue, without setoff, counterclaim, withholding or other deduction of any kind or nature, except for payments to a Bank subject to a withholding deduction under Section 2.13(c) hereof and except that the principal amount of any Loans then due by a Borrower to the Banks shall automatically be set off against the principal amount of any Loans then due from the Banks to such Borrower hereunder. Except for payments expressly provided herein to be made directly to a Bank, such payments shall be made to the Agent at its Office in Dollars in funds immediately available at such Office, and payments expressly provided herein to be made directly to a Bank shall be made to the applicable Bank at such domestic account as it shall specify to the Company from time to time in Dollars in funds immediately available at such account. Any payment or prepayment received by the Agent or such Bank after 12:00 Noon, New York City time, on any day shall be deemed to have been received on the next succeeding Business Day. The Agent shall distribute to the appropriate Banks all such payments received by it from the Borrowers as promptly as practicable after receipt by the Agent. (c) Interest on Overdue Amounts. To the extent permitted by Law, after there shall have become due (on a Maturity Date, Expiration Date, by acceleration or otherwise) interest, fees, indemnity, expenses or any other amounts due from the Borrowers hereunder or under any other Loan Document (excluding overdue principal, which shall bear interest as described in Section 2.08(d) hereof, but including interest payable under this Section 2.11), such amounts shall bear interest for each day until paid (before and after judgment), payable on demand, at a rate per annum (based on a year of 365 or 366 days, as the case may be) 2% above the then current Base Rate, such interest rate to change automatically from time to time effective as of the effective date of each change in the Base Rate. SECTION 2.12. Additional Compensation in Certain Circumstances. (a) Increased Costs or Reduced Return Resulting From Taxes, Reserves, Capital Adequacy Requirements, Expenses, etc. If any Law or guideline or interpretation or application thereof by any Official Body charged with the interpretation or administration thereof or compliance with any request or directive of any Official 59 51 Body (whether or not having the force of law) now existing or hereafter adopted: (i) subjects any Bank or any Notional Euro-Rate Funding office of such Bank to any tax not applicable on the date hereof or changes the basis of taxation with respect to this Agreement, the Notes held by such Bank, the Loans, the Letters of Credit or payments by the Borrowers of principal, interest, L/C Obligations, Facility Fee, Utilization Fee or other amounts due from the Borrowers hereunder or under the Notes (except for taxes on the overall, net income of such Bank or such Notional Euro-Rate Funding Office imposed by the jurisdiction in which the Bank's principal office or Notional Euro-Rate Funding Office is located), (ii) imposes, modifies or deems applicable any reserve, special deposit or similar requirement against assets held by, credit extended by, deposits with or for the account of, or other acquisition of funds by, any Bank or any Notional Euro-Rate Funding Office of such Bank (other than requirements included in Section 2.12(c) below), (iii) imposes, modifies or deems applicable any capital adequacy or similar requirement (A) against Assets (funded or contingent) of, or credit or commitments to extend credit by, any Bank or any Notional Euro-Rate Funding Office, or (B) otherwise applicable to the obligations of any Bank or Notional Euro-Rate Funding Office under this Agreement, or (iv) imposes upon any Bank or any Notional Euro-Rate Funding Office of such Bank any other condition or expense with respect to this Agreement, the Notes held by such Bank or its making, maintenance or funding of any Loans or issuance of or participation in any Letters of Credit; and the result of any of the foregoing is to increase the cost to, reduce the income receivable by, or impose any expense (including loss of margin) upon such Bank, any Notional Euro-Rate Funding office of such Bank or, in the case of clause (iii) hereof, any Person controlling such Bank, with respect to this Agreement, the Notes held or Letters of Credit issued by such Bank, the making, maintenance or funding of any part of any Loan or the issuance of or participation in any Letter of Credit (or, in 60 52 the case of any capital adequacy or similar requirement, to have the effect of reducing the return on such Bank's or controlling Person's capital, taking into account such Bank's or controlling Person's policies with respect to capital adequacy) by an amount which such Bank deems to be material (such Bank being deemed for this purpose to have made, maintained or funded each Euro-Rate Loan from a Corresponding Source of Funds), such Bank shall from time to time notify the Agent and the Agent shall notify the Company of the amount determined (using any averaging and attribution methods) by such Bank to be necessary to compensate such Bank, such Notional Euro-Rate Funding Office or such controlling Person (on an after-tax basis) for such increase in cost, reduction in income or additional expense, such notice to include such Bank's calculation, in reasonable detail, as to the amount of its claim and such determination to be conclusive absent manifest error; provided, however, that any Bank in making such claim, and in calculating the amount thereof, shall treat the Borrowers no less favorably than the treatment afforded by such Bank to similarly situated borrowers in similar circumstances. Such amount shall be due and payable by the Company to such Bank ten Business Days after such notice is given. If any Bank requests compensation under this Section 2.12(a), it shall use reasonable efforts, such as by designating a different lending office for its Loans hereunder, to eliminate or reduce amounts payable under this Section 2.12(a) in the future, provided that such action would not subject such Bank to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Bank in any respect deemed significant by it. If the Company is required to make a payment to a Bank under this Section 2.12(a), the Company may at the time of such payment notify such Bank that the Company has elected to treat it as a "Non-Extending Bank" in which case the provisions of Section 2.02(b) shall apply except that in applying the provisions of Section 2.02(b) for purposes of this Section 2.12(a), (i) the term "Expiration Date" as used therein shall mean the date specified in the notice given pursuant to this sentence as the date when such Bank's Commitment shall be reduced to zero, which date shall not be earlier than the latest Maturity Date applicable to Loans of such Bank then outstanding and (ii) the Expiration Date with respect to any Replacement Bank shall be the Expiration Date applicable to Loans other than Loans of the Bank being replaced. 61 53 (b) Indemnity. In addition to the compensation required by subsection (a) of this Section 2.12, each of the respective Borrowers shall indemnify each Bank against any loss or reasonable expense (including loss of margin but excluding any other consequential or incidental damages) which such Bank has sustained or incurred as a consequence of any (i) payment or prepayment of any part of any Euro-Rate Loan or Fixed Rate Loan of such Borrower on a day other than the last day of the corresponding Interest Period (whether or not such payment or prepayment is mandatory and whether or not such payment or prepayment is then due), (ii) attempt by such Borrower to revoke (expressly, by later inconsistent notices or otherwise) in whole or part any notice stated herein to be irrevocable (the Banks having in their discretion the options (A) to give effect to any such attempted revocation and obtain indemnity under this Section 2.12(b) or (B) to treat such attempted revocation as having no force or effect, as if never made), or (iii) default by such Borrower in the performance or observance of any covenant or condition contained in this Agreement or the Notes, including without limitation any failure of such Borrower to pay when due (on a Maturity Date, Expiration Date, by acceleration or otherwise) any principal, interest, L/C Obligation, Facility Fee, Utilization Fee or any other amount due hereunder or under any Note. If a Bank sustains or incurs any such loss or expense it shall, without unreasonable delay, notify the Agent and the Agent shall, as soon as practicable, notify the Company of the amount determined in good faith by such Bank to be necessary to indemnify the Bank for such loss or expense (the Bank being deemed for this purpose to have made, maintained or funded each Euro-Rate Loan from a Corresponding Source of Funds), such notice to include the Bank's calculation in reasonable detail as to the amount of its claim and such determination to be conclusive absent manifest error. Such amount shall be due and payable by the applicable Borrower to such Bank ten Business Days after such notice is given. 62 54 (c) Euro-Rate Reserves. Without limiting the effect of Section 2.12(a) hereof, for every day for which a Bank's Euro-Rate Reserve Percentage is greater than zero, the applicable Borrower shall pay to such Bank an additional amount for each Euro-Rate Loan of such Bank (rounded upward if necessary to the nearest cent) equal to: (i) 1/360 times (ii) the Euro-Rate applicable to such Loan times (iii) the principal amount of such Loan times (iv) a number (rounded upward if necessary to the nearest 1/100 of 1%) equal to (A) a number equal to 1.00 divided by (a) 1.00 minus (b) the Euro-Rate Reserve Percentage minus (B) 1.00. The amount payable pursuant to this 2.12(c) may also be expressed by the following formula: [Daily amount payable ] [Euro-Rate applicable] [with respect to such ] = [1/360] X [to such Loan ] [Bank's Euro-Rate Loan] [Principal amount ] [ 1.00 ] ------------------------- X [of such Loan ] X [1.00 - [Euro-Rate Reserve] - 1.00] [ [Percentage ] ]
The "Euro-Rate Reserve Percentage" of a Bank for any day is the maximum effective percentage (expressed as a decimal fraction, rounded upward to the nearest 1/100 of l%), as determined in good faith by such Bank (which determination shall be conclusive), which actually would be applicable to such Bank for such day as prescribed by the Federal Reserve Board (or any successor) for reserve requirements (including, without limitation, supplemental, marginal and emergency reserve requirements) with respect to any eurocurrency funding (currently referred to as "Eurocurrency Liabilities") by such Bank on such day. Each Bank shall from time to time notify the Agent and the Agent shall, as soon as practicable, notify the Company of the amounts determined in good faith by such Bank (which determination shall be conclusive) to be payable to it by each Borrower pursuant to this Section 2.12(c). Such amounts shall be due and payable by the applicable Borrower to such Bank ten Business Days after such notice is given. SECTION 2.13. Taxes. (a) Payments Net of Taxes. All payments made by the Borrowers under this Agreement shall be made free and clear of, and without reduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter 63 55 imposed, levied, collected, withheld or assessed by any Official Body, and all liabilities with respect thereto, excluding (i) in the case of the Agent and each Bank, income or franchise taxes imposed on the net income of the Agent or such Bank by the jurisdiction under the laws of which the Agent or such Bank is organized or any political subdivision or taxing authority thereof or therein or as a result of a connection between such Bank and any jurisdiction other than a connection resulting solely from this Agreement and the transactions contemplated hereby, and (ii) in the case of each Bank, income or franchise taxes imposed on the net income of such Bank by any jurisdiction in which such Bank's lending offices which made or book Loans are located or any political subdivision or taxing authority thereof or therein (all such non-excluded taxes, levies, imposts, deductions, charges or withholdings being hereinafter called "Taxes"). Subject to Section 2.13(a)(i) hereof, if any Taxes are required to be withheld or deducted from any amounts payable by a Borrower to the Agent or any Bank under this Agreement, such Borrower shall pay the relevant amount of such Taxes, and the amounts so payable to the Agent or such Bank shall be increased to the extent necessary to yield to the Agent or such Bank (after payment of all Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement. Whenever any Taxes are paid by a Borrower with respect to payments made in connection with this Agreement, as promptly as possible thereafter, the Borrower shall send to the Agent for its own account or for the account of such Bank, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. (b) Indemnity. Each Borrower hereby indemnifies the Agent and each of the Banks for the full amount of all Taxes attributable to payments by or on behalf of such Borrower hereunder, any Taxes paid by the Agent or such Bank, as the case may be, any present or future claims, liabilities or losses with respect to or resulting from any omission to pay or delay in paying any Taxes (including any incremental Taxes, interest or penalties that may become payable by the Agent or such Bank as a result of any failure 64 56 to pay such Taxes), whether or not such Taxes were correctly or legally asserted. Such indemnification shall be made within 30 days from the date such Bank or the Agent, as the case may be, makes written demand therefor. (c) Withholding and Backup Withholding. Each Bank that is incorporated or organized under the laws of any jurisdiction other than the United States or any State thereof agrees that, on or prior to the date any payment is due to be made to it hereunder or under any other Loan Document, it will furnish to the Company and the Agent (i) two valid, duly completed copies of United States Internal Revenue Service Form 4224 or United States Internal Revenue Form 1001 or successor applicable form, as the case may be, certifying in each case that such Bank is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes and (ii) if applicable, a valid, duly completed Internal Revenue Service Form W-8 or W-9 or successor applicable form, as the case may be, to establish an exemption from United States backup withholding tax. Each Bank which so delivers to the Company and the Agent a Form 1001 or 4224 and Form W-8 or W-9, or successor applicable forms, agrees to deliver to the Company and the Agent two further copies of the said Form 1001 or 4224 and, if applicable, Form W-8 or W-9, or successor applicable forms, or other manner of certification, as the case may be, on or before the date that any such form expires or becomes obsolete or otherwise is required to be resubmitted as a condition to obtaining an exemption from withholding tax, or after the occurrence of any event requiring a change in the most recent form previously delivered by it, and such extensions or renewals thereof as may reasonably be requested by the Company and the Agent, certifying in the case of a Form 1001 or Form 4224 that such Bank is entitled to receive payments under this Agreement or any other Loan Document without deduction or withholding of any United States federal income taxes, unless in any such cases an event (including any changes in Law) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Bank from duly completing and delivering any such letter or form with respect to it, and such Bank advises the Company and the Agent that it is not capable of 65 57 receiving payments without any deduction or withholding of United States federal income tax, and in the case of a Form W-8 or W-9, establishing an exemption from United States backup withholding tax. SECTION 2.14. Funding by Branch, Subsidiary or Affiliate. (a) Notional Funding. Each Bank shall have the right from time to time, prospectively or retrospectively, without notice to the Borrowers, to deem any branch, Subsidiary or Affiliate of such Bank to have made, maintained or funded any of such Bank's Euro-Rate Loans at any time. Any branch, Subsidiary or Affiliate so deemed shall be known as a "Notional Euro-Rate Funding Office". A Bank shall deem any of its Euro-Rate Loans or the funding therefor to have been transferred to a different Notional Euro-Rate Funding Office if such transfer would avoid or cure an event or condition described in Section 2.08(e) hereof or would lessen compensation payable by the Company under Section 2.12(a) hereof, and if the Bank determines in its sole discretion that such transfer would be practicable, would not have a material adverse effect on such Loans and would not be inconsistent with such Bank's internal policies, the Bank or any Notional Euro-Rate Funding Office (it being assumed for purposes of such determination that each such Euro-Rate Loan is actually made or maintained by or funded through the corresponding Notional Euro-Rate Funding Office). Notional Euro-Rate Funding Offices may be selected by a Bank without regard to the Bank's actual methods of making, maintaining or funding Loans or any sources of funding actually-used by or available to the Bank. (b) Actual Funding. Each Bank shall have the right from time to time to make or maintain any Euro-Rate Loan by arranging for a branch, Subsidiary or Affiliate of such Bank to make or maintain such Loan. Each Bank shall have the right to (i) hold any applicable Note payable to its order for the benefit and account of such branch, Subsidiary or Affiliate or (ii) request the applicable Borrower to issue one or more Notes in the principal amount of such Euro-Rate Loan in substantially the form attached hereto as Exhibit A or Exhibit B, as the case may be, with the blanks appropriately filled, payable to such branch, Subsidiary or Affiliate and with appropriate changes reflecting that the holder thereof is not obligated to make any additional Loans to the Borrowers. The Borrowers agree to comply promptly with any request under subsection (ii) of this Section 2.14(b). If such Bank causes a branch, 66 58 Subsidiary or Affiliate to make or maintain any Loan hereunder, all terms and conditions of this Agreement shall, except where the context clearly requires otherwise, be applicable to such Loan and to any Note payable to the order of such branch, Subsidiary or Affiliate to the same extent as if such Loan were made or maintained by the Bank and such note were a Note payable to the Bank's order. ARTICLE III Letters of Credit SECTION 3.01. Committed L/C Commitment. (a) Subject to the terms and conditions hereof, the Committed L/C Issuer, in reliance on the agreements of the other Banks set forth in Section 3.03(a), agrees to issue letters of credit ("Committed L/C's") under either Tranche A or Tranche B for the account of a Borrower under such Tranche on any Business Day during the period from the Closing Date to the Expiration Date for the relevant Tranche in such form as may be approved from time to time by the Committed L/C Issuer; provided that the Committed L/C Issuer shall not issue any Committed L/C under a Tranche if, (i) after giving effect to such issuance, the Committed L/C Obligations under Tranche A and Tranche B would exceed $100,000,000 in the aggregate or (ii) any of the conditions precedent specified in Section 5.02 of this Agreement are not satisfied. Each Committed L/C under either Tranche (i) shall be denominated in Dollars, (ii) shall expire no later than the earlier of (x) the fifth Business Day prior to the Expiration Date for such Tranche and (y) the first anniversary of the date of issuance thereof and (iii) unless otherwise agreed by the Committed L/C Issuer in its sole discretion, shall be in a face amount of at least $1,000,000. (b) The Committed L/C Issuer shall not at any time be obligated to issue any Committed L/C hereunder if such issuance would conflict with, or cause the Committed L/C Issuer or any Committed L/C Participant to exceed any limits imposed by, any applicable Law. SECTION 3.02. Procedure for Issuance of Committed L/C. A Borrower may from time to time request that the Committed L/C Issuer issue a Committed L/C by delivering to the Committed L/C Issuer at its address for notices specified herein an Application therefor, completed to the 67 59 reasonable satisfaction of the Committed L/C Issuer, and such other certificates, documents and other papers and information as the Committed L/C Issuer may reasonably request. Upon receipt of any Application, the Committed L/C Issuer will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Committed L/C requested thereby (but in no event shall the Committed L/C Issuer be required to issue any Committed L/C earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Committed L/C to the beneficiary thereof or as otherwise may be agreed by the Committed L/C Issuer and the requesting Borrower. The Committed L/C Issuer shall furnish a copy of such Committed L/C to the Borrower and each Bank under the relevant Tranche promptly following the issuance thereof. SECTION 3.03. Committed L/C Participations. (a) In respect of each Committed L/C issued under either Tranche, the Committed L/C Issuer irrevocably agrees to grant and hereby grants to each Committed L/C Participant, and, to induce the Committed L/C Issuer to issue Committed L/C's hereunder, each Committed L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from the Committed L/C Issuer, on the terms and conditions hereinafter stated, for such Committed L/C Participant's own account and risk, an undivided participating interest equal to such Committed L/C Participant's Commitment Percentage under such Tranche in the Committed L/C Issuer's obligations and rights under such Committed L/C and the amount of each draft paid or drawing by the Committed L/C Issuer thereunder. Each Committed L/C Participant under each Tranche unconditionally and irrevocably agrees with the Committed L/C Issuer that, if a draft or drawing is paid under any Committed L/C issued under such Tranche for which the Committed L/C Issuer is not reimbursed in full by the relevant Borrower in accordance with the terms of this Agreement, such Committed L/C Participant shall pay to the Committed L/C Issuer upon demand at the Committed L/C Issuer's address for notices specified herein an amount equal to such Committed L/C Participant's Commitment Percentage under such Tranche of the amount of such draft or drawing, or any part thereof, which is not so reimbursed. 68 60 (b) If any amount required to be paid by any Committed L/C Participant to the Committed L/C Issuer pursuant to Section 3.03(a) in respect of any unreimbursed portion of any payment made by the Committed L/C Issuer under any Committed L/C is paid to the Committed L/C Issuer within two Business Days after the date such payment is due, such Committed L/C Participant shall pay to the Committed L/C Issuer on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal funds rate, as quoted by the Committed L/C Issuer, during the period from and including the date such payment is required to the date on which such payment is immediately available to the Committed L/C Issuer, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any Committed L/C Participant pursuant to Section 3.03(a) is not in fact made available to the Committed L/C Issuer by such Committed L/C Participant within two Business Days after the date such payment is due, the Committed L/C Issuer shall be entitled to recover from such Committed L/C Participant, on demand, such amount with interest thereon calculated from the third Business Day after such due date at the rate per annum applicable to Base Rate Loans hereunder. A certificate of the Committed L/C Issuer submitted to any Committed L/C Participant with respect to any amount owing under this Section 3.03 shall be conclusive in the absence of manifest error. (c) Whenever, at any time after the Committed L/C Issuer has made payment under any Committed L/C and has received from any Committed L/C Participant its Pro Rata share of such payment in accordance with Section 3.03(a), the Committed L/C Issuer receives any payment related to such Committed L/C (whether directly from the relevant Borrower or otherwise), or any payment of interest on account thereof, the Committed L/C Issuer will distribute to such Committed L/C Participant its Pro Rata share thereof; provided, however, that in the event that any such payment received by the Committed L/C Issuer shall be required to be returned by the Committed L/C Issuer, such Committed L/C Participant shall return to the Committed L/C Issuer the portion thereof previously distributed by the Committed L/C Issuer to it. SECTION 3.04. Competitive L/C's. Subject to the terms and conditions of this Agreement, each Borrower under either Tranche may request that the Competitive L/C Issuers 69 61 offer to issue letters of credit ("Competitive L/C's") for the account of such Borrower on any Business Day prior to the fifth Business Day preceding the Expiration Date for such Tranche in such form as may be approved from time to time by the relevant Competitive L/C Issuer. Each Competitive L/C (i) shall be denominated in Dollars and (ii) shall expire no later than the fifth Business Day preceding the Expiration Date for the relevant Tranche. The Tranche A Borrowers and Tranche B Borrowers shall from time to time designate Tranche A Banks and Tranche B Banks, respectively, as "Competitive L/C Issuers" under such Tranche by written notice to the Agent and each affected Bank. No Bank shall have any obligation to accept and purchase a participating interest in another Bank's obligations and rights as a Competitive L/C Issuer. SECTION 3.05. Procedure for Competitive L/C Issuance. (a) A Borrower shall request the issuance of Competitive L/C's by delivering a Competitive L/C Request to the Agent, not later than 12:00 Noon (New York City time) four Business Days prior to the proposed date of issuance. Each Competitive L/C Request may solicit bids for a Competitive L/C to be issued in an aggregate face amount of at least $5,000,000 or an integral multiple of $1,000,000 in excess thereof. Any Competitive L/C Request shall specify the Tranche to which it relates, the minimum acceptable credit rating ("L/C Rating") of a Competitive L/C Issuer required by the requesting Borrower for the Competitive L/C to be issued, and the proposed beneficiary, purpose, amount, issue date and expiration date of the requested Competitive L/C. The Agent shall notify each Competitive L/C Issuer under the relevant Tranche promptly by facsimile transmission of the contents of each Competitive L/C Request under such Tranche received by the Agent. (b) Upon receipt of notice from the Agent of the contents of such Competitive L/C Request, each Competitive L/C Issuer under the relevant Tranche having an L/C Rating at least equal to the minimum L/C Rating specified in the Competitive L/C Request may elect, in its sole discretion, to offer irrevocably, subject to satisfaction of the conditions precedent set forth in Article V, to issue the requested Competitive L/C. Any such irrevocable offer shall be made by delivering a Competitive L/C Offer to the Agent before 9:30 a.m. (New York City time) three Business Days prior to the proposed date of issuance, setting forth (i) the fronting fee for which such Competitive L/C Issuer is willing to issue such Competitive L/C and (ii) the L/C 70 62 Fee Payment Dates on which such fronting fee would be payable. The Agent shall advise the requesting Borrower before 10:00 a.m. (New York City time) three Business Days prior to the proposed date of issuance, of the contents of each such Competitive L/C Offer received by it. If the Agent, in its capacity as a Competitive L/C Issuer, shall elect, in its sole discretion, to make any such Competitive L/C Offer, it shall advise the relevant Borrower of the contents of its Competitive L/C Offer before 9:15 a.m. (New York City time) three Business Days prior to the proposed date of issuance. (c) Before 10:30 a.m. (New York City time) three Business Days prior to the proposed date of issuance, the Borrower making the Competitive L/C Request, in its absolute discretion, shall: (i) cancel such Competitive L/C Request by giving the Agent telephone notice to that effect, or (ii) by giving telephone notice to the Agent (immediately confirmed by delivery to the Agent of a Competitive L/C Confirmation in writing or by facsimile transmission) (A) subject to the provisions of Section 3.05(d), accept an offer made by any Competitive L/C Issuer pursuant to Section 3.05(b) to issue a Competitive L/C and (B) reject any remaining offers made by Competitive L/C Issuers pursuant to Section 3.05(b). (d) Such Borrower's acceptance of an offer to issue a Competitive L/C shall be subject to the following limitations: (i) such Borrower shall accept any such offer based solely upon pricing (including the specified L/C Fee Payment Dates) and upon no other criteria whatsoever (provided that no offer of any Competitive L/C Issuer not having the minimum acceptable L/C Rating specified in the Competitive L/C Request shall be accepted), and (ii) if two or more Competitive L/C Issuers submit offers for any Competitive L/C at identical pricing and such Borrower determines in accordance with clause (i) to accept a Competitive L/C issued by one of them, then the Agent shall select by lot from among such offers 71 63 the Competitive L/C Issuer to issue such Competitive L/C. (e) If the requesting Borrower notifies the Agent that a Competitive L/C Request is cancelled pursuant to Section 3.05(c)(i), the Agent shall give prompt telephone notice thereof to the Competitive L/C Issuers under the relevant Tranche. (f) If the requesting Borrower accepts pursuant to Section 3.05(c)(ii) an offer made by any one or more Competitive L/C Issuers, the Agent promptly shall notify each such Competitive L/C Issuer of the acceptance or rejection of its offer to issue the relevant Competitive L/C. (g) Before 12:00 Noon (New York City time) on the second Business Day preceding the proposed date of issuance, the requesting Borrower shall deliver an Application to the relevant Competitive L/C Issuer, completed to the reasonable satisfaction of the Competitive L/C Issuer, and such other certificates, documents and other papers and information as the Competitive L/C Issuer may reasonably request. Upon receipt of any such Application, such Competitive L/C Issuer will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Competitive L/C requested thereby (but in no event later than the proposed date of issuance) by issuing the original of such Competitive L/C to the beneficiary thereof or as otherwise may be agreed by such Competitive L/C Issuer and the requesting Borrower. The relevant Borrower and Competitive L/C Issuer may from time to time agree to extend the expiration date, or otherwise amend or modify the terms (other than the aggregate face amount), of any Competitive L/C issued pursuant hereto, and such Competitive L/C as so extended, amended or modified shall continue to be a Competitive L/C for purposes of this Agreement. The relevant Competitive L/C Issuer shall promptly notify the Agent of any extended expiration date applicable to any of its Competitive L/Cs hereunder. Each Competitive L/C Issuer shall furnish a copy of each Competitive L/C (and of any amendment, modification or extension thereof) to the requesting Borrower and to the Agent promptly following the issuance (or amendment, modification or extension) thereof. 72 64 SECTION 3.06. Fees, Commissions and Other Charges. (a) Each Borrower for whose account a Committed L/C is issued under any Tranche shall pay to the Agent, for the account of the Banks under such Tranche, a letter of credit commission with respect to such Committed L/C issued under such Tranche at a rate per annum equal to the Applicable Margin on the average daily amount available to be drawn under such Committed L/C during the period for which payment is made. Such commission shall be payable to the Banks under such Tranche (including the Committed L/C Issuer) to be shared ratably among them in accordance with their respective Commitment Percentages under such Tranche. In addition, each Borrower for whose account a Committed L/C is issued under any Tranche shall pay to the Agent, for the sole account of the Committed L/C Issuer, a fronting fee with respect to each such Committed L/C at a rate per annum equal to .10% on the average daily amount available to be drawn under such Committed L/C during the period for which payment is made. Each such letter of credit commission and fronting fee shall be payable in arrears on each L/C Fee Payment Date. (b) Each Borrower for whose account a Competitive L/C is issued shall pay to the Agent, for the account of the relevant Competitive L/C Issuer, a fronting fee with respect to each Competitive L/C issued by it at a rate per annum equal to the rate specified in the relevant Competitive L/C Offer on the average daily amount available to be drawn under such Competitive L/C during the period for which payment is made. Such fronting fee shall be payable in arrears on each L/C Fee Payment Date with respect to such Competitive L/C. (c) In addition to the foregoing commissions and fees, each Borrower shall pay or reimburse any L/C Issuer for such reasonable and customary costs and expenses as are incurred or charged by such L/C Issuer in issuing, effecting payment under, amending or otherwise administering any Letter of Credit issued at the request of such Borrower. SECTION 3.07. Reimbursement Obligation. Each Borrower for whose account a Letter of Credit has been issued hereunder agrees to reimburse the relevant L/C Issuer (including, if applicable, pursuant to a Revolving Credit Borrowing referred to below) on each date on which such L/C Issuer notifies such Borrower of the date and amount of a draft presented or drawing made under such Letter of Credit and paid by such L/C Issuer for the amount of (a) such draft 73 65 or drawing so paid and (b) any taxes, fees, charges or other reasonable out-of-pocket costs or expenses incurred by such L/C Issuer in connection with such payment. Each such payment shall be made to such L/C Issuer at its address for notices specified herein in Dollars and in immediately available funds. Interest shall be payable on any and all amounts remaining unpaid by a Borrower under this Section 3.07 from and including the date such amounts become payable (whether at stated maturity, by acceleration or otherwise) to but not including the date of payment in full at the rate which would be payable on any outstanding Base Rate Loans which were then overdue. Each drawing under any Committed L/C shall, unless otherwise reimbursed by a Borrower on the date made, constitute a request by such Borrower to the Agent for a Revolving Credit Borrowing of Base Rate Loans pursuant to Section 2.05 in the amount of such drawing. The Borrowing Date with respect to such Borrowing shall be the date of such drawing, and the proceeds of such Revolving Loans shall be applied by the Agent to reimburse the Committed L/C Issuer for the amounts drawn under such Committed L/C. SECTION 3.08. Obligations Absolute. Each Borrower's obligations under this Article III shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which any Borrower may have or have had against any L/C Issuer or any beneficiary of a Letter of Credit. Each Borrower also agrees with each L/C Issuer that, except as contemplated by the next succeeding sentence, such L/C Issuer shall not be responsible for, and such Borrower's Reimbursement Obligations under Section 3.07 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among any Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of a Borrower against any beneficiary of such Letter of Credit or any such transferee. None of the L/C Issuers shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such L/C Issuer. Each Borrower agrees that any action taken or omitted by any L/C 74 66 Issuer under or in connection with any Letter of Credit issued for the account of such Borrower or the related drafts or documents, if done in the absence of gross negligence and willful misconduct, shall be binding on such Borrower and shall not result in any liability of such L/C Issuer to such Borrower. SECTION 3.09. L/C Payments. If any draft shall be presented for payment under any Letter of Credit, the applicable L/C Issuer shall promptly notify the relevant Borrower of the date and amount thereof. The responsibility of each L/C Issuer to a Borrower in connection with any draft presented for payment under any Letter of Credit shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are in conformity with such Letter of Credit. SECTION 3.10. Applications; Uniform Customs; Securities Affiliates of Banks. (a) To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Article III, the provisions of this Article III shall apply. Each Letter of Credit shall be subject to the Uniform Customs and, to the extent not inconsistent therewith, the laws of the State of New York. (b) In the event any Committed L/C is utilized to provide credit, liquidity or other support in respect of any issue of commercial paper or other securities of a Borrower, its Affiliates or related entities (including any trusts or other vehicles utilized in connection with securitizations), and such Borrower or the issuer of such securities proposes to engage any securities Affiliate of a Bank hereunder to act as a placement agent for, or underwriter of, such securities, such Borrower will, prior to any such engagement, inform such securities Affiliate of the existence and use of such Committed L/C in connection with such securities. 75 67 ARTICLE IV Representations and Warranties The Company hereby represents and warrants to the Agent and each Bank as follows: SECTION 4.01. Organization and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company is duly qualified to do business as a foreign corporation and is in good standing in all jurisdictions in which its ownership of property or the nature of its business activities or both makes such qualification necessary or advisable and where failure to so qualify could have a material adverse effect upon the business, operations or condition (financial or otherwise) of the Company. Each of ANB and AUS is a national banking association duly organized, validly existing and in good standing under the laws of the United States. SECTION 4.02. Corporate Power and Authorization. Each Borrower has corporate power and authority to make and carry out this Agreement, to make the borrowings provided for herein, to take all action contemplated hereby or required hereunder, to execute and deliver this Agreement, its Notes and the other Loan Documents to be executed and delivered by it and to perform its obligations hereunder and thereunder; and all such action has been duly authorized by all necessary corporate proceedings on its part. SECTION 4.03. Audited Annual Financial Statements. The Company has heretofore furnished to the Agent and each Bank consolidated balance sheets of the Company and its Consolidated Subsidiaries as of December 31, 1995 and 1994 and the related consolidated statements of income, cash flows and changes in stockholders, equity for the three years ended December 31, 1995, as examined and reported on by Arthur Andersen LLP, independent public accountants for the Company, who delivered an unqualified opinion in respect thereof. Such financial statements (including the notes thereto) present fairly in all material respects the financial condition of the Company and its Consolidated Subsidiaries as of such dates and the results of their operations and their cash flows for such years, all in conformity with GAAP. 76 68 SECTION 4.04. Consolidating Financial Statements. The Company has heretofore furnished to the Agent and each Bank consolidating balance sheets of the Company and its Consolidated Subsidiaries as of December 31, 1995, together with the related consolidating statements of income for the year then ended. Such financial statements (including the notes thereto) present fairly in all material respects the financial condition of the Company and its Consolidated Subsidiaries as of such date and the results of their operations for the year then ended, all in conformity with GAAP, except that such financial statements do not contain all of the footnote disclosures required by GAAP. SECTION 4.05. Bank Financial Statements. The Company has heretofore furnished to the Agent and each Bank true and correct copies of the Call Reports prepared on behalf of and pertaining to each Insured Subsidiary for the year ended December 31, 1995. Such Call Reports present fairly in all material respects the financial condition of such Insured Subsidiaries as of the end of such year and the results of their operations, their capital positions and their cash flows for the year then ended, all in conformity with RAP. SECTION 4.06. Absence of Material Adverse Changes. Except as otherwise disclosed in Schedule 4.06 hereof, since December 31, 1995 and as of the Closing Date, there has been no material adverse change in the business, performance, operations, or condition (financial or otherwise) of the Company and its Material Subsidiaries, either individually or taken as a whole. SECTION 4.07. Litigation and Regulatory Proceedings. Except as set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 1995, copies of which have been provided to the Agent and the Banks, (a) there is no litigation, arbitration or governmental proceeding or investigation by or against the Company or any Subsidiary of the Company pending or, to the knowledge of the Company, after due inquiry, threatened, which in the reasonable judgment of the Company, if determined adversely, either individually or in the aggregate, is reasonably likely to have any material adverse effect on the financial condition or business of the Company or any Material Subsidiary, and (b) neither the Company nor any Material Subsidiary is subject to any order, directive or supervisory letter of, or agreement, memorandum of understanding or similar arrangement (including board 77 69 resolutions adopted at the request of a regulatory authority) with, any regulatory authority (including, without limitation, any Primary Federal Regulator, the Federal Reserve Board or the FDIC or any state banking or insurance department or regulatory agency) restricting its operations, restricting it from taking any action or requiring that certain actions be taken, and the Company has no knowledge that any such action is threatened or contemplated by any regulatory authority. SECTION 4.08. No Conflicting Laws or Agreements; Consents and Approvals. (a) Neither the execution and delivery of any Loan Document, the consummation of the transactions herein contemplated (including the Borrowings hereunder) nor compliance with the terms and provisions hereof, of the Notes or of any other Loan Document will violate, conflict with or result in a breach of any of the terms, conditions or provisions of the articles of incorporation, by-laws or other constituent documents of the Company or of any of its Subsidiaries or of any Law applicable to the Company or any of its Subsidiaries or of any material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or to which any of them or their material properties is subject, or constitute a default thereunder or result in the creation or imposition of any Lien of any nature whatsoever upon any of the Assets or property of the Company or any of its Subsidiaries pursuant to the terms of any such agreement or instrument. (b) No authorization, consent, approval, license, exemption or other action by, and no registration, qualification, designation, declaration or filing required to be made or obtained by the Borrowers with or from, any Official Body (collectively, "Governmental Action") is or will be necessary or advisable in connection with execution and delivery of this Agreement, the Notes or any other Loan Document, consummation of the transactions herein or therein contemplated (including the Borrowings hereunder), or the performance of or compliance by the Borrowers with the terms and conditions hereof or thereof. SECTION 4.09. Execution and Binding Effect. This Agreement has been duly and validly executed and delivered by the Company, ANB and AUS. This Agreement constitutes as to each Borrower, and the Notes and other Loan Documents when duly executed and delivered by a Borrower pursuant to the provisions hereof will constitute as to such Borrower, 78 70 legal, valid and binding obligations, enforceable in accordance with the terms thereof except, as to the enforcement of remedies, for limitations imposed by bankruptcy, receivership, insolvency, reorganization, moratorium or other similar Laws affecting the enforcement of creditors' rights generally or by Laws limiting the right of specific performance and by general equitable principles. SECTION 4.10. Employee Benefits. A copy of the most recent (as of the date hereof) Annual Report (5500 Series Form) including all attachments thereto as filed with the Internal Revenue Service for each Plan has been provided to the Agent and each Bank and fairly presents the funding status (as of the date hereof) of each Plan. There has been no material deterioration in any such Plan's funding status since the date of such Annual Report. Schedule 4.10 sets forth as of the date hereof a list of all Plans and Multiemployer Plans, and all information available to the Borrower with respect to the direct, indirect or potential withdrawal liability to any Multiemployer Plan of any Borrower or any Controlled Group Member. Except as set forth in Schedule 4.10, neither the Company nor any of its Subsidiaries has any material liability (contingent or otherwise) for or in connection with, and none of their respective properties is subject to a Lien in connection with, any Pension-Related Event. As of the date hereof, the aggregate amount of Postretirement Benefit Obligations, as certified by an actuary, does not exceed the amount set forth in Schedule 4.10. The PBGC premiums and contributions required to meet the minimum funding requirements of ERISA and the Code for all Plans have not exceeded $25,000,000 on an annual basis for any of the past three years. The amount of unfunded benefit liabilities (as defined in Section 4001(a)(16) of ERISA) for all Plans, as certified by the Plans' actuaries, do not exceed $25,000,000. SECTION 4.11. Taxes. All tax and information returns required to be filed by the Company or any Subsidiary of the Company have been properly prepared in all material respects, executed and filed. All material taxes, assessments, fees and other governmental charges upon the Company and its Subsidiaries or upon their respective properties, incomes, sales, deposits or franchises which are due and payable have been paid, other than any taxes, assessments, fees and other governmental charges the validity of which is being contested in good faith by appropriate proceedings and with respect to which appropriate accounting reserves have to the extent required 79 71 by GAAP been set aside. The Company reasonably believes the reserves and provisions for taxes on the books of the Company and its Subsidiaries are adequate for all open years and for their current fiscal periods. SECTION 4.12. Regulation U. No part of the proceeds of any Loan hereunder will be used for the purpose of buying or carrying any "margin stock," as such term is used in Regulation U of the Federal Reserve Board, or to extend credit to others for the purpose of buying or carrying any "margin stock." Neither the making of any Loan nor any use of proceeds of such Loan will violate or conflict with the provisions of Regulation G, T, U or X of the Federal Reserve Board. SECTION 4.13. Environmental Matters. (a) The Company, each of its Material Subsidiaries and each of their respective Environmental Affiliates is and has been in full compliance with all applicable Environmental Laws, except for matters which, individually or in the aggregate, are not likely to have a material adverse effect on the Company, any of its Material Subsidiaries or their respective business, operations or conditions, financial or otherwise. There are no circumstances that may prevent or interfere with such full compliance in the future. (b) To the best of the knowledge of all Responsible Officers of the Company, the Company, each of its Material Subsidiaries and each of their respective Environmental Affiliates have all Environmental Approvals necessary or desirable for the ownership and operation of their respective properties, facilities and businesses as presently owned and operated and as presently proposed to be owned and operated, except for matters which, individually or in the aggregate, are not likely to have a material adverse effect on the Company, its Material Subsidiaries or their respective business, operations or conditions, financial or otherwise. (c) To the best of the knowledge of all Responsible Officers of the Company, there is no Environmental Claim pending or threatened, and there are no past or present acts, omissions, events or circumstances that could form the basis of any Environmental Claim against the Company, any of its Material Subsidiaries or any of their respective Environmental Affiliates, except for matters which, if adversely decided, individually or in the aggregate, are not likely to have a material adverse effect 80 72 on the Company, its Material Subsidiaries or their respective business, operations or conditions, financial or otherwise. (d) To the best of the knowledge of all Responsible Officers of the Company and except as disclosed in Schedule 4.13(d) hereof, no facility or property now or previously owned, operated or leased by the Company, any of its Material Subsidiaries or any of their respective Environmental Affiliates is an Environmental Cleanup Site, and neither the Company, any of its Material Subsidiaries nor any of their respective Environmental Affiliates has stored, treated, transported, handled, disposed of, or arranged for the disposal of any Environmental Concern Materials at, on, under, above, or adjacent to any Environmental Cleanup Site. No Lien (including without limitation any cost-reimbursement claim of any Official Body) exists, and no condition exists which is likely to result in the filing of a Lien, against any property of the Company, any of its Material Subsidiaries, or any of their respective Environmental Affiliates, under any Environmental Law. (e) To the best of the knowledge of all Responsible Officers of the Company, there are no facts, circumstances or conditions that reasonably could be expected to restrict or encumber under any Environmental Law the ownership, occupancy, use or transferability of facilities or properties now or previously owned, operated or leased by the Company, any of its Material Subsidiaries, or any of their respective Environmental Affiliates. SECTION 4.14. Investment Company; Bank Holding Company; Public Utility Holding Company. None of the Borrowers: (a) is or is controlled by an investment company within the meaning of the Investment Company Act of 1940, as amended; (b) is a registered bank holding company under the Bank Holding Company Act of 1956, as amended; or (c) is a "holding company" or an "affiliate" of a "holding company" or a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. SECTION 4.15. Capitalization of Insured Subsidiaries. As of the Closing Date, each Insured Subsidiary is "Well Capitalized" as defined under and determined pursuant to the regulations of its Primary Federal Regulator. 81 73 SECTION 4.16. Absence of Undisclosed Liabilities. Neither the Company nor any Subsidiary of the Company has any liability or obligation of any nature whatever (whether absolute, accrued, contingent or otherwise, whether or not due), forward or long-term commitments or unrealized or anticipated losses from unfavorable commitments, except (a) as disclosed in the financial statements referred to in Sections 4.03, 4.04 and 4.05 hereof, (b) matters that, individually or in the aggregate, could not reasonably be expected to have a material adverse effect on the Company, any of its Material Subsidiaries or their respective business, operations or conditions, financial or otherwise, (c) liabilities, obligations, commitments and losses incurred after December 31, 1995 in the ordinary course of business and consistent with past practices; and (d) matters disclosed on Schedule 4.16 hereof. SECTION 4.17. Absence of Events of Default. No event has occurred and is continuing and no condition exists which constitutes an Event of Default or a Potential Default. SECTION 4.18. Title to Property. The Company and each Subsidiary of the Company has good and marketable title in fee simple to all real property owned or purported to be owned by it and good title to all other property of whatever nature owned or purported to be owned by it, including but not limited to all property reflected in the most recent audited balance sheet referred to in Section 4.03 hereof or submitted pursuant to Section 6.01(a) hereof, as the case may be, except as sold or otherwise disposed of in the ordinary course of business after the date of such balance sheet or, after the Closing Date, as otherwise permitted hereunder, in each case free and clear of all Liens, other than Permitted Liens. SECTION 4.19. Subsidiaries and Other Investments. Annexed hereto as Schedule 4.19 is a correct and complete list, as of the Closing Date, of all Subsidiaries of the Company, showing as to each such Subsidiary, its name, the jurisdiction of its incorporation (or formation, if other than a corporation), its primary business activity, capitalization, the ownership of the capital stock of such Subsidiary and whether, as of the Closing Date, such Subsidiary is an Active Subsidiary and/or a Material Subsidiary. Except as disclosed in Schedule 4.19 and except for investments by the Company or its Subsidiaries in the ordinary course of business which individually and in the 82 74 aggregate are not material, the Company directly or indirectly owns the issued and outstanding capital stock of every class and series of the corporations, and equity interests in the joint ventures, partnerships and other entities, set forth in Schedule 4.19 (other than directors' qualifying shares) and directly or indirectly owns none of the capital stock of any other corporation, association, trust or other entity, and no interest share in the equity of any partnership, joint venture, or other entity or enterprise. Each of said Subsidiaries and other entities has been duly organized or established and is validly existing and in good standing under the laws of the jurisdiction of its incorporation, organization or establishment, as shown in Schedule 4.19, possesses corporate or other powers adequate to transact the business in which it is engaged, and is engaged primarily in the business attributed to it in Schedule 4.19. All of the outstanding shares of stock directly or indirectly owned by the Company in each corporation listed in Schedule 4.19 are duly authorized, validly issued, fully paid and nonassessable (subject, in the case of the shares of ANB and AUS, to the provisions of Section 55, Title 12, United States Code). Each such Subsidiary is duly qualified and in good standing in all jurisdictions in which the nature of its business or the character of the property owned by it makes such qualification necessary except where a failure to so qualify would not have a material adverse effect upon its business, operations or condition, financial or otherwise, and the Company and each such Subsidiary is duly authorized, qualified and licensed under all laws, regulations, ordinances or orders of public authorities to carry on its business in the places and in the manner presently conducted. SECTION 4.20. Compliance with Laws. The Company and its Subsidiaries are in compliance with all Laws applicable to them and their respective businesses except for noncompliances which, individually or in the aggregate, would not have a material adverse effect on the business, operations or condition (financial or otherwise) of the Company or upon the ability of the Borrowers to perform their obligations under the Loan Documents. SECTION 4.21. Accurate and Complete Disclosure. The Company has disclosed to the Banks in writing every fact which materially and adversely affects, or which so far as the Company can reasonably foresee would materially and adversely affect (whether by virtue of such fact's impact 83 75 upon the business, operations, performance or condition, financial or otherwise, of the Company, ANB, AUS or any Material Subsidiary or otherwise) the ability of the Company, ANB and AUS to perform their respective obligations under this Agreement, the Notes and any other Loan Document. ARTICLE V Conditions of Lending SECTION 5.01. Closing Date. The obligation of each Bank to make Loans hereunder and of the L/C Issuers to issue Letters of Credit hereunder is subject to the satisfaction as of the Closing Date of the following conditions precedent in addition to the satisfaction as of the date of each Credit Extension of the conditions set forth in Section 5.02 hereof: (a) Agreement; Notes. The Agent shall have received an executed counterpart of this Agreement for each Bank, duly executed by the Borrowers, and executed Notes payable to each Bank, conforming to the requirements hereof, duly executed on behalf of each of the Borrowers (except, in the case of Tranche B Notes, the Company). (b) Guaranty Agreement. The Agent shall have received an executed counterpart for each Bank of a Guaranty and Suretyship Agreement in substantially the form attached hereto as Exhibit F, duly executed by the Company. (c) Corporate Proceedings. The Agent shall have received, with a counterpart for each Bank, certificates by the Secretary or Assistant Secretary (or equivalent officer) of the Company, ANB, AUS and each other Material Subsidiary dated as of the Closing Date as to (i) true copies of the articles of incorporation and by-laws (or other constituent documents) of such Person as in effect on the Closing Date and on the date of any corporate action of such Person relative to the Loan Documents, (ii) true copies of all corporate action taken by the Company, ANB and AUS relative to the Loan Documents and (iii) the authority, incumbency and signature of the respective officers of the Company, ANB and AUS executing any Loan Document and of the Responsible Officers authorized to sign any certificate or other document required to be provided on behalf of the Company, ANB or AUS pursuant hereto, all together with satisfactory 84 76 evidence of the incumbency of such Secretary or Assistant Secretary. (d) Good Standing Certificates. The Agent shall have received, with a copy for each Bank, certificates from the appropriate Secretaries of State or other applicable Official Body dated not more than 45 days before the Closing Date showing the good standing of the Company, ANB, AUS and each other Material Subsidiary in its state of incorporation or jurisdiction of organization. (e) Financial Statements. The Agent shall have received, with a counterpart for each Bank, copies of the consolidated financial statements, interim financial statements, consolidating financial statements and Call Reports referred to in Sections 4.03, 4.04 and 4.05 hereof respectively. (f) Opinion of Counsel. There shall have been delivered to the Agent a written opinion addressed to the Agent and each Bank, dated the Closing Date, of Gene Schneyer, Vice President and General Counsel to the Company, in form and substance satisfactory to the Agent and each Bank and with a signed counterpart for each Bank, (i) as to the matters referred to in Sections 4.01, 4.02, 4.07, 4.08, 4.09 and 4.14 except that as to the matters referred to in Section 4.07 such opinion may be limited to the knowledge of such counsel after due inquiry, and (ii) as to such other matters incident to the transactions contemplated by this Agreement as the Agent or any Bank may reasonably request. (g) Officers' Certificates. The Agent shall have received, with an executed counterpart for each Bank, certificates of the Borrowers signed on their behalf by Responsible Officers as to such matters as the Agent may reasonably request. (h) Fees, Expenses, etc. All fees, expenses and other compensation required to be paid to the Agent or to the Agent for the account of the Banks on or prior to the Closing Date pursuant hereto or pursuant to any other written agreements, including but not limited to those referred to in the Fee Letter, shall have been paid or received by the Agent. (i) Termination of Existing Credit Facility. On or before the Closing Date, the Commitments under and as defined in the Existing Credit Facility shall have been 85 77 terminated in full, and if any loans or other obligations of the Company or ANB are outstanding thereunder, they shall have been paid in full. Each Bank which is party to the Existing Credit Facility hereby waives the requirement therein for prior notice of the termination of the Existing Credit Facility. (j) Details, Proceedings and Documents. All legal details and proceedings in connection with the transactions contemplated by this Agreement shall be satisfactory to the Agent, and the Agent and the Banks shall have received all such counterpart originals or certified or other copies of such documents and proceedings in connection with such transactions, in form and substance satisfactory to them, as the Agent or any Bank may from time to time reasonably request. SECTION 5.02. Conditions to all Credit Extensions. The obligation of each Bank to make each and any Loan (including initial Loans) and the obligation of any L/C Issuer to issue any Letter of Credit hereunder is subject to the performance by the Borrowers of their respective obligations to be performed hereunder on or before the date of such Credit Extension, satisfaction of the conditions set forth in Section 5.01 hereof, and the satisfaction of the following further conditions precedent on and as of the date of each Credit Extension hereunder: (a) Notice. Standard Notice of, or a Competitive Bid Confirmation for, any such Loan shall have been given by the relevant Borrower to the Agent as provided in Section 2.03 or 2.05 hereof, as appropriate, and an appropriate request or Competitive L/C Confirmation shall have been given in respect of any such Letter of Credit as provided in Section 3.02 or 3.05 hereof, as appropriate. (b) Representations and Warranties. The representations and warranties contained in Article IV hereof shall be true and correct in all material respects on and as of the date of each Credit Extension as if made on and as of such date, both before and after giving effect to the Loans requested to be made or Letters of Credit requested to be issued on such date (except for the representations and warranties set forth at Sections 4.06, 4.15 and 4.19 hereof, which are made solely as of the Closing Date). 86 78 (c) No Defaults. No Event of Default or Potential Default shall have occurred and be continuing on such date or after giving effect to the Loans requested to be made or Letters of Credit requested to be issued on such date. (d) Total Exposure. Immediately after giving effect to such Credit Extension, (i) the aggregate Facility Exposure of all the Banks shall not exceed the Total Current Commitments and (ii) the aggregate Facility Exposure of all the Banks under each Tranche shall not exceed the Total Current Commitments under such Tranche. Each request by a Borrower for any Loan or for the issuance of any Letter of Credit shall constitute a representation and warranty by the Company that the conditions set forth in this Section 5.02 have been satisfied as of the date of such request. Failure of the Agent to receive notice from the Company to the contrary before such Loan is made or Letter of Credit is issued shall constitute a further representation and warranty by the Company that the conditions referred to in this Section 5.02 have been satisfied as of the date of such Credit Extension. ARTICLE VI Affirmative Covenants The Company hereby covenants to the Agent and each Bank as follows: SECTION 6.01. Basic Reporting Requirements. (a) Annual Audit Reports. As soon as practicable, and in any event within 90 days after the close of each fiscal year of the Company, the Company shall furnish to the Agent, with a copy for each Bank, consolidated statements of income, cash flows and changes in stockholders' equity of the Company and its Consolidated Subsidiaries for such fiscal year and a consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the close of such fiscal year, and notes to each, all in reasonable detail, setting forth in comparative form the corresponding figures for the preceding fiscal year, in the case of the balance sheets, and for the two preceding fiscal years, in the case of such other statements. All such financial statements shall be accompanied by an opinion of independent public accountants of recognized national standing selected by the Company. 87 79 Such opinion shall be free of exceptions or qualifications of "going concern" or like nature or which relate to a limited scope of examination. Such opinion in any event shall contain a written statement of such accountants substantially to the effect that (x) such accountants examined such financial statements in accordance with generally accepted auditing standards and accordingly made such tests of accounting records and such other auditing procedures as such accountants considered necessary in the circumstances and (y) in the opinion of such accountants such financial statements present fairly the financial position of the Company and its Consolidated Subsidiaries, as appropriate, as of the end of such fiscal years and the results of their operations and their cash flows and changes in stockholders' equity for such fiscal years, in conformity with GAAP. (b) Quarterly Consolidated Reports. As soon as practicable, and in any event within 45 days after the close of each of the first three fiscal quarters of each fiscal year of the Company, the Company shall furnish to the Agent, with a copy for each Bank, unaudited consolidated statements of income and cash flows of the Company and its Consolidated Subsidiaries for such fiscal quarter and for the period from the beginning of such fiscal year to the end of such fiscal quarter and an unaudited consolidated balance sheet of the Company and its Consolidated Subsidiaries as of the close of such fiscal quarter, and notes to each, all in reasonable detail, setting forth in comparative form the corresponding figures for the same periods during the preceding fiscal year (except for the consolidated balance sheet, which shall set forth in comparative form the corresponding balance sheet as of the prior fiscal year end). Such financial statements shall be certified on behalf of the Company by a Responsible Officer of the Company as presenting fairly in all material respects the financial position of the Company and its Consolidated Subsidiaries as of the end of such fiscal quarter and the results of their operations and their cash flows and changes in stockholders' equity for such fiscal periods, in conformity with GAAP, subject to normal and recurring year-end audit adjustments. (c) Bank Financial Statements. As soon as practical and in any event within 90 days after the close of each fiscal year (in the case of annual Call Reports) and within 45 days after the close of each fiscal quarter (in the case of quarterly Call Reports) of each Insured Subsidiary for which such reports are required by its 88 80 Primary Federal Regulator, the Company shall furnish or cause to be furnished to the Agent, with a copy for each Bank, true and correct copies of the Call Reports prepared on behalf of and pertaining to such Insured Subsidiary for such fiscal year or fiscal quarter, as the case may be, in each instance together with (i) such notes and information as the Agent or any Bank may reasonably require in order to reconcile such Call Reports with GAAP, and (ii) a certification by a Responsible Officer on behalf of the Company that such Call Report fairly presents in all material respects the financial condition and capital position of such Insured Subsidiary as of the end of the fiscal period to which it pertains and the results of its operations and cash flows for such fiscal periods, all in conformity with RAP. (d) Consolidating Reports. As soon as practicable, and in any event within 45 days after the close of each of the first three fiscal quarters of each fiscal year of the Company and 90 days after the close of each fiscal year of the Company, the Company shall furnish to the Agent, with a copy for each Bank, unaudited consolidating statements of income of the Company and each of its Subsidiaries for such fiscal quarter or fiscal year, as the case may be, and unaudited consolidating balance sheets of the Company and each of its Subsidiaries as of the close of such fiscal quarter or fiscal year, as the case may be, all in reasonable detail. Such statements shall be certified by a Responsible Officer on behalf of the Company as presenting fairly in all material respects the financial position of the Company and each of its Subsidiaries as of the end of such fiscal quarter or fiscal year, as the case may be, and the results of their operations for such fiscal quarter or fiscal year, as the case may be, in conformity with GAAP (exclusive of principles of consolidation), subject (in the case of quarterly reports) to normal and recurring year-end audit adjustments. (e) Compliance Certificates. Within 90 days after the end of each fiscal year of the Company and within 45 days after the end of each of the first three fiscal Quarters of each fiscal year (and in any event concurrently with the delivery of the financial statements referred to in Subsections (a), (b) and (c) of this Section 6.01) the Company shall deliver to the Agent, with a copy for each Bank, a compliance certificate dated as of the end of such fiscal year or quarter, duly executed on behalf of the Company by a Responsible Officer of the Company and in form 89 81 acceptable to the Agent: (i) stating that, as of the date thereof, no Event of Default or Potential Default has occurred and is continuing or exists, or, if any Event of Default or Potential Default has occurred and is continuing or exists, specifying in detail the nature and period of the existence thereof and any action taken or contemplated to be taken by the Company with respect thereto; (ii) stating that as of the date thereof, the Company is in compliance with the provisions of Sections 6.07, 7.01, 7.02(i) and 7.02(l) hereof and providing in reasonable detail the information and calculations necessary or, in the judgment of the Agent, appropriate to establish compliance with Sections 6.07, 7.01, 7.02(i) and 7.02(l) hereof; (iii) stating that the signer has personally reviewed this Agreement and that such certificate is based on a reasonable and appropriate examination made by or under the supervision of the signer sufficient to assure that such certificate is complete and accurate; and (iv) containing statements or certifications as to such other matters as the Agent may from time to time reasonably request. (f) Asset Quality Reports. As soon as available, and in no event later than concurrently with the delivery to the Agent of the financial statements required pursuant to Sections 6.01(a) and 6.01(b) hereof, the Company shall furnish to the Agent, with a copy for each Bank, its quarterly statistical supplement in form and substance as is currently prepared for and provided by the Company to its outside analysts or, in the event that the Company does not prepare such quarterly statistical supplement, the Company shall furnish to the Agent the substantive equivalent of such quarterly statistical supplement. (g) Certain Other Reports and information. Promptly upon their becoming available to the Company, the Company shall deliver to the Agent, with a copy for each Bank, a copy of (i) all regular or special reports, prospectuses and amendments to the foregoing which the Company or any Subsidiary shall file, on its own behalf, with the Securities and Exchange Commission (or any successor thereto) or any securities exchange, (ii) all reports, proxy statements, financial statements and other information distributed by the Company or any of its Subsidiaries to its stockholders, bondholders or the financial community generally, (iii) all reports of examination of, and if adverse information or comments are contained therein, any other material written reports, letters, comments or other communications pertaining to, any 90 82 Insured Subsidiary prepared or provided by its Primary Federal Regulator or any other Official Body (except to the extent that such disclosure is prohibited by Law), (iv) all material reports, filings, notices, or responses or amendments to the foregoing which the Company or any Insured Subsidiary shall file with or otherwise provide to any Primary Federal Regulator, the Federal Reserve Board, the FDIC (or the successor to any of the foregoing) or any other state or federal banking or insurance regulatory authority, or other Official Body (except to the extent that such disclosure is prohibited by Law). In addition to the foregoing, at any time during which any Borrower's Rating Level is 6 or lower, the Company shall provide to the Agent, without unreasonable delay, all accountant's management letters pertaining to, and all other reports submitted by accountants in connection with, any audit of the Company. (h) Further Information. The Company will promptly furnish to the Agent, with a copy for each Bank, such other information and in such form as the Agent or any Bank may reasonably request from time to time. (i) Notice of Certain Events. Promptly upon becoming aware of any of the following (and in addition to any other requirement of the Agent), the Company shall give the Agent notice thereof, together with a written statement of a Responsible Officer of the Company setting forth the details thereof and any action taken or proposed to be taken by the Company with respect thereto (which notice and/or written statement will be promptly communicated by the Agent to each Bank): (i) Any Event of Default or Potential Default. (ii) Any pending or threatened arbitration or action, suit, proceeding or investigation by or before any court or regulatory authority (including, without limitation, any Primary Federal Regulator, the Federal Reserve Board or the FDIC or any state banking or insurance department or regulatory agency) against or affecting the Company or any Material Subsidiary, except for matters that if adversely decided, individually or in the aggregate, would not be likely to have a material adverse effect upon the business, operations, performance or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole or upon the ability of any Borrower to perform its obligations under the Loan Documents. 91 83 (iii) Any material violation, breach or default by the Company or any Subsidiary of the Company of or under any agreement or instrument evidencing any Indebtedness of the Company or any such Subsidiary or otherwise material to the business, operations, performance or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole. (iv) Any Pension-Related Event. Such notice shall be accompanied by: (A) a copy of any notice, request, return, petition or other document received by a Borrower or any Controlled Group Member from any Person, or which has been or is to be filed with or provided to any Person (including without limitation the Internal Revenue Service, PBGC or any Plan participant, beneficiary, alternate payee or employer representative), in connection with such Pension-Related Event, and (B) in the case of any Pension-Related Event with respect to a Plan, the most recent Annual Report (5500 Series), with attachments thereto, and the most recent actuarial valuation report, for such Plan. (v) Any material Environmental Claim pending or threatened against the Company or any Subsidiary of the Company or any of their respective Environmental Affiliates, or any past or present acts, omissions, events or circumstances (including but not limited to any dumping, leaching, deposition, removal, abandonment, escape, emission, discharge or release of any Environmental Concern Material at, on or under any facility or property now or previously owned, operated or leased by the Company or any Subsidiary or any of their respective Environmental Affiliates) that could reasonably form the basis of such a material Environmental Claim. (vi) Any change in the Company's, ANB's or AUS's senior unsecured debt rating by Moody's, S&P or Fitch. (vii) Any change in any Law or regulation which could reasonably be expected to have a material adverse effect upon the business, operations, performance or condition (financial or otherwise) of the Company or any Material Subsidiary. (viii) Any change after the date hereof in the status of any Subsidiary of the Company from that which 92 84 is designated in Schedule 4.19 attached hereto, including the reasonable details thereof, which results in any Subsidiary of the Company becoming or ceasing to be a Material Subsidiary of the Company. (j) Visitation; Verification. The Company shall, upon reasonable notice and during normal business hours, permit such persons as the Agent or any Bank may designate from time to time to visit and inspect any of the properties of the Company and of any Material Subsidiary, to examine their respective books and records and take copies and extracts therefrom and to discuss their respective affairs with their respective executive officers and independent accountants at such times and as often as the Agent or any Bank may reasonably request. The Company hereby authorizes such executive officers and independent accountants to discuss with the Agent or any Bank the affairs of the Company and its Subsidiaries. The Agent and the Banks shall have the right to examine and verify accounts, inventory and other properties and liabilities of the Company and its Material Subsidiaries from time to time, and the Company shall cooperate, and shall cause each Material Subsidiary to cooperate, with the Agent and the Banks in such verification. SECTION 6.02. Insurance. The Company shall, and shall cause each Active Subsidiary to, maintain with financially sound and reputable insurers insurance with respect to its properties and business and against such liabilities, casualties and contingencies and of such types and in such amounts as is customary in the case of entities engaged in the same or similar businesses or having similar properties similarly situated. SECTION 6.03. Payment of Taxes and Other Potential Charges and Priority Claims. The Company shall, and shall cause each of its Subsidiaries to, pay or discharge: (a) on or prior to the date on which penalties attach thereto, all taxes, assessments and other governmental charges imposed upon it or any of its properties; (b) on or prior to the date when due, all lawful claims of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons which, if unpaid, might result in the creation of a Lien upon any such property; and 93 85 (c) on or prior to the date when due, all other lawful claims which, if unpaid, might result in the creation of a Lien upon any such property or which, if unpaid, might give rise to a claim entitled to priority over general creditors of the Company or such Subsidiary in a case under Title 11 (Bankruptcy) of the United States Code, as amended, or pursuant to any other insolvency or receivership Law; provided, that unless and until foreclosure, distraint, levy, sale or similar proceedings shall have been commenced, the Company or such Subsidiary need not pay or discharge any such tax, assessment, charge or claim so long as (x) the validity thereof is contested in good faith and by appropriate proceedings diligently conducted, and (y) such reserves or other appropriate provisions as may be required by GAAP shall have been made therefor. SECTION 6.04. Preservation of Existence and Franchises. Without limiting the right of the Company (or any of its Subsidiaries) to merge or consolidate in accordance with and to the extent permitted by Section 7.03 hereof, the Company shall and shall cause each Material Subsidiary to: (a) maintain its (i) corporate existence and (ii) good standing in full force and effect in its jurisdiction of incorporation; (b) preserve, renew and keep in full force and effect the franchises, licenses, charters and rights necessary for the conduct of its business; and (c) qualify and remain qualified as a foreign corporation in each jurisdiction in which the ownership of its properties or the nature of its business or both make such qualification necessary except for matters for which the failure to receive or retain such qualification individually or in the aggregate would not have a material adverse effect on the business, operations, performance or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole. SECTION 6.05. Maintenance of Properties/Business. The Company shall, and shall cause each of its Subsidiaries to, maintain or cause to be maintained in good repair, working order and condition the properties now or hereafter owned, leased or otherwise possessed by it and shall make or cause to be made all needful and proper repairs, renewals, replacements and improvements thereto so that the business carried on in connection therewith may be properly and advantageously conducted at all times. 94 86 SECTION 6.06. Avoidance of Other Conflicts. The Company shall not, and shall not permit any of its Subsidiaries to, in each case in any material respect, violate or take or omit to take any action in conflict with, be in violation of or conflict with, or be or remain subject to any liability (contingent or otherwise) on account of any violation or conflict with: (a) any Law, (b) its articles of incorporation or by-laws (or other constituent documents), or (c) any material agreement or instrument to which it is a party or by which it or any of its Assets (now owned or hereafter acquired) may be subject or bound. SECTION 6.07. Capitalization of Insured Subsidiaries. The Company shall at all times cause all Insured Subsidiaries to be at least "adequately capitalized" as determined and defined pursuant to the regulations of their respective Primary Federal Regulators, and shall cause each Insured Subsidiary to maintain such additional capital as may be required from time to time by such Insured Subsidiary's Primary Federal Regulator. SECTION 6.08. Financial Accounting Practices. The Company shall, and shall cause each of its Consolidated Subsidiaries to, make and keep books, records and accounts which, in reasonable detail, accurately and fairly reflect its transactions and dispositions of its Assets and maintain a system of internal accounting controls sufficient to provide reasonable assurances that (a) transactions are executed in accordance with management's general or specific authorization, (b) transactions are recorded as necessary (i) to permit preparation of financial statements in conformity with GAAP (and any other accounting principles applicable thereto) and (ii) to maintain accountability for Assets, (c) access to Assets is permitted only in accordance with management's general or specific authorization and (d) the recorded accountability for Assets is compared with the existing Assets at reasonable intervals and appropriate action is taken with respect to any differences. SECTION 6.09. Use of Proceeds. The Borrowers shall use the proceeds of all Loans hereunder only for the Borrowers' working capital and general corporate purposes. The Borrowers shall not use the proceeds of any Loans 95 87 hereunder, directly or indirectly, in any manner inconsistent with Section 4.12 hereof, for any unlawful purpose or in any manner inconsistent with any other provision hereof. SECTION 6.10. Continuation of or Change in Business. The Company shall and shall cause each of its Subsidiaries to continue to engage in their respective businesses substantially as conducted and operated during the present and preceding fiscal year, and the Company shall not, and shall not permit any of its Subsidiaries to, engage in any other business which is not of substantially the same general nature as the business engaged in by the Company and its Subsidiaries as of the date hereof except that the Company may, and may cause any Subsidiary to, engage in any other business whatsoever to the extent that the aggregate Assets of all such businesses do not exceed an amount equal to 6% of Consolidated Assets. As used herein, "businesses of substantially the same general nature" shall be deemed to include businesses in and relating to all types of financial products and services (consumer and commercial) (other than the business of engaging in highly leveraged transactions, the business of financing the purchase of commercial real estate and/or the business of investing in commercial real estate) and related technology; businesses in and relating to direct marketing, assessing consumer needs and preferences, dissemination of information, and data manipulation; and businesses in and relating to insurance and leasing products and services and the servicing of all types of receivables (in each case, to the extent not included in the financial products and services referred to above). SECTION 6.11. Consolidated Tax-Return. The Company shall not, and shall not suffer any of its Subsidiaries to, file or consent to the filing of any consolidated income tax return with any Person other than the Company and its Subsidiaries. SECTION 6.12. Fiscal Year. The Company shall not, and shall not suffer any of its Subsidiaries to, change its fiscal year or fiscal quarter. 96 88 ARTICLE VII Negative Covenants The Company covenants to the Agent and each Bank as follows: SECTION 7.01. Financial Covenants. (a) Consolidated Tangible Net Worth. Consolidated Tangible Net Worth shall not at any time be less than the sum of (i) $500,000,000 plus (ii) an amount equal to 65% of the aggregate of positive Consolidated Net Income (without deduction for quarterly losses) for each fiscal quarter which begins after March 31, 1996 and ends prior to the date for which compliance with this Section 7.01(a) is being determined. (b) Double Leverage Ratio. The Double Leverage Ratio shall not at any time exceed 1.3 to 1.0. (c) Total Liabilities to Consolidated Tangible Net Worth. The ratio of Total Liabilities of the Company to Consolidated Tangible Net Worth shall not at any time exceed 5.0 to 1.0. (d) Consolidated Interest Coverage Ratio. The Consolidated Interest Coverage Ratio for the Rolling Period shall at no time be less than 1.25 to 1.0. (e) Contingent Obligations. The aggregate of all Contingent Obligations of the Company shall not at any time exceed Consolidated Tangible Net Worth. (f) Doubtful Accounts-Managed and/or Owned. At no time shall the aggregate amount of reserves for credit losses maintained by the Company and its Consolidated Subsidiaries, on a managed and/or owned basis, against and in respect of all receivables either managed or owned by the Company and its Consolidated Subsidiaries be less than an amount equal to 75% of the total of all receivables 90 or more days contractually past due which are either managed or owned by the Company and its Consolidated Subsidiaries. SECTION 7.02. Liens. The Company shall not, and shall not permit any of its Subsidiaries to, at any time, create, incur, assume or suffer to exist any Lien on any of its property or Assets, tangible or intangible, now owned or hereafter acquired, (including, without limitation, the 97 89 capital stock of any Subsidiary) or agree or become liable to do so, except for the following ("Permitted Liens"): (a) Liens existing on the date hereof securing obligations existing on the date hereof and listed on Schedule 7.02(a) and extensions, renewals and replacements thereof that do not increase the aggregate outstanding principal amount secured thereby or extend to any property or assets not subject to such Liens on the date hereof. (b) Liens arising from taxes, assessments, charges, levies or claims described in Section 6.03 hereof that are not yet due or that remain payable without penalty or to the extent permitted to remain unpaid under the provisions of such Section 6.03. (c) Liens on property securing all or part of the purchase price thereof to the Company or a Subsidiary of the Company, as the case may be, Liens arising by virtue of capitalized lease transactions utilized to acquire property of the Company or any Subsidiary, and Liens (whether or not assumed) existing in property at the time of purchase thereof by the Company or such Subsidiary (and extension, renewal and replacement Liens upon the same property), provided (i) such Lien is created before or substantially simultaneously with the purchase or acquisition (including pursuant to a capitalized lease transaction) of such property by the Company or such Subsidiary; (ii) each such Lien is confined solely to the property so purchased or acquired, improvements thereto and proceeds thereof, and (iii) the aggregate principal amount of the obligations secured by all such Liens on any particular property at any time purchased or acquired by the Company or such Subsidiary (including the attributable principal component of capitalized lease obligations, calculated in accordance with GAAP) shall not exceed 100% of the lesser of the fair market value of such property at such time or the actual purchase price of such property. 98 90 (d) Deposits or pledges of cash or securities (other than the capital stock of any Subsidiary of the Company) in the ordinary course of business to secure (i) workmen's compensation, unemployment insurance or other social security obligation, (ii) performance of bids, tenders, trade contracts (other than for payment of money) or leases, (iii) stay, surety or appeal bonds or (iv) other obligations of a like nature incurred in the ordinary course of business. (e) Zoning restrictions, easements, minor restrictions on the use of real property, minor irregularities in title thereto and other minor Liens that do not in the aggregate materially detract from the value of a property or asset, or materially impair its use in the business of, the Company or its Subsidiaries, as the case may be. (f) Deposits or pledges of cash or securities (other than the capital stock of the Company or any Subsidiary of the Company) by the Company or any Subsidiary of the Company in the ordinary course of business to secure performance obligations of the Company or any such Subsidiary, as the case may be, under any interest rate or currency swap or cap or other interest rate or currency hedge agreement incurred by the Company or any such Subsidiary in the ordinary course of business or other obligations of a like nature incurred by the Company or any such Subsidiary in the ordinary course of business. (g) Liens granted by Insured Subsidiaries in the ordinary course of business. (h) Liens created, incurred or otherwise arising to secure obligations incurred in direct connection with conveyances of Assets by the Company or any Subsidiary of the Company for the purpose of the securitization of those Assets for cash in the ordinary course of business (or other Liens created in connection with securitization transactions to secure liabilities or exposures on customary terms in connection with such securitization transactions), and other Liens arising in connection with any other securitization structure consented to in advance by the Required Banks, which consent shall not be unreasonably withheld. 99 91 (i) Liens granted by the Company or a Subsidiary of the Company to secure Indebtedness or other obligations of such Person incurred in anticipation of and relating to the securitization of loan assets of and by such Person in the ordinary course of business, provided, however, that neither the aggregate amount of all Indebtedness or other obligations so secured nor the aggregate value of all loan assets upon which such Liens are granted by the Company and all Subsidiaries shall at any time exceed $500,000,000 and provided further that the Indebtedness or other obligations so secured shall be evidenced in writing and shall, by their terms, have a final maturity of not more than 120 days from the date upon which such Liens are granted, whereupon such Liens shall be discharged and released. (j) Liens granted by the Company or a Subsidiary of the Company to secure Indebtedness or any other obligations of any such Person, provided that neither the aggregate amount of all Indebtedness or other obligations so secured nor the aggregate value of all Assets upon which such Liens are granted shall exceed $5,000,000 at any time. For purposes hereof, the value of Assets upon which Liens are granted shall be determined by reference to, and equal to, the face amount payable to the Company or a Subsidiary of all Assets consisting of accounts, instruments, notes or other evidences of Indebtedness and at the fair market value of all tangible or other Assets. (k) Liens securing the claims or demands of materialmen, mechanics, contractors, landlords and other like Persons for labor, materials, supplies or rentals incurred in the ordinary course of business or in connection with the construction of a corporate headquarters building facility of the Company and its Subsidiaries, but only if the payment thereof is not at the time required, or the validity thereof is being contested in good faith and reserves have been made with respect thereto pursuant to Section 6.03. (l) Liens granted by the Company on Investment Securities owned by the Company, provided that: (i) each such Lien is incurred in connection with a Repurchase Agreement entered into by the Company in the normal course of business; (ii) the Company's Rating Level is 3 or better; and (iii) the aggregate principal face amount of all Repurchase Agreements to which the 100 92 Company is a party at any time shall not exceed 10% of Consolidated Assets. For purposes of this Section 7.02(l) and Section 8.01, "Investment Securities" shall mean United States government and other securities customarily utilized in repurchase transactions; and "Repurchase Agreement" shall mean an agreement between the Company and a creditworthy counterparty to exchange securities for cash and/or securities for a specified period of time. (m) Liens on life insurance policies owned by the Company securing Company borrowings on such life insurance policies pursuant to a corporate-owned life insurance program with respect to employees of the Company and its Subsidiaries. (n) Liens on life insurance policies securing non-recourse borrowings by Advanta Mortgage Corp. USA ("Advanta Mortgage") or an Affiliate thereof on such life insurance policies, which policies are owned by Advanta Mortgage or such Affiliate (with each mortgagor to be the beneficiary of such insurance to the extent of the amount, if any, of the mortgagor's outstanding mortgage loan balance at date of death) pursuant to a "mortgage customer life insurance" program with respect to mortgagors whose mortgages (whether held by AUS, Advanta Mortgage or its Subsidiaries, a REMIC securitization trust, or otherwise) are being serviced by Advanta Mortgage. "Permitted Lien" shall in no event include any Lien imposed by, or required to be granted pursuant to, ERISA or any Environmental Law. SECTION 7.03. Mergers, Acquisitions, etc. The Company shall not, and shall not permit any of its Material Subsidiaries to (v) merge with or into or consolidate with any other Person, (w) liquidate, wind up, dissolve or divide, (x) acquire, in a single transaction or in a series of transactions, all or any substantial portion of the properties of any going concern or going line of business, (y) acquire, in a single transaction or in a series of transactions, all or any substantial portion of the properties of any other Person other than in the ordinary 101 93 course of business, or (z) agree, become or remain liable (contingently or otherwise) to do any of the foregoing, except: (a) A wholly-owned Material Subsidiary of the Company may merge with or into or consolidate with any other wholly owned Subsidiary of the Company, provided that no Event of Default or Potential Default shall occur and be continuing or shall exist at such time or after giving effect to such transaction; (b) A wholly-owned Material Subsidiary of the Company may merge with or consolidate with the Company, provided that the Company shall be the surviving corporation and no Event of Default or Potential Default shall occur and be continuing or shall exist at such time or after giving effect to such transaction; and (c) The Company or a Material Subsidiary of the Company may merge with or into or consolidate with any other Person, or may, subject to the other provisions of this Agreement, acquire all or substantially all of the properties of any going concern, of any going line of business or of any other Person provided that (i) with respect to the Company, the Company is the surviving entity or, with respect to any such Material Subsidiary, the surviving entity is a wholly-owned Subsidiary of the Company; (ii) the Person into or with which the Company or such Subsidiary is merged or consolidated or whose properties are acquired is engaged in business of substantially the same general nature (as specified in the last sentence of Section 6.10 hereof) as the Company and its Subsidiaries except as otherwise permitted pursuant to Section 6.10 hereof, and (iii) no Event of Default or Potential Default shall occur and be continuing or shall exist at such time or after giving effect to such merger, consolidation or acquisition; provided, however, that in the case of any permitted merger or consolidation involving ANB or AUS, the surviving or resulting entity, if other than the Company, ANB or AUS, (1) shall have expressly assumed, in a manner satisfactory to the Agent, the obligations of ANB or AUS, as the case may be, hereunder and under the other Loan Documents and (2) if requested by any Bank, shall execute and deliver to such Bank, in exchange for the Notes of ANB or AUS then held by 102 94 such Bank, Notes of the surviving or resulting entity in substantially the same form. SECTION 7.04. Dispositions of Properties. Except as permitted by Section 7.03 hereof, (a) the Company shall not, and shall not permit any of its Subsidiaries to, sell, convey, assign, transfer, pledge or otherwise dispose of any capital stock in a Material Subsidiary and (b) the Company shall not, and shall not permit any of its Material Subsidiaries to, sell, convey, assign, lease, transfer, abandon or otherwise dispose of, voluntarily or involuntarily (any of the foregoing being referred to in this Section 7.04(b) as a "transaction" and any series of related transactions constituting but a single transaction) any Indebtedness of a Material Subsidiary or any of its other properties or Assets (tangible or intangible), or agree, become or remain liable (contingently or otherwise) to do any of the foregoing, except: (i) Transactions in the ordinary course of business and on customary terms; (ii) Transactions between Subsidiaries of the Company or between the Company and its Subsidiaries, subject to Section 7.05 hereof; and (iii) Sales, conveyances, assignments or other transfers or dispositions in immediate exchange for cash or tangible Assets (excluding Indebtedness of any Person), provided that such transaction shall not otherwise be prohibited by any other provision of this Agreement and no Event of Default or Potential Default shall occur and be continuing or shall exist at such time or after giving effect to such transaction. By way of illustration, and without limitation, it is understood that the following are dispositions of property or Assets subject to this Section 7.04(b): any disposition of accounts, chattel paper or general intangibles; and any disposition of any leasehold interest. Nothing in this Section 7.04(b) shall be construed to limit the restriction set forth in Section 7.04(a) hereof or any other restriction on dispositions of property imposed by this Agreement. SECTION 7.05. Dealings with Affiliates. The Company shall not, and shall not permit any of its Subsidiaries to, enter into or carry out any transaction with (including, without limitation, purchase or lease 103 95 property or services from, sell or lease property or services to, loan or advance to, or enter into, suffer to remain in existence or amend any contract, agreement or arrangement with) any Affiliate of the Company or of such Subsidiary, directly or indirectly, or agree, become or remain liable (contingently or otherwise) to do any of the foregoing, except: (a) Performance of contracts, agreements and arrangements in existence as of the date hereof and any renewals, extensions, or continuations thereof; (b) Directors, officers and employees of the Company and its Subsidiaries may be compensated for services rendered in such capacity to the Company or such Subsidiary, provided that such compensation is in good faith and on terms no less favorable to the Company or such Subsidiary than those that could have been obtained in a comparable transaction on an arm's-length basis from an unrelated Person; (c) Transactions in the ordinary course of business and consistent with past practices between a Subsidiary of the Company, on the one hand, and the Company or another Subsidiary of the Company, on the other hand, in good faith and on terms not substantially less favorable to the Company or either such Subsidiary than those that could have been obtained in a comparable transaction on an arm's-length basis from an unrelated Person; and (d) Other transactions with Affiliates in good faith and on terms not substantially less favorable to the Company or such Subsidiary than those that could have been obtained in a comparable transaction on an arm's-length basis from an unrelated Person. SECTION 7.06. Limitation on other Restrictions on Dividends by Subsidiaries, etc. The Company shall not permit any Subsidiary of the Company to be or become subject to any restriction of any nature (whether arising by operation of Law, by agreement, by its articles of incorporation, by-laws or other constituent documents of such Subsidiary, or otherwise) on the right of such Subsidiary from time to time to (w) declare and pay Stock Payments with respect to capital stock owned by the Company or any 104 96 Subsidiary including, without limitation, any management fees, tax payments or otherwise pursuant to any contractual arrangement for the provision of goods or services, or (y) make loans or advances to the Company or any Subsidiary, or (z) transfer any of its properties or assets to the Company or any Subsidiary, except: (a) Restrictions pursuant to this Agreement; (b) Restrictions under any Law; (c) With respect to clause (z) above: (i) nonassignment provisions of any executory contract or of any lease by the Company or such Subsidiary as lessee, and (ii) restrictions on transfer of property subject to a Permitted Lien for the benefit of the holder of such Permitted Lien; (d) Any restriction contained in an agreement or instrument applicable to a Subsidiary of the Company acquired by the Company or its Subsidiary after the date hereof, which restriction was not entered into in connection with or in contemplation of such acquisition, and which restriction is not applicable to any Person, property or assets, other than such acquired Subsidiary and its property and assets; (e) Any restriction or limitation imposed by an Official Body having jurisdiction thereof; (f) Restrictions resulting from requirements imposed on Advanta Mortgage as a FNMA approved mortgage servicer or requirements contained in various mortgage servicing agreements and whole loan sales agreements entered into and to be entered into by Advanta Mortgage, in each case, requiring Advanta Mortgage and/or its parent Advanta Mortgage Holding Corp. ("AMHC") to maintain minimum equity in or of Advanta Mortgage to the extent that the failure to comply with such requirements would be likely to have a material adverse effect on the business, operations or condition (financial or otherwise) of Advanta Mortgage and/or AMHC and provided further that in no event shall the Company agree to, or cause or permit any agreement by Advanta Mortgage or AMHC to, maintain or cause to be maintained equity in Advanta Mortgage in excess of $25,000,000; 105 97 (g) Restrictions resulting from requirements imposed on Advanta Business Services Corp. ("ABS") by the Municipal Bond Investors Assurance Corporation or requirements contained in various credit enhancement agreements entered into and to be entered into by ABS, in each case, requiring ABS and/or its parent to maintain minimum equity in or of ABS to the extent that the failure to comply with such requirements would be likely to have a material adverse effect on the business, operations or condition (financial or otherwise) of ABS and provided further that in no event shall the Company agree to, or cause or permit any agreement by ABS to, maintain or cause to be maintained equity in ABS in excess of $25,000,000; and (h) Any restriction or limitation negotiated in good faith at arms'-length which is contained in an agreement or instrument applicable to a Subsidiary of the Company (other than a Material Subsidiary) such as provisions relating to dividend and other payment restrictions, capital maintenance and contracted-for distribution mechanisms intended (i) to protect a minority capital or quasi- capital position (evidenced by common stock, preferred stock, subordinated notes, limited partnership interests and the like) in such Subsidiary and (ii) to assure the minority investors of their proportionate share in distributions from such Subsidiary; provided, however, that the aggregate initial investments and any subsequent capital contribution by the Company and its Subsidiaries (other than through retained earnings or distributions not taken from any such Subsidiary) in all such Subsidiaries shall not exceed an amount equal to 10% of Consolidated Assets at any time. (i) Restrictions on the Company's or a Subsidiary's ability, as the case may be, to require repayment of such debt contained in instruments evidencing borrowings from the Company or a Subsidiary on a subordinated basis (a) by ANB or AUS which qualify as Tier 2 capital under regulations of such Borrower's Primary Federal Regulator, in an amount not to exceed $250 million in aggregate principal amount outstanding at any one time and (b) by any other Subsidiary in an amount not to exceed $25 million in aggregate principal amount outstanding at any one time, provided, however that any amounts borrowed under this subsection 7.06(i)(b) shall reduce, on a dollar for dollar basis, 106 98 the amount which may be borrowed under subsection 7.06(i)(a). ARTICLE VIII Events of Default SECTION 8.01. Events of Default. If one or more of the following described Events of Default shall occur and be continuing or shall exist (for any reason, whether voluntary, involuntary or effected or required by Law), that is to say: (a) Any Borrower shall default in the payment when due of principal of any Note; or (b) Any Borrower shall default in the payment when due of interest on any Note or of any Facility Fee, Utilization Fee or other amount payable hereunder or under any other Loan Document, and such default shall have continued for a period of five days thereafter; or (c) The Company shall default in the observance, performance or fulfillment of any covenant contained in Article VII hereof, or any of the covenants contained in Sections 6.01(i)(i), 6.04(a)(i), 6.07, 6.09 or 6.10 hereof; or (d) Any representation or warranty made by any Borrower herein or in any other Loan Document, or any certificate or financial statement furnished pursuant to the provisions hereof or thereof, shall prove to have been incorrect, false or misleading in any material respect as of the time made, furnished or deemed made; or (e) Any Borrower shall default in the observance, performance or fulfillment of any other covenant (not otherwise referred to in (a), (b), (c) or (d) above) or provision hereof or of any other Loan Document and such default shall not be remedied for a period of 30 days after written notice thereof to the Company from the Agent or the holder of any Note issued hereunder; or (f) The Company or any Subsidiary of the Company shall default (i) in any payment of principal of or 107 99 interest on any Indebtedness in principal amount of $25,000,000 or more beyond any period of grace provided with respect thereto, or (ii) in the performance of any other covenant, term or condition contained in any agreement under which any such Indebtedness is created, evidenced or secured if the effect of such default is to cause, or permit the holder or holders of such obligation or their agents (or trustee on behalf of such holder or holders) to cause, such obligation to become due prior to its stated maturity; or (g) Any one or more Pension-Related Events referred to in subsection (a)(ii), (b) or (e) of the definition of "Pension- Related Event" shall have occurred; or any one or more other Pension-Related Events shall have occurred with respect to a Plan or Plans having "unfunded benefit liabilities" (within the meaning of Section 4001(a)(16) of ERISA) aggregating in excess of $25,000,000, or with respect to a Multiemployer Plan or Multiemployer Plans where the aggregate potential liability-to the Borrowers and all Controlled Group Members exceeds $25,000,000; or (h) One or more judgments for the payment of money shall have been entered against the Company or any Subsidiary of the Company, which judgment or judgments exceed $25,000,000 in the aggregate, and such judgment or judgments shall have remained undischarged and unstayed for a period of thirty days; or (i) This Agreement or any other Loan Document for any reason shall be or become, in whole or in material part, nullified or other than in full force and effect; or (j) Any judicial or regulatory action or proceeding is initiated against the Company or any Material Subsidiary by any regulatory authority (including, without limitation, any Primary Federal Regulator, the Federal Reserve Board or the FDIC or any state banking or insurance department or regulatory agency) which, if resolved against the Company or such Material Subsidiary, could, either individually or in the aggregate, reasonably be expected to restrict the ability of the Borrowers to repay all outstanding Loans hereunder; or (k) A Change of Control shall have occurred; or 108 100 (1) (A) An involuntary proceeding shall be commenced in a court of competent jurisdiction (or by or before any Official Body having the power to appoint a conservator or receiver for an Insured Subsidiary) or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of the Company or any Subsidiary of the Company or of a substantial part of the property or assets of the Company or such Subsidiary under Title 11 of the United States Code, as now constituted or hereafter amended, or any other Federal or state bankruptcy, insolvency, conservatorship, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Company or any Subsidiary of the Company or for a substantial part of the property or assets of the Company or such Subsidiary or (iii) the winding-up or liquidation of the Company or a Subsidiary of the Company, and (B) such proceeding or petition shall continue undismissed and unstayed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered or any such appointment shall be made; or (m) The Company or a Subsidiary of the Company shall institute proceedings to be adjudicated a voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization under the Federal bankruptcy laws, or any other similar applicable Federal or state law, or shall consent to the filing of any such petition, or shall seek or consent to the appointment of a conservator or receiver or of a liquidator or trustee or assignee in bankruptcy or insolvency of it or of a substantial part of its property, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts generally as they become due, or corporate action shall be taken by the Company or such Subsidiary in furtherance of any of the aforesaid purposes; then, (i) as to any Event of Default specified under subsections (a) through (k) of this Article VIII, at any time during the continuance of such event, the Banks shall be under no obligation to make Loans hereunder, and the Agent may, and at the request of the Required Banks shall, by notice to the Borrowers, take either or both of the 109 101 following actions, at the same or different times: (x) terminate the Commitments, and thereupon the Total Commitments shall terminate immediately, and (y) declare the unpaid balance of all Notes then outstanding and interest accrued thereon and all other liabilities of the Borrowers under the Loan Documents to be forthwith due and payable, and the same shall thereupon become and be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, and an action therefor shall immediately accrue; and (ii) as to any Event of Default specified under subsections (l) or (m) of this Article VIII, the Total Commitments shall automatically terminate and the Banks shall be under no further obligation to make Loans or issue or participate in Letters of Credit hereunder and the unpaid balance of all Notes outstanding hereunder and interest accrued thereon and all other liabilities of the Borrowers under the Loan Documents shall be immediately due and payable, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, and an action therefor shall immediately accrue. If an Event of Default has occurred and the Loans are accelerated pursuant to the preceding paragraph (or if an Event of Default has occurred and is continuing, the Loans have not been accelerated, and the Agent or Banks holding, directly or through participations hereunder, more than 50% of the L/C Obligations attributable to undrawn Letters of Credit so request by notice to the Borrowers), each Borrower shall deposit in an account with the Agent, for the benefit of the relevant Banks, an amount in cash equal to such Borrower's L/C Obligations as of such date. Such deposit shall be held by the Agent as collateral for the payment and performance of the obligations of the depositing Borrower under the Loan Documents (and shall not be commingled with the deposits of any other Borrowers). The Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits in Investment Securities, which investments shall be made at the option and sole discretion of the Agent, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall (i) automatically be applied by the Agent to make payment to L/C Issuers of the depositing Borrower's Reimbursement Obligation in respect of drawings under Letters of Credit requested by such Borrower for which they have not otherwise 110 102 been reimbursed, (ii) be held for the satisfaction of the Reimbursement Obligations of the depositing Borrower for the L/C Obligations attributable to it at such time and (iii) if the maturity of the Loans has been accelerated (but subject to the consent of Banks holding more than 50% of the L/C Obligations attributable to outstanding Letters of Credit requested by such Borrower), be applied to satisfy other obligations of such Borrower under this Agreement. If a Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all Events of Default have been cured or waived. ARTICLE IX The Agent SECTION 9.01. Appointment. Each Bank hereby appoints The Chase Manhattan Bank as Agent for such Bank under this Agreement and the other Loan Documents and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and the other Loan Documents, and to exercise such powers and perform such duties, as are expressly delegated to the Agent by the terms hereof or thereof, together with such other powers as are reasonably incidental thereto. The Agent agrees to act as such, upon the express conditions contained in this Article IX. Each Bank hereby irrevocably authorizes the Agent to execute and deliver each of the Loan Documents requiring execution by the Agent and to accept delivery of each of the Loan Documents. Notwithstanding any provision to the contrary elsewhere in the Loan Documents, the Agent shall have no duties or responsibilities except those expressly set forth in the Loan Documents, or any fiduciary relationship with any Bank, and no implied covenants functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Agent. The provisions of this Article IX are solely for the benefit of the Agent and the Banks, and neither the Borrowers nor any other Person shall have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under the Loan Documents, the Agent shall act solely as Agent of the Banks and shall not be deemed to have assumed any obligation or relationship of 111 103 agency or trust with or for the Borrowers. Each Bank agrees that the rights and remedies granted to the Agent under the Loan Documents shall be exercised exclusively by the Agent, and that no Bank shall have any right individually to exercise any such right or remedy, except to the extent provided herein or therein. SECTION 9.02. Exercise of Powers. The Agent shall take any action of the type specified in this Agreement or any other Loan Document as being within the Agent's rights, powers or discretion in accordance with directions from the Required Banks (or, to the extent this Agreement or such Loan Document expressly requires the direction or consent of some other Person or set of Persons, then instead in accordance with the directions of such other Person or set of Persons). In the absence of such directions, the Agent shall have the authority (but under no circumstances shall be obligated), in its sole discretion, to take any such action, except to the extent this Agreement or such Loan Document expressly requires the direction or consent of the Required Banks (or some other Person or set of Persons), in which case the Agent shall not take such action absent such direction or consent. Any action or inaction pursuant to such direction, discretion or consent shall be binding on all the Banks. The Agent shall not have any liability to any Person as a result of (x) the Agent acting or refraining from acting in accordance with the directions of the Required Banks (or other applicable Person or set of Persons), (y) the Agent refraining from acting in the absence of instructions to act from the Required Banks (or other applicable Person or set of Persons), whether or not the Agent has discretionary power to take such action, or (z) the Agent taking discretionary action it is authorized to take under this Section (subject, in the case of this clause (z), to the provisions of Section 9.04 (i) hereof). SECTION 9.03. Delegation of Duties. The Agent may execute any of its duties under the Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with responsible care except to the extent otherwise required by Section 9.04. SECTION 9.04. Exculpatory Provisions. None of the Agent or any of its officers, directors, employees, 112 104 representatives, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such person under or in connection with the Loan Documents (except for its or such person's own gross negligence or willful misconduct), or (ii) responsible in any manner for any recitals, statements, representations or warranties made or contained in any Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Loan Document, or for any failure of any Borrower or any of its officers to perform its obligations hereunder or thereunder. The Agent shall be under no obligation (i) to ascertain, inquire or give any notice as to (A) the observance or performance of any of the terms, conditions, provisions, covenants or agreements contained in this Agreement or any other Loan Document, (B) the business, operations, condition (financial or otherwise) or prospects of any Borrower or any other Person or (C) except to the extent set forth in Section 9.06 hereof, the existence of any Event of Default or Potential Default or (ii) to inspect the properties, books or records of the Company or any Subsidiary. The Agent shall not be responsible to any Bank for the execution, delivery, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement, the Notes or any other Loan Documents or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished by the Agent to the Banks or by or on behalf of any Borrower to the Agent or any Bank. The duties and responsibilities of the Agent under this Agreement shall be mechanical and administrative in nature. The Agent shall be under no obligation to take any action hereunder or under any other Loan Document if the Agent believes in good faith that taking such action may conflict with any Law or provision of this Agreement or another Loan Document. SECTION 9.05. Reliance by Agent. The Agent shall be entitled to rely, and shall be fully protected in relying, upon any notice, writing, resolution, note, consent, certificate, affidavit, letter, cablegram, telegram, facsimile, telex or teletype message, statement, order or other document or conversation (written or oral, and including telephone conversations) believed by it to be genuine and correct and to have been signed, sent or made by 113 105 the proper person or persons (whether or not made in a manner permitted or required by this Agreement or any Loan Document), and the Agent shall not have any duty to verify the identity or authority of any Person giving such notice or other communication. The Agent may consult with legal counsel (including, without limitation, in-house counsel for the Agent or in-house or other counsel for any Borrower), independent public accountants and any other experts selected by it from time to time, and the Agent shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts. The Agent may conclusively rely upon the truth of the statements and the correctness of the opinions expressed in any certificates or opinions furnished to the Agent in accordance with the requirements of this Agreement or any other Loan Document. Whenever the Agent shall deem it necessary or desirable that a matter be proved or established with respect to any Borrower or Bank, such matter may be established by a certificate of such Person, and the Agent may conclusively rely upon such certificate (unless other evidence with respect to such matter is specifically prescribed in this Agreement or another Loan Document). The Agent shall be fully justified in failing or refusing to take or continue to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Banks (or to the extent specifically provided herein, of all of the Banks) as it deems appropriate. The Agent may fail or refuse to take any action unless it shall be indemnified to its satisfaction from time to time against any and all amounts, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature which may be imposed on, incurred by or asserted against the Agent by reason of taking or continuing to take any such action. SECTION 9.06. Notice of Default. The Agent shall not be deemed to have knowledge or notice of the occurrence of any Potential Default or Event of Default hereunder unless the Agent has received notice from a Bank or a Borrower referring to this Agreement, describing such Potential Default or Event of Default and stating that such notice is a "notice of default". In the event that the Agent receives such notice, the Agent shall give prompt notice thereof to the Banks. 114 106 SECTION 9.07. Non-Reliance on Agent and Other Banks. Each Bank expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, representatives, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Agent hereinafter taken, including any review of the affairs of the Company or any of its Subsidiaries, shall be deemed to constitute any representation or warranty by the Agent or any other such Person to any Bank. Each Bank represents to the Agent that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrowers, made its own analysis of all legal matters relating to the Loan Documents and made its own decision to make its Commitment hereunder and enter into this Agreement. Each Bank also represents that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, legal analysis, appraisals and decisions in taking or not taking action under the Loan Documents, and will make such investigation as it deems necessary to inform itself as to the business, Assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrowers. In each instance where a Loan Document provides that the Company or a Borrower shall furnish to the Agent copies or counterparts for each Bank of any notice, report or other document, the Agent shall, promptly upon receipt thereof, furnish to the Banks the copies or counterparts thereof so received. Except as provided in the preceding sentence and except for any other notices, reports and other documents expressly required by the Loan Documents to be furnished to the Banks by the Agent, the Agent shall not have any duty or responsibility, either initially or on a continuing basis, to provide any Bank with any credit or other information concerning the business, operations, assets, property, financial and other conditions, prospects or creditworthiness of the Borrowers which is presently or may hereafter come into the possession of the Agent or any of its officers, directors, employees, agents, representatives, attorneys-in-fact or Affiliates, or with any other reports, notices or information of any nature. 115 107 SECTION 9.08. Indemnification. The Banks agree to reimburse and indemnify the Agent in its capacity as such and its directors, officers, employees, agents and Affiliates (to the extent not reimbursed by the Borrowers and without limitation of the obligations of the Borrowers to do so) Pro Rata (or if the Total Commitment has been terminated, based on the amounts of their respective outstanding Loans, and if furthermore all Loans have been repaid, their respective Commitments immediately prior to such termination and repayment) from and against any and all liabilities, obligations, losses, damages, penalties, claims, actions, judgments, suits, costs, reasonable expenses or disbursements of any kind whatsoever (including, without limitation, the fees and disbursements of counsel for the Agent or such other Person) in connection with any investigative, administrative or judicial proceeding commenced or threatened (whether or not the Agent or such other Person shall be designated a party thereto) which may at any time (including without limitation at any time following the repayment of the Loans) be imposed on, incurred by or asserted against the Agent in its capacity as such or such other Person in any way relating to or arising out of this Agreement or any other Loan Documents or other documents contemplated by or referred to herein or the transactions contemplated hereby or thereby or any action taken or omitted to be taken by the Agent or such other Person under or in connection with any of the foregoing, but only to the extent that any of the foregoing is not paid by the Company or any of its Subsidiaries, provided that no Bank shall be liable to the Agent or any such other Person for the payment of any portion of such liabilities, obligations, losses, damages, penalties, claims, actions, judgments, suits, costs, expenses or disbursements resulting solely from the negligence or willful misconduct of the Agent or such other Person, as finally determined by a court of competent jurisdiction. The agreements in this Section 9.08 shall survive the payment of all the Loans and Reimbursement Obligations. SECTION 9.09. Agent In Its Individual Capacity. The Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Company and its Subsidiaries as though the Agent were not the Agent hereunder. With respect to its Commitment and the Loans made by it, the Agent shall have the same rights and powers under this Agreement and each other Loan Document as any other Bank and may exercise the same as though it were not the Agent, and the terms "Banks," 116 108 "holders of Notes" and like terms shall include the Agent in its individual capacity. SECTION 9.10. Successor Agent. The Agent may resign at any time by giving 30 days' prior written notice thereof to the Banks and the Company. The Agent may be removed by the Required Banks at any time by giving 10 days' prior written notice thereof to the Agent, the other Banks and the Company. Upon any such resignation or removal, the Required Banks shall have the right to appoint a successor Agent, subject to the consent of the Borrowers (provided no Event of Default shall have occurred and be continuing at such time), which consent will not be unreasonably withheld. If no successor Agent shall have been so appointed, and shall have accepted such appointment, within 30 days after such notice of resignation or within 10 days after such notice of removal, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, subject to the consent of the Borrowers (provided no Event of Default shall have occurred and be continuing at such time), which consent will not be unreasonably withheld. Upon the acceptance by a successor Agent of its appointment as Agent hereunder, such successor Agent shall thereupon succeed to and become vested with all the properties, rights, powers, privileges and duties of the former Agent, without further act, deed or conveyance. Upon the effective date of resignation or removal of a retiring Agent, such Agent shall be discharged from its duties as Agent under this Agreement and the other Loan Documents, but the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted by it while it was Agent under this Agreement. If and so long as no successor Agent shall have been appointed, then any notice or other communication required or permitted to be given by the Agent shall be sufficiently given if given by the Required Banks, all notices or other communications required or permitted to be given to the Agent shall be given to each Bank, and all payments to be made to the Agent shall be made directly to the Borrower or Bank for whose account such payment is made. SECTION 9.11. Calculations. The Agent shall not be liable for any calculation, apportionment or distribution of payments made by it in good faith. If such calculation, apportionment or distribution is subsequently determined to have been made in error, the sole recourse of any Bank to whom payment was due but not made shall be to recover from the other Banks any payment in excess of the amount to which they are determined to be entitled or, if the amount due was 117 109 not paid by the appropriate Borrower, to recover such amount from such Borrower. SECTION 9.12. Holders of Notes. The Agent may deem and treat the Bank which is payee of a Note as the owner and holder of such Note for all purposes hereof unless and until an Assignment Supplement with respect to the assignment or transfer thereof shall have been filed with the Agent in accordance with Section 10.14 hereof. Any authority, direction or consent of any Person who at the time of giving such authority, direction or consent is shown in the Register as being a Bank shall be conclusive and binding on each present and subsequent holder, transferee or assignee of any Note or Notes payable to such Bank or of any Note or Notes issued in exchange therefor. SECTION 9.13. Agent's Fee. The Company agrees to pay to the Agent, for its individual account, a nonrefundable Agent's fee in an amount and at such time or times as the Agent and the Company have heretofore agreed in the Fee Letter. SECTION 9.14. Funding by Agent. Unless the Agent shall have been notified in writing by any Bank not later than (1) in the case of Euro-Rate Loans, the close of business on the day before the day on which such Loans are requested by a Borrower to be made or (2) in the case of Base Rate Loans, 1:00 p.m. on the date such loans are requested by a Borrower to be made, that such Bank will not make its Pro Rata share of such Loans, the Agent may assume that such Bank will make its Pro Rata share of the Loans, and in reliance-upon such assumption the Agent may (but in no circumstances shall be required to) make available to such Borrower a corresponding amount. If and to the extent that any Bank fails to make such payment to the Agent on such date, such Bank shall pay such amount on demand (or, if such Bank fails to pay such amount on demand, such Borrower shall pay such amount on demand) (such obligations of such Bank and such Borrower being several and not joint), together with interest, for the Agent's own account, for each day until repayment to the Agent from and including the date of the Agent's payment and to and including the date which is two days thereafter at the Federal Funds Effective Rate for each such day, and for each day thereafter (before and after judgment) at the rate or rates per annum applicable to such Loans. All payments to the Agent under this Section shall be made to the Agent at its office in Dollars in funds immediately available at such Office, 118 110 without set-off, withholding, counterclaim or other deduction of any nature. SECTION 9.15. The Syndication Agent and the Documentation Agent. Neither of the two Banks identified herein as the "Syndication Agent" and as the "Documentation Agent", respectively, shall have any right, power, obligation, liability, responsibility or duty under the Loan Documents other than those applicable to all Banks as such. Each Bank acknowledges that it has not relied, and will not rely, upon either of the two Banks so identified in deciding to enter into this Agreement or in taking or not taking any action hereunder. ARTICLE X Miscellaneous SECTION 10.01. Holidays. Unless specifically otherwise provided herein or therein, whenever any payment or action to be made or taken under any Loan Document shall be stated to be due on a day which is not a Business Day, such payment or action shall be made or taken on the next following Business Day, and such extension of time shall be included in computing interest or fees, if any, in connection with such payment or action. SECTION 10.02. Records. The unpaid principal amount of the Loans owing to each Bank, the unpaid interest accrued thereon, the interest rate or rates applicable to such unpaid principal amount, the duration of such applicability, each Bank's Current Commitment, and the accrued and unpaid Facility Fees, Utilization Fees and Letter of Credit fees shall at all times be ascertained from the records of the Agent, which shall be conclusive absent manifest error. SECTION 10.03. Amendments and Waivers. Neither this Agreement nor any other Loan Document may be amended, modified or supplemented except in accordance with the provisions of this Section. Subject to the consent of the requisite Banks as hereinafter provided, the Agent and the Borrower or Borrowers may from time to time amend, modify or supplement the provisions of this Agreement or any other Loan Document for the purpose of amending, adding to, or waiving any provisions, or changing in any manner the rights and duties of, any or all of the Borrowers, the Agent or any 119 111 Bank. Any such amendment, modification or supplement made by the Borrower(s) and the Agent in accordance with the provisions of this Section shall be binding upon each Borrower, each Bank and the Agent. The Agent shall enter into such amendments, modifications or supplements from time to time as directed by the Required Banks, and only as so directed, provided, that no such amendment, modification or supplement may be made which will: (a) Increase the Commitment of any Bank over the amount thereof then in effect, extend any Maturity Date or extend the Expiration Date other than as provided in Section 2.02, amend Section 2.02, or amend or waive any of the provisions of Section 5.01, Section 5.02(b), Section 5.02(c) or Section 5.02(d), in each case without the written consent of each Bank affected thereby; (b) Reduce the principal amount of or extend the time for any scheduled payment of principal of any Loan, or reduce the rate or amount of interest or extend the time for payment of interest borne by any Loan or extend the time for payment of or reduce the amount of any Facility Fee, Utilization Fee or Letter of Credit fee or reduce or postpone the date for payment of any other fees, expenses, indemnities or amounts payable under any Loan Document, without the written consent of each Bank affected thereby; (c) Change the definition of "Required Banks" or "Pro Rata," release the obligations of the Company under the Guaranty or amend the Guaranty so as to reduce such obligations, amend Section 2.01 or Section 2.07 so as to increase the Total Commitment or amend Section 2.11(a), Section 10.13, Section 10.14(a) or this Section 10.03, without the written consent of all the Banks; or (d) Amend or waive any of the provisions of Article IX hereof, or impose additional duties upon the Agent or otherwise adversely affect the rights, interests or obligations of the Agent, without the written consent of the Agent; and provided, further, that Commitment Assumptions and Assignment Supplements may be entered into in the manner provided in Section 2.07 and Section 10.14 hereof. Any such amendment, modification, supplement or waiver must be in 120 112 writing and shall be effective only to the extent set forth in such writing. Any Event of Default or Potential Default waived or consented to in any such amendment, modification or supplement shall be deemed to be cured and not continuing to the extent and for the period set forth in such waiver or consent, but no such waiver or consent shall extend to any other or subsequent Event of Default or Potential Default or impair any right consequent thereto. SECTION 10.04. No Implied Waiver; Cumulative Remedies. No course of dealing and no delay or failure of the Agent or any Bank in exercising any right, power or privilege under this Agreement or any other Loan Document shall affect any other or future exercise thereof or the exercise of any other right, power or privilege; nor shall any single or partial exercise of any such right, power or privilege or any abandonment or discontinuance of steps to enforce such a right, power or privilege preclude any further exercise thereof or of any other right, power or privilege. The rights and remedies of the Agent and the Banks under this Agreement and any other Loan Document are cumulative and not exclusive of any rights or remedies which the Agent or any Bank would otherwise have hereunder or thereunder, at Law, in equity or otherwise. SECTION 10.05. Notices. (a) Except to the extent otherwise expressly permitted hereunder or thereunder, all notices, requests, demands, directions and other communications (collectively "Notices") under this Agreement or any Loan Document shall be in writing (including telexed and telecopied communication) and shall be sent by first class mail, or by nationally recognized overnight courier, or by telex or telecopier (with confirmation in writing mailed first class or sent by such an overnight courier), or by personal delivery. All notices shall be sent to the applicable party as follows (in all cases with postage or other charges prepaid): (i) if to the Company, to Advanta Corp., 300 Welsh Road, Building 4, Horsham, PA 19044, Attention of R. Alan Lindsay (Telecopy No. 215-830-6403 and Telephone No. 215-830-6442), with copy to 300 Welsh Road, Building 5, Horsham, PA 19044, Attention of Gene S. Schneyer (Telecopy No. 215-784-5350 and Telephone No. 215-784-5343); 121 113 (ii) if to ANB or to AUS, to Advanta National Bank or Advanta National Bank USA, as the case may be, 501 Carr Road, Wilmington, DE 19809, Attention of Ronald V. Samuels (Telecopy No. 302-791-6540 and Telephone No. 302-791-4400), with copy to 300 Welsh Road, Building 5, Horsham, PA 19044, Attention of Gene S. Schneyer (Telecopy No. 215-784-5350 and Telephone No. 215-784-5343); (iii) if to the Agent, to Chemical Bank Agency Services Corporation, Grand Central Tower, 140 East 45th Street, New York, NY 10017, Attention of Janet Belden (Telecopy No. 212-622-0122 and Telephone No. 212-622-0011); and (iv) if to a Bank, to it at its address (or telecopy number) set forth in the Administrative Questionnaire delivered to the Agent by such Bank in connection with the execution of this Agreement or the Assignment Supplement pursuant to which such Bank became a party hereto. Any such properly given notice to the Agent or any Bank shall be effective when received. Any such properly given notice to a Borrower shall be effective on the earliest to occur of receipt, telephone confirmation of receipt of telex or telecopy communication, one Business Day after delivery to a nationally recognized overnight courier, or three Business Days after deposit in the mail. (b) Any Bank giving any notice to a Borrower or any other party hereto shall simultaneously send a copy thereof to the Agent, and the Agent shall promptly notify the other Banks of the receipt by it of any such notice. (c) The Agent and each Bank may rely on any notice (whether or not such notice is made in a manner permitted or required by this Agreement or any other Loan Document) purportedly made by or on behalf of any Borrower, and neither the Agent nor any Bank shall have any duty to verify the identity or authority of any Person giving such notice. SECTION 10.06. Expenses; Taxes; Indemnity. (a) The Company agrees to pay or cause to be paid and to save the Agent and each of the Banks harmless against liability for the payment of all reasonable out-of- 122 114 pocket costs and expenses (including but not limited to reasonable fees and expenses of counsel, including internal counsel for the Agent or any Bank, local counsel, auditors, consulting engineers, appraisers, and all other professional, accounting, evaluation and consulting costs, and with respect to expenses of the Agent's counsel, subject to the letter agreement dated June 14, 1996 among the Borrowers, The Chase Manhattan Bank and Chase Securities Inc.) incurred by the Agent or any Bank from time to time arising from or relating to (i) any requested amendments, modifications, supplements, waivers or consents (whether or not ultimately entered into or granted) to this Agreement or any Loan Document, and (ii) the enforcement or preservation of rights under this Agreement or any Loan Document (including but not limited to any such costs or expenses arising from or relating to collection or enforcement of an outstanding Loan or any other amount owing hereunder or thereunder by the Agent or any Bank, and any litigation, proceeding (including any bankruptcy or receivership proceeding), dispute, work-out, restructuring or rescheduling related in any way to this Agreement or the Loan Documents). (b) The Company hereby agrees to pay all stamp, document, transfer, recording, filing, registration, search, sales and excise fees and taxes and all similar impositions now or hereafter determined by the Agent or any Banks to be payable in connection with this Agreement or any other Loan Documents or any other documents, instruments or transactions pursuant to or in connection herewith or therewith, and the Company agrees to save the Agent and each Bank harmless from and against any and all present or future claims, liabilities or losses with respect to or resulting from any omission to pay or delay in paying any such fees, taxes or impositions. (c) The Company hereby agrees to reimburse and indemnify each of the Agent, the Banks, and their respective Affiliates, officers, directors, employees, attorneys and agents (the "Indemnified Parties") from and against any and all losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for such Indemnified Party, including internal counsel, in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not such Indemnified Party shall be 123 115 designated a party thereto) that may at any time be imposed on, asserted against or incurred by such Indemnified Party as a result of, or arising out of, or in any way related to or by reason of, this Agreement or any other Loan Document or any transaction from time to time contemplated hereby or any transaction financed in whole or in part or directly or indirectly with the proceeds of any Loan and (without in any way limiting the generality of the foregoing) including any violation or breach of any Environmental Law or any other Law by the Company or any Subsidiary of the Company or any Environmental Affiliate of any of them; any Environmental Claim arising out of the management, use, control, ownership or operation of property by any of such Persons, including all on-site and off-site activities involving Environmental Concern Materials; or any exercise by the Agent or any Bank of any of its rights or remedies under this Agreement; but excluding any such losses, liabilities, claims, damages, expenses, obligations, penalties, actions, judgments, suits, costs or disbursements resulting solely from the negligence or willful misconduct of such Indemnified Party, or the unexcused breach by such Indemnified Party of its obligations under this Agreement or any other Loan Document, in each case as finally determined by a court of competent jurisdiction. If and to the extent that the foregoing obligations of the Company under this subsection (c) or any other indemnification obligation of the Company hereunder are unenforceable for any reason, the Company hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable Law. SECTION 10.07. Severability. The provisions of the Loan Documents are intended to be severable. If any provision of any Loan Document shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions of such Loan Document in any jurisdiction. SECTION 10.08. Prior Understandings. This Agreement and the other Loan Documents supersede all prior and contemporaneous understandings and agreements, whether written or oral, among the parties hereto relating to the transactions provided for herein and therein. 124 116 SECTION 10.09. Duration; Survival. All representations and warranties contained herein or in any other Loan Document or made in connection herewith or therewith shall survive the making of, and shall not be waived by the execution and delivery of, this Agreement or any other Loan Document, any investigation by or knowledge of the Agent or any Bank, the making of any Loan, or any other event or condition whatever. The Agent and the Banks acknowledge that, as of the date hereof, none of the Borrowers has made any representation or warranty which is not contained in a Loan Document. All covenants and agreements contained herein or in any other Loan Document shall continue in full force and effect from and after the date hereof so long as any of the Borrowers may borrow hereunder and until payment in full of all obligations of the Borrowers hereunder and thereunder. Without limitation, all obligations of the Borrowers hereunder or under any other Loan Document to make payments to or indemnify the Agent or any Bank shall survive the payment in full of all other obligations hereunder and thereunder, termination of the Borrowers' right to borrow hereunder, and all other events and conditions whatever. In addition, all obligations of each Bank to make payments to or indemnify the Agent shall survive payment in full by the Borrowers of all said obligations, termination of the Borrowers' right to borrow hereunder, and all other events and conditions whatever. SECTION 10.10. Counterparts. This Agreement and the Guaranty Agreement may be executed in any number of counterparts, and by the different parties hereto and thereto on separate counterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute but one and the same instrument. SECTION 10.11. Limitation on Payments. The parties hereto intend to conform to all applicable Laws in effect from time to time limiting the maximum rate of interest that may be charged or collected. Accordingly, notwithstanding any other provision hereof or of any other Loan Document, the Borrowers shall not be required to make any payment to or for the account of any Bank, and each Bank shall refund any payment made by a Borrower, to the extent that such requirement or such failure to refund would violate or conflict with nonwaivable provisions of applicable Laws limiting the maximum amount of interest which may be charged or collected by such Bank. 125 117 SECTION 10.12. Set-Off. Each Borrower hereby agrees that, to the fullest extent permitted by Law, if an Event of Default or Potential Default shall have occurred and be continuing or shall exist and if any obligation of such Borrower hereunder or under any other Loan Document shall be due and payable (on a Maturity Date, Expiration Date, by acceleration or otherwise), each Bank shall have the right, without notice to such Borrower, to set-off against and to appropriate and apply to such obligation any Indebtedness, liability or obligation of any nature owing to such Borrower by such Bank, including but not limited to all deposits (whether time or demand, general or special, provisionally credited or finally credited, whether or not evidenced by a certificate of deposit) now or hereafter maintained by such Borrower with such Bank. Such right shall be absolute and unconditional in all circumstances and, without limitation, shall exist whether or not such Bank or any other Person shall have given notice or made any demand to such Borrower or any other Person, whether such Indebtedness, obligation or liability owed to such Borrower is contingent, absolute, matured or unmatured (it being agreed that such Bank may deem such Indebtedness, obligation or liability to be then due and payable at the time of such set-off), and regardless of the existence or adequacy of any collateral, guaranty or any other security, right or remedy available to any Bank or any other Person. Each Borrower hereby agrees that, to the fullest extent permitted by Law, any Participant and any branch, Subsidiary or Affiliate of any Bank or any Participant shall have the same rights of set-off as a Bank as provided in this Section (regardless of whether such Participant, branch, Subsidiary or Affiliate would otherwise be deemed in privity with or a direct creditor of such Borrower). The rights provided by this Section are in addition to all other rights of set-off and banker's-lien and all other rights and remedies which any Bank (or any such Participant, branch, Subsidiary or Affiliate) may otherwise have under this Agreement or any other Loan Document, at Law or in equity, or otherwise, and nothing in this Agreement or any other Loan Document shall be deemed a waiver or prohibition of or restriction on the rights of set-off or banker's-lien of any such Person. SECTION 10.13. Sharing of Collections. The Banks hereby agree among themselves that if any Bank shall receive (by voluntary payment, realization upon security, set-off or from any other source) any amount on account of the Loans (other than Competitive Loans), interest thereon, L/C Obligations (other than Competitive L/C Obligations), 126 118 Reimbursement Obligations (other than those relating to Competitive L/Cs) or any other obligation contemplated by this Agreement or another Loan Document to be made by a Borrower Pro Rata to all Banks or to any set of Banks (for example, Tranche A or Tranche B Banks) (such Banks or set of Banks being referred to as the "Sharing Banks") in greater proportion than any such amount received by any other Sharing Bank, then the Bank receiving such proportionately greater payment shall notify each other Sharing Bank and the Agent of such receipt, and equitable adjustment will be made in the manner stated in this Section so that, in effect, all such excess amounts will be shared ratably among all of the Sharing Banks. The Bank or Banks receiving such excess amount shall purchase (which it shall be deemed to have done simultaneously upon the receipt of such excess amount) for cash from the other Sharing Banks a participation in the applicable obligations owed to such other Sharing Banks in such amount as shall result in a ratable sharing by all Sharing Banks of such excess amount (and to such extent the receiving Bank shall be a Participant). If all or any portion of such excess amount is thereafter recovered from the Bank making such purchase, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, together with interest or other similar amounts, if any, required by Law to be paid by the Bank making such purchase. The Borrowers hereby consent to and confirm the foregoing arrangements. Each Participant shall be bound by this Section as fully as if it were a Bank hereunder. SECTION 10.14. Successors and Assigns; Participations; Assignments. (a) Successors and Assigns. This Agreement and the other Loan Documents shall be binding upon and inure to the benefit of the Borrowers, the Banks, all future holders of the Notes, the Agent and their respective successors and assigns, except that the Borrowers may not assign or transfer any of their rights or obligations hereunder or thereunder or interests herein or therein without the prior written consent of all the Banks and the Agent, and any purported assignment without such consent shall be void. (b) Participations. Any Bank may, in the ordinary course of its business and in accordance with applicable Law, at any time sell participations to one or more commercial banks or other Persons (each a "Participant") in all or a portion of its rights and 127 119 obligations under this Agreement and the other Loan Documents (including, without limitation, all or a portion of its Commitment under Tranche A or Tranche B and the Loans owing to it and any Note held by it); provided, that (i) any such Bank's obligations under this Agreement shall remain unchanged, (ii) such Bank shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the parties hereto shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement and the other Loan Documents, and (iv) such Participant shall be bound by the provisions of Section 10.13 hereof. The Borrowers agree that any such Participant shall be entitled to the benefits of Sections 2.12, 2.13 and 10.06 with respect to its participation in the Commitments and the Loans outstanding from time to time; provided, that no such Participant shall be entitled to receive any greater amount pursuant to such Sections than the transferor Bank would have been entitled to receive in respect of the amount of the participation transferred to such Participant had no such transfer occurred. (c) Assignments. Any Bank may, in the ordinary course of its business and in accordance with applicable Law, at any time assign all or a portion of its rights and obligations under this Agreement and the other Loan Documents (including, without limitation, all or any portion of both its Tranche A Commitment and Tranche B Commitment and Loans owing to it and any Note held by it)(such Bank a "Transferor Bank") to any Bank, any Affiliate of a Bank or to one or more additional commercial banks or other Persons (each a "Purchasing Bank"); Provided, that (i) any such assignment to a Purchasing Bank which is not a Bank or an Affiliate of a Bank shall be made only with the consent of the Company and the Agent (which in each case shall not be unreasonably withheld or delayed), provided, however, that the consent of the Company required by this Subsection (i) of 128 120 Section 10.14(c) shall not be required at any time during the occurrence, continuance, or existence of an Event of Default or Potential Default, (ii) if a Bank makes such an assignment of less than all of its then remaining rights and obligations under this Agreement and the other Loan Documents, it will assign the same portion of its Commitments, rights and obligations under each Tranche to the Purchasing Bank, and such Transferor Bank shall retain, after such assignment, a minimum principal amount of $5,000,000 of its Commitment and Loans then outstanding under each Tranche, and such assignment shall be in a minimum aggregate principal amount of $10,000,000 of the Commitments and Loans then outstanding, (iii) each such assignment shall be of a constant, and not a varying, percentage of all of the Transferor Bank's rights and obligations under this Agreement and the other Loan Documents, and (iv) each such assignment shall be made pursuant to an Assignment Supplement in substantially the form of Exhibit G to this Agreement, duly completed (an "Assignment Supplement"). By executing and delivering an Assignment Supplement, the Transferor Bank and each Purchasing Bank confirm to and agree with each other and the Agent and the Banks as follows: (i) Other than the representation and warranty that it is the legal and beneficial owner of the interest being assigned free and clear of any adverse claim, the Transferor Bank makes no representation or warranty and assumes no responsibility with respect to (A) the execution, delivery, effectiveness, enforceability, genuineness, validity or adequacy of this Agreement or any other Loan Document, (B) any recital, representation, warranty, document, certificate, report or statement in, provided for in, received under or in connection with, this Agreement or any other Loan Document, or (C) the existence, validity, enforceability, perfection, recordation, priority, adequacy or value, now or hereafter, of any Lien or other direct or indirect security afforded or purported to be afforded by any of the Loan Documents or otherwise from time to time. 129 121 (ii) The Transferor Bank makes no representation or warranty and assumes no responsibility with respect to (A) the performance or observance of any of the terms or conditions of this Agreement or any other Loan Document on the part of any Borrower, (B) the business, operations, condition (financial or otherwise) or prospects of the Borrowers or any other Person, or (C) the existence of any Event of Default or Potential Default. (iii) Each Purchasing Bank confirms that it has received a copy of this Agreement and each of the other Loan Documents, together with copies of the financial statements referred to in Sections 4.03 through 4.05 hereof, the most recent financial statements delivered pursuant to Section 6.01 hereof, if any, and such other documents and information as it has deemed appropriate to make its own credit and legal analysis and decision to enter into an Assignment Supplement. Each Purchasing Bank confirms that it has made such analysis and decision independently and without reliance upon the Agent, the Transferor Bank or any other Bank. (iv) Each Purchasing Bank, independently and without reliance upon the Agent, the Transferor Bank or any other Bank, and based on such documents and information as it shall deem appropriate at the time, will make its own decisions to take or not take action under or in connection with this Agreement or any other Loan Document. (v) Each Purchasing Bank irrevocably appoints the Agent to act as Agent for such Purchasing Bank under this Agreement and the other Loan Documents, all in accordance with Article IX hereof and the other provisions of this Agreement and the other Loan Documents. (vi) Each Purchasing Bank agrees that it will perform in accordance with their terms all of the obligations which by the terms hereof and the other Loan Documents are required to be performed by it as a Bank. In order to effect any such assignment, the Transferor Bank and the Purchasing Bank shall execute and deliver to the Agent a duly completed Assignment Supplement (which shall be signed on behalf of the Purchasing Bank and the Transferor 130 122 Bank and shall include the effective date of such assignment (the "Assignment Effective Date"), the portion of the Commitment and Loans under each Tranche being assigned, the legal name of the Purchasing Bank and the consents required in the first clause (i) of this Section 10.14(c), together with an Administrative Questionnaire completed by the Purchasing Bank (if it shall not be a Bank), any Notes subject to such assignment and a processing and recording fee of $2,000 (such fee not to apply to an assignment by a Bank to its own Affiliate). Upon receipt thereof, the Agent shall accept such Assignment Supplement and shall record such acceptance in the Register. Upon such execution, delivery, acceptance and recording, from and after the Assignment Effective Date specified in such Assignment Supplement (x) the Purchasing Bank shall be a party hereto and, to the extent provided in such Assignment Supplement, shall have the rights and obligations of a Bank hereunder, and (y) the Transferor Bank thereunder shall be released from its obligations under this Agreement to the extent so transferred (and, in the case of an Assignment Supplement covering all or the remaining portion of a Transferor Bank's rights and obligations under this Agreement, such Transferor Bank shall cease to be a party to this Agreement) from and after the Assignment Effective Date. On or prior to the Assignment Effective Date specified in an Assignment Supplement, the Borrowers, at their expense, shall execute and deliver to the Agent (for delivery to the Purchasing Bank) new Notes evidencing such Purchasing Bank's assigned Commitment or Loans and (for delivery to the Transferor Bank) replacement Notes in the principal amount of the Loans or Commitment retained by the Transferor Bank (such Notes to be in exchange for, but not in payment of, those Notes then held by such Transferor Bank). Each such replacement Note shall be dated the date of, and be substantially in the form of, the predecessor Note. The Agent shall mark the predecessor Notes "exchanged" and deliver them to the Company. Accrued interest and accrued fees shall be paid to the Purchasing Bank at the same time or times provided in the predecessor Notes and this Agreement. 131 123 (d) Register. The Agent shall maintain at its Office a copy of each Assignment Supplement delivered to it and a register (the "Register") for the recordation of the names and addresses of the Banks and the Commitment of, and principal amount of the Loans owing to, each Bank under each Tranche from time to time. The entries in the Register shall be conclusive (absent manifest error), and the Borrowers, the Agent and the Banks may treat each Person whose name is Recorded in the Register as a Bank hereunder for all purposes of the Agreement. The Register shall be available for inspection by the Borrowers or any Bank at any reasonable time and from time to time upon reasonable prior notice. (e) Financial and Other Information. Subject to the provisions of the second sentence of this Section 10.14(e), the Borrowers authorize the Agent and each Bank to disclose to any Participant or Purchasing Bank (each, a "transferee") and any prospective transferee any and all financial and other information in the possession of the Agent or such Bank, as the case may be, concerning the Company and its Subsidiaries and Affiliates which has been or may be delivered to such Person by or on behalf of the Borrowers in connection with this Agreement or the Agent's or such Bank's credit evaluation of the Borrowers and their respective Subsidiaries and Affiliates. Each Bank and the Agent agrees (on behalf of itself and each of its Affiliates, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance with their customary procedures for handling confidential information of this nature and in accordance with safe and sound banking practices, any non-public information supplied to it by the Borrowers pursuant to this Agreement, provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for any of the Banks or the Agent, (iii) to bank examiners, auditors or accountants, (iv) to the Agent or any other Bank, (v) in connection with any litigation to which any one or more of the Banks is a party or (vi) to any assignee or Participant (or prospective assignee or Participant) so long as such assignee or Participant (or prospective assignee or Participant) first executes and delivers to the respective Bank a confidentiality agreement in such form and substance as is customary in transactions of this type and consistent with this Section; provided, further, that, unless specifically prohibited by applicable law or court order, each Bank shall, prior to disclosure 132 124 thereof, notify the Company of any request for disclosure of any such non-public information (x) by any governmental agency or representative thereof (other than any such request in connection with an examination of the financial condition of such Bank by such governmental agency) or (y) pursuant to legal process; and provided, finally, that in no event shall any Bank or the Agent be obligated or required to return any materials furnished by the Borrowers. Each Bank agrees that it will not use any non-public information supplied to it by the Borrowers pursuant to this Agreement for any purpose unrelated to this Agreement and the Loans. At the request of any Bank, the Company, at its expense, shall provide to each prospective transferee the conformed copies of documents referred to in Section 4 of the form of Assignment Supplement. (f) Assignments to Federal Reserve Bank. Notwithstanding any other provision contained herein, any Bank may at any time assign all or any portion of its rights under this Agreement, including without limitation any Loans owing to it, and any Note held by it to a Federal Reserve Bank. No such assignment shall relieve the Transferor Bank from its obligations hereunder. SECTION 10.15. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial; Limitation of Liability. (a) Governing Law. THIS AGREEMENT AND ALL OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CHOICE OF LAW PRINCIPLES. (b) Certain Waivers. EACH BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY: (i) AGREES THAT ANY ACTION, SUIT OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY STATEMENT, COURSE OF CONDUCT, ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH (COLLECTIVELY, "RELATED LITIGATION") MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN NEW YORK, NEW YORK, AND SUBMITS TO THE JURISDICTION OF SUCH COURTS (BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE AGENT OR ANY BANK TO BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM); 133 125 (ii) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT, WAIVES ANY CLAIM THAT ANY SUCH RELATED LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, AND WAIVES ANY RIGHT TO OBJECT, WITH RESPECT TO ANY RELATED LITIGATION BROUGHT IN ANY SUCH COURT, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH BORROWER; (iii) CONSENTS AND AGREES TO SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY RELATED LITIGATION BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO SUCH BORROWER AT THE ADDRESS FOR NOTICES DESCRIBED IN SECTION 10.05 HEREOF (TO THE ATTENTION OF "GENERAL COUNSEL"), AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY LAW); AND (iv) WAIVES THE RIGHT TO TRIAL BY JURY IN ANY RELATED LITIGATION. (c) Limitation of Liability. TO THE FULLEST EXTENT PERMITTED BY LAW, NO CLAIM MAY BE MADE BY ANY BORROWER AGAINST THE AGENT, ANY BANK OR ANY AFFILIATE, DIRECTOR, OFFICER, EMPLOYEE, ATTORNEY OR AGENT OF ANY OF THEM FOR ANY SPECIAL, INCIDENTAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY CLAIM ARISING FROM OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY STATEMENT, COURSE OF CONDUCT, ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH (WHETHER FOR BREACH OF CONTRACT, TORT OR ANY OTHER THEORY OF LIABILITY). EACH BORROWER HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM FOR ANY SUCH DAMAGES, WHETHER SUCH CLAIM PRESENTLY EXISTS OR ARISES HEREAFTER AND WHETHER OR NOT SUCH CLAIM IS KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR. 134 126 IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed and delivered this Agreement as of the date first above written. ADVANTA CORP., as Borrower, by /s/ David D. Wesselink ------------------------- Name: David D. Wesselink Title: Senior Vice President and Chief Financial Officer ADVANTA NATIONAL BANK, as Borrower, by /s/ Jeffrey D. Beck ------------------------- Name: Jeffrey D. Beck Title: Senior Vice President and Treasurer ADVANTA NATIONAL BANK USA, as Borrower, by /s/ Jeffrey D. Beck -------------------------- Name: Jeffrey D. Beck Title: Senior Vice President and Treasurer 135 127 THE CHASE MANHATTAN BANK, individually and as Agent, by /s/ Susan F. Herzog ------------------------- Name: Susan F. Herzog Title: Vice President NATIONSBANK OF TEXAS, N.A., by /s/ Patrick K. Doyle ------------------------- Name: Patrick K. Doyle Title: Senior Vice President PNC BANK, NATIONAL ASSOCIATION, by /s/ Robert E. Bjorhus, Jr ---------------------------- Name: Robert E. Bjorhus, Jr. Title: Vice President BANK OF AMERICA ILLINOIS, by /s/ Mark N. Hurley ------------------------- Name: Mark N. Hurley Title: Managing Director BANK OF TOKYO-MITSUBISHI TRUST COMPANY, by /s/ Mark R. Marron --------------------------- Name: M. R. Marron Title: Vice President UNION BANK OF CALIFORNIA, N.A., by /s/ Alison A. Mason ------------------------- Name: Alison A. Mason Title: Vice President 136 128 CIBC INC., by /s/ Lu Ann Bowers ------------------------- Name: Lu Ann Bowers Title: Authorized Signatory COMMERZBANK AKTIENGESELLSCHAFT, by /s/ A. Campbell ------------------------- Name: A. Campbell Title: Assistant Cashier by /s/ Juergen Schmieding ------------------------- Name: Juergen Schmieding Title: Vice President MORGAN GUARANTY TRUST COMPANY OF NEW YORK, by /s/ Andrew D. Brown ----------------------- Name: Andrew D. Brown Title: Vice President DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCH by /s/ Marc A. G. Gorr ------------------------ Name: Marc A. G. Gorr Title: Assistant Vice President by /s/ Dale F. Oberst ------------------------- Name: Dale F. Oberst Title: Associate 137 129 THE FIRST NATIONAL BANK OF CHICAGO, by /s/ John Ide ------------------------- Name: John Ide Title: Authorized Agent BANKERS TRUST COMPANY, by /s/ Cynthia Berge O'Keeffe ----------------------------- Name: Cynthia Berge O'Keeffe Title: Managing Director BARCLAYS BANK PLC, by /s/ Karen M. Wagner ------------------------- Name: Karen M. Wagner Title: Associate Director CAISSE NATIONALE DE CREDIT AGRICOLE, by /s/ Katherine L. Abbott -------------------------- Name: Katherine L. Abbott Title: First Vice President CORESTATES BANK, by /s/ Ward S. Johnson ------------------------- Name: Ward S. Johnson Title: Vice President 138 130 CREDIT LYONNAIS NEW YORK BRANCH, by /s/ Renaud d'Herbes ------------------------- Name: Renaud d'Herbes Title: Senior Vice President DG BANK DEUTSCHE GENOSSENSCHAFTSBANK, by /s/ Karen A. Brinkman ------------------------- Name: Karen A. Brinkman Title: Vice President by /s/ Robert B. Herber ------------------------- Name: Robert B. Herber Title: Vice President DRESDNER BANK AG, NEW YORK AND GRAND CAYMAN BRANCHES, by /s/ Robert Grella ------------------------- Name: Robert Grella Title: Vice President by /s/ Ulrich Kahlow ------------------------- Name: Ulrich Kahlow Title: Vice President FIRST HAWAIIAN BANK, by /s/ Kathryn A. Plumb ------------------------- Name: Kathryn A. Plumb Title: Vice President 139 131 FLEET BANK, N.A. by /s/ Stephanie Wilson-Flaherty -------------------------------- Name: Stephanie Wilson-Flaherty Title: Vice President HARRIS TRUST AND SAVINGS BANK, by /s/ Patrick A. Horne ------------------------- Name: Patrick A. Horne Title: Vice President LASALLE NATIONAL BANK, by /s/ David C. Schmidt ------------------------- Name: David C. Schmidt Title: Assistant Vice President LLOYDS BANK PLC, by /s/ Windsor R. Davies -------------------------- Name: Windsor R. Davies Title: Vice President & Manager by /s/ Stephen J. Attree ------------------------- Name: Stephen J. Attree Title: Assistant Vice President MELLON BANK, N.A., by /s/ Donald G. Cassidy, Jr. ----------------------------- Name: Donald G. Cassidy, Jr. Title: First Vice President 140 132 SOCIETE GENERALE, by /s/ Emilio Martinez ------------------------- Name: Emilio Martinez Title: Vice President SWISS BANK CORPORATION, NEW YORK BRANCH by /s/ Thomas R. Salzano ------------------------- Name: Thomas R. Salzano Title: Associate Director Banking Finance Support, N.A. by /s/ Thomas Eggenschwiler --------------------------- Name: Thomas Eggenschwiler Title: Executive Director Credit Risk Management THE BANK OF NEW YORK, by /s/ David J. Lucey ------------------------- Name: David J. Lucey Title: Vice President FIRST NATIONAL BANK OF MARYLAND, by /s/ Clinton S. Lucas ------------------------- Name: Clinton S. Lucas Title: Vice President 141 133 THE INDUSTRIAL BANK OF JAPAN, LIMITED, by /s/ Takeshi Kawano ------------------------- Name: Takeshi Kawano Title: Senior Vice President THE SUMITOMO BANK, LIMITED, by /s/ Yoshinori Kawamura ------------------------- Name: Yoshinori Kawamura Title: Joint General Manager UNION BANK OF SWITZERLAND, NEW YORK BRANCH, by /s/ Richard W. Fortney ------------------------- Name: Richard W. Fortney Title: Managing Director by /s/ Jenni Capellen -------------------------- Name: Jenni Capellen Title: FDBK WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH by /s/ Lillian Tung Lum -------------------------- Name: Lillian Tung Lum Title: Vice President by /s/ Laura Spichiger --------------------------- Name: Laura Spichiger Title: Associate 142 EXHIBIT A FORM OF REVOLVING CREDIT NOTE $[Revolving Credit Commitment] New York, New York [ ], 1996 FOR VALUE RECEIVED, the undersigned [ ], a [ ] (the "Borrower"), hereby promises to pay to the order of [ ] (the "Bank"), at the office of The Chase Manhattan Bank (the "Agent"), at 270 Park Avenue, New York, New York 10017, on (i) each Maturity Date (as defined in the Revolving Credit and Competitive Loan Agreement dated as of [ ], 1996 (the "Credit Agreement"), among Advanta Corp., Advanta National Bank, Advanta National Bank USA, the lenders from time to time party thereto and The Chase Manhattan Bank, as Agent), the aggregate unpaid principal amount of each [Tranche A] [Tranche B] Revolving Loan (as defined in the Credit Agreement) to which such Maturity Date applies and (ii) on the [Tranche A] [Tranche B] Expiration Date (as defined in the Credit Agreement) the lesser of the principal sum of [ ] DOLLARS ($ ) and the aggregate unpaid principal amount of all [Tranche A] [Tranche B] Revolving Loans made to the Borrower by the Bank pursuant to the Credit Agreement, in lawful money of the United States of America in immediately available funds, and to pay interest from the date hereof on the principal amount hereof from time to time outstanding, in like funds, at said office, at the rate or rates per annum and payable on the dates provided in the Credit Agreement. The Borrower promises to pay interest, on demand, on any overdue principal and, to the extent permitted by law, overdue interest from their due dates at the rate or rates provided in the Credit Agreement. The Borrower hereby waives diligence, presentment, demand, protest and notice of any kind whatsoever. The nonexercise by the holder of any of its rights hereunder in any particular instance shall not constitute a waiver thereof in that or any subsequent instance. All borrowings evidenced by this Revolving Credit Note and all payments and prepayments of the principal hereof and interest hereon and the respective dates thereof shall be endorsed by the holder hereof on the schedule attached hereto and made a part hereof or on a continuation 143 2 thereof which shall be attached hereto and made a part hereof, or otherwise recorded by such holder in its internal records; provided, however, that the failure of the holder hereof to make such a notation or any error in such notation shall not affect the obligations of the Borrower under this Revolving Credit Note. This Revolving Credit Note is one of the Revolving Credit Notes referred to in the Credit Agreement, which, among other things, contains provisions for the acceleration of the maturity hereof upon the happening of certain events, for optional and mandatory prepayment of the principal hereof prior to the maturity hereof and for the amendment or waiver of certain provisions of the Credit Agreement, all upon the terms and conditions therein specified. THIS REVOLVING CREDIT NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. [ ] by ------------------------- Name: Title: 144 3 Loans and Payments
Unpaid Name of Payments Principal Person Maturity ----------------- Balance of Making Date Amount of Loan Date Principal Interest Note Notation ---- -------------- -------- ------------------ ----------- --------
145 EXHIBIT B FORM OF COMPETITIVE NOTE New York, New York [ ], 1996 FOR VALUE RECEIVED, the undersigned [ ], a [ ] (the "Borrower"), hereby promises to pay to the order of [ ] (the "Bank"), at the office of The Chase Manhattan Bank (the "Agent"), at 270 Park Avenue, New York, New York 10017, on (i) each Maturity Date (as defined in the Revolving Credit and Competitive Loan Agreement dated as of [ ], 1996 (the "Credit Agreement"), among Advanta Corp., Advanta National Bank, Advanta National Bank USA, the lenders from time to time party thereto and The Chase Manhattan Bank, as Agent), the aggregate unpaid principal amount of each [Tranche A] [Tranche B] Competitive Loan (as defined in the Credit Agreement) to which such Maturity Date applies and (ii) on the [Tranche A] [Tranche B] Expiration Date (as defined in the Credit Agreement) the aggregate unpaid principal amount of all [Tranche A] [Tranche B] Competitive Loans made to the Borrower by the Bank pursuant to the Credit Agreement, in lawful money of the United States of America in immediately available funds, and to pay interest from the date hereof on the principal amount hereof from time to time outstanding, in like funds, at said office, at the rate or rates per annum and payable on the dates provided in the Credit Agreement. The Borrower promises to pay interest, on demand, on any overdue principal and, to the extent permitted by law, overdue interest from their due dates at the rate or rates provided in the Credit Agreement. The Borrower hereby waives diligence, presentment, demand, protest and notice of any kind whatsoever. The nonexercise by the holder of any of its rights hereunder in any particular instance shall not constitute a waiver thereof in that or any subsequent instance. All borrowings evidenced by this Competitive Note and all payments and prepayments of the principal hereof and interest hereon and the respective dates thereof shall be endorsed by the holder hereof on the schedule attached hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof, or 146 2 otherwise recorded by such holder in its internal records; provided, however, that the failure of the holder hereof to make such a notation or any error in such notation shall not affect the obligations of the Borrower under this Competitive Note. This Competitive Note is one of the Competitive Notes referred to in the Credit Agreement, which, among other things, contains provisions for the acceleration of the maturity hereof upon the happening of certain events, for optional and mandatory prepayment of the principal hereof prior to the maturity hereof and for the amendment or waiver of certain provisions of the Credit Agreement, all upon the terms and conditions therein specified. THIS COMPETITIVE NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. [ ] by ----------------------- Name: Title: 147 3 Loans and Payments
Unpaid Name of Payments Principal Person Maturity ----------------- Balance of Making Date Amount of Loan Date Principal Interest Note Notation ---- -------------- -------- ------------------ ----------- --------
148 EXHIBIT C FORM OF LOAN REQUEST [Date] The Chase Manhattan Bank, as Agent 270 Park Avenue New York, NY 10017 Attention: Ladies & Gentlemen: The undersigned refers to the Revolving Credit and Competitive Loan Agreement dated as of [ ], 1996 (the "Credit Agreement") (terms defined in the Credit Agreement are used herein as therein defined), among Advanta Corp., Advanta National Bank and Advanta National Bank USA, as Borrowers, certain Banks party thereto and The Chase Manhattan Bank, as Agent, and hereby gives you notice, pursuant to Section 2.05 of the Credit Agreement, irrevocably, that the undersigned hereby requests a Revolving Credit Borrowing under the Credit Agreement (the "Proposed Borrowing"), and in connection therewith sets forth the following information relating to such Revolving Credit Borrowing as required by Section 2.05 of the Credit Agreement: (i) The Proposed Borrowing is to be a [Tranche A] [Tranche B] Borrowing; (ii) The Business Day on which the Proposed Borrowing is to be made is , 199 ; (iii) The Interest Rate Option applicable to the Proposed Borrowing is the [Base Rate Option] [Euro-Rate Option]; (iv) The Interest Period to apply to the Proposed Borrowing is [ days] [ months] and the Maturity Date applicable to such Borrowing is [ ], 19__; and 149 2 (v) The aggregate principal amount of the Proposed Borrowing is $ . Very truly yours, [NAME OF BORROWER] by --------------------- Name: Title: 150 EXHIBIT D-1 FORM OF COMPETITIVE BID REQUEST [Date] The Chase Manhattan Bank, as Agent 270 Park Avenue New York, NY 10017 Attention: Ladies & Gentlemen: The undersigned refers to the Revolving Credit and Competitive Loan Agreement dated as of [ ], 1996, among Advanta Corp., Advanta National Bank and Advanta National Bank USA, as Borrowers, certain Banks party thereto and The Chase Manhattan Bank, as Agent (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. Pursuant to Section 2.03(a) of the Credit Agreement, the undersigned hereby requests quotes for the 151 2 following [Euro-Rate] [Fixed Rate] Competitive Loans under the [Tranche A] [Tranche B] Facility:
Loan 1 Loan 2 Loan 3 Aggregate Principal Amount $ $ $ Borrowing Date Interest Period (1) Maturity Date (2) Interest Payment Dates Prepayable (yes/no)
Very truly yours, [NAME OF BORROWER] by -------------------- Name: Title: - ---------------------------------- (1) Not to extend beyond the Expiration Date for the relevant Tranche. (2) Insert last day of Interest Period. 152 EXHIBIT D-2 FORM OF COMPETITIVE BID [Date] The Chase Manhattan Bank, as Agent 270 Park Avenue New York, NY 10017 Attention: Ladies & Gentlemen: The undersigned refers to the Revolving Credit and Competitive Loan Agreement dated as of [ ], 1996, among Advanta Corp., Advanta National Bank and Advanta National Bank USA, as Borrowers, certain Banks party thereto and The Chase Manhattan Bank, as Agent (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. Pursuant to Section 2.03 of the Credit Agreement, in response to the Competitive Bid Request made by [name of Borrower] on [ ], 19__, the undersigned Bank hereby 153 2 offers to make Competitive Loans in the following amounts with the following terms: Borrowing Date: Aggregate Maximum Amount: $_______ ____________, ____ Maturity Date 1: Maximum Amount: $__________ $ ______ offered at ______* ____________, ____ $ ______ offered at ______* Maturity Date 2: Maximum Amount: $__________ $ ______ offered at ______* ____________, ____ $ ______ offered at ______* Maturity Date 3: Maximum Amount: $__________ $ ______ offered at ______* ____________, ____ $ ______ offered at ______*
Very truly yours, [NAME OF BANK] by --------------------------- Name: Title: - --------------------------------- * Insert the interest rate offered for the specified loan amount. In the case of Euro-Rate Competitive Loans, insert a Margin bid. In the case of Fixed Rate Competitive Loans, insert a Fixed Rate bid. 154 EXHIBIT D-3 FORM OF COMPETITIVE BID CONFIRMATION [Date] The Chase Manhattan Bank, as Agent 270 Park Avenue New York, NY 10017 Attention: Ladies & Gentlemen: The undersigned refers to the Revolving Credit and Competitive Loan Agreement dated as of [ ], 1996, among Advanta Corp., Advanta National Bank and Advanta National Bank USA, as Borrowers, certain Banks party thereto and The Chase Manhattan Bank, as Agent (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. Pursuant to Section 2.03(d) of the Credit Agreement, the undersigned hereby accepts and confirms the offers by Bank(s) to make Competitive Loans to the undersigned on _________________, ______ [Competitive Loan Borrowing Date] under Section 2.03 in the (respective) amounts(s) and at the rates set forth on the attached list of Competitive Bids. Very truly yours, [NAME OF BORROWER] by --------------------------- Name: Title: [The Borrower must attach Competitive Bid list prepared by Agent with accepted amount entered by the Borrower to the right of each Competitive Bid]. 155 EXHIBIT E-1 FORM OF COMPETITIVE L/C REQUEST [Date] The Chase Manhattan Bank, as Agent 270 Park Avenue New York, NY 10017 Attention: Ladies & Gentlemen: The undersigned refers to the Revolving Credit and Competitive Loan Agreement dated as of [ ], 1996, among Advanta Corp., Advanta National Bank and Advanta National Bank USA, as Borrowers, certain Banks party thereto and The Chase Manhattan Bank, as Agent (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. Pursuant to Section 3.05(a) of the Credit Agreement, the undersigned hereby requests bids from Competitive L/C Issuers with a minimum L/C Rating of ______ for the following [Tranche A] [Tranche B] Competitive L/C: Face Amount $ Issue Date Expiration Date Beneficiary
The Letter of Credit will be used for [describe purpose]. Very truly yours, [NAME OF BORROWER] by -------------------- Name: Title: 156 EXHIBIT E-2 FORM OF COMPETITIVE L/C OFFER [Date] The Chase Manhattan Bank, as Agent 270 Park Avenue New York, NY 10017 Attention: Ladies & Gentlemen: The undersigned refers to the Revolving Credit and Competitive Loan Agreement dated as of [ ], 1996, among Advanta Corp., Advanta National Bank and Advanta National Bank USA, as Borrowers, certain Banks party thereto and The Chase Manhattan Bank, as Agent (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. Pursuant to Section 3.05(b) of the Credit Agreement, in response to the Competitive L/C Request made by [name of Borrower] on [ ], 19 __, the undersigned 157 2 hereby offers to issue a [Tranche A] [Tranche B] Competitive L/C with the following terms: Face Amount $ Issue Date Expiration Date Fronting Fee [ ]% per annum L/C Fee Payment Dates
Very truly yours, [NAME OF COMPETITIVE L/C ISSUER] by -------------------- Name: Title: 158 EXHIBIT E-3 FORM OF COMPETITIVE L/C CONFIRMATION [Date] Chase Manhattan Bank, as Agent 270 Park Avenue New York, NY 10017 Attention: Ladies & Gentlemen: The undersigned refers to the Revolving Credit and Competitive Loan Agreement dated as of [ ], 1996, among Advanta Corp., Advanta National Bank and Advanta National Bank USA, as Borrowers, and Chase Manhattan Bank, as Agent (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. Pursuant to Section 3.05(c) of the Credit Agreement, the undersigned hereby accepts and confirms the offer by [name of Competitive L/C Issuer] to issue a Competitive L/C to the undersigned on __________, ___ [date of issuance] under Section 3.05(b) in the aggregate face amount set forth on the attached list of Competitive L/C Offers. Very truly yours, [NAME OF BORROWER] by -------------------- Name: Title: [The Borrower must attach Competitive L/C Offer list prepared by Agent indicating the accepted Competitive L/C Offer]. 159 GUARANTY AND SURETYSHIP AGREEMENT THIS AGREEMENT, dated as of July 26, 1996, made by ADVANTA CORP., a Delaware corporation (the "Guarantor"), in favor of THE CHASE MANHATTAN BANK (the "Agent"), as agent for the Banks (as hereinafter defined). Recitals: A. Advanta National Bank, a national banking association ("ANB"), Advanta National Bank USA, a national banking association ("AUS", and, together with ANB, the "Borrowers") and the Guarantor have entered into a Revolving Credit and Competitive Loan Agreement of substantially even date herewith (as amended, modified or supplemented from time to time, the "Credit Agreement") with the lenders party thereto from time to time (each a "Bank" and, collectively, the "Banks") and the Agent. The Guarantor, as owner of all of the understanding shares of stock of each Borrower, will derive substantial direct and indirect benefit from the Loans to be made to each Borrower under the Credit Agreement. B. The Agent, the Banks and each L/C Issuer shall be referred to herein, individually, each as a "Credit Party," and collectively, as the "Credit Parties". C. It is a condition precedent to the extension of credit under the Credit Agreement that the Guarantor execute and deliver this Agreement. This Agreement is made by the Guarantor among other things to induce the Credit Parties to enter into the Loan Documents and to induce the Banks to extend credit under the Credit Agreement. D. The Guarantor acknowledges that the Credit Parties have relied and will rely on this Agreement in entering into the Loan Documents (as defined in the Credit Agreement) and extending credit under the Credit Agreement. The Guarantor further acknowledges that it has, independently and without reliance upon any Credit Party or any representation by or other information from any Credit Party, made its own credit analysis and decision to enter into this Agreement. 160 NOW, THEREFORE, in consideration of the premises, and intending to be legally bound, the Guarantor hereby agrees as follows: ARTICLE I DEFINITIONS 1.01. Definitions. Capitalized terms not otherwise defined herein shall have the meanings given in the Credit Agreement. In addition to the other terms defined elsewhere in this Agreement, as used herein the term "Guaranteed Obligations" shall have the following meaning: "Guaranteed Obligations" shall mean all obligations from time to time of the Borrowers to any Credit Party under or in connection with any Loan Document (and whether under the Tranche A Facility, the Tranche B Facility or otherwise), including all obligations to pay principal, interest, fees, indemnities or other amounts, in each case whether such obligations are direct or indirect, secured or unsecured, joint or several, absolute or contingent, due or to become due, whether for payment or performance, now existing or hereafter arising (including interest and other obligations arising or accruing after the commencement of any receivership, bankruptcy, insolvency, reorganization, dissolution or similar proceeding with respect to the Borrower or any other Person, or which would have arisen or accrued but for the commencement of such proceeding, even if such obligation or the claim thereof is not enforceable or allowable in such proceeding). ARTICLE II GUARANTY AND SURETYSHIP 2.01. Guaranty and Suretyship. The Guarantor hereby absolutely, unconditionally and irrevocably guarantees and becomes surety for the full and punctual payment and performance of the Guaranteed Obligations as and when such payment or performance shall become due (at scheduled maturity, by acceleration or otherwise) in accordance with the terms of the Loan Documents. This Agreement is an agreement of suretyship as well as of guaranty, is a guarantee of payment and performance and not merely of collectibility, and is in no way conditioned upon 161 any attempt to collect from or proceed against either Borrower or any other Person or any other event or circumstance. The obligations of the Guarantor under this Agreement are direct and primary obligations of the Guarantor and are independent of the Guaranteed Obligations, and a separate action or actions may be brought against the Guarantor regardless of whether action is brought against either Borrower or any other Person or whether either Borrower or any other Person is joined in any such action or actions. 2.02. Obligations Absolute. The Guarantor agrees that, to the fullest extent permitted by Law, the Guaranteed accordance with the terms of the Loan Documents, regardless of any Law now or hereafter in effect in any jurisdiction affecting the Guaranteed Obligations, any of the terms of the Loan Documents or the rights of any Credit party or any Guarantor under this Agreement shall be absolute, unconditional and irrevocable, irrespective of any of the following: (a) any lack of legality, validity, enforceability or allowability (in a bankruptcy, receivership, insolvency, reorganization, dissolution or similar proceeding, or otherwise), or any avoidance or subordination, in whole or in part, or any Loan Document or any of the Guaranteed Obligations; (b) any increase, decrease or change in the amount, nature, type or purpose of any of the Guaranteed Obligations (whether or not contemplated by the Loan Documents as presently constituted, but including without limitation, pursuant to any increase in commitments pursuant to Section 2.07(c) of the Credit Agreement); any change in the time, manner, method or place or payment or performance of, or in any other term of, any of the Guaranteed Obligations; any execution or delivery of any additional Loan Documents; or any amendment to, or refinancing or refunding or, any Loan Document or any of the Guaranteed Obligations; (c) any impairment by any Credit Party or any other Person of any recourse of the Guarantor against a borrower or any other Person; any failure to assert any breach of or default under any Loan Document or any of the Guaranteed Obligations; any extensions of credit in 162 excess of the amount committed under or contemplated by the Loan Documents, or in circumstances in which any condition to such extensions of credit has not been satisfied; any impairment by the exercise or non-exercise, or any other failure, omission, breach, default, delay or wrongful action in connection with any exercise or non-exercise, of any right or remedy against a Borrower or any other Person under or in connection with any Loan Document or any of the Guaranteed Obligations; any refusal of payment or performance of any of the Guaranteed Obligations, whether or not with any reservation of rights against (including collections resulting from realization upon Obligations) to other obligations, if any, not entitled to the benefits of this Agreement, in preference to Guaranteed Obligations entitled to the benefits of this Agreement, or if any collections are applied to Guaranteed Obligations, any application to particular Guaranteed Obligations; (d) any taking, exchange, amendment, termination, subordination, release, loss or impairment of, or any failure to protect, perfect, or preserve the value of or any enforcement of, realization upon, or exercise of failure, omission, breach, default, delay or wrongful action by any Credit Party or any other Person in connection with, or any other action or inaction by any Credit Party or any other Person in respect of, any direct or indirect security for any of the Guaranteed Obligations. As used in this Agreement, "direct or indirect security" for the Guaranteed Obligations, and similar phrases, includes any collateral security, guaranty, suretyship, letter of credit, capital maintenance agreement, put option, subordination agreement or other right or arrangement of any nature providing direct or indirect assurance of payment or performance of any of the Guaranteed Obligations, made or on behalf of any Person; (e) any merger, consolidation, liquidation, dissolution, winding-up, charter revocation or forfeiture, or other change in , restructuring or termination of the corporate structure or existence of, 163 either Borrower or any other Person; any receivership, bankruptcy, insolvency, reorganization, dissolution or similar proceeding with respect to either Borrower or any other Person; or any action taken or election made by any Credit Party (including any election under Section 1111 (b) (2) of the United States Bankruptcy Code), either Borrower or any other Person in connection with any such proceeding; (f) any defense, setoff or counterclaim (including any defense or failure of consideration, breach of warranty, statute of frauds, bankruptcy, lack of legal capacity, statute of limitations, lender liability, accord and satisfaction or usury, and excluding only the defense of full, strict and indefeasible payment and performance), which may at any time be available to either Borrower or any other Person with respect to any Loan Document or any of the Guaranteed Obligations; or any discharge by operation of law or release of either Borrower or any other Person from the performance or observance of any Loan Document or any of the Guaranteed Obligations; or (g) any other event or circumstance, whether similar or dissimilar to the foregoing, and whether known or unknown, which might otherwise constitute a defense available to, or limit the liability of, a Borrower, the Guarantor, a guarantor or a surety, excepting only full, strict and indefeasible payment and performance of the Guaranteed Obligations. 2.03. Waivers, etc. To the fullest extent permitted by law, the Guarantor hereby waives any defense to or limitation on its obligations under this Agreement arising out of or based on any event or circumstance referred to in Section 2.02. Without limitation, the Guarantor waives each of the following: (a) all notices, disclosures and demands of any nature which otherwise might be required from time to time to preserve intact any rights against the Guarantor, including (i) any notice of any event or circumstance described in Section 2.02, (ii) any notice required by any Law now or hereafter in effect in any jurisdiction, (iii) any notice of nonpayment, nonperformance, dishonor, or protest under any Loan Document or any of the Guaranteed Obligations, (iv) any notice of the incurrence of any Guaranteed Obligation, 164 6 (v) any notice of any default or any failure on the part of a Borrower or any other Person to comply with any Loan Document or any of the Guaranteed Obligations or any direct or indirect security for any of the Guaranteed Obligations, and (vi) any notice of any information pertaining to the business, operations, condition (financial or otherwise) or prospects of either Borrower or any other Person: (b) any right to any marshalling of assets, to the filing of any claim against either Borrower or any other Person in the event of any receivership, bankruptcy,. insolvency, reorganization, dissolution or similar proceeding, or to the exercise against either Borrower or any other Person of any other right or remedy under or in connection with any Loan Document or any of the Guaranteed Obligations or any direct or indirect security for any of the Guaranteed Obligations; any requirement of promptness or diligence on the part of any Credit Party or any other Person; any requirement to exhaust any remedies under or in connection with, or to mitigate the damages resulting from default under, any Loan Document or any of the Guaranteed Obligations or any direct or indirect security for any of the Guaranteed Obligations; and any requirement of acceptance of this Agreement, and any requirement that the Guarantor receive notice of such acceptance; and (c) any defense or other right arising by reason of any law now or hereafter in effect in any jurisdiction pertaining to election of remedies (including anti-deficiency laws, "one action" laws or similar laws), or by reason of any election of remedies or other action or inaction by any Credit Party (including commencement or completion of any judicial preceding or nonjudicial sale or other action in respect of collateral security for any of the Guaranteed Obligations), which results in denial or impairment of the right of any Credit Party to seek a deficiency against a Borrower or any other Person, or which otherwise discharges or impairs any of the Guaranteed Obligations or any recourse of the Guarantor against a Borrower or any other Person. 2.04. Reinstatement. This Agreement shall continue to be effective, or be automatically reinstated, as the case may be, if at any time payment of any of the 165 Guaranteed Obligations is avoided, rescinded or must otherwise be returned by any Credit Party for any reason, all as though such payment had not been made. 2.05. No Stay. Without limitation of any other provision of this Agreement, if any acceleration of the time for payment of performance of any Guaranteed Obligation, or any condition to any such acceleration, shall at any time be stayed, enjoined or prevented for any reason (including stay or injunction resulting from the pendency against a Borrower or any other Person of a receivership, bankruptcy, insolvency, reorganization, dissolution or similar proceeding), the Guarantor agrees that, for purposes of this Agreement and its obligations hereunder, such Guaranteed Obligation shall be deemed to have been accelerated, and such condition to acceleration shall be deemed to have been met. 2.06. Payments. All payments to be made by the Guarantor pursuant to this Agreement shall be made at the times and in the manner prescribed for payments in Article II of the Credit Agreement, without setoff, counterclaim, withholding or other deduction of any nature. 2.07. Subrogation, etc. Any rights which the Guarantor may have or acquire by way of subrogation, reimbursement, exoneration, contribution or indemnity, and any similar rights (whether arising by operation of law, by agreement or otherwise), against either Borrower, arising from the existence, payment, performance or enforcement of any of the obligations of the Guarantor under or in connection with this Agreement, shall be subordinate in right of payment to the Guaranteed Obligations, and the Guarantor shall not exercise any such rights until all Guaranteed Obligations and all other obligations under this Agreement have been paid in full and all commitments to extend credit under the Loan Documents shall have terminated. If, notwithstanding the foregoing, any amount shall be received by the Guarantor on account of any such rights at any time prior to the time at which all Guaranteed Obligations and all other obligations under this Agreement shall have been paid in full and all commitments to extend credit under the Loan Documents shall have terminated, such amount shall be held by the Guarantor in trust for the benefit of the Credit Parties, segregated from other funds held by the Guarantor, and shall be forthwith delivered to the Agent in the exact form received by the Guarantor (with any necessary endorsement), to be applied to the Guaranteed 166 8 Obligations, whether matured or unmatured, in such order as the Agent or the required Banks may elect, or to be held by the Agent as security for the Guaranteed Obligations and disposed of by the Agent in any lawful manner, all as the Agent or the Required banks may elect. 2.08. Continuing Agreement. This Agreement is a continuing guaranty and shall continue in full force and effect until all Guaranteed Obligations and all other amounts payable under this Agreement have been paid and performed in full, and all commitments to extend credit under the Loan Documents have terminated, subject in any event to reinstatement in accordance with Section 2.04. 2.09. Limitation on Payments. The parties hereto intend to conform to all applicable laws limiting the maximum rate of interest that may be charged or collected by the Credit Parties from the Guarantor. Accordingly, notwithstanding any other provision hereof, the Guarantor shall not be required to make any payment made by the Guarantor, to the extent that such requirement or such failure to refund would violate or conflict with mandatory and nonwaivable provisions of applicable law limiting the maximum amount of interest which may be charged or collected by such Credit Party from the Guarantor. In any action, suit or proceeding pertaining to this Agreement, the burden of proof, by clear and convincing evidence shall be on the Person claiming that this Section 2.09 applies to limit any obligation of the Guarantor under this Agreement or to require any Credit Party to make any refund, or claiming that this Agreement conflicts with any applicable law limiting the maximum rate of interest that may be charged or collected by any Credit Party from the Guarantor, as to each element of such claim. For purposes of the definitions of "Guaranteed Obligations" and "Loan Documents" as used in this Agreement, any provisions in the Loan Documents which have the effect of limiting the obligations of either borrower in order to conform to applicable laws limiting the maximum rate of interest that may be charged or collected by the Credit Parties from such Borrower shall be ignored. 167 ARTICLE III MISCELLANEOUS 3.01. Amendments, Notices, etc. Sections 10.01 through 10.10 and Section 10.15 of the Credit Agreement shall be applicable to this Agreement as if set forth in full herein. 3.02. Setoff. In the event that any obligation of the Guarantor now or hereafter existing under this Agreement or any other Loan Document shall have become due and payable, each Credit Party shall have the right from time to time, without notice to the Guarantor, to setoff against and apply to such due and payable amount any obligation of any nature of such Credit Party to the Guarantor, including all deposits (whether time or demand, general or special, provisionally or finally credited, however evidenced) now or hereafter maintained by the Guarantor with such Credit Party. Such right shall be absolute and unconditional in all circumstances and, without limitation, shall exist whether such obligation to the Guarantor is matured or unmatured. Nothing in this Agreement or any other Loan Document shall be deemed a waiver or restriction on any right of setoff or banker's lien available to any Credit Party. The Guarantor hereby agrees that any affiliate of a Credit Party, and any holder of a participation in any obligation of the Guarantor under this Agreement, shall have the same rights of setoff as such Credit Party as provided in this Section 3.02 (regardless of whether such affiliate or participant otherwise would be deemed a creditor of the Guarantor). 3.03. Construction. In this Agreement, unless the context otherwise clearly requires, references to the plural include the singular, the singular, the plural and the part the whole; "or" is not exclusive; and "include" means include without limitation (and similarly for similar terms). This Agreement has been fully negotiated between the applicable parties, each party having the benefit of legal counsel, and accordingly neither any doctrine of construction of guaranties or suretyships in favor of the guarantor or surety, nor any doctrine of construction of ambiguities against the party controlling the drafting, shall apply to this Agreement. Section and other references in this Agreement are to this Agreement unless otherwise specified. 168 10 3.04 Successors and Assigns. This Agreement shall be binding upon the Guarantor and its successors, and shall inure to the benefit of and be enforceable by the Credit Parties and their respective successors and assigns. Without limitation of the foregoing, each Bank (and any successive assignee or transferee) from time to time may, in the manner provided in Section 10.14 of the Credit Agreement, assign or otherwise transfer all or any portion of its rights or obligations under the Loan Documents (including all or any portion of any commitment to extend credit), or any Guaranteed Obligations, to any other Person, and such Guaranteed Obligations (including any Guaranteed Obligations resulting from extension of credit by such other Person under or in connection with the Loan Documents) shall be and remain Guaranteed Obligations entitled to the benefit of this Agreement, and to the extent of its interest in such Guaranteed Obligations such other Person shall be vested with all the benefits in respect thereof granted to such Bank in this Agreement or otherwise. IN WITNESS WHEREOF, the Guarantor has caused this Agreements to be duly executed and delivered as of the date first above written. ADVANTA CORP., by --------------------- Name: Title: ACCEPTED AND AGREED: THE CHASE MANHATTAN BANK, as Agent, by --------------------- Name: Title: 169 EXHIBIT G FORM OF ASSIGNMENT SUPPLEMENT Reference is made to the Revolving Credit and Competitive Loan Agreement dated as of [ ], 1996, among Advanta Corp., Advanta National Bank, Advanta National Bank USA, certain Banks party thereto from time to time and The Chase Manhattan Bank, as Agent (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. 1. The Transferor Bank hereby sells and assigns, without recourse, to the Purchasing Bank, and the Purchasing Bank hereby purchases and assumes, without recourse, from the Transferor Bank, effective as of the Assignment Effective Date set forth below, the interests set forth below in the Transferor Bank's rights and obligations under the Credit Agreement, including, without limitation, the interests set forth in the Tranche A Commitment and the Tranche B Commitment of the Transferor Bank on the Assignment Effective Date and the Competitive Loans and Revolving Loans owning to the Transferor Bank which are outstanding on the Assignment Effective Date, together with unpaid interest accrued on the assigned Loans to the Assignment Effective Date and the amount, if any, set forth of the Facility Fee and Utilization Fee accrued to the Assignment Effective Date for the account of the Transferor Bank. Each of the Transferor Bank and the Purchasing Bank hereby makes and agrees to be bound by all the representations, warranties and agreements set forth in Section 10.14(c) of the Credit Agreement, a copy of which has been received by each such party. From and after the Assignment Effective Date, (i) the Purchasing Bank shall be a party to and be bound by the provisions of the Credit Agreement and, to the extent of the interest assigned by this Assignment Supplement, have the rights and obligations of a Bank thereunder and (ii) the Transferor Bank shall, to the extent of the interests assigned by this Assignment Supplement, relinquish its rights and be released from its obligations under the Credit Agreement. 2. This Assignment Supplement is being delivered to the Agent together with (i) if the Purchasing Bank is organized under the laws of a jurisdiction outside the United States, the forms specified in Section 2.13(c) of the Credit Agreement, duly completed and executed by such Purchasing Bank, (ii) if the Purchasing Bank is not already a Bank under the Credit Agreement, an Administrative 170 2 Questionnaire in the form of Exhibit I to the Credit Agreement, (iii) a processing and recordation fee of $[2,000], (iv) the consent required in clause (i) of Section 10.14(c), if applicable, and (v) the Transferor Bank's existing Revolving Credit Notes for Tranche A and Tranche B. 3. On or prior to the Assignment Effective Date, the Borrowers shall execute and deliver to the Agent (for delivery to the Purchasing Bank) new Notes evidencing such Purchasing Bank's assigned Commitment or Loans and (for delivery to the Transferor Bank) replacement Notes in the principal amount of the Loans or Commitment retained by the Transferor Bank. 4. This Assignment Supplement shall be governed by and construed in accordance with the laws of the State of New York. Date of Assignment:________________________________________________ Legal Name of Transferor Bank:_____________________________________ Legal Name of Purchasing Bank:_____________________________________ Purchasing Bank's Address for Notices:_____________________________ Assignment Effective Date (may not be fewer than 5 Business Days after the Date of Assignment unless otherwise agreed by the Agent):_____________________________ 171 3
Percentage of Facility and Commitments Assigned (must be the same for each Tranche and set forth, to at Principal Amount least 8 decimals, as Assigned (and a percentage of the identifying Facility and the information as to aggregate individual Commitments of Facility Competitive Loans all Banks thereunder) -------- -------------------- --------------------- Tranche A Commitment Assigned: $__________ __________% Tranche B Commitment Assigned: $__________ __________% Revolving Loans: $__________ __________% Competitive Loans: $__________ Facility Fees Assigned (if any): $__________ Utilization Fees Assigned (if any): $__________
[NAME OF TRANSFEROR BANK], by ----------------------- Name: Title: [NAME OF PURCHASING BANK], by ----------------------- Name: Title: Accepted: ADVANTA CORP., by ----------------------- Name: Title: 172 4 ADVANTA NATIONAL BANK, by ----------------------- Name: Title: ADVANTA NATIONAL BANK USA, by ----------------------- Name: Title: THE CHASE MANHATTAN BANK, as Agent, by ------------------------ Name: Title: 173 EXHIBIT H FORM OF COMMITMENT ASSUMPTION [Date] Reference is made to the Revolving Credit and Competitive Loan Agreement dated as of [ ], 1996, among Advanta Corp., Advanta National Bank, Advanta National Bank USA, certain Banks party thereto from time to time and The Chase Manhattan Bank, as Agent (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. 1. The undersigned [Increasing][Assuming] Bank hereby assumes effective as of the Increase Date set forth below, the Additional Commitment set forth below. The Borrowers hereby confirm satisfaction of the conditions specified in Section 2.07(c)(i) of the Credit Agreement, a copy of which has been received by each such party. From and after the Increase Date, the Assuming Bank (if applicable) shall be a party to, a "Bank" under, and be bound by the provisions of the Credit Agreement and, to the extent of the commitment(s) assumed pursuant to this Commitment Assumption, have the rights and obligations of a Bank thereunder. 2. This Commitment Assumption is being delivered to the Agent together with (a) the certificates (and opinions, if applicable) specified in Section 2.07(c)(i)(G) of the Credit Agreement, delivered herewith by the Borrowers, (b) in the case of an Assuming Bank, (i) if such Assuming Bank is organized under the laws of a jurisdiction outside the United States, the forms specified in Section 2.13(c) of the Credit Agreement, duly completed and executed by such Assuming Bank, and (ii) an Administrative Questionnaire in the form of Exhibit I to the Credit Agreement and (c) in the case of an Increasing Bank, such Increasing Bank's existing Revolving Credit Notes for Tranche A and Tranche B. 3. This Commitment Assumption shall be governed by and construed in accordance with the laws of the State of New York. Increase Date: _________________________ Legal Name of [Increasing][Assuming] Bank: _______________ [Assuming Bank's Address for Notices]: __________________ Additional Commitment (must be in same proportion as existing Tranche A and Tranche B Commitments): Tranche A $_______________________ Tranche B $_______________________ 174 2 [NAME OF INCREASING OR ASSUMING BANK], by ----------------------- Name: Title: ADVANTA CORP., by ----------------------- Name: Title: ADVANTA NATIONAL BANK, by ----------------------- Name: Title: ADVANTA NATIONAL BANK USA, by ---------------------- Name: Title: Accepted: THE CHASE MANHATTAN BANK, as Agent, by -------------------------- Name: Title: 175 [CHASE MANHATTAN LETTERHEAD] The Chase Manahattan Bank 140 East 45th Street New York, NY 10017-3162 Tel 212-622-0001 Fax 212-622-0002 ADVANTA CORPORATION Telex 353006 ABSC NYK ADMINISTRATIVE QUESTIONNAIRE Please accurately complete the following information and return via FAX to the attention of Janet Belden at Chase Manhattan Bank as soon as possible. FAX Number: 212-622-0122 LEGAL NAME TO APPEAR IN DOCUMENTATION: ______________________________________________________________________________ Institution Name: ___________________________________________________________ Street Address: ___________________________________________________________ City, State, Zip Code: _______________________________________________________ GENERAL INFORMATION - EURODOLLAR LENDING OFFICE: Institution Name: ____________________________________________________________ Street Address: ____________________________________________________________ City, State, Zip Code: _______________________________________________________ CONTACTS/NOTIFICATION METHODS: CREDIT CONTACTS: Primary Contact: ____________________________________________________________ Street Address: _____________________________________________________________ City, State, Zip Code: _______________________________________________________ Phone Number: ________________________________________________________________ FAX Number: __________________________________________________________________ Backup Contact: ______________________________________________________________ Street Address: ______________________________________________________________ City, State, Zip Code: _______________________________________________________ Phone Number: ________________________________________________________________ FAX Number: __________________________________________________________________ 176 TAX WITHHOLDING: Non Resident Alien ______ Y* ______ N * Form 4224 Enclosed Tax ID Number _____________________ CONTACTS/NOTIFICATION METHODS: ADMINISTRATIVE CONTACTS - BORROWINGS, PAYDOWNS, INTEREST, FEES, ETC. Contact: ___________________________________________________________ Street Address: ____________________________________________________ City, State, Zip Code: _____________________________________________ Phone Number: ______________________________________________________ FAX Number: ________________________________________________________ BID LOAN NOTIFICATION: Contact: ___________________________________________________________ Street Address: ____________________________________________________ City, State, Zip Code: _____________________________________________ Phone Number: ______________________________________________________ Fax Number: ________________________________________________________ PAYMENT INSTRUCTIONS: Name of Bank where funds are to be transferred: _______________________________________________________________ Routing Transit/ABA number of Bank where funds are to be transferred: _______________________________________________________________ Name of Account, if applicable: _______________________________________________________________ Account Number: ____________________________________________________ Additional Information: ____________________________________________ ____________________________________________ It is very important that all of the above information is accurately filled in and returned promptly. If there is someone other than yourself who should receive this questionnaire, please notify us of their name and FAX number and we will FAX them a copy of the questionnaire. If you have any questions, please call me on 212-622-0011. -----END PRIVACY-ENHANCED MESSAGE-----