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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/X/ Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [Fee Required] for the
fiscal year ended December 31, 1993 or
/ / Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required] for the
transition period from ------------to -------------
Commission File No. 0-14120
ADVANTA Corp.
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(Exact name of Registrant as specified in its Charter)
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DELAWARE 23-1462070
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
organization)
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Brandywine Corporate Center, 650 Naamans Road, Claymont, Delaware 19703
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (302-791-4400)
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of each exchange on which registered
None N/A
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.01 par value
Class B Common Stock, $.01 par value
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(Title of each class)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K / /
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of filing.
(See definition of affiliate in Rule 405)
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$ 341,344,003 as of March 1, 1994 which amount excludes the value of all shares
beneficially owned (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934) by officers and directors of the Company (however, this does not
constitute a representation or acknowledgment that any of such individuals is
an affiliate of the Registrant).
(APPLICABLE ONLY TO CORPORATE REGISTRANTS) Indicate the number of shares
outstanding of each of the registrant's classes of common stock, as of the
latest practicable date.
As of March 1, 1994 there were 17,248,389 shares of the Registrant's Class A
Common Stock, $.01 par value, outstanding and 22,876,523 shares of the
Registrant's Class B Common Stock, $.01 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE. List hereunder the following documents if
incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II,
etc.) into which the document is incorporated: (1) Any annual report to
security holders; (2) Any proxy or information statement; and (3) Any
prospectus filed pursuant to Rule 424(b) or (e) under the Securities Act of
1933. The listed documents should be clearly described for identification
purposes (e.g., annual report to security holders for fiscal year ended
December 24, 1980).
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Document Form 10-K Reference
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Definitive Proxy Statement relating to the Part III, Items 10-13
Registrant's 1994 Annual Meeting of
Stockholders, to be filed pursuant to
Regulation 14A not later than 120 days
following the end of the Registrant's
last fiscal year, and referred
to herein as the "Proxy Statement".
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PART I
ITEM 1. BUSINESS.
OVERVIEW
Advanta Corp. (the "Company") is a highly focused direct marketer of select
consumer financial services. The Company primarily originates and services
credit cards and mortgage loans. Other businesses include small ticket
equipment leasing, credit insurance and deposit products. At year end 1993,
assets under management totalled over $6.1 billion.
Approximately 75% of total revenues are derived from credit cards marketed
through carefully targeted direct mail campaigns. By focusing primarily on the
no fee gold card, the Company has successfully grown to one of the ten largest
issuers of gold cards. Mortgage services contribute 10% of total
revenues with a managed loan portfolio of $1.15 billion. Mortgage loans are
originated through a network of branch offices, a direct originations center
and an expanding number of correspondent relationships.
The Company was incorporated in Delaware in 1974 as Teachers Service
Organization, Inc., the successor to a business originally founded in 1951.
In January 1988, the Company's name was changed from TSO Financial Corp. to
Advanta Corp. The Company's principal executive office is located at
Brandywine Corporate Center, 650 Naamans Road, Claymont, Delaware 19703. Its
principal operating office is located at Five Horsham Business Center, 300
Welsh Road, Horsham, Pennsylvania 19044-0749. The Company's telephone numbers
at its principal executive and operating offices are, respectively, (302)
791-4400 and (215) 657-4000. References to the Company in this Report include
its consolidated subsidiaries unless the context otherwise requires.
CREDIT CARDS
The Company, which has been in the credit card business since 1983, issues gold
and standard MasterCard and VISA credit cards nationwide. The Company has
built a substantial cardholder base which, as of December 31, 1993, totalled
nearly 2.7 million accounts and $3.9 billion in managed receivables. According
to industry statistics, the Company is one of the ten largest issuers of gold
cards. Both gold and standard accounts undergo the same credit analysis, but
gold accounts have higher initial credit limits because of the cardholders'
higher incomes. In addition, gold accounts generally offer a wider variety of
services to cardholders.
The primary method of account acquisition is direct mail solicitation. The
Company generally uses credit scoring by independent third parties and a
proprietary market segmentation and targeting model to target its mailings to
profitable segments of the market.
In 1982, the Company acquired Colonial National Bank USA ("Colonial National").
As a national bank, Colonial National has the ability to make loans to
consumers without many of the restrictions found in various state usury and
licensing laws, to negotiate variable rate loans, to generate funds
economically in the form of deposits insured by the Federal Deposit Insurance
Corporation ("FDIC"), and to include in its product mix a MasterCard and VISA
credit card program. Substantially all of the Company's credit card
receivables and bank deposits, and most of its mortgage loan receivables, are
held by Colonial National.
MasterCard and VISA license banks, such as Colonial National and other
financial institutions, to issue credit cards using their trademarks and to
utilize their interchange networks. Cardholders may use their cards to make
purchases at participating merchants or to obtain cash advances at
participating financial institutions. The purchase is submitted to a merchant
bank which remits to the merchant the purchase amount less a merchant discount
fee, and submits the purchase to the card issuing bank for payment through the
interchange system. The card issuing bank receives an interchange fee as
compensation for the funding and credit risk that it takes when its customers
use its credit card. MasterCard or VISA sets the interchange fee as a
percentage of each card transaction (currently approximately 1.4%).
The Company generates interest and other income from its credit card business
through finance charges assessed on outstanding loans, interchange income, cash
advance and other credit card fees, and securitization income as described
below. Credit Card income also includes fees paid by credit card customers for
product
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enhancements they may select, and revenues paid to Colonial National by third
parties for the right to market their products to the Company's credit card
customers.
Most of the Company's MasterCard and VISA credit cards carry no annual fee, and
those credit cards which do include an annual fee generally have lower fees
than those charged by many of the Company's competitors. The Company believes
that this characteristic of no or low annual fee credit cards has appealed to
consumers, and that the Company's credit cards have also appealed to consumers
because of their competitive interest rates, quality service, payment terms and
credit lines.
While the Company believes that its credit card offers will continue to appeal
to consumers for the reasons stated, the Company also notes that competition is
increasing in the credit card industry. At the same time, the American people
are becoming generally more sophisticated and demanding users of credit. These
forces are likely to produce significant changes in the industry; in recent
years they have resulted in slower growth and lower yields for the industry,
and these trends may continue. The Company is devoting substantial resources
to meeting the challenges, and taking advantage of the opportunities, which
management sees emerging in the industry. In 1993, this included significant
focus on balance transfer initiatives, in which the Company encouraged
consumers to transfer account balances they were maintaining with other credit
card issuers to a Colonial National account with a lower interest rate.
Approximately one-half of the growth in the Company's managed credit card
receivables in 1993 resulted from balance transfers. The Company intends to
continue exploring new approaches to the credit card market.
The interest rates on the majority of the Company's credit card receivables are
variable, tied to the prime rate. This helps the Company maintain net interest
margins in both rising and declining interest rate environments. As Delaware,
Colonial National's state of domicile, does not have a usury ceiling applicable
to banks, there is no statutory maximum interest rate that the Company may
charge its credit cardholders, nor does Delaware law limit the amount of any
annual fees, late charges and other ancillary charges which may be assessed.
While the state in which an individual cardholder resides may seek to regulate
the annual fees and ancillary charges which Colonial National may charge to
that state's residents, the enforceability of such regulation is unclear and is
currently the subject of litigation in certain states. At the present time,
the only Federal appellate decision addressing this issue held such regulation
to be unenforceable. See "Government Regulation--Colonial National."
Since 1988, Colonial National has been active in the credit card securitization
market, securitizing $1.0 billion of credit card receivables in 1993 and $3.2
billion since 1988. The Company continues to recognize income on a monthly
basis from the securitized receivables. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Notes 1 and 3 of
the Notes to Consolidated Financial Statements.
Colonial National's securitization program provides a number of benefits:
diversifying its funding base, providing liquidity, reducing the bank's
regulatory capital requirements, lowering its cost of funds, providing a source
of variable rate funding to complement the variable rate credit card portfolio
and helping to limit the on-balance sheet growth of Colonial National to not
more than 7% per annum. See "Government Regulation--The Company."
Furthermore, Colonial National continues to own the credit card accounts and
customer relationships, which the Company believes continue to build
significant long-term value. While the Company believes that securitization
will continue to be a reliable source of funding, there is no assurance that
the Company will be able to continue securitizations in amounts or under terms
comparable to its securitizations to date.
A securitization involves the transfer by the Company of the receivables
generated by a pool of credit card accounts to a securitization trust.
Certificates issued by the trust and sold to investors represent undivided
ownership interests in receivables transferred to the trust. The
securitization results in removal of receivables from the Company's balance
sheet for financial and regulatory accounting purposes. For tax purposes, the
investor certificates are characterized as a collateralized debt financing of
the Company.
The trust receives finance and other charges paid by the credit card customers
and pays a rate of return on a monthly basis to the certificate holders. While
in most cases the rate of return paid to investors is variable in order to
match the pricing dynamics of the underlying receivables, the Company also uses
fixed rate securitizations where appropriate to balance interest rate exposure
on its assets and liabilities. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Asset/Liability Management."
Credit losses on the securitized receivables are paid from the funds in the
trust. The Company continues to service the accounts for a fee, generally two
percent per annum of the securitized receivables. Excess funds (defined as
finance charges plus miscellaneous fees less interest paid to certificate
holders, credit
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losses and servicing fees) are first retained to build up a reserve fund to a
certain level, after which amounts are remitted to the Company. The Company's
relationship with its credit card customers is not affected by the
securitization.
Investors in the trust receive payments of interest only during the first three
to four years of the trust. Thereafter, an amortization period (generally
between six and ten months) commences, during which the certificate holders are
entitled to payment of principal and interest. Acceleration of the
commencement of the amortization period (which may occur in limited
circumstances) on a securitization would accelerate the Company's funding
requirement. Upon full repayment of principal to the certificate holders,
whether as a result of normal or accelerated amortization, the trust's lien on
the accounts terminates and all related receivables and funds held in the
trust, including the reserve fund, are transferred to the Company.
MORTGAGE LOANS
The Company's subsidiary, Advanta Mortgage Corp. USA ("Advanta Mortgage"),
originates and services closed end mortgage loans for itself and for Colonial
National's "Advanta Mortgage USA" Division, primarily through a broker network
serviced by selected sales locations, a centralized direct origination center,
and correspondent relationships. Closed end mortgage loans involve the loan of
a fixed amount of funds to a residential borrower repayable over a contractual
period of generally fifteen years. The Company does not extend mortgage lines
of credit, which involve the extension of a revolving amount of credit to a
borrower. Advanta Mortgage and Colonial National also purchase portfolios of
mortgage loan receivables. Portfolio acquisitions totalled $6 million in 1991,
$32 million in 1992 and $42 million in 1993.
Advanta Mortgage and Colonial National operate the Company's mortgage loan
business as a mortgage banking enterprise, i.e., they originate or purchase
loans and then sell or securitize them, generally retaining servicing rights
and the related excess cash flows. Consequently, the mortgage loan receivables
on the Company's balance sheet are generally its most recently originated loans
being held for sale. Thus, while mortgage loan receivables owned at December
31, 1993 were $91 million, during 1993 the Company originated or purchased $510
million and securitized $608 million of such receivables. At the time the
receivables are sold or securitized, the Company recognizes a gain which is
included in its mortgage banking income. See Note 1 to the Consolidated
Financial Statements.
Thus, Advanta Mortgage packages its loans for sale and customarily enters into
agreements with the purchasers to continue to service the loans for a fee.
Advanta Mortgage also services Colonial National's mortgage loan portfolio,
packages Colonial National's mortgage loans for sale, and performs the
servicing on loans sold by Colonial National where Colonial National retains
the servicing rights and obligations. In addition, Advanta Mortgage performs
fee-based servicing on loans originated and owned by unrelated third party
mortgage lenders. Therefore, Advanta Mortgage and Colonial National's Advanta
Mortgage USA Division have the following basic sources of income: net
interest income on loans outstanding pending their sale, gains on sales of
loans, loan servicing fees and loan origination fees ("points"). Points are
deferred and amortized over the contractual life of a loan, and on sale or
securitization of the loan are included in the computation of the gain on sale.
Interest income earned on loans prior to their sale or securitization is
included in the Company's interest revenues, as detailed in "Management's
Discussion and Analysis of Financial Condition and Results of Operations -- Net
Interest Income."
Advanta Mortgage and Colonial National began securitizing home loans in 1988,
when they privately placed with institutional investors $72 million of
certificates representing fractional ownership interests in securitization
trusts. In February 1991, Advanta Mortgage and Colonial National securitized
$108 million of loans in their first publicly offered mortgage securitization
transaction and securitized approximately $193 million of additional loans in
public offerings during the balance of 1991. They publicly securitized $385
million of loans in 1992, and $608 million in 1993.
Securitizations of mortgage loans are similar to credit card securitizations as
described above. The Company transfers a specified pool of mortgage loans to a
trust which issues certificates representing undivided ownership interests in
the loans. The Company acts as servicing agent for the trust, providing
customer service and collection efforts, and receives loan servicing fees equal
to .5% per annum of the securitized receivables. Finance and other charges
paid to the trust are used to pay the investors interest on their certificates
and premiums on an insurance contract issued by a third party guaranteeing full
repayment of principal and interest to
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the investors. Excess amounts generally go into a reserve account, and after
that account reaches a specified level, are paid to the Company. Credit losses
on the securitized loans reduce the amount of these payments to the Company.
Significant differences from the Company's credit card securitizations,
however, include: (1) while in most cases the credit card securitization
certificates pay a variable interest rate (which complements the variable rate
pricing on the Company's credit cards), the mortgage securitization
certificates generally carry a fixed rate of interest (as generally do each of
the mortgage loans held by the trust), and (2) payments to investors in the
mortgage loan securitizations include both principal and interest from the
outset, since the loans held by the trust are not revolving credit lines.
At December 31, 1993, Advanta Mortgage and Colonial National had approximately
$91 million of mortgage loan receivables outstanding secured by mortgages on
properties located in 30 states plus the District of Columbia. Additionally,
as of that date, Advanta Mortgage was servicing approximately $1.1 billion in
mortgage loans sold by the Company's subsidiaries, as well as $125 million of
"contract servicing" receivables. Contract servicing receivables are not
included in the Company's "managed portfolio," as the performance of such loans
does not have a material impact on either the Company's net income or its
credit risk profile. In contrast, the performance of the managed portfolio,
including loans sold by the Company, can materially impact ongoing mortgage
banking income. See Note 1 to the Consolidated Financial Statements.
In 1993, loan loss and prepayment experience depressed mortgage banking income,
resulted in higher charge-off rates and necessitated an increase in off-balance
sheet mortgage loan recourse reserves. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - - Provision for
Credit Losses" and "-- Credit Risk Management -- Asset Quality." As
indicated by these higher off-balance sheet reserves, in 1994 the Company
expects to experience a higher relative managed mortgage charge-off rate
compared to 1993. A majority of this experience is due to a class of loan
which the Company has not actively solicited since 1991, as well as to
softening real estate values in certain areas in which the Company operates.
Approximately 43% of the managed portfolio is secured by second mortgages and
the balance is secured by non-purchase money first mortgages. At December 31,
1993, total mortgage loans managed, and the nonperforming loans included in
those totals, are concentrated in the following regions:
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Percent of
Percent of Percent of Nonperforming
Mortgage Total Portfolio Nonperforming To Total
Receivables Nonperforming By Region By Region Receivables
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(Dollars in Millions)
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California $275.4 $8.7 24.0% 17.4% .8%
Midatlantic 454.6 25.1 39.5% 49.7% 2.2%
Northeast 279.7 13.7 24.3% 27.2% 1.2%
Other 140.1 2.9 12.2% 5.7% .2%
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$1,149.9 50.4 100.0% 100.0% 4.4%
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Geographic concentration carries a risk of increased delinquency and/or loss if
an area suffers an economic downturn. Advanta Mortgage monitors economic
conditions in those regions through market and trend analyses. A Credit Policy
Committee meets through the year to update lending policies based on the
results of analyses, which may include abandoning lending activities in
economically unstable areas of the country. The Company believes that the
concentrations of nonperforming loans reflected in the preceding table are not
necessarily reflective of general economic conditions in each region, but
rather reflect the credit risk inherent in the different grades of loans
originated in each area. The interest rate charged and the maximum
loan-to-value ratio permitted with respect to each grade of loans are adjusted
to compensate for the credit risk inherent in that loan grade.
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The Company generally limits the total dollar amount of all loans secured by a
property, including both the Company's mortgage loan and any other lender's
first mortgage, to between 60% and 80% (depending upon the creditworthiness of
the borrower) of the appraised value of the property. The average total
loan-to-value ratio is 68% (calculated based upon the appraised values of the
properties at the time of origination). However, a substantial depreciation in
home values may impair the Company's security for these loans. As a result of
substantial refinancing activity by consumers as market interest rates
declined, in 1992 over 60% and in 1993 over 70% of the mortgage loans
originated by the Company were first lien loans.
EQUIPMENT LEASING
The Company's leasing subsidiary, Advanta Leasing Corp. ("Advanta Leasing"),
engages primarily in non-cancelable financing leases of equipment, including
computers, fax machines, copiers and commercial cleaning equipment, primarily
to professionals and small businesses. Most of the equipment leased has an
initial value of less than $150,000, while the average initial value of leased
equipment is approximately $7,000. Costs relating to equipment maintenance,
insurance and personal property taxes are the responsibility of the lessee. In
October 1991, Advanta Leasing closed its first securitization of lease
receivables with a private placement of $74.5 million of certificates and
closed a similar transaction in the amount of $53 million in September 1992.
In 1993, Advanta Leasing securitized $68 million of lease receivables.
Securitization of lease receivables is substantially similar to mortgage loan
securitization as described above, except that the servicing fee payable to
Advanta Leasing is 1.25% per annum of the securitized lease receivables.
Including $138 million of remaining securitized receivables, at December 31,
1993 Advanta Leasing managed a portfolio of $189 million of net lease
receivables.
The small ticket equipment leasing industry is experiencing change as many
smaller companies' funding sources have retrenched. This has provided Advanta
Leasing with attractive direct marketing and portfolio acquisition
opportunities, as Advanta Leasing's funding capacity remains strong.
Consequently, the Company anticipates Advanta Leasing's origination volume
increasing in 1994.
CREDIT INSURANCE AND CREDIT PROTECTION
Through unaffiliated insurance carriers, the Company offers credit life,
disability and unemployment insurance to its credit cardholders and credit life
insurance and a limited life/disability/unemployment insurance product to its
mortgage loan customers. The unaffiliated insurers reinsure 100% of the risk
on the credit card credit life, disability and unemployment insurance (but not
the mortgage loan credit life insurance) with one or more of the Company's
insurance subsidiaries. Such subsidiaries receive reinsurance premiums
approximating 94% of the net premiums written. The subsidiaries are obligated
to pay all losses and refunds, and to maintain reserve amounts equal to all
statutory reserves for the benefit of the unaffiliated insurance carriers. In
1992, the insurance subsidiaries began direct underwriting of the property
insurance provided for the Company's equipment leasing customers. The
insurance subsidiaries are domiciled in Arizona, and are subject to regulation
by the Arizona Department of Insurance and other insurance departments in
states where they are licensed.
The credit card credit life insurance insures the life of the borrower (and any
joint borrower) in an amount equal to the unpaid loan balance and accrued
interest (subject to a maximum amount of $5,000) and provides for payment to
the lender of the borrower's obligation in the event of death. The credit
disability insurance and credit unemployment insurance pay the minimum monthly
payments required by the credit card loan with respect to the debt outstanding
at the commencement of a period of disability or unemployment, up to a maximum
of $5,000.
Through Colonial National, the Company offers to some of its credit cardholders
in certain states a card enhancement program named Credit Protection
PlusR which provides benefits similar to those provided to other customers by
the credit life, disability and unemployment insurance coverages offered by the
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unaffiliated insurance carriers. Colonial National, which insures its excess
risk of loss on this product with the Company's insurance subsidiaries, began
expanding its offering of Credit Protection PlusR in 1993.
DEPOSIT, SAVINGS AND INVESTMENT PRODUCTS
The Company offers a range of insured savings and transaction accounts through
Colonial National, and offers uninsured investment products through the direct
and brokered public sale of its senior and subordinated debt securities. Bank
deposit services include demand deposits, money market savings accounts,
statement savings accounts, retail certificates of deposit, large denomination
certificates of deposit (certificates of $100,000 or more) and individual
retirement accounts. During 1993, both the senior debt securities of Advanta
Corp. and the senior debt securities and deposits of Colonial National achieved
investment-grade ratings from the nationally recognized rating agencies. These
ratings have allowed the Company to further diversify its funding sources. In
November 1993, the Company filed a shelf registration statement with the
Securities and Exchange Commission for $1 billion of senior debt securities,
and subsequently sold $150 million of three-year notes in an underwritten
transaction as well as $90 million (as of March 1, 1994) of medium-term notes
of varying maturities pursuant to its $500 million medium-term note program
established under this registration statement. In addition, the Company's
subordinated debt securities historically have been and continue to be offered
to investors with a variety of maturities (ranging from demand to ten years)
and yield options. Further, a wholly-owned subsidiary of the Company, Colonial
National Financial Corp. ("CNF"), began taking deposits in the form of
certificates of deposit in January 1992. CNF is an FDIC insured industrial
loan corporation organized under the laws of the State of Utah. The activities
of CNF are not currently material to the Company's business.
Consumer deposit business at Colonial National is generated from repeat sales
to existing customers and new deposits from individuals attracted by newspaper,
direct mail and radio advertisements. Also, Colonial National offers retail
certificates of deposit to customers through several nationally recognized
broker/dealer firms which offer "Master Certificate of Deposit" programs to
banks throughout the nation. Under these programs, the customers of the
broker/dealer firms may purchase Colonial National certificates of deposit in
$1,000 increments, from $1,000 to $100,000. The award of investment grade
ratings to Colonial National's senior debt securities has allowed the bank to
acquire additional sources of institutional funds throuogh both deposit and
non-deposit products. Together, these various programs provide Colonial
National with cost effective sources of funding which are geographically
diverse and improve control in managing interest rate sensitivity. Investments
in the Company's senior debt securities are marketed primarily to institutional
investors through underwritten offerings as well as direct placements pursuant
to the Company's medium-term note program. Investments in the Company's
subordinated debt securities are generated from newspaper advertisements, from
direct mail marketing efforts to existing and prospective investors, and
through broker/dealer firms.
GOVERNMENT REGULATION
THE COMPANY. The Company is not required to register as a bank holding
Company under the Bank Holding Company Act of 1956, as amended (the "BHCA").
The Company owns Colonial National, which is a "bank" as defined under the BHCA
as amended by the Competitive Equality Banking Act of 1987 ("CEBA"). However,
under certain grandfathering provisions of CEBA, the Company is not required to
register as a bank holding Company under the BHCA, because Colonial National,
which takes demand deposits but does not make commercial loans, did not come
within the BHCA's definition of the term "bank" prior to the enactment of CEBA
and it complies with certain restrictions set forth in CEBA, such as limiting
its activities to those in which it was engaged prior to March 5, 1987 and
limiting its growth rate to not more than 7% per annum. Such restrictions also
prohibit Colonial National from cross-marketing products or services of an
affiliate that are not permissible for bank holding companies under the BHCA.
In addition, the Company complies with certain other restrictions set forth in
CEBA, such as not acquiring control of more than 5% of the stock or assets of
an additional "bank" or "savings association" as defined for these purposes
under the BHCA. Consequently, the Company is not subject to examination by the
Federal Reserve Board (other than for purposes of assuring continued compliance
with the CEBA restrictions referenced in this paragraph). Should the Company
or Colonial National cease complying
<PAGE> 9
with the restrictions set forth in CEBA, registration as a bank holding Company
under the BHCA would be required.
Registration as a bank holding Company is not automatic. The Federal Reserve
Board may deny an application if it determines that control of a bank by a
particular Company will cause undue interference with competition or that such
Company lacks the financial or managerial resources to serve as a source of
strength to its subsidiary bank. While the Company believes that it meets the
Federal Reserve Board's managerial standards and that its ownership of Colonial
National has improved the bank's competitiveness, should the Company be
required to apply to become a bank holding Company the outcome of any such
application cannot be certain.
Registration as a bank holding Company would subject the Company and its
subsidiaries to inspection and regulation by the Federal Reserve Board.
Although the Company has no plans to register as a bank holding Company at this
time, the Company believes that registration would not restrict, curtail, or
eliminate any of its activities at current levels, except that some portions of
the current business operations of the Company's insurance subsidiaries would
have to be discontinued, the effects of which would not be material.
COLONIAL NATIONAL. The Company conducts substantially all its deposit-taking
activities and credit card lending business, as well as a large portion of its
mortgage lending business, through Colonial National. Under Federal law,
Colonial National may "export" (i.e., charge its customers resident in other
states) the finance charges permissible under the law of its state of domicile,
Delaware, which state has no usury statute applicable to banks. Consistent
with prevailing industry practice, the Company also exports credit card fees
(including, for example, annual fees, late charges and fees for exceeding
credit limits) permitted under Delaware law. There is no precedent clearly
applicable to Colonial National as to the permissibility of exporting such
fees. In a case involving this issue (to which the Company was not a party),
the United States Court of Appeals for the First Circuit ruled that the
Commonwealth of Massachusetts did not have the power to prevent a Delaware
state-chartered financial institution from charging Massachusetts residents
credit card fees in excess of those allowed under Massachusetts law. The
United States Supreme Court declined to consider an appeal of the First
Circuit's decision, and so that decision became final in 1992. However,
litigation involving this issue has been initiated against other credit card
issuers in several states, and it is possible that a contrary decision could be
reached in a jurisdiction where the judgment of the First Circuit Court of
Appeals is not binding. The Company cannot quantify the impact on its
business, as a result of possible loss of fees, penalties or other sanctions,
that could result from an adverse determination on this issue in one or more
states.
Colonial National is subject primarily to regulation and periodic examination
by the Office of the Comptroller of the Currency (the "Comptroller"). Such
regulation relates to the maintenance of reserves for certain types of
deposits, the maintenance of certain financial ratios, transactions with
affiliates and a broad range of other banking practices. As a national bank,
Colonial National is subject to provisions of federal law which restrict its
ability to extend credit to its affiliates or pay dividends to its parent
Company. See "Dividends and Transfers of Funds."
Colonial National is subject to capital adequacy guidelines approved by the
Comptroller. These guidelines make regulatory capital requirements more
sensitive to differences in risk profiles among banking organizations and
consider off-balance sheet exposures in determining capital adequacy. As of
December 31, 1993, the minimum ratio of total capital to risk-weighted assets
(including certain off- balance sheet items) was 8%. At least half of the
total capital is to be comprised of common equity, retained earnings and a
limited amount of non-cumulative perpetual preferred stock ("Tier 1 capital").
The remainder may consist of other preferred stock, certain hybrid debt/equity
instruments, a limited amount of term subordinated debt or a limited amount of
the reserve for possible credit losses ("Tier 2 capital"). In addition, the
Comptroller has also adopted a minimum leverage ratio (Tier 1 capital divided
by total average assets) of 3% for national banks that meet certain specified
criteria, including that they have the highest regulatory rating. Under this
guideline, the minimum leverage ratio would be at least 1 or 2 percentage
points higher for national banks that do not have the highest regulatory
rating, for national banks undertaking major expansion programs, and for other
national banks in certain circumstances. As of December 31, 1993, Colonial
National's Tier 1 capital ratio was 7.19%, its combined Tier 1 and Tier 2
capital ratio was 12.06%, and its leverage ratio was 6.03%.
<PAGE> 10
Recognizing that the risk-based capital standards address only credit risk
(i.e., not interest rate, liquidity, operational or other risks), the
Comptroller has indicated that many national banks will be expected to maintain
capital in excess of the minimum standards. As indicated above, Colonial
National's capital levels currently exceed the minimum standards. To date, the
Comptroller has not required Colonial National to maintain capital in excess of
the minimum standards. However, there can be no assurance that such a
requirement will not be imposed in the future, or if it is, what higher
standard will be applicable.
In addition, pursuant to certain provisions of the FDIC Improvements Act of
1991 ("FDICIA") and regulations promulgated thereunder, FDIC insured
institutions such as Colonial National may only accept brokered deposits
without FDIC permission if they meet certain capital standards, and are subject
to restrictions with respect to the interest they may pay on deposits unless
they are "well-capitalized." To be "well-capitalized," a bank must have a
ratio of total capital to risk-weighted assets of not less than 10%, Tier 1
capital to risk-weighted assets of not less than 6%, and a Tier 1 leverage
ratio of not less than 5%. Based on the applicable standards under these
regulations, Colonial National is currently "well-capitalized," and the Company
intends to maintain Colonial National as a "well-capitalized" institution.
LENDING AND LEASING ACTIVITIES. The Company's activities as a lender are also
subject to regulation under various federal and state laws including the
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Home Mortgage
Disclosure Act, the Electronic Funds Transfer Act, and the Fair Credit
Reporting Act. Provisions of those statutes, and related regulations, among
other matters, require disclosure to borrowers of finance charges in terms of
an annual percentage rate, prohibit certain discriminatory practices in
extending credit, and regulate the dissemination and use of information
relating to a borrower's creditworthiness. Certain of these statutes and
regulations also apply to the Company's leasing activities. In addition,
Advanta Mortgage and its subsidiaries are subject to licensure and regulation
in various states as mortgage bankers, mortgage brokers, and originators,
sellers and servicers of mortgage mortgage loans.
DIVIDENDS AND TRANSFERS OF FUNDS. There are various legal limitations on the
extent to which Colonial National can finance or otherwise supply funds through
dividends, loans or otherwise to the Company and its affiliates. The prior
approval of the Comptroller is required if the total of all dividends declared
by Colonial National in any calendar year exceeds its net profits (as defined)
for that year combined with its retained net profits for the preceding two
years, less any required transfers to surplus accounts. In addition, Colonial
National may not pay a dividend in an amount greater than its undivided profits
then on hand after deducting its losses and bad debts. The Comptroller also
has authority under the Financial Institutions Supervisory Act to prohibit a
national bank from engaging in any unsafe or unsound practice in conducting its
business. It is possible, depending upon the financial condition of the bank
in question and other factors, that the Comptroller could claim that a dividend
payment might under some circumstances be an unsafe or unsound practice.
Colonial National is also subject to restrictions under Sections 23A and 23B of
the Federal Reserve Act. These restrictions limit the transfer of funds to the
Company and certain other affiliates, as defined in that Act, in the form of
loans, extensions of credit, investments or purchases of assets, and they
require generally that Colonial National's transactions with its affiliates be
on terms no less favorable to the bank than comparable transactions with
unrelated third parties. These transfers by Colonial National to the Company
or any single affiliate are limited in amount to 10% of Colonial National's
capital and surplus and transfers to all affiliates are limited in the
aggregate to 20% of Colonial National's capital and surplus. Furthermore, such
loans and extensions of credit are also subject to various collateral
requirements. In addition, in order for the Company to maintain its
grandfathered exemption under CEBA, Colonial National may not make any loans to
the Company or any of its subsidiaries.
The Company's insurance subsidiaries are insurance companies organized under
and regulated by Arizona law. Arizona insurance regulations restrict the
amount of dividends which an insurance Company may distribute without the prior
consent of the Director of Insurance.
GENERAL. Because the banking and finance businesses in general are the
subject of such extensive regulation at both the state and federal levels, and
because numerous legislative and regulatory
<PAGE> 11
proposals are advanced each year which, if adopted, could affect the Company's
profitability or the manner in which the Company conducts its activities, the
Company cannot now predict the extent of the impact of any such new laws or
regulations.
Various legislative proposals have been introduced in Congress in recent years,
including, among others, proposals relating to imposing a statutory cap on
credit card interest rates, permitting interstate branching by banks,
permitting affiliations between banks and commercial or securities firms, and
proposals which would place new restrictions on a lender's ability to utilize
pre-screening of consumers' credit reports through credit reporting agencies
(credit bureaus) in connection with the lender's direct marketing efforts. It
is impossible to determine whether any of these proposals will become law and,
if so, what impact they will have on the Company. In September 1992, the
Federal Communications Commission established rules implementing the Telephone
Consumer Protective Act of 1991 which limits telephone solicitations to
residences. Because the statute exempts telemarketing to existing or former
customers, it will not materially impact the Company's current business
operations.
COMPETITION
As a marketer of credit products, the Company faces intense competition from
numerous providers of financial services. Many of these companies are
substantially larger and have more capital and other resources than the
Company. Competition among lenders can take many forms including convenience
in obtaining a loan, customer service, size of loans, interest rates and other
types of finance or service charges, duration of loans, the nature of the risk
which the lender is willing to assume and the type of security, if any,
required by the lender. Although the Company believes it is generally
competitive in most of the geographic areas in which it offers its services,
there can be no assurance that its ability to market its services successfully
or to obtain an adequate yield on its loans will not be impacted by the nature
of the competition that now exists or may develop.
In seeking investment funds from the public, the Company faces competition from
banks, savings institutions, money market funds, credit unions and a wide
variety of private and public entities which sell debt securities, some of
which are publicly traded. Many of the competitors are larger and have more
capital and other resources than the Company. Competition relates to such
matters as rate of return, collateral, insurance or guarantees applicable to
the investment (if any), the amount required to be invested, convenience and
the cost to and conditions imposed upon the investor in investing and
liquidating his investment (including any commissions which must be paid or
interest forfeited on funds withdrawn), customer service, service charges, if
any, and the taxability of interest.
EMPLOYEES
As of December 31, 1993, the Company had 1,614 employees, up from 1,327
employees at the end of 1992. The Company believes that it has good
relationships with its employees. None of its employees is represented by a
collective bargaining unit.
<PAGE> 12
ITEM 2. PROPERTIES.
The Company leases an aggregate of approximately 189,000 square feet of office
space in six office buildings located in Horsham, Pennsylvania, a Philadelphia
suburb, and owns a 95,000 square foot building in Horsham. The Company also
leases an aggregate of approximately 75,000 square feet of office space for its
Advanta Mortgage offices in California, New Jersey, New York and Maryland, and
41,000 square feet of office space for its Advanta Leasing offices in New
Jersey.
The Company's principal executive and Colonial National's principal operating
offices are currently located in approximately 81,000 square feet of leased
space in two office buildings in Delaware.
ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings to which the Registrant or any
of its subsidiaries is a party or of which any of their property is the
subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
<PAGE> 13
EXECUTIVE OFFICERS OF THE REGISTRANT
Each of the executive officers of the Company listed below was elected by the
Board of Directors, to serve at the pleasure of the Board in the capacities
indicated.
<TABLE>
<CAPTION>
Date Elected to
Name Age Office Current Position
- - - -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dennis Alter 51 Chairman of the Board 1972
and Chief Executive Officer
Alex W. "Pete" Hart 54 Executive Vice Chairman and 1994
Director
Richard A. Greenawalt 50 President, Chief Operating 1987
Officer and Director
Warren Kantor 52 Vice Chairman and Director 1993
David D. Wesselink 51 Senior Vice President and 1993
Chief Financial Officer
Robert A. Marshall 53 Executive Vice President and 1993
Group Executive,
Consumer Financial Services
Milton Riseman 57 Senior Vice President, and President 1994
of Advanta Mortgage Corp. USA
Albert E. Lindenberg 41 President and Director, 1988
Advanta Leasing Corp.
Ronald W. Averett 37 Vice President 1988
Jeffrey D. Beck 45 Vice President and Treasurer 1992
John J. Calamari 39 Vice President, Finance 1988
Katharin S. Dyer 36 Vice President, Marketing 1992
Jeffrey L. Fread 37 Vice President, Asset Quality 1987
Mitchell S. Fried 41 Vice President, Strategic Planning 1992
and Business Development
Michael A. Girman 44 Vice President, Audit and Control 1991
John Hofmann 47 Vice President, Human Resources 1987
Edward Millman 42 Vice President and Chief Financial 1993
Officer, Consumer Financial Services
Harry F. Perlet, III 51 Vice President, Insurance and 1988
President, Advanta Insurance
Companies
Gene S. Schneyer 40 Vice President, Secretary 1989
and General Counsel
</TABLE>
<PAGE> 14
Mr. Alter became Executive Vice President and a director of the Company in
1967. He was elected President and Chief Executive Officer in 1972, and
Chairman of the Board of Directors in August 1985. In February 1986, he
relinquished the title of President.
Mr. Hart joined the Company in March 1994 as Executive Vice Chairman. For the
five years prior to that he had been President and Chief Executive Officer of
MasterCard International, Inc., a worldwide association of over 29,000 member
financial institutions. Prior to joining MasterCard in November 1988, Mr. Hart
was Executive Vice President of First Interstate Bancorp, Los Angeles,
California.
Mr. Greenawalt was elected President and Chief Operating Officer of the Company
in November 1987. Prior to joining the Company, Mr. Greenawalt served as
President of Transamerica Financial Corp., Los Angeles, California, from May
1986. For the 15 years prior to that, Mr. Greenawalt served in various
capacities with Citicorp, including most recently as Chairman and Chief
Executive Officer of Citicorp Person-to-Person, Inc., St. Louis, Missouri, and,
prior to that, as President and Chief Executive Officer of Citicorp Retail
Services, Inc., New York, New York.
Mr. Kantor became a Senior Vice President of the Company in April 1986, a
director in May 1986, Chief Financial Officer in September 1986 and Executive
Vice President in December 1986. In November 1993, he was promoted to the
position of Vice Chairman, and he relinquished the title of Chief Financial
Officer. Prior to joining the Company, Mr. Kantor was the partner in charge of
the Financial Services Division of Arthur Andersen & Co. in Philadelphia,
Pennsylvania where he served for more than ten years, and was also the audit
partner assigned to the Company's account.
Mr. Wesselink joined the Company in November 1993 as Senior Vice President and
Chief Financial Officer. Prior to joining the Company, Mr. Wesselink was Vice
President and Treasurer of Household International. Previous positions held at
Household include Vice President-Director of Research, Group Vice
President-Chief Financial Officer of Household Finance Corporation (HFC) and
Senior Vice President-Chief Financial Officer of HFC.
Mr. Marshall joined the Company in January 1988 and was elected Senior Vice
President in February 1988. Prior to joining the Company, from July 1987 he
was Chief Operations Officer of a Scudder, Stevens & Clark joint venture.
Prior to that, Mr. Marshall served in various capacities at Citibank from 1976.
At the time he left Citibank, he was a Senior Vice President of Citicorp Retail
Services, managing a major portion of its client relationships.
Mr. Riseman came to the Company in June 1992 as Senior Vice President,
Administration. He was appointed to his present position in February 1994.
Prior to joining the Company, Mr. Riseman had 27 years experience with
Citicorp, most recently as Director of Training and Development. Prior to that
he held Citicorp positions as Business Manager for the Long Island Region, Head
of Policy and Administration for New York's Retail Bank, and Chairman of
Citicorp Acceptance Co. which was involved in the financing and leasing of
autos and financing of mobile homes.
Mr. Lindenberg had been the Chairman of the Board and President of an equipment
leasing business, LeaseComm Financial Corporation, from that Company's
inception in June 1985 until its purchase by the Company. Following the
acquisition, Mr. Lindenberg was elected President and Chief Executive Officer
of Advanta Leasing Corp., the successor to LeaseComm. Prior to starting
LeaseComm, Mr. Lindenberg had been with First Pennsylvania Bank, Philadelphia,
Pennsylvania since 1982, where he had served in various capacities, most
recently as Vice President of the national division responsible for that bank's
commercial lending activities in leasing and electronics.
Mr. Averett came to the Company as Vice President in January 1988. Prior to
joining the Company, Mr. Averett worked with Citicorp from 1980 to 1987. Most
of this tenure was in a retail credit card division (CRS) holding a wide array
of positions from financial analyst to credit cycle manager and eventually
Regional Collections Manager.
Mr. Beck joined the Company in 1986 as Senior Vice President of Colonial
National and was elected Vice President and Treasurer in 1992. Prior to
joining the Company, he was Vice President, Fidelity Bank,
<PAGE> 15
N.A., responsible for asset/liability planning, as well as for managing a
portfolio of investment securities held at the bank. From 1970 through 1980,
he served in various treasury and planning capacities for Wilmington Trust
Company.
Mr. Calamari joined the Company in May 1988. From May 1985 through April 1988,
Mr. Calamari served in various capacities in the accounting departments of
Chase Manhattan Bank, N.A. and its subsidiaries, culminating in the position of
Chief Financial Officer of Chase Manhattan of Maryland. From 1976 until May
1985, Mr. Calamari was an accountant with the public accounting firm of Peat,
Marwick, Mitchell in New York.
Ms. Dyer joined the Company as Vice President, Marketing in 1992. Prior to
joining the Company, she was Vice President and Director of Marketing for the
Retail Finance Division of MNC Financial. From 1985 to 1989, she was Director,
Product Development and Management at the Student Loan Marketing Association
and had previously held marketing management positions with Citicorp in their
credit card, mortgage and consumer finance businesses.
Mr. Fread joined the Company in 1986 as Director of Internal Audit, and was
elected to the office of Vice President, Asset Quality in June 1987. Prior to
joining the Company, he was an audit manager for Arthur Andersen & Co. where he
was responsible for audit and consulting engagements for a variety of financial
service companies.
Mr. Fried joined the Company as Vice President, Strategic Planning and Business
Development in 1992. Prior to joining the Company, he was Vice President, New
Business Development for Chase Manhattan's Direct Response Banking Sector.
Prior to that position, Mr. Fried had 11 years of senior level marketing,
planning and development experience in the Credit Card, Consumer Branch Banking
and Private Label Retail Credit Divisions at Citicorp.
Mr. Girman joined the Company as Vice President, Accounting Operations,
Policies and Procedures in July 1988, and was elected Vice President, Audit and
Control, in April 1991. Prior thereto, Mr. Girman served as Vice President,
Management Accounting and Accounting Policies and Procedures for The Chase
Manhattan Bank (USA), N.A. from April 1985 until joining the Company.
Mr. Hofmann came to the Company as Director of Human Resources in November 1986
and was elected Vice President, Human Resources in March 1987. Prior to
joining the Company, he was Manager, Human Resources Planning and Development
for Subaru of America, Inc. from October 1984, and Manager, Management and
Organization Development for Shared Medical Systems Corporation from
March 1981 until October 1984.
Mr. Millman joined the Company in September 1989 and was elected Assistant
Treasurer in July 1990 and Vice President, Corporate Funds Management in August
1991. In November 1993, he became Chief Financial Officer of the Consumer
Financial Services unit. Prior to joining the Company, Mr. Millman served as
Director of Financial Planning for Knight Ridder, Inc. from March 1987 to
January 1988, and as Chief Financial Officer of Osteotech, Inc. from January
1988 to September 1989.
Mr. Perlet joined the Company in November 1987, and was elected as Vice
President, Insurance in June 1988. Prior to joining the Company, Mr. Perlet
was with Colonial Penn Group, Inc. for 13 years, where he served in a variety
of capacities, most recently as Senior Vice President.
Mr. Schneyer joined the Company as Associate General Counsel in September 1986
and was elected to the offices of Vice President, Secretary and General Counsel
in March 1989. Prior to joining the Company, from October 1983, Mr. Schneyer
was an attorney in the Legal Department of Allied-Signal, Inc., Morristown, New
Jersey.
<PAGE> 16
ADVANTA CORP. AND SUBSIDIARIES
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
<TABLE>
<CAPTION>
COMMON STOCK PRICE RANGES AND DIVIDEND POLICY
- - - ---------------------------------------------
In April 1992, the Company approved a dual class stock plan which resulted in
an effective two-for-one stock split and established two classes of common
stock effect May 5, 1992. On September 23, 1993, the Board of the Directors
approved a three-for-two stock split effected in the form of a 50% stock
dividend on both the class A and class B common Stock to shareholders of record
as of October 4, 1993, which dividend was paid on October 15, 1993. All share
and per share amounts have been adjusted to reflect this stock split as a
result of the stock dividend. The Company's common is traded on the over
the counter market on NASDAQ National Market system under the the trading
symbols ADVNB (non-voting common stock) and ADVNA (voting common stock).
Following are the high and low sale prices and cash dividends declared for the
last two years as they apply to each class of stock:
Cash Dividends
Quarter Ended: High Low Declared
- - - -----------------------------------------------------------
Class A:
- - - --------
<S> <C> <C> <C>
March 1992 $16.75 $ 11.50 $.02
June 1992 15.75 9.00 .027
September 1992 15.50 10.33 .027
December 1992 21.83 10.67 .033
March 1993 29.33 19.00 .033
June 1993 32.50 24.17 .042
September 1993 41.50 29.83 .042
December 1993 46.75 29.25 .05
Class B:
- - - --------
June 1992 $12.83 $ 7.75 $.032
September 1992 13.83 9.33 .032
December 1992 19.67 9.67 .04
March 1993 25.33 16.00 .04
June 1993 26.50 20.17 .05
September 1993 36.50 25.33 .05
December 1993 38.50 25.00 .06
- - - -----------------------------------------------------------
</TABLE>
At December 31, 1993, the Company had approximately 1,000 and 850 holders of
record of Class B and Class A common stock, respectively.
<PAGE> 17
ADVANTA CORP. AND SUBSIDIARIES
ITEM 6. SELECTED FINANCIAL DATA.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(In thousands, except per share amounts) Year Ended December 31,
- - - ------------------------------------------------------------------------------------------------------------
Five Year
1993 1992 1991 1990 1989 1988 CAGR(2)
- - - ------------------------------------------------------------------------------------------------------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net interest income $ 72,078 $ 68,694 $ 69,252 $ 56,855 $ 45,084 $ 63,030 2.7%
Noninterest revenues 255,580 193,144 133,357 85,894 67,200 41,882 43.6
Net operating revenues(1) 327,658 261,838 202,609 133,839 93,698 102,670 26.1
Provision for credit
losses 29,802 47,138 55,461 42,411 26,047 21,895 6.4
Operating expenses 174,601 137,600 107,829 77,808 73,623 90,206 *
Income (loss) before
income taxes and
extraordinary items 123,255 77,100 39,319 22,530 12,614 (7,189) *
Income (loss) before
extraordinary items 77,920 48,037 25,165 15,095 8,765 (6,588) *
Net income (loss) 76,647 48,037 25,165 15,095 12,033 (9,088) *
- - - ------------------------------------------------------------------------------------------------------------------------
PER COMMON SHARE DATA(3)
Income (loss) before
extraordinary items $ 1.95 $ 1.38 $ .81 $ .53 $ .31 $ (.25) *
Net income (loss) 1.92 1.38 .81 .53 .42 (.34) *
Cash dividends
declared(4)
Class A .167 .107 .063 .037 .033 .00 *
Class B .200 .104 N/A N/A N/A N/A *
Book value 8.82 5.22 3.70 2.60 2.17 1.77 37.9%
Average common shares
outstanding(5) 39,777 34,590 31,044 28,053 28,389 26,835 8.2
Closing stock price
Class A 33.25 21.58 11.50 3.33 3.29 1.44 87.4
Class B 29.00 19.33 N/A N/A N/A N/A *
- - - ------------------------------------------------------------------------------------------------------------------------
FINANCIAL CONDITION--YEAR
END
Investments and money
market instruments $ 542,222 $ 521,567 $ 270,267 $ 187,631 $ 241,869 $ 238,466 17.9%
Gross receivables
Owned 1,277,305 998,244 1,273,420 1,129,493 947,002 828,663 9.0
Securitized 3,986,923 2,721,726 1,573,164 980,856 590,020 409,000 57.7
Managed 5,264,228 3,719,970 2,846,584 2,110,349 1,537,022 1,237,663 33.6
Total assets
Owned 2,141,382 1,775,067 1,716,350 1,450,942 1,297,788 1,171,049 12.8
Managed 6,128,305 4,496,793 3,289,514 2,431,798 1,887,808 1,580,049 31.1
Deposits 1,254,881 1,204,486 1,205,035 1,052,322 976,641 876,337 7.4
Long-term debt 368,372 173,668 112,609 80,990 79,030 83,795 34.5
Stockholders' equity 342,741 174,870 118,859 70,895 61,595 50,431 46.7
Stockholders' equity and
long-term debt 711,113 348,538 231,468 151,885 140,625 134,226 39.6
- - - ------------------------------------------------------------------------------------------------------------------------
SELECTED FINANCIAL RATIOS
Return on average assets 3.91% 2.82% 1.63% 1.09% .92% (.73)% *
Return on average equity 27.50 33.32 27.09 23.28 21.53 (16.50) *
Equity/Owned assets 16.01 9.85 6.93 4.88 4.75 4.31 *
Dividend payout 9.56 7.69 7.85 6.90 7.67 -- *
Owned net interest margin 4.85 5.07 5.68 5.48 4.92 6.50 *
Managed net interest
margin(6) 7.77 8.05 7.54 6.70 6.04 7.01 *
- - - ------------------------------------------------------------------------------------------------------------------------
(1) Excludes gains on sales of credit card accounts in 1988-1990.
(2) Compound annual growth rate from December 31, 1988.
(3) All share and per share amounts have been adjusted to reflect an effective three-for-two stock split as a result of the
October 15, 1993 stock dividend.
(4) 1992 cash dividends include dividends for three quarters on the Class B common stock and the full year on the Class A common
stock, adjusted to reflect the effective stock split.
(5) Includes common stock equivalents.
(6) Combination of owned interest earning assets/interest-bearing liabilities and securitized credit card assets/liabilities.
* Not meaningful.
</TABLE>
<PAGE> 18
ADVANTA CORP. AND SUBSIDIARIES
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Overview
Net income for 1993 rose to $76.6 million or $1.92 per share. This reflects
increases of 60% and 39%, respectively, from the $48.0 million or $1.38 per
share reported in 1992. Net income before extraordinary item was $77.9 million
or $1.95 per share, increases of 62% and 41%, respectively, from 1992. Earnings
per share for 1993 incorporated a 15% increase in the number of common shares
outstanding versus 1992, reflecting an equity offering by the Company in March
1993. Earnings per share for 1992 have been adjusted to reflect an effective
three-for-two stock split as a result of the October 15, 1993 stock dividend.
Earnings for 1993 increased primarily as a result of a $1.1 billion or 34%
increase in average managed receivables, continued improvement in credit
quality with the total managed charge-off rate decreasing from 3.4% in 1992 to
2.9% in 1993, and controlled growth in operating expenses. The Company
continues to securitize a majority of the growth in its receivables and to
report the performance of the securitized receivables as noninterest revenues.
Consequently, the 34% increase in average managed receivables resulted in a
$62.5 million or 32% increase in noninterest revenues to $255.6 million in
1993, from $193.1 million in 1992. As a result of improved credit quality, the
provision for credit losses in 1993 fell to $29.8 million from $47.1 million in
1992. Despite a lower provision, reserve coverage of impaired owned assets was
higher at December 31, 1993 compared to a year ago. Disciplined cost management
resulted in operating expenses increasing only 27%, while average managed
receivables grew 34% and the operating expense ratio fell to 4.1% for 1993
compared to 4.4% in 1992.
Net interest income of $72.1 million for 1993 increased $3.4 million or
5% from 1992 as a result of a $170 million increase in average earning asset
balances, offset by a 22 basis point drop in the owned net interest margin.
The Company is executing a strategy to market a "risk-adjusted" credit card
product in which credit cards are issued with lower rates to customers whose
credit quality is expected to result in a lower rate of credit losses (the
"risk-adjusted" strategy). This strategy resulted in a drop in credit card
yields thereby lowering the owned net interest margin.
Over the last three years, average managed receivables have grown at a
compound annual rate of 34%. This receivable growth has generated higher
financial returns, net income and earnings per share. The Company intends to
continue pursuing a strategy of receivable growth with a goal of increasing
average managed receivables by 30% or more in 1994.
Net income for 1992 of $48.0 million or $1.38 per share increased 91%
and 72%, respectively, from $25.2 million or $.81 per share in 1991.
Earnings increased in 1992 primarily as a result of an $807 million or
34% increase in average managed receivables and a 51 basis point increase in the
managed net interest margin. Average securitized assets rose 67% in 1992
increasing noninterest revenues $59.8 million or 45%. The largest single
component of noninterest revenues, credit card securitization income, rose $38.3
million or 90% as average securitized credit card receivables increased 85%.
The provision for credit losses was down 15% in 1992 compared to 1991 as
a result of lower charge-offs and delinquency levels on owned receivables.
Operating expenses increased 28% with a 34% increase in average managed
receivables, while operating expenses as a percentage of average managed
receivables fell to 4.4% in 1992 from 4.6% in 1991.
<TABLE>
<CAPTION>
NET INTEREST INCOME
(Dollars in thousands)
- - - --------------------------------------------------------------------
1993 1992 1991
- - - --------------------------------------------------------------------
<S> <C> <C> <C>
Net interest income before
amortization of deferred
origination costs and fees
and including tax
equivalent interest $80,170 $ 75,083 $78,707
Amortization of deferred
origination costs,
net of deferred fees(1) (7,188) (6,303) (9,026)
Tax equivalent interest (904) (86) (429)
- - - --------------------------------------------------------------------
Net interest income $72,078 $ 68,694 $69,252
====================================================================
</TABLE>
(1)See Note 1 to Consolidated Financial Statements.
22
<PAGE> 19
ADVANTA CORP. AND SUBSIDIARIES
The owned net interest margin fell to 4.85% in 1993 from 5.07% in 1992, due to
a 173 basis point decrease in the yield on interest earning assets partially
offset by a 151 basis point improvement in the cost of funding those assets. In
1993, the owned net interest margin of 4.85% reflects the benefit of the March
1993 equity offering and increased retained earnings.
Credit card, mortgage and lease receivable securitization activity
shifts revenues from interest income to noninterest revenues. This ongoing
securitization activity reduces the level of higher-yielding receivables on the
balance sheet while increasing the quantity of lower-yielding money market
assets. While the money market assets are subsequently replaced with new
receivables, the active securitization program reduces the average yield of the
on-balance sheet portfolio. Net interest income on securitized credit card
balances is reflected in credit card securitization income. Net interest income
on securitized mortgage loans is reflected in income from mortgage banking
activities, and net interest income on securitized lease receivables is
reflected in leasing revenues, net. All securitization income is included in
noninterest revenues. See Note 1 to Consolidated Financial Statements.
Average managed credit card receivables of $3.0 billion for 1993
increased $755 million or 34% from 1992. This increase can be attributed to
several successful credit card campaigns which generated approximately 853,000
new accounts and a large volume of balance transfers by card- holders. Owned
receivable balances would have been higher in both years had it not been for the
securitization of $1.0 billion of credit card receivables in 1993 and $950
million in 1992. The 241 basis point decline in the yield on owned credit card
receivables was the result of the Company's "risk-adjusted" strategy and the
influence of a predominance of newer, lower-yielding accounts in the owned
portfolio. It is anticipated that these accounts will start repricing upwards in
1994.
Average managed mortgage loans increased to $1.0 billion in 1993, a 34%
increase from $786.3 million in 1992. The average balance of owned mortgage
loans de-creased to $154.2 million in 1993 from $185.6 million in 1992 primarily
due to the securitization of $608 million of receivables in 1993. Mortgage loan
originations of $510 million in 1993 were up $84 million or 20% from 1992.
Yields on owned mortgage loans decreased to 9.91% from 11.40% in 1992 reflecting
the lower rate environment and a significant increase in the proportion of first
lien mortgage loans in the portfolio.
Average managed lease receivables of $154.8 million increased $45
million or 42% from 1992. Average owned balances on leases increased $12.7
million during 1993 due to increased originations and portfolio purchases.
Yields on owned leases increased from 17.46% in 1992 to 18.70% in 1993 due to a
higher amount of late fees.
A significant decline in the owned average cost of funds was experienced
in 1993 as the cost of funds fell to 5.18% from 6.39% in 1992. The rollover of
deposits in a lower rate environment, lower money market rates, and the
Company's entrance into funding markets not previously available to them with a
newly acquired investment-grade rating were the primary reasons for this
decline.
Net interest income of $68.7 million in 1992 dropped slightly from $69.3
million in 1991 primarily as a result of a 61 basis point decline in the owned
net interest margin. This decline in the owned net interest margin was a result
of a 218 basis point decline in yields on interest earning assets partially
offset by a 157 basis point improvement in the cost of funding those assets.
Offsetting this decline in the owned net interest margin was a $96 million
increase in average interest earning asset balances.
The following table provides 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 1991 through 1993. Average owned loan
and lease receivables and the related interest revenues exclude deferred
origination costs and the amortization thereof (see Note 1 to Consolidated
Financial Statements) and include certain loan fees.
23
<PAGE> 20
ADVANTA CORP. AND SUBSIDIARIES
INTEREST RATE ANALYSIS
<TABLE>
<CAPTION>
(Dollars in thousands) Year Ended December 31,
- - - ----------------------------------------------------------------------------------------------------
1993 1992
------------------------------- ----------------------------------
Average Average Average Average
Balance Interest Rate Balance Interest Rate
- - - ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ON-BALANCE SHEET
- - - ------------------------
Interest earning assets:
Receivables:
Credit cards $ 899,650 $ 108,518 12.06% $ 805,604 $ 116,577 14.47%
Mortgage loans 154,210 15,286 9.91 185,596 21,149 11.40
Leases 57,877 10,825 18.70 45,169 7,886 17.46
Other loans 1,911 177 9.26 1,625 179 11.02
----------- --------- ---------- --------
Total receivables 1,113,648 134,806 12.10 1,037,994 145,791 14.05
Federal funds sold 93,507 2,831 3.03 99,426 3,231 3.25
Interest-bearing
deposits 177,942 7,927 4.45 160,318 7,100 4.43
Tax-free securities(1) 42,669 2,585 6.06 2,509 241 9.61
Taxable investments 223,991 11,324 5.06 181,626 12,265 6.75
----------- --------- ---------- ---------
Total interest
earning assets(2) $ 1,651,757 $ 159,473 9.65%(3) $1,481,873 $ 168,628 11.38%(3)
=========== ========= ===== ========== ========= ======
Interest-bearing
liabilities:
Deposits:
Savings $ 214,351 $ 6,984 3.26% $ 195,814 $ 7,706 3.94%
Time deposits
under $100,000 686,159 35,676 5.20 671,442 44,344 6.60
Time deposits of
$100,000 or more 268,064 10,729 4.00 268,853 14,476 5.38
----------- -------- ---------- ---------
Total deposits 1,168,574 53,389 4.57 1,136,109 66,526 5.87
Debt 302,430 22,951 7.59 259,856 23,426 9.01
Other borrowings 59,957 2,963 4.94 68,032 3,593 5.28
----------- -------- ---------- ---------
Total interest-bearing
liabilities 1,530,961 79,303 5.18 1,463,997 93,545 6.39
Net noninterest-bearing
liabilities 120,796 17,876
----------- ----------
Sources to fund interest
earning assets $ 1,651,757 $ 79,303 4.80% $1,481,873 $ 93,545 6.31%
=========== ========= ===== ========== ========= ======
Net interest spread 4.47% 4.99%
===== =====
Net interest margin 4.85% 5.07%
===== =====
OFF-BALANCE SHEET
- - - -------------------------
Average balance on
securitized:
Credit cards $ 2,110,583 $1,449,681
Mortgage loans 895,237 600,738
Leases 96,891 64,152
----------- ----------
Total average securitized
receivables 3,102,711 2,114,571
----------- ----------
Total average managed
receivables $ 4,216,359 $3,152,565
=========== ==========
MANAGED NET INTEREST
ANALYSIS(4)
- - - --------------------------
Interest earning assets $ 3,762,340 $ 479,799 12.75% $2,931,554 $ 409,902 13.98%
Interest-bearing
liabilities $ 3,641,544 $ 187,269 5.14% $2,913,678 $ 173,885 5.97%
Net interest spread 7.61% 8.01%
Net interest margin 7.77% 8.05%
- - - ----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
(Dollars in thousands) Year Ended December 31,
- - - -------------------------------------------------------------------
1991
----------------------------------
Average Average
Balance Interest Rate
- - - -------------------------------------------------------------------
<S> <C> <C> <C>
ON-BALANCE SHEET
- - - --------------------------
Interest earning assets:
Receivables:
Credit cards $ 809,246 $128,282 15.85%
Mortgage loans 201,203 24,939 12.39
Leases 69,382 13,258 19.11
Other loans 1,977 257 13.00
---------- --------
Total receivables 1,081,808 166,736 15.41
Federal funds sold 80,482 4,502 5.59
Interest-bearing
deposits 93,327 5,643 6.05
Tax-free securities(1) 12,504 1,248 9.98
Taxable investments 117,282 9,717 8.28
----------- --------
Total interest
earning assets(2) $ 1,385,403 $187,846 13.56%(3)
=========== ======== ======
Interest-bearing liabilities
Deposits:
Savings $ 193,438 $ 11,324 5.85%
Time deposits
under $100,000 599,337 47,245 7.88
Time deposits of
$100,000 or more 306,385 22,226 7.25
----------- -------
Total deposits 1,099,160 80,795 7.35
Debt 197,153 20,239 10.27
Other borrowings 86,697 8,105 9.35
Total interest-bearing ----------- -------
liabilities 1,383,010 109,139 7.89
Net noninterest-bearing
liabilities 2,393
-----------
Sources to fund interest
earning assets $ 1,385,403 $109,139 7.88%
=========== ======== ====
Net interest spread 5.67%
====
Net interest margin 5.68%
====
OFF-BALANCE SHEET
- - - --------------------------
Average balance on
securitized:
Credit cards $ 782,576
Mortgage loans 463,888
Leases 17,332
-----------
Total average securitized
receivables 1,263,796
-----------
Total average managed
receivables $ 2,345,604
===========
MANAGED NET INTEREST
ANALYSIS(4)
- - - -----------------------------
Interest earning assets $ 2,167,979 $325,009 14.99%
Interest-bearing
liabilities $ 2,165,586 $161,406 7.45%
Net interest spread 7.54%
Net interest margin 7.54%
- - - ----------------------------------------------------------------------------------------------------
(1) Interest and average rate computed on a tax equivalent basis using a statutory rate of 35%
in 1993 and 34% in 1992 and 1991.
(2) Includes assets held and available for sale, and nonaccrual loans and leases.
(3) The yields on owned interest earning assets for 1993, 1992 and 1991 were 9.22%, 10.95% and
12.91%, respectively, including the impact of SFAS 91 (See Note 1 to Consolidated Financial
Statements).
(4) Combination of owned interest earning assets/owned interest-bearing liabilities and
securitized credit card assets/liabilities.
</TABLE>
24
<PAGE> 21
ADVANTA CORP. AND SUBSIDIARIES
INTEREST VARIANCE ANALYSIS: ON-BALANCE SHEET
- - - ---------------------------------------------
The following table presents the effects of changes in average volume and
interest rates on individual financial statement line items on a tax equivalent
basis, excluding the amortization of deferred origination costs and including
certain loan fees. Changes not solely due to volume or rate have been allocated
on a pro rata basis between volume and rate. The effects on individual
financial statement line items are not necessarily indicative of the overall
effect on net interest income.
<TABLE>
<CAPTION>
(Dollars in thousands)
- - - ---------------------------------------------------------------------------------------------------------------------
1993 vs. 1992 1992 vs. 1991
------------------------------------- ------------------------------------
Increase (Decrease) Increase (Decrease)
Due To Due To
------------------------------------- ------------------------------------
Volume Rate Total Volume Rate Total
- - - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest income from:
Loan and lease
receivables:
Credit cards $ 12,680 $(20,739) $(8,059) $ (575) $(11,130) $(11,705)
Mortgage loans (3,307) (2,556) (5,863) (1,867) (1,923) (3,790)
Leases 2,347 592 2,939 (4,306) (1,066) (5,372)
Other loans 29 (31) (2) (42) (36) (78)
Federal funds sold (187) (213) (400) 898 (2,169) (1,271)
Interest-bearing
deposits 794 33 827 3,264 (1,807) 1,457
Tax-free securities 2,465 (121) 2,344 (964) (43) (1,007)
Taxable investments 2,503 (3,444) (941) 4,594 (2,046) 2,548
-------- ------- ------ -------- -------- --------
Total interest income(1) 17,324 (26,479) (9,155) 1,002 (20,220) (19,218)
-------- ------- ------ -------- -------- --------
Interest expense on:
Deposits:
Savings 876 (1,598) (722) 137 (3,755) (3,618)
Time deposits
under $100,000 949 (9,617) (8,668) 5,294 (8,195) (2,901)
Time deposits
of $100,000 or more (42) (3,705) (3,747) (2,496) (5,254) (7,750)
Debt 3,519 (3,994) (475) 5,885 (2,698) 3,187
Other borrowings (408) (222) (630) (1,493) (3,019) (4,512)
-------- ------- ------ -------- -------- --------
Total interest expense 4,894 (19,136) (14,242) 7,327 (22,921) (15,594)
-------- ------- ------ -------- -------- --------
Net interest income $ 12,430 $ (7,343) $ 5,087 $(6,325) $ 2,701 $ (3,624)
======================================================================================================================
</TABLE>
(1) Includes income from assets held and available for sale.
PROVISION FOR CREDIT LOSSES
- - - ---------------------------
The provision for credit losses of $29.8 million in 1993 decreased $17.3
million or 37% from $47.1 million in 1992. This decrease can be attributed to
lower charge-offs on owned receivables, which on a consolidated basis were 2.4%
of average receivables compared to 3.9% in 1992, and to lower levels of
impaired assets. The owned impaired asset level fell to $22.5 million at
December 31, 1993, from $31.6 million a year ago. Lower delinquency levels
helped to strengthen the Company's reserve coverage of impaired assets to
138.6% at December 31, 1993, from 127.4% a year ago.
During 1993, the Company transferred $11 million of on-balance sheet
unallocated loan loss reserves to increase off-balance sheet mortgage loan
recourse reserves, which reserves are netted against excess mortgage servicing
rights.
The provision for credit losses of $47.1 million in 1992 decreased $8.4
million or 15% from $55.5 million in 1991. This decrease was primarily due to
lower charge-offs on owned receivables and lower impaired asset levels.
A description of the credit performance of the loan portfolio is set
forth under the section entitled "Credit Risk Management."
25
<PAGE> 22
ADVANTA CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
NONINTEREST REVENUES
(DOLLARS IN THOUSANDS)
- - - -------------------------------------------------------------
1993 1992 1991
- - - -------------------------------------------------------------
<S> <C> <C> <C>
Credit card securitization
income $ 135,785 $ 80,761 $ 42,422
Credit card
servicing income 41,593 28,634 15,362
Income from mortgage
banking activities 24,146 24,633 21,417
Credit card interchange
income 18,843 30,693 31,819
Other credit card revenues 11,545 11,752 11,966
Leasing revenues, net 10,317 6,170 3,492
Insurance revenues, net 9,249 7,406 5,851
Other 4,102 3,095 1,028
---------- --------- ---------
Total noninterest
revenues $ 255,580 $ 193,144 $ 133,357
========== ========= =========
For the year:
Noninterest revenues
as a percentage of average
managed receivables 6.1% 6.1% 5.7%
</TABLE>
Noninterest revenues of $255.6 million in 1993 increased $62.5 million or 32%
from $193.1 million in 1992.
Due to the securitization of credit card receivables, activity from
securitized account balances normally reported as net interest income and
charge-offs is reported in securitization income and servicing income, both of
which are included in noninterest revenues. Credit card securitization income
increased 68% to $135.8 million from $80.8 million in 1992 while average
securitized credit card receivables increased 46% to $2.1 billion in 1993 from
$1.5 billion in the prior year. Securitization income as a percentage of average
securitized receivables was 6.4% in 1993 compared with 5.6% for 1992. See Note 1
to Con-solidated Financial Statements for further description of securitization
income.
Credit card securitization income is the revenue collected on the
securitized receivables, including interest, interchange income and certain
fees, less the related ex-penses, including interest payments to investors in
the trusts, charge-offs, servicing costs and transaction expenses.
Credit card servicing income increased to $41.6 million in 1993 from
$28.6 million in 1992. Servicing income represents fees paid to the Company for
continuing to service accounts which have been securitized. Such fees
approximate 2% of securitized receivables.
Total interchange income earned represents approximately 1.4% of credit
card purchases. The amount of inter-change paid to the securitization trusts
ranges from 1% to 2% of securitized balances and is included in credit card
securitization income. Interchange income decreased 39% to $18.8 million in 1993
from $30.7 million in 1992 due to a larger proportion of interchange revenues
being included in securitization income. Other credit card revenues, which
include credit insurance, cash advance fees and other credit card related
revenues, were basically flat year-to-year due to an increasing proportion of
credit card revenues becoming part of securitization income. Additionally, the
amortization of annual fee income on owned credit card receivables previously
had been included in other credit card revenues; beginning in 1993, this
amoritization is included as a com-ponent of net interest income.
During 1993, the Company securitized $608 million of mortgage loans
compared to $385 million in 1992. In 1993, increased credit losses on the
securitized portfolio decreased income from mortgage banking activities by
approximately $14 million. Increased prepayments also de-creased income from
mortgage banking activities by $14 million in 1993. Consequently, mortgage
banking income of $24.1 million was relatively flat compared with 1992. See Note
1 to Consolidated Financial Statements for a description of mortgage banking
income.
Noninterest revenues of $193.1 million in 1992 increased $59.7 million
or 45% from $133.4 million in 1991 primarily due to increases in credit card
securitization and servicing income.
26
<PAGE> 23
ADVANTA CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
OPERATING EXPENSES
(DOLLARS IN THOUSANDS)
- - - -------------------------------------------------------------
1993 1992 1991
- - - -------------------------------------------------------------
<S> <C> <C> <C>
Salaries and
employee benefits $ 65,469 $ 51,599 $ 42,566
Marketing 18,742 13,845 8,135
External processing 16,604 12,993 10,871
Credit card fraud losses 13,779 13,134 10,820
Professional fees 10,761 5,700 3,236
Postage 9,818 7,806 6,278
Credit & collection expense 7,055 5,273 4,140
Equipment expense 6,550 5,629 5,433
Occupancy expense 6,247 5,272 4,591
Telephone expense 5,402 4,379 3,346
Other 14,174 11,970 8,413
---------- --------- ---------
Total operating
expenses $ 174,601 $ 137,600 $ 107,829
========== ========= =========
At year end:
Number of accounts
managed (000's) 2,827 2,252 2,125
Number of employees 1,614 1,327 1,082
For the year:
Operating expenses
as a percentage of average
managed receivables 4.1% 4.4% 4.6%
</TABLE>
Operating expenses of $174.6 million for 1993 increased $37.0 million or 27%
from $137.6 million in 1992, driven by a 34% growth in average managed
receivables. The increase in operating expenses can be primarily attrib-uted
to: (a) a $13.9 million, or 27%, increase in salaries and employee benefits
with a 22% increase in the number of employees from 1992, (b) a $4.9 million
increase in marketing expenses as the Company promoted its finan-cial products
as well as enhanced its general public visibility, (c) a $3.6 million increase
in external processing resulting primarily from a 26% increase in the number of
accounts managed year-to-year, (d) a $5.1 million increase in professional fees
as the Company invested in long-term planning projects, and (e) an overall
increase in credit card related costs due to a 27% increase in the number of
accounts managed.
Operating expenses of $137.6 million for 1992 were up $29.8 million or
28% from $107.8 million in 1991 while average managed receivables grew 34%. This
increase in operating expenses can be primarily attributed to: (a) a $9.0
million, or 21%, increase in salaries and employee benefits with a 23% increase
in the number of employees year-to-year, (b) a $5.7 million increase in
marketing expenses to market the Company's financial products and enhance its
general visibility, (c) a $2.3 million increase in credit card fraud losses, due
to the growth in managed credit card receivables and a higher incidence of
fraud, and (d) an overall increase in credit card related costs due to a 15%
increase in the number of accounts managed. In 1991, credit card fraud losses
included $3.9 million related to the acceleration of charge-offs (see discussion
in "Asset Quality" on page 30). The operating expense ratio fell to 4.4% in 1992
from 4.6% in 1991.
INCOME TAXES
The Company's consolidated income tax expense was $45.3 million for 1993, or an
effective tax rate of 37%, compared to tax expense of $29.1 million, or 38%, in
1992 and tax expense of $14.2 million, or 36%, in 1991. The decrease in the
effective tax rate from 1992 to 1993 resulted from a higher level of tax-free
income, while the increase in the effective tax rate from 1991 to 1992 resulted
from higher pretax income and less tax-free income year-to-year.
ASSET/LIABILITY MANAGEMENT
- - - -------------------------------------------------------------------------------
The financial condition of Advanta Corp. is managed with a focus on maintaining
high credit quality standards, disci-plined interest rate risk management and
prudent levels of leverage and liquidity.
INTEREST RATE SENSIVITY
Interest rate sensitivity refers to the net interest income volatility
resulting from changes in interest rates, product spread variability and
mismatches in the repricing intervals between interest-rate-sensitive assets
and liabilities.
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, sells and purchases assets, alters the mix and term
structure of its retail and institutional funding base and complements its basic
business activities by changing the investment portfolio and short-
27
<PAGE> 24
ADVANTA CORP. AND SUBSIDIARIES
term asset positions. The Company has primarily utilized variable rate funding
in pricing its credit card securitization transactions in an attempt to match
the pricing dynamics of the underlying receivables sold to the trusts. Although
credit card receivables are priced at a spread over the prime rate, they
generally 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 instances when a significant portion of credit
card receivables are at their floors, the Company may convert part of the
underlying funding to a fixed rate by using interest rate hedges, swaps and
fixed rate securitizations. In pricing mortgage and lease securitizations,
primarily fixed rate fund-ing is used as nearly all of the receivables sold to
investors carry a fixed rate.
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 inter-est income. Specifically, within the credit card portfolio, pricing
decisions and customer behavior regarding convenience usage affect the yield on
the portfolio. These factors may counteract or exacerbate income changes due to
fluc-tuating interest rates. The Company closely monitors interest rate
movements, competitor pricing and consumer behavioral changes in its ongoing
analysis of net interest income sensitivity.
LIQUIDITY, FUNDING, 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 1993, the Company, through its subsidiaries, securitized $1.0 billion of
credit card receivables, $608 million of mortgage loans and $68 million of
lease receivables. Cash generated from these transactions was temporarily
invested in short-term, high quality investments at money market rates awaiting
redeployment to pay down deposits and to fund future credit card, mortgage loan
and lease receivable growth. See Consolidated Statements of Cash Flows for more
information regarding liquidity, funding and capital resources. In addition,
see Note 5 to Consolidated Financial Statements and Supplemental Schedules
thereto for additional information regarding the Company's investment
portfolio.
Over the last six years, the Company has accessed the securitization
market to efficiently support its growth strate-gy. While securitization should
continue to be a reliable source of funding for the Company, other funding
sources are available and include deposits, subordinated debt, medium-term notes
and the ability to sell assets and raise additional equity.
At December 31, 1993, the Company was carrying $668 million of loans
available for sale. The fair value of such loans was in excess of their carrying
value at year end. In connection with managing liquidity and asset/liability
management, the Company had $308 million of investments available for sale at
December 31, 1993. See Note 18 to Consolidated Financial Statements for fair
value disclosures.
In August 1993, the Company's principal subsidiary, Colonial National
Bank USA ("Colonial National" or the "Bank"), sold $50 million of subordinated
notes which had received an investment-grade rating and qualified as Tier 2
capital.
The following table details the composition of the deposit base at year
end for each of the past five years.
<TABLE>
<CAPTION>
Composition of Deposit Base
(Dollars in millions) As of December 31,
- - - -----------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
-------------- ---------------- ---------------- --------------- ---------------
Amount % Amount % Amount % Amount % Amount %
- - - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Demand deposits $ 33.4 3% $ 24.8 2% $ 20.2 2% $ 8.5 1% $ 7.7 1%
Money market savings 220.7 17 210.7 17 197.1 16 192.8 18 138.9 14
Time deposits of
$100,000 or less 961.4 77 926.8 77 932.5 77 762.9 73 755.6 77
Time deposits of
more than $100,000 39.4 3 42.2 4 55.2 5 88.1 8 74.4 8
- - - -----------------------------------------------------------------------------------------------------------------------
Total deposits $1,254.9 100% $ 1,204.5 100% $1,205.0 100% $1,052.3 100% $976.6 100%
=======================================================================================================================
</TABLE>
28
<PAGE> 25
ADVANTA CORP. AND SUBSIDIARIES
It is expected that deposits will increase slightly in 1994, as the Bank is
likely to expand its asset base within the limits permitted under the
Competitive Equality Banking Act of 1987 ("CEBA"). As a grandfathered
institution under CEBA, the Company must limit the Bank's asset growth to 7%
per annum. For the fiscal CEBA year ended September 30, 1993, the Bank's
average assets did not exceed the allowable amount and, accordingly, the Bank
was in full compliance with CEBA growth limits.
Deposits at December 31, 1993 include $38 million of deposits at
Colonial National Financial Corp. ("CNF"), a Utah state-chartered, FDIC- insured
industrial loan corporation (a wholly-owned subsidiary of the Company). CNF's
assets or operations are not currently material to the Company, and the Company
does not expect them to become material in the near term.
During 1993, the debt securities of Advanta Corp. achieved
investment-grade ratings from the nationally recognized rating agencies. These
ratings have allowed the Company to further diversify its funding sources. In
November 1993, the Company filed a shelf registration statement with the
Securities and Exchange Commission for $1 billion of debt securities, and
subsequently sold $150 million of three-year notes under this registration
statement. The Company also anticipates selling up to an additional $500 million
of medium-term notes as needed. In addition, steady building of liquidity and
capital in 1993 and 1992 was achieved as a result of $76.5 million of dividends
from subsidiaries in 1993 and $40.0 million in 1992, and retained earnings of
$69.3 million in 1993 and $44.0 million in 1992. The Board of Directors
currently intends to have the Company pay regular quarterly dividends to its
shareholders, maintaining a 20% premium on the dividend paid on the Class B
shares; however, the Company plans to reinvest the majority of its earnings to
support future growth.
During 1993, the Company raised $90 million in new equity through a 3.0
million share (pre-split) Class B common stock offering. Proceeds were used to
support future growth.
Other elements contributed to liquidity at the subsidiary level (other
than the Bank) in 1993. Advanta Mortgage Corp. USA ("Advanta Mortgage") had
lines of credit totaling $190 million, which, because of other available funding
sources, were not renewed when they expired in December 1993. Advanta Leasing
Corp. ("Advanta Leasing") also has lines of credit totaling approximately $86
million.
While there are no specific capital requirements for Advanta Corp., the
Office of the Comptroller of the Currency requires that Colonial National
maintain a risk-based capital ratio of at least 8%. Colonial National's
risk-based capital ratio of 12.06% at December 31, 1993 was in excess of the
required level and, in fact, exceeded the mini-mum required capital level of 10%
for designation as a "well capitalized" depository institution. The Company
intends to take the necessary actions to maintain Colonial National as a "well
capitalized" bank. In addition, the Company is subject to various rate setting
rules and capital regulations related to the Advanta Insurance Companies. At
December 31, 1993, the Company was in full compliance with these rules and
regulations.
CAPITAL EXPENDITURES
The Company spent $11.3 million for capital expenditures in 1993, primarily for
the purchase of a building, improvements to that building and additional space
in other build-ings, office and voice communication equipment and furniture and
fixtures. This compared to $5.3 million for capital expenditures in 1992 and
$4.2 million in 1991.
In 1994, the Company anticipates capital expenditures to exceed those of
1993 as its facilities are expanding and the Company is continuing to upgrade
its voice and comm-unication systems.
In 1994, the Company anticipates that its marketing expenditures will
exceed those of 1993 as the Company continues to manage account retention,
originate new accounts and develop new consumer products for its customers.
CREDIT RISK MANAGEMENT
- - - -------------------------------------------------------------------------------
Management regularly reviews the loan portfolio in order to evaluate the
adequacy of the reserve for credit losses. The evaluation includes such factors
as the inherent credit quality of the loan portfolio, past experience, current
eco-nomic conditions, projected credit losses and changes in the composition of
the loan portfolio. The reserve for credit losses is maintained for on-balance
sheet receivables. The on-balance sheet reserve is intended to cover all 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 and Amounts Due From Securitizations.
Recourse reserves are intended to cover all probable credit losses over the
life of the securitized receivables.
29
<PAGE> 26
ADVANTA CORP. AND SUBSIDIARIES
The reserve for credit losses on a consolidated basis was $31.2
million, or 2.4% of receivables, at December 31, 1993, down from $40.2 million,
or 4.0% of receivables, in 1992. Due to improved credit quality, this reserve
level resulted in higher reserve coverage of impaired assets (nonperforming
assets and accruing loans past due 90 days or more on credit cards) of 138.6%
at December 31, 1993, compared to 127.4% at December 31, 1992. Reserve
cover-age of impaired credit card assets was 183.7% at December 31, 1993, down
slightly from 187.6% at year end 1992.
The reserve for credit losses on a consolidated basis increased to $40.2
million, or 4.0% of receivables, in 1992 up from $36.4 million, or 2.9% of
receivables, in 1991. This reserve level and a decrease in impaired assets
resulted in higher reserve coverage of impaired assets.
ASSET QUALITY
Impaired assets include both nonperforming assets (mortgage loans and
leases past due 90 days or more, real estate owned, credit card receivables due
from cardholders in bankruptcy, and off-lease equipment) and accruing loans
past due 90 days or more on credit cards. The carrying values for both real
estate owned and equipment held for lease or sale are based on net realizable
value after taking into account holding costs and costs of disposition and are
reflected in other assets.
On the total managed portfolio, impaired assets were $95.1 million, or
1.8% of receivables, at year end 1993 compared to $92.7 million, or 2.5% of
receivables, in 1992. Nonperforming assets on the total managed portfolio were
$63.6 million, or 1.2% of receivables, compared to $57.8 million, or 1.6%, in
1992. A key credit quality statistic, the 30-plus-day delinquency rate on
managed credit cards, dropped to 2.4% from 3.7% a year ago. The total managed
charge-off rate for 1993 was 2.9%, compared to 3.4% for 1992. The charge-off
rate on managed credit cards was 3.5% for 1993, down from 4.5% for 1992.
On the total owned portfolio, impaired assets were $22.5 million, or
1.8% of receivables, in 1993 compared to $31.6 million, or 3.2%, in 1992. Gross
interest income that would have been recorded in 1993 and 1992 for owned
nonperforming assets, had interest been accrued through-out the year in
accordance with the assets' original terms, was approximately $1.5 million and
$1.8 million, respectively. The amount of interest on nonperforming assets
included in income for 1993 and 1992 was $.3 million and $.5 million,
respectively.
Past due loans represent accruing loans that are past due 90 days or
more as to collection of principal and interest. Credit card receivables, except
those on bankrupt, decedent and fraudulent accounts, continue to accrue interest
until the time they are charged off at 186 days contractual delinquency. In
contrast, all mortgage loans and leases are put on nonaccrual when they become
90 days past due. Owned credit card receivables past due 90 days or more and
still accruing interest were $11.0 million or 1.0% of receivables at December
31, 1993, compared to $16.3 million, or 2.2% of receivables, a year ago.
Through 1990, when the Company received notice that a credit cardholder
had filed a bankruptcy petition or was deceased, the Company established a
reserve equal to the full balance of the receivable. The receivable, if not
paid, would be charged off in accordance with the Com-pany's normal credit card
charge-off policy at 186 days contractual delinquency. Likewise, receivables in
accounts identified as fraudulent would be reserved against and written off (as
an operating expense) when they became 186 days contractually delinquent. These
policies are consistent with many leading competitors in the credit card
industry.
During 1991, the Company adopted a new policy for the charge-off of
bankrupt, decedent and fraudulent credit card accounts. Under the new policy,
the Company charges off bankrupt or decedent accounts within 30 days of
notification and accounts suspected of being fraudulent after a 90-day
investigation period, unless the investigation shows no evidence of fraud.
Consequently, in 1991, both newly identified bankrupt, decedent and fraudulent
accounts, as well as those previously identified, were written off. The 1991
charge-off rates included in the following tables exclude the effect of this
acceleration.
With respect to the mortgage loan business, in 1993 the Company
continued to face several difficult challenges: softening real estate values,
increased prepayments and a higher level of charge-offs. The managed charge-off
rate on mortgage loans increased from .8% in 1992 to 1.3% in 1993. The 1993
charge-off amount includes $3.0 million of accelerated charge-offs. The managed
mortgage charge-off rate in 1994 is anticipated to stay at a high level.
30
<PAGE> 27
ADVANTA CORP. AND SUBSIDIARIES
The following tables provide a summary of reserves, impaired assets,
delinquencies and charge-offs for the past five years:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) DECEMBER 31,
- - - -----------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
- - - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED--MANAGED
Nonperforming assets $ 63,589 $ 57,797 $ 47,587 $ 41,126 $ 25,847
Accruing loans past due 90 days or more 31,514 34,890 33,250 21,463 14,622
Impaired assets 95,103 92,687 80,837 62,589 40,469
Total loans 30 days or more delinquent 186,297 184,670 159,345 126,977 86,509
As a percentage of gross receivables:
Nonperforming assets 1.2% 1.6% 1.7% 2.0% 1.7%
Accruing loans past due 90 days or more .6% .9% 1.2% 1.0% 1.0%
Impaired assets 1.8% 2.5% 2.8% 3.0% 2.6%
Total loans 30 days or more delinquent 3.5% 5.0% 5.6% 6.0% 5.6%
Net charge-offs:
Amount $ 122,715 $108,606(1) $ 89,072 $ 46,270 $ 35,961
As a percentage of average gross
receivables 2.9% 3.4%(1) 3.2%(2) 2.7% 2.7%
- - - -----------------------------------------------------------------------------------------------------------------------
CREDIT CARDS--MANAGED
Nonperforming assets $ 10,881 $ 7,592 $ 5,586 $ 13,615 $ 7,152
Accruing loans past due 90 days or more 31,489 34,890 33,239 21,424 14,560
Impaired assets 42,370 42,482 38,825 35,039 21,712
Total loans 30 days or more delinquent 94,035 99,308 97,100 77,712 53,123
As a percentage of gross receivables:
Nonperforming assets .3% .3% .3% .9% .7%
Accruing loans past due 90 days or more .8% 1.3% 1.6% 1.5% 1.4%
Impaired assets 1.1% 1.6% 1.9% 2.4% 2.1%
Total loans 30 days or more delinquent 2.4% 3.7% 4.8% 5.4% 5.2%
Net charge-offs:
Amount $ 105,966 $100,465 $ 84,113 $ 43,115 $ 31,850
As a percentage of average gross
receivables 3.5% 4.5% 4.4%(2) 3.8% 3.9%
- - - -----------------------------------------------------------------------------------------------------------------------
MORTGAGE LOANS--MANAGED
Nonperforming assets $ 50,418 $ 46,755 $ 37,371 $ 22,703 $ 15,779
Total loans 30 days or more delinquent 75,747 69,962 51,137 39,001 27,786
As a percentage of gross receivables:
Nonperforming assets 4.4% 5.1% 5.2% 3.9% 3.6%
Total loans 30 days or more delinquent 6.6% 7.7% 7.1% 6.6% 6.4%
Net charge-offs:
Amount $ 13,991 $ 5,924(1) $ 3,031 $ 1,335 $ 415
As a percentage of average gross
receivables 1.3% .8%(1) .5% .3% .1%
- - - -----------------------------------------------------------------------------------------------------------------------
LEASES--MANAGED
Nonperforming assets $ 2,290 $ 3,432 $ 4,625 $ 4,808 $ 2,916
Total loans 30 days or more delinquent 16,476 15,320 11,048 10,212 5,494
As a percentage of receivables:
Nonperforming assets 1.2% 2.5% 4.5% 5.8% 4.0%
Total loans 30 days or more delinquent 8.7% 11.1% 10.8% 12.2% 7.6%
Net charge-offs:
Amount $ 2,759 $ 2,352 $ 2,130 $ 2,226 $ 1,247
As a percentage of average receivables 1.8% 2.2% 2.5% 2.8% 1.9%
- - - -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Restated, where necessary, to exclude interest advances on the serviced
mortgage portfolio to be consistent with presentation of owned portfolio.
(2) The 1991 charge-off rates are normalized to exclude the acceleration of the
charge-off of bankrupt and decedent accounts related to the adoption of a
new credit card charge-off policy in 1991. Including these amounts, the
charge-off rates for 1991 were 3.8% and 5.3% on a consolidated-managed and
credit card-managed basis, respectively.
31
<PAGE> 28
ADVANTA CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) DECEMBER 31,
- - - -----------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
- - - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED--OWNED
Reserve for credit losses $ 31,227 $40,228 $36,355 $31,701 $ 23,108
Nonperforming assets 11,487 15,318 18,367 25,765 18,300
Accruing loans past due 90 days or more 11,038 16,270 20,989 17,118 11,220
Impaired assets 22,525 31,588 39,356 42,883 29,520
Reserve as a percentage of impaired assets 138.6% 127.4% 92.4% 73.9% 78.3%
As a percentage of gross receivables:
Reserve 2.4% 4.0% 2.9% 2.8% 2.4%
Nonperforming assets .9% 1.5% 1.4% 2.3% 1.9%
Accruing loans past due 90 days or more .9% 1.6% 1.7% 1.5% 1.2%
Impaired assets 1.8% 3.2% 3.1% 3.8% 3.1%
Net charge-offs:
Amount $ 26,776 $39,965 $50,807 $33,435 $ 24,672
As a percentage of average gross receivables 2.4% 3.9% 4.0%(1) 3.4% 2.9%
- - - -----------------------------------------------------------------------------------------------------------------------
CREDIT CARDS--OWNED
Reserve for credit losses $ 25,859 $35,743 $31,193 $27,247 $ 19,247
Nonperforming assets 3,062 2,780 3,008 9,354 5,384
Accruing loans past due 90 days or more 11,013 16,270 20,978 17,079 11,158
Impaired assets 14,075 19,050 23,986 26,433 16,542
Reserve as a percentage of impaired assets 183.7% 187.6% 130.0% 103.1% 116.4%
As a percentage of gross receivables:
Reserve 2.3% 4.8% 3.0% 3.4% 2.9%
Nonperforming assets .3% .4% .3% 1.2% .8%
Accruing loans past due 90 days or more 1.0% 2.2% 2.0% 2.2% 1.7%
Impaired assets 1.2% 2.6% 2.3% 3.3% 2.5%
Net charge-offs:
Amount $ 23,623 $37,382 $47,252 $30,445 $ 20,624
As a percentage of average gross receivables 2.6% 4.6% 4.9%(1) 4.4% 3.8%
- - - -----------------------------------------------------------------------------------------------------------------------
MORTGAGE LOANS--OWNED
Reserve for credit losses $ 2,706 $ 2,926 $ 2,447 $ 1,766 $ 1,411
Nonperforming assets 7,090 10,266 11,801 11,603 10,000
Reserve as a percentage of impaired assets 38.2% 28.5% 20.7% 15.2% 14.1%
As a percentage of gross receivables:
Reserve 3.0% 1.4% 1.3% .7% .7%
Nonperforming assets 7.8% 4.8% 6.3% 4.6% 4.7%
Net charge-offs:
Amount $ 2,207 $ 1,451 $ 1,627 $ 1,170 $ 352
As a percentage of average gross receivables 1.4% .8% .8% .5% .2%
- - - -----------------------------------------------------------------------------------------------------------------------
LEASES--OWNED
Reserve for credit losses $ 1,826 $ 1,442 $ 1,119 $ 1,594 $ 1,363
Nonperforming assets 1,335 2,254 3,553 4,808 2,916
Reserve as a percentage of impaired assets 136.8% 64.0% 31.5% 33.2% 46.7%
As a percentage of receivables:
Reserve 3.6% 3.1% 3.1% 1.9% 1.9%
Nonperforming assets 2.6% 4.8% 9.7% 5.8% 4.0%
Net charge-offs:
Amount $ 947 $ 1,267 $ 2,130 $ 2,226 $ 1,247
As a percentage of average receivables 1.6% 2.8% 3.1% 2.8% 1.9%
- - - -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The 1991 charge-off rates are normalized to exclude the acceleration of
the charge-off of bankrupt and decedent accounts related to the adoption
of a new credit card charge-off policy in 1991. Including these amounts,
the charge-off rates for 1991 were 4.7% and 5.8% on a consolidated-owned
and credit card-ownedbasis, respectively.
32
<PAGE> 29
ADVANTA CORP. AND SUBSIDIARIES
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS) DECEMBER 31,
- - - -----------------------------------------------------------------------------------------------------------------------
1993 1992
- - - -----------------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Cash $ 31,162 $ 35,753
Federal funds sold 83,700 92,900
Interest-bearing deposits 150,496 219,385
Loan and lease receivables, net:
Available for sale 667,774 473,658
Other loan and lease receivables, net 614,879 503,923
-------------------------------------
Total loan and lease receivables, net 1,282,653 977,581
Investments available for sale 308,026 209,282
Premises and equipment (at cost, less
accumulated depreciation of $25,163
in 1993 and $21,238 in 1992) 17,045 9,460
Amounts due from securitizations 153,082 138,744
Other assets 115,218 91,962
- - - -----------------------------------------------------------------------------------------------------------------------
Total assets $ 2,141,382 $1,775,067
=======================================================================================================================
LIABILITIES
Deposits:
Noninterest-bearing $ 33,446 $ 24,748
Interest-bearing 1,221,435 1,179,738
-------------------------------------
Total deposits 1,254,881 1,204,486
Other borrowings 105,327 154,264
Long-term debt 368,372 173,668
Other liabilities 70,061 67,779
- - - -----------------------------------------------------------------------------------------------------------------------
Total liabilities 1,798,641 1,600,197
- - - -----------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
(See Notes 7 and 9)
Preferred stock 1,010 1,010
Class A common stock, $.01 par value;
Authorized - 30,000,000 shares;
Issued - 17,240,064 shares in 1993
and 16,995,453 shares in 1992 172 170
Class B common stock, $.01 par value;
Authorized - 30,000,000 shares;
Issued - 22,603,088 shares in 1993
and 17,206,594 shares in 1992 226 172
Additional paid-in capital, net 166,646 69,174
Retained earnings, net 174,687 104,775
Less: Treasury stock at cost,
20,794 Class A common shares and
16,216 Class B common shares in 1992 0 (431)
- - - -----------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 342,741 174,870
- - - -----------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 2,141,382 $1,775,067
=======================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
33
<PAGE> 30
ADVANTA CORP. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA) YEAR ENDED DECEMBER 31,
- - - -----------------------------------------------------------------------------------------------------------------------
1993 1992 1991
- - - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Loans and leases $ 127,618 $ 139,488 $157,710
Investments:
Taxable 22,083 22,596 19,862
Exempt from federal income tax 1,680 155 819
---------------------------------------------------------
Total investments 23,763 22,751 20,681
---------------------------------------------------------
Total interest income 151,381 162,239 178,391
---------------------------------------------------------
Interest expense:
Deposits 53,389 66,526 80,795
Debt 22,951 23,426 20,239
Other borrowings 2,963 3,593 8,105
---------------------------------------------------------
Total interest expense 79,303 93,545 109,139
---------------------------------------------------------
Net interest income 72,078 68,694 69,252
Provision for credit losses 29,802 47,138 55,461
---------------------------------------------------------
Net interest income after provision for credit losses 42,276 21,556 13,791
Noninterest revenues 255,580 193,144 133,357
Operating expenses 174,601 137,600 107,829
---------------------------------------------------------
Income before income taxes and extraordinary item 123,255 77,100 39,319
Provision for income taxes 45,335 29,063 14,154
---------------------------------------------------------
Net income before extraordinary item 77,920 48,037 25,165
Extraordinary item, net (See Note 10) (1,273) 0 0
---------------------------------------------------------
Net income $ 76,647 $ 48,037 $ 25,165
=======================================================================================================================
Earnings per common share before
extraordinary item (See Note 1) $ 1.95 $ 1.38 $ .81
=======================================================================================================================
Earnings per common share (See Note 1) $ 1.92 $ 1.38 $ .81
=======================================================================================================================
Weighted average common shares outstanding 39,777 34,590 31,044
=======================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
34
<PAGE> 31
ADVANTA CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
- - - ----------------------------------------------------------------------------------------------------------------------------
Unrealized
Class A Class A Class B Additional Invesment Total
Preferred Common Common Paid-In Deferred Holding Gains Retained Treasury Stockholders'
Stock Stock Stock Capital Compensation (Losses) Earnings Stock Equity
- - - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at Dec. 31, 1990 $ 1,010 $ 99 $ 99 $ 41,452 $ (2,607) $(663) $ 38,273 (6,768) $ 70,895
Effective stock split 49 49 (98) 0
Purchase of treasury stock
at cost (62) (62)
Change in unrealized
appreciation of equity
investments 430 430
Preferred and common cash
dividends declared (2,111) (2,111)
Exercise of stock options 2 2 1,031 (436) 601 1,200
Issuance of stock:
Public offering 16 16 17,722 2,219 19,973
Benefit plans 482 (5,167) 4,811 126
Amortization of deferred
compensation 1,748 1,748
Termination/Tax
benefit--benefit plans 2,024 358 (86) (801) 1,495
Net Income 25,165 25,165
- - - ----------------------------------------------------------------------------------------------------------------------------
Balance at Dec. 31, 1991 1,010 166 166 62,613 (5,668) (233) 60,805 0 118,859
Change in unrealized
appreciation of equity
investments 194 194
Preferred and common cash
dividends declared (4,028) (4,028)
Exercise of stock options 4 3 1,724 1,731
Issuance of stock:
Benefit plans 3 3,512 (2,025) 156 1,646
Amortization of deferred
compensation 2,338 2,338
Termination/Tax
benefit--benefit plans 6,462 218 (587) 6,093
Net Income 48,037 48,037
- - - ----------------------------------------------------------------------------------------------------------------------------
Balance at Dec. 31, 1992 1,010 170 172 74,311 (5,137) (39) 104,814 (431) 174,870
Change in unrealized
appreciation of investment
portfolio 563 563
Preferred and common cash
dividends declared (7,298) (7,298)
Exercise of stock options 2 4 1,866 1,872
Issuance of stock:
Public offering 45 89,980 90,025
Benefit plans 5 9,575 (7,934) 419 2,065
Amortization of deferred
compensation 1,960 1,960
Termination/Tax
benefit--benefit plans 1,922 103 12 2,037
Net Income 76,647 76,647
- - - ----------------------------------------------------------------------------------------------------------------------------
Balance at Dec. 31, 1993 $ 1,010 $ 172 $226 $ 177,654 $(11,008) $ 524 $ 174,163 $ 0 $ 342,741
============================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
35
<PAGE> 32
ADVANTA CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS) YEAR ENDED DECEMBER 31,
- - - ------------------------------------------------------------------------------------------------------------------------
1993 1992 1991
- - - ------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 76,647 $ 48,037 $ 25,165
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of intangibles 5,206 4,855 4,986
Provision for credit losses 29,802 47,138 55,461
Change in other assets and amounts due from securitizations (19,549) (41,182) (19,346)
Change in other liabilities 16,952 31,792 14,508
Gain on securitization of mortgages and leases (19,127) (15,209) (15,830)
Loss on repurchase of senior subordinated debentures 1,928 0 0
- - - ------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 91,859 75,431 64,944
INVESTING ACTIVITIES
Purchase of investments (1,020,355) (502,853) (177,724)
Proceeds from sales of investments 840,936 352,980 147,063
Proceeds from maturing investments 81,592 87,361 10,144
Change in fed funds sold and interest-bearing deposits 78,089 (188,777) (61,467)
Change in credit card receivables, excluding sales (1,441,397) (692,582) (673,627)
Proceeds from sales/securitizations of receivables 1,686,913 1,396,011 725,206
Purchase of mortgage/lease portfolios (70,014) (25,159) (19,100)
Principal collected on mortgages/loans 21,881 25,950 45,125
Mortgages/loans made to customers (472,724) (443,162) (281,375)
Change in premises and equipment (12,341) (5,017) (3,999)
Excess of cash collections over income
recognized on direct financing leases 20,493 16,907 35,566
Equipment purchased for direct financing lease contracts (90,002) (63,571) (44,063)
- - - ------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (376,929) (41,912) (298,251)
FINANCING ACTIVITIES
Increase in demand and savings deposits 18,666 18,171 16,034
Proceeds from sales of time deposits 820,904 621,456 738,220
Payments for maturing time deposits (789,175) (640,176) (601,541)
Change in repurchase agreements 0 (101,847) 70,991
Proceeds from issuance of subordinated debt 135,000 177,321 132,022
Payments on redemption of subordinated debt (103,480) (98,711) (80,916)
Redemption of senior subordinated debentures (36,404) 0 0
Proceeds from issuance of medium-term notes 164,851 0 0
Proceeds from issuance of notes payable to banks 121,069 193,977 78,430
Repayment of notes payable to banks (137,196) (190,663) (146,842)
Proceeds from issuance of stock 93,542 3,377 21,238
Cash dividends paid (7,298) (4,028) (2,111)
- - - ------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities 280,479 (21,123) 225,525
- - - ------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash (4,591) 12,396 (7,782)
Cash at beginning of year 35,753 23,357 31,139
Cash at end of year $ 31,162 $ 35,753 $ 23,357
========================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
36
<PAGE> 33
ADVANTA CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- - - ---------------------------------------------------
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles and include the accounts of Advanta
Corp. (the "Company") and its subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
RECLASSIFICATION
Certain prior-period amounts have been reclassified to conform with
current-year classifications.
CREDIT CARD ORIGINATION COSTS, SECURITIZATION INCOME AND FEES
CREDIT CARD ORIGINATION COSTS
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 approximated $29.5
million in 1993, $20.3 million in 1992 and $24.4 million in 1991. For credit
card receivables, deferred origination costs have been amortized over 60
months.
At the May 20, 1993 meeting of the Emerging Issues Task Force ("EITF") of
the Financial Accounting Standards Board, the task force reached a consensus
regarding the acquisition of individual credit card accounts from independent
third parties (EITF Issue 93-1). The consensus was 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 indi-vidual 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.
In accordance with this recent consensus, direct origi-nation costs incurred
related to credit card originations initiated after the May 20, 1993 consensus
date are deferred and amortized over 12 months. Costs incurred for originations
which were initiated prior to May 20, 1993 will continue to be amortized over a
60 month period. Prior to the EITF Issue 93-1 consensus, it was the Company's
practice to write off deferred origination costs related to credit card
receivables that have been securitized. This practice had effectively written
off credit card origination costs much more quickly than the 60 month period
previously utilized. In connection with the prospective adoption of a 12 month
amortization period for deferred credit card origination costs, the Company
will no longer write off deferred origination costs related to credit card
receivables being securitized, as under the EITF Issue 93-1 consensus such
costs are not directly associated with the receivables.
CREDIT CARD SECURITIZATION INCOME
Since 1988, the Company, through its subsidiary Colonial National Bank USA
("Colonial National" or "CNB") has completed 16 credit card securitizations
totalling $3.2 billion in receivables. See Note 3 and Note 16. In each
transaction, credit card receivables were transferred to a trust and interests
in the trust were sold to investors for cash. 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
37
<PAGE> 34
ADVANTA CORP. AND SUBSIDIARIES
deferred origination cost write-offs upon securitization of receivables as
discussed above. During the "revolving period" of each trust, 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.
CREDIT CARD FEES
Annual fees on credit cards are deferred and amortized on a straight-line basis
over the fiscal year of the account.
The changes relating to origination costs and securitization income, as
discussed above, in the aggregate did not have a material effect on the
Company's 1993 financial statements.
MORTGAGE LOAN ORIGINATION FEES
The Company generally charges origination fees ("points") for mortgage loans
where permitted under state law. Origi-nation fees are deferred and amortized
over the contractual life of the loan. However, upon the sale or securitization
of the loans, the unamortized portion of such fees is recognized and included
in the computation of the gain on sale.
LOAN AND LEASE RECEIVABLES AVAILABLE FOR SALE
Loan and lease receivables available for sale represent receivables that the
Company generally intends to sell or securitize within the next six months.
These assets are reported at the lower of cost or fair market value.
INVESTMENTS HELD TO MATURITY
Investments held to maturity include those investments that the Company has the
positive intent and ability to hold to maturity. These investments are reported
at cost, adjusted for amortization of premiums or accretions of discounts.
INVESTMENTS AVAILABLE FOR SALE
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. In
1993, the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("SFAS 115"). This statement requires that debt and
equity securities classified as Available for Sale be reported at market value.
This Statement is effective for fiscal years beginning after December 15, 1993,
although a company may elect earlier adoption as of the end of a fiscal year
for which annual statements have not been previously issued. The Company has
elected to adopt this statement as of December 31, 1993, and as such, these
securities are recorded at market value at that date. Unrealized holding gains
and losses on these securities are reported as a separate component of
stockholders' equity and included in retained earnings. These securities are
reported at the lower of cost or market value at December 31, 1992. The market
value was $202,708 at December 31, 1992.
FORWARD CONTRACTS
A short sale of U.S. Treasury securities for forward settlement involves an
agreement between two parties to sell Treasury securities at a specified future
date and at a speci-fied future price. The Company periodically sells U.S.
Treasury securities short for forward settlement for the purpose of hedging the
pricing of anticipated mortgage loan securitizations. Gains or losses are
deferred and included in the measurement of the dollar basis of the assets
sold. The contractual amounts of forward contracts at December 31, 1993 and
1992 were $72 million and $165 million, respectively.
FINANCIAL FUTURES
A financial future is a contract to take or make delivery of the underlying
financial instrument at a specified price at a future date. The Company
periodically sells financial futures contracts expressly for the purpose of
managing and reducing interest rate risk specifically related to the reset of
one-month LIBOR on outstanding credit card securitiza-tions. Gains or losses
are included in securitization income. At December 31, 1993 and 1992, there
were no futures contracts outstanding.
INTEREST RATE SWAPS
An interest rate swap is a contract between two counter-parties to exchange
interest payments on a specified notion-al amount at agreed upon rates. The
Company enters into these agreements for the primary purpose of managing its
interest rate risk. At December 31, 1993, the Company had $500 million notional
amount of interest rate swap agreements fixed at a 4.95% weighted average rate
and $150 million notional amount of floating rate swaps priced at one-month
LIBOR. The fixed rate contracts mature throughout 1994 and the floating rate
contracts mature in 1996.
INCOME FROM MORTGAGE BANKING ACTIVITIES
The Company, through its subsidiaries, sells mortgage loans through both
secondary market securitizations and whole loan sales, typically with servicing
retained. Income is
38
<PAGE> 35
ADVANTA CORP. AND SUBSIDIARIES
recognized at the time of sale approximately equal to the present value of the
anticipated future cash flows resulting from the retained yield adjusted for an
assumed prepayment rate, net of any anticipated charge-offs, and allowing for a
normal servicing fee. Changes in the anticipated future cash flows, as well as
the receipt of cash flows which differ from those projected, affect the
recognition of current and future mortgage banking income. Also included in
this income is any difference between the net sales proceeds and the carrying
value of the mortgage loans sold at the time of the transaction. See Note 3 and
Note 16. The carrying value includes deferred loan origination fees and costs
which in-clude certain fees and costs related to acquiring and pro-cessing a
loan held for resale. These deferred origination fees and costs are netted
against income from mortgage banking activities when the loans are sold.
Mortgage banking income also includes loan servicing fees equal to .5% of the
outstanding balance of securitized loans and, beginning in 1992, loan servicing
fees on mortgage loan portfolios which were never owned by the Company
("contract servicing").
INCOME FROM LEASE SECURITIZATIONS
The Company, through its subsidiaries, sells equipment lease receivables
through secondary market securitizations. Income is recorded at the time of
sale approximately equal to the present value of the anticipated future cash
flows net of anticipated charge-offs, partially offset by deferred initial
direct costs, transaction expenses and estimated credit losses under certain
recourse requirements of the trust. Also included in income is the difference
between the net sales proceeds and the carrying amount of the receivables sold.
Subsequent to the initial sale, securitization income is recorded in proportion
to the actual cash flows received from the trusts.
INSURANCE
Insurance premiums, net of commissions on credit life, disability and
unemployment policies on credit cards, are earned monthly based upon the
outstanding balance of the underlying receivables. The cost of acquiring new
rein-surance is deferred and amortized over the reinsurance period in order to
match the expense with the anticipated premium revenue. Insurance claim
reserves are based on estimated settlement amounts for both reported and
incurred but not reported losses.
CREDIT LOSSES
During 1991, the Company adopted a new charge-off policy related to bankrupt,
decedent and fraudulent credit card accounts. Under the previous policy,
whenever the Company received notification that a credit cardholder had filed a
bankruptcy petition or was deceased, a reserve was established equal to the
full balance of the receivable. The receivable, if not paid, would be charged
off at 186 days contractual delinquency. Likewise, receivables in accounts
identified as fraudulent would be reserved against and written off (as an
operating expense) when they became 186 days contractually delinquent. Under
the policy adopted in 1991, bankrupt and decedent accounts are written off
within 30 days of notification, and accounts suspected of being fraudulent are
written off after a 90 day investigation period, unless the investigation shows
no evidence of fraud. During the 1991 transition period, both newly identified
bankrupt, decedent and fraudulent accounts, as well as those previously
identified, were written off.
PREMISES AND EQUIPMENT
Premises, equipment, computers and software are stated at cost less accumulated
depreciation and amortization. Depreciation is calculated using the
straight-line method over the estimated useful lives of the assets. Repairs and
maintenance are charged to expense as incurred.
GOODWILL
Goodwill, representing the cost of investments in subsidiaries and affiliated
companies in excess of net assets acquired at acquisition, is being amortized
on a straight-line basis over 25 years.
INCOME TAXES
Effective January 1, 1993, the Company implemented the provisions of Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109") with no material effect on the financial statements. SFAS 109 utilizes
the liability method and deferred taxes are determined based on the estimated
future tax effects of differences between the financial statement and tax bases
of assets and liabilities given the provisions of the enacted tax laws. Prior
to the implementation of SFAS 109, the Company accounted for income taxes using
Accounting Principles Board Opinion No. 11.
EARNINGS PER SHARE
Earnings per common share are computed by dividing net earnings after preferred
stock dividends by the average number of shares of common stock and common
stock equivalents outstanding during each year. The outstanding preferred stock
is not a common stock equivalent. Earnings
39
<PAGE> 36
ADVANTA CORP. AND SUBSIDIARIES
per share in 1992 and 1991 have been adjusted to reflect the effective
three-for-two stock split as a result of the October 15, 1993 stock dividend.
See Note 7.
CASH FLOW REPORTING
For purposes of reporting cash flows, cash includes cash on hand and amounts
due from banks. Cash paid during 1993, 1992 and 1991 for interest was $78.8
million, $94.4 million and $107.7 million, respectively. Cash paid for taxes
during these periods was $30.0 million, $17.7 million and $8.7 million,
respectively.
<TABLE>
<CAPTION>
NOTE 2. LOAN AND LEASE RECEIVABLES
- - - ---------------------------------------------------------------
Loan and lease receivables consisted of the following:
December 31,
- - - ---------------------------------------------------------------
1993 1992
- - - ---------------------------------------------------------------
<S> <C> <C>
Credit cards(A) $1,131,367 $737,485
Mortgage loans(B) 91,340 212,273
Leases(C) 51,008 46,712
Other loans 3,590 1,774
- - - ---------------------------------------------------------------
Gross loan and
lease receivables 1,277,305 998,244
- - - ---------------------------------------------------------------
Add: Deferred origination costs,
net of deferred fees(D) 36,575 19,565
Less: Reserve for credit losses:
Credit cards (25,859) (35,743)
Mortgage loans (2,706) (2,926)
Leases (1,826) (1,442)
Other loans (836) (117)
- - - ---------------------------------------------------------------
Total (31,227) (40,228)
- - - ---------------------------------------------------------------
Net loan and lease
receivables $1,282,653 $977,581
===============================================================
</TABLE>
(A) Includes credit card receivables available for sale of $564 million and
$250 million in 1993 and 1992, respectively.
(B) Includes mortgage loan receivables available for sale of $74.6 million and
$190.5 million in 1993 and 1992, respectively.
(C) Includes lease receivables available for sale of $28.6 million and $31.5
million in 1993 and 1992, respectively, and is net of unearned income of
$11.9 million and $10.8 million in 1993 and 1992, respectively, and also
includes residual interest for both years.
(D) Includes approximately $.6 million and $1.7 million in 1993 and 1992,
respectively, related to loan and lease receivables available for sale.
Receivables serviced for others consisted of the following items:
<TABLE>
<CAPTION>
December 31,
- - - ----------------------------------------------------------
1993 1992
- - - ----------------------------------------------------------
<S> <C> <C>
Credit cards $2,790,719 $1,934,008
Mortgage loans 1,058,524 696,683
Leases 137,680 91,035
- - - ----------------------------------------------------------
Total $3,986,923 $2,721,726
==========================================================
</TABLE>
The geographic concentration of managed receivables was as follows:
<TABLE>
<CAPTION>
December 31,
- - - ----------------------------------------------------------------------------
1993 1992
------------------------- --------------------------
Receivables % Receivables %
- - - ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
California $ 988,178 18.8% $697,001 18.7%
New York 455,036 8.6 346,992 9.3
New Jersey 333,064 6.3 264,442 7.1
Texas 261,991 5.0 178,766 4.8
Illinois 254,250 4.8 169,253 4.6
All other 2,971,709 56.5 2,063,516 55.5
- - - ----------------------------------------------------------------------------
Total managed
receivables $ 5,264,228 100.0% 3,719,970 100.0%
============================================================================
</TABLE>
In the normal course of business, the Company makes commitments to extend
credit to its credit card customers. Commitments to extend credit are
agreements to lend to a customer as long as there is no violation of any
conditions established in the contract. The Company does not require collateral
to support this financial commitment. At December 31, 1993 and 1992, the
Company had $16.0 billion and $11.7 billion, respectively, of commitments to
extend credit outstanding for which there is potential credit risk. The Company
believes that its customers' utilization of these lines of credit will continue
to be substantially less than the amount of the commitments, as has been the
Company's experience to date. At December 31, 1993 and 1992, out-standing
managed credit card receivables represented 24% and 23%, respectively, of
outstanding commitments.
40
<PAGE> 37
ADVANTA CORP. AND SUBSIDIARIES
NOTE 3. CREDIT CARD, MORTGAGE LOAN AND
EQUIPMENT LEASE SECURITIZATIONS
- - - ---------------------------------------
Colonial National has completed 16 sales of credit card receivables through
asset-backed securitizations aggregating $3.2 billion. In each transaction,
credit card receivables were transferred to a trust which issued certificates
representing ownership interests in the trust to institutional investors.
Colonial National retained a participation interest in each trust, reflecting
the excess of the total amount of receivables transferred to the trust over the
portion represented by certificates sold to investors. The retained
participation interests in the credit card trusts were $371.8 million and
$393.5 million at December 31, 1993 and 1992, respectively. Although Colonial
National continues to service the underlying credit card accounts and maintain
the customer relationships, these transactions are treated as sales for
financial reporting purposes to the extent of the investors' interests in the
trusts. According-ly, the associated receivables are not reflected on the
balance sheet.
Colonial National is subject to certain recourse provi-sions in
connection with these securitizations. At December 31, 1993 and 1992, Colonial
National had reserves of $96.4 million and $108.8 million, respectively, related
to these recourse provisions. These reserves are netted against the excess
servicing-credit card securitization. See Note 16. At December 31, 1993, the
Company had amounts receivable from credit card securitizations, which include
the related interest-bearing deposits, excess servicing and other amounts
related to securitization of $191.0 million, $104.7 million of which was subject
to liens by the providers of the credit enhancement facilities for the
individual securitizations. At December 31, 1992, the amounts receivable and
amounts subject to lien were $192.0 million and $106.5 million, respectively.
Through December 31, 1993, the Company had sold, through securitizations
and whole loan sales, approximately $1.7 billion of mortgage loan receivables
which sales are subject to certain recourse provisions. The Company had reserves
of $32.1 million and $10.1 million at year end 1993 and 1992, respectively,
related to these recourse provisions which are netted against the excess
mortgage servicing rights. See Note 16. At December 31, 1993, the Company had
amounts receivable from mortgage loan sales and securitizations of $102.8
million, $39.7 million of which was subject to liens. At December 31, 1992, the
amounts receivable and amounts subject to lien were $82.0 million and $32.8
million, respectively.
Through December 31, 1993, the Company had securitized approximately
$196 million of equipment lease receiv-ables which are subject to certain
recourse provisions. The asset-backed certificates carry a fixed rate to
investors. There were reserves of $5.3 million and $3.1 million at year end 1993
and 1992, respectively, related to these recourse provisions which are netted
against the excess servicing-lease securitizations. See Note 16. The Company had
accounts receivable from lease securitizations of $9.7 million at year end 1993
and $4.0 million at year end 1992, of which $5.9 million and $1.7 million,
respectively, were subject to liens by the providers of the credit enhancement
facility. Total interest in residuals for lease assets sold was $9.6 million and
$7.7 million at December 31, 1993 and 1992, respectively, and is also subject to
recourse provisions.
NOTE 4. RESERVE FOR CREDIT LOSSES
- - - --------------------------------------
The reserve for credit losses for lending and leasing transactions is
established to reflect losses anticipated from delinquencies that have
already occurred. Any adjustments to the reserves are reported in the
Income Statements in the periods they become known.
During 1993, the Company used $11 million of its on-balance sheet
unallocated reserves to increase its off-balance sheet mortgage loan recourse
reserves, which are a component of excess mortgage servicing rights.
In 1992, the Company used $3.3 million of its on-balance sheet
unallocated reserves to increase its off-balance sheet mortgage loan recourse
reserves.
41
<PAGE> 38
ADVANTA CORP. AND SUBSIDIARIES
The following table displays five years of reserve history:
<TABLE>
<CAPTION>
RESERVE FOR CREDIT LOSSES YEAR ENDED DECEMBER 31,
- - - ------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
- - - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at January 1 $ 40,228 $ 36,355 $31,701 $23,108 $ 30,664
Provision for credit losses 29,802 47,138 55,461 42,411 26,047
Reserve on other receivables sold or acquired 0 0 0 (383) (8,931)
Transfer of reserves to recourse reserves (12,027) (3,300) 0 0 0
Gross credit losses:
Credit cards (33,805) (46,477) (52,798) (34,848) (25,595)
Mortgage loans (2,247) (1,488) (1,635) (1,188) (382)
Leases (1,376) (1,930) (3,205) (4,038) (3,760)
Other loans (93) (73) (155) (126) (3,304)
- - - ------------------------------------------------------------------------------------------------------------------------
Total credit losses (37,521) (49,968) (57,793) (40,200) (33,041)
Recoveries:
Credit cards 10,182 9,095 5,546 4,403 4,971
Mortgage loans 40 37 8 18 30
Leases 429 663 1,075 1,811 2,513
Other loans 94 208 357 533 855
- - - ------------------------------------------------------------------------------------------------------------------------
Total recoveries 10,745 10,003 6,986 6,765 8,369
Net credit losses (26,776) (39,965) (50,807) (33,435) (24,672)
- - - ------------------------------------------------------------------------------------------------------------------------
Balance at December 31 $ 31,227 $ 40,228 $36,355 $31,701 $ 23,108
========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
NOTE 5. INVESTMENTS AVAILABLE FOR SALE
- - - -----------------------------------------------------------------------------------------------------------------
Investments available for sale consisted of the following:
DECEMBER 31,
- - - -----------------------------------------------------------------------------------------------------------------
1993 1992
-------------------------------------------- ---------------------------------------
Gross Gross Gross Gross
Amortized Unrealized Unrealized Market Amortized Unrealized Unrealized Market
Cost Gains Losses Value Cost Gains Losses Value
- - - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U. S. Treasury
& other U. S.
government
securities $154,873 $ 225 $(177) $154,921 $ 38,575 $ 248 $ (73) $ 38,750
State and
municipal
securities 75,797 868 0 76,665 2,942 139 0 3,081
Collateralized
mortgage
obligations 21,288 42 (60) 21,270 101,913 902 (319) 102,496
Mortgage-backed
securities 45,611 0 (42) 45,569 58,089 232 (66) 58,255
Equity
securities 6,947 0 0 6,947 5,539 32 0 5,571
Other 2,704 0 (50) 2,654 2,224 0 0 2,224
- - - -----------------------------------------------------------------------------------------------------------------
Total $307,220 $1,135 $(329) $308,026 $209,282 $ 1,553 $(458) $210,377
=================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
- - - ----------------------------------------------------------------------
1991
---------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
- - - ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
U. S. Treasury
& other U. S.
government
securities $15,584 $ 88 $ 0 $ 15,672
State and
municipal
securities 2,560 122 0 2,682
Collateralized
mortgage
obligations 83,352 4,019 0 87,371
Mortgage-backed
securities 31,051 903 0 31,954
Equity
securities 11,588 33 0 11,621
Other 2,625 0 0 2,625
- - - ----------------------------------------------------------------------
Total 146,760 $5,165 $ 0 $151,925
======================================================================
</TABLE>
42
<PAGE> 39
ADVANTA CORP. AND SUBSIDIARIES
At December 31, 1993, investment securities with a book value of $17,473
were pledged as collateral for swap and hedge transactions. At December 31,
1991, investment securities with a book value of $101,847 were pledged as
collateral for repurchase transactions. There were no investment securities
pledged as collateral at December 31, 1992. At December 31, 1993, 1992 and 1991,
investment securities with a book value of $7,927, $9,147 and $8,748,
respectively, were deposited with insurance regu-latory authorities to meet
statutory requirements or held by a trustee for the benefit of primary
insurance carriers. At December 31, 1993, $806 of net unrealized gains on
securities was included in investments available for sale. During 1993, the net
change in unrealized gains on available for sale securities included as a
separate component of stockholders' equity was $563.
Maturity of investments available for sale at December 31, 1993:
<TABLE>
<CAPTION>
- - - ----------------------------------------------------------
Amortized Market
Cost Value
- - - ----------------------------------------------------------
<S> <C> <C>
Due in 1 year $ 62,379 62,386
Due after 1 but within 5 years 169,950 170,806
Due after 5 but within 10 years 1,045 1,048
Due after 10 years 0 0
- - - ----------------------------------------------------------
Subtotal 233,374 234,240
Mortgage-backed-CMO and MBS 66,899 66,839
Equity securities 6,947 6,947
- - - ----------------------------------------------------------
Total investments $307,220 $308,026
==========================================================
</TABLE>
Proceeds from sales of available for sale securities during 1993 were
$841,000. Gross gains of $3,430 and losses of $888 were realized on these
sales. Proceeds during 1992 were $353,000. Gross gains of $2,414 and losses of
$427 were realized on these sales. Proceeds during 1991 were $147,000. Gross
gains of $1,085 and losses of $508 were realized on these sales. The specific
identification method was the basis on which cost was determined in computing
realized gains and losses. Equity securities primarily includes FRB, FHLB and
FNMA stock that the Company is required to hold.
<TABLE>
<CAPTION>
NOTE 6. DEBT
- - - ----------------------------------------------------------
Debt consisted of the following:
DECEMBER 31,
- - - ----------------------------------------------------------
1993 1992
- - - ----------------------------------------------------------
<S> <C> <C>
12 3/4% senior
subordinated debentures,
due 1998 $ 0 $ 33,150
7% CNB subordinated notes,
due 2003 49,620 0
5 1/8% medium-term notes,
due 1996 149,851 0
RediReserve money
market subordinated
certificates 5,843 5,337
Six-month subordinated
notes 7,354 12,708
One-year subordinated
notes 39,436 59,264
Eighteen-month
subordinated notes 14,261 16,264
Two-, four- and five-year
subordinated notes 133,401 132,201
Thirty-month
subordinated notes 41,281 34,719
Other notes 25,165 10,675
- - - ----------------------------------------------------------
Total debt 466,212 304,318
Less short-term debt
and certificates (97,840) (130,650)
- - - ----------------------------------------------------------
Long-term debt $368,372 $173,668
==========================================================
</TABLE>
The annual maturities of long-term debt at December 31, 1993 for the years
ending December 31 are as follows: $70.4 million in 1995; $180.7 million in
1996; $51.4 million in 1997; $10.4 million in 1998; and $55.5 million
thereafter. The average interest cost of the Company's debt during 1993, 1992
and 1991 was 7.59%, 9.01% and 10.27%, respectively.
NOTE 7. STOCK DIVIDENDS
- - - ------------------------------------
On April 24, 1992, the Company's shareholders approved a dual class stock plan
pursuant to which the Company's Common Stock was reclassified as Class A Common
Stock and a new class of non-voting stock, Class B Common Stock, was
authorized. Promptly following shareholder approval, the Board of Directors
declared a dividend of one share of Class B Common Stock on each outstanding
share of Class A Common Stock to shareholders of record as of April 24, 1992,
which dividend was paid on May 5, 1992.
43
<PAGE> 40
ADVANTA CORP. AND SUBSIDIARIES
On September 23, 1993, the Board of Directors approved a three-for-two stock
split in the form of a 50% stock dividend on both the Class A and Class B
Common Stock to shareholders of record as of October 4, 1993, which dividend
was paid on October 15, 1993. All share and per share amounts have been
adjusted to reflect the three-for-two stock split as a result of the stock
dividend. The balance sheet presentation of stockholders' equity for prior
years and earnings per share for the years ended December 31, 1992 and 1991,
have been adjusted to reflect the impact of this dividend, as if it had already
occurred at such respective dates.
<TABLE>
<CAPTION>
Note 8. Capital Stock
- - - -----------------------------------------------------------
The number of shares of capital stock was as follows:
DECEMBER 31,
- - - -----------------------------------------------------------
ISSUED AND OUTSTANDING
------------------------
1993 1992
- - - -----------------------------------------------------------
(In thousands)
<S> <C> <C>
Class A preferred--
$1,000 par value;
Authorized, 1,010 1 1
===========================================================
Class B preferred--
$.01 par value;
Authorized, 1,000,000 0 0
===========================================================
Class A common stock--
$.01 par value;
Authorized, 30,000,000 17,240 16,995
Class B common stock--
$.01 par value;
Authorized, 30,000,000 22,603 17,207
===========================================================
Less treasury stock:
Class A 0 21
Class B 0 16
- - - -----------------------------------------------------------
39,844 34,166
===========================================================
</TABLE>
The Class A Preferred Stock is entitled to 1/2 vote per share and a
non-cumulative dividend of $140 per share per year, which must be paid prior to
any dividend on the common stock. Dividends were declared on the Class A
Preferred Stock for the first time in 1989 and have continued through 1993 as
the Company paid dividends on its common stock. The redemption price of the
Class A Preferred Stock is equivalent to the par value.
NOTE 9. ISSUANCE OF COMMON STOCK
- - - ------------------------------------
On March 24, 1993, in a public offering, the Company sold 2,575,000 shares
(pre-split) of Class B Common Stock. Proceeds from the offering, net of the
underwriting discount, were $77.5 million. On April 21, 1993, the underwriters
of the offering purchased an additional 450,000 shares (pre-split) of Class B
Common Stock, pursuant to the overallotment option granted to them by the
Company. This brought the Company's total proceeds of the offering, net of
related expenses, to approximately $90 million. The Company used the proceeds
of the offering for general corporate purposes, including to finance the growth
of its subsidiaries.
NOTE 10. EXTRAORDINARY ITEM
- - - ------------------------------------
In April of 1993, the Company repurchased the remaining $33.2 million of its 12
3/4% Senior Subordinated Debentures at a price equal to 104% of par. This
transaction resulted in an extraordinary loss of $1.3 million (net of a tax
benefit of $.7 million) or $.03 per share for the year ended December 31, 1993.
<TABLE>
<CAPTION>
NOTE 11. INCOME TAXES
- - - ----------------------------------------------------------
Income tax expense consisted of the following components:
YEAR ENDED DECEMBER 31,
- - - ----------------------------------------------------------
1993 1992 1991
- - - ----------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $40,736 $21,853 $6,802
- - - ----------------------------------------------------------
State 4,184 3,077 885
44,920 24,930 7,687
- - - ----------------------------------------------------------
Deferred:
Federal (1,829) 2,999 5,160
State 2,244 1,134 1,307
415 4,133 6,467
- - - ----------------------------------------------------------
Total tax expense before
extraordinary item $45,335 $29,063 14,154
==========================================================
</TABLE>
Current tax payable includes earnings of certain subsidiaries which are not
included in the consolidated federal income tax return. In 1993 and 1992, the
tax provision includes $2.0 million and $6.5 million of direct entries to
equity accounts, respectively.
44
<PAGE> 41
ADVANTA CORP. AND SUBSIDIARIES
In 1991, the Company's consolidated tax return reflects alternative minimum
taxes payable.
The reconciliation of the statutory federal income tax to the consolidated
tax expense is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- - - ---------------------------------------------------------
1993 1992 1991
- - - ---------------------------------------------------------
<S> <C> <C> <C>
Statutory federal
income tax $43,139 $26,217 $13,368
State income taxes,
net of federal income
tax benefit 4,178 2,784 1,447
Nontaxable investment
income (675) (46) (281)
Other (1,307) 108 (380)
- - - ---------------------------------------------------------
Consolidated tax
expense before
extraordinary item $ 45,335 $29,063 $14,154
- - - ---------------------------------------------------------
Tax benefit on loss
from repurchase
of debentures (656) 0 0
- - - ---------------------------------------------------------
Consolidated tax
expense $44,679 $29,063 $14,154
=========================================================
</TABLE>
Deferred taxes are determined based on the estimated future tax effects of
differences between the financial statement and tax bases of assets and
liabilities given the provisions of the enacted tax laws. The net deferred tax
liability is comprised of the following:
<TABLE>
<CAPTION>
- - - ------------------------------------------------------------
December 31, January 1,
1993 1993
- - - ------------------------------------------------------------
Deferred taxes:
<S> <C> <C>
Gross assets $ 25,755 $ 20,784
Gross liabilities (43,815) (38,460)
- - - ------------------------------------------------------------
Total deferred
taxes $(18,060) $(17,676)
============================================================
</TABLE>
The Company did not record any valuation allowances against deferred
tax assets at December 31, 1993. The tax effect of significant temporary
differences representing deferred tax assets and liabilities is as follows:
<TABLE>
<CAPTION>
- - - ------------------------------------------------------------
December 31, January 1,
1993 1993
- - - ------------------------------------------------------------
<S> <C> <C>
SFAS 91 $(13,344) $ (7,038)
Loan losses 23,631 18,706
Mortgage banking income (2,395) (7,413)
Securitization income (25,817) (22,295)
Insurance underwriting (2,258) (1,714)
Deferred compensation 592 55
Other 1,531 2,023
- - - ------------------------------------------------------------
Net deferred tax liabilities $(18,060) $(17,676)
============================================================
</TABLE>
NOTE 12. BENEFIT PLANS
- - - ----------------------------------
In 1991, the Company adopted the Advanta Management Incentive Plan With Stock
Election II ("AMIPWISE II"), which plan was designed to provide incentives to
participating employees to remain in the employ of the Company and devote
themselves to its success. Under the plan, employees eligible to participate in
the Advanta Management Incentive Plan (a bonus program) were given the
opportunity to elect to take portions of their anticipated or "target" bonus
payments for 1993, 1994 and 1995 in the form of restricted shares of common
stock. To the extent such elections were made, restricted shares were issued to
the employees, with the number of shares granted to each employee determined by
dividing the amount of future bonus payments the employee had elected to
receive in stock by the market price of the stock on February 7, 1991 ($4.75).
The restricted shares are subject to forfeiture should the employee terminate
employment with the Company prior to vesting. Restricted shares vest 10 years
from the date of grant, but vesting was and will be accelerated annually with
respect to one-third of an employee's restricted shares, to the extent that the
employee and the Company met or meet their respective performance goals for
each of 1993, 1994 and 1995. When newly eligible employees elect to participate
in AMIPWISE II, the number of restricted shares issued to them with respect to
their "target" bonus payments for the relevant years is determined based on the
average market price of the stock for the 90 days prior to eligibility. Under
the plan, 1,062,009 shares of restricted stock have been issued, of which
283,130 shares were vested as the result of 1993 performance bonus awards.
45
<PAGE> 42
ADVANTA CORP. AND SUBSIDIARIES
In 1992, the Company implemented a plan similar to AMIPWISE II, for key
employees below the management level, under which eligible employees were
awarded shares of restricted Class B common stock with respect to "target"
bonus payments for 1992, 1993, 1994 and 1995. The num-ber of shares issued to
them with respect to their "target" bonus payments for the relevant years was
determined based on the average market price of the stock for the year ended
December 31, 1991 ($7.07). Under this plan, a total of 83,853 restricted shares
of Class B common stock have been issued, of which 35,531 shares have vested as
the result of 1992 and 1993 bonus awards. In 1993, the Company adopted a plan
substantially similar to AMIPWISE II ("AMIPWISE III") under which elections
were made to take "target" bonus payments for 1996, 1997 and 1998 in shares of
Class B common stock. The number of shares was determined using the market
price of the stock on the election date ($17.00). Under this plan, 386,304
shares of restricted Class B common stock have been issued. At December 31,
1993, a total of 1,229,829 shares issued under these plans and under the
predecessor plan to AMIPWISE II (with respect to which employees made elections
with respect to "target" bonuses for 1990, 1991 and 1992) 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 share. Deferred compensation of $11.0 million and $5.1 million related to
these plans is reflected as a reduction of equity at December 31, 1993 and
1992, respectively.
The Company has an Employee Stock Purchase Plan which allows employees
and directors to purchase Advanta common stock at a 15% discount from the market
price without paying brokerage fees. The Company reports this 15% discount as
compensation expense. During 1993, shares were issued under the plan from
unissued stock at the average market price on the day of purchase. Effective
with the stock dividend on May 5, 1992, only Class B shares are issued for this
plan.
The Company has two Stock Option Plans which together authorize the
grant to employees and directors, of options to purchase an aggregate of
7,425,000 shares of common stock. In connection with the implementation of the
dual class stock plan described in Note 7, each option granted prior to the May
5, 1992 stock dividend was converted into two options, each covering an equal
number of Class A common shares and Class B common shares as were covered by the
original option, and each with an exercise price per share equal to one-half the
original exercise price. In connection with the October 15, 1993 stock dividend,
the number of options and the exercise price of each option were modified to
reflect the three-for-two stock split. Although under these plans options issued
after the May 5, 1992 dividend date may be for either Class A or Class B common
stock, the Company presently intends only to issue options to purchase Class B
common stock. Beginning in 1992, options generally vest over a four-year period,
and expire 10 years after the date of grant.
Shares available for future grant aggregated 2,051,508 at December 31,
1993, and 2,629,209 at December 31, 1992. Transactions under the plans for the
two years ended December 31, 1993, were as follows:
<TABLE>
<CAPTION>
- - - ----------------------------------------------------------------
Number of Shares Price Range Per Share
- - - ----------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Options outstanding at
December 31, 1991 2,742 $ .98 - $10.57
Options granted 1,047 $ 8.83 - $16.33
Options exercised (719) $ .98 - $ 8.25
Options terminated (22) $ 4.50 - $12.33
- - - ----------------------------------------------------------------
Options outstanding at
December 31, 1992 3,048 $ .98 - $16.33
Options granted 588 $19.33 - $27.50
Options exercised (586) $ .98 - $12.83
Options terminated (11) $12.33 - $20.92
- - - ----------------------------------------------------------------
Options outstanding at
December 31, 1993 3,039 $ .98 - $27.50
================================================================
</TABLE>
The Company also has outstanding, options to purchase 718,500 shares of
common stock at a price range of $1.52 to $11.00 per share, which were not
issued pursuant to either of the predecessor plans and generally vest over a
three-year period.
At December 31, 1993, 1,547,115 of the 3,039,000 out-standing options
issued under the Stock Options Plans had vested and 709,500 of the 718,500
issued outside the Plans had vested.
The Company has a tax-deferred employee savings plan which provides
employees savings and investment opportunities, including the ability to invest
in the Company's common stock. The employee savings plan provides for
discretionary Company contributions equal to a portion of the first 5% of an
employee's compensation contributed to the plan. For the three years ended
December 31, 1993, 1992 and 1991, the Company contributions equalled 100% of the
first 5% of participating employees' compensation contributed to the plan. The
expense for this plan totalled
46
<PAGE> 43
ADVANTA CORP. AND SUBSIDIARIES
$1,189, $882 and $753 in 1993, 1992 and 1991, respectively. At December 31,
1993, 133,018 of the 337,500 shares of common stock reserved for issuance
under the employee savings plan had been purchased by the plan from the Company
at the market price on each purchase date. All other shares purchased by the
plan for the three years ended December 31, 1993, 1992 and 1991 were purchased
on the open market.
NOTE 13. COMMITMENTS AND CONTINGENCIES
- - - --------------------------------------------
The Company leases office space in several states under leases accounted for as
operating leases. Total rent expense for all of the Company's locations for the
years ended December 31, 1993, 1992 and 1991 was $4.8 million, $3.5 million and
$3.1 million, respectively. The future minimum lease payments of all
non-cancellable operating leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- - - ----------------------------------------------------------
<S> <C>
1994 $4,230
- - - ----------------------------------------------------------
1995 4,142
- - - ----------------------------------------------------------
1996 3,753
- - - ----------------------------------------------------------
1997 2,687
- - - ----------------------------------------------------------
1998 1,187
- - - ----------------------------------------------------------
Thereafter 47
- - - ----------------------------------------------------------
</TABLE>
In January 1994, the Company hired a new senior executive and agreed to
the following compensation arrangement. In addition to a base salary, the
executive received 200,000 restricted shares of Class B common stock and an
option to purchase 100,000 shares of Class B common stock at $27.75 per share.
The restricted shares, which as of the date of the grant had a market value of
$5.6 million, will vest at the rate of 25% per annum for four years, and the
options will become exercisable at the same rate. Should the executive leave the
Company's employ before four years have passed, these benefits will vest upon
the departure, except in certain limited circumstances. The executive is also to
receive a guaranteed one-time bonus of $525, other annual benefits and
perquisites estimated at $250, and will also be eligible to receive annual
bonuses under AMIPWISE II and AMIPWISE III (see Note 12).
NOTE 14. OTHER BORROWINGS
- - - ---------------------------------
The Company had lines of credit and term funding arrangements of $63.5
million at December 31, 1993, which were collateralized by lease receivables, as
well as equipment under operating lease. At December 31, 1992, the Company had
lines of credit and term funding arrangements of $208.7 million which were
collateralized by lease receivables and mortgage loans. These facilities carry
variable interest rates which range from 1 1/4 % above LIBOR to 1 1/4% above the
prime rate. There is a quarterly facility fee of 1/4 to 1/2 of 1% of the average
unused portion on the lines of credit.
The composition of other borrowings was as follows:
<TABLE>
<CAPTION>
December 31,
- - - ------------------------------------------------------------
1993 1992
- - - ------------------------------------------------------------
<S> <C> <C>
Short-term debt $ 97,840 $130,650
Lines of credit and
term funding
arrangements 7,487 16,548
Other short-term
borrowings 0 7,066
- - - ------------------------------------------------------------
Total $105,327 $154,264
============================================================
</TABLE>
The following table displays information related to selected types of
short-term borrowings:
<TABLE>
<CAPTION>
- - - ------------------------------------------------------------
1993 1992
------------- --------------
Amount Rate Amount Rate
- - - ------------------------------------------------------------
<S> <C> <C> <C> <C>
At year end:
Securities sold
under repurchase
agreements $ 0 0% $ 0 0%
Other short-term
borrowings 0 0 7,066 7.02
- - - ------------------------------------------------------------
Total $ 0 0% $ 7,066 7.02%
============================================================
Average for the year:
Securities sold
under repurchase
agreements $42,649 3.07% $25,216 3.98%
Other short-term
borrowings 17,337 5.62 9,871 6.76
- - - ------------------------------------------------------------
Total $59,986 3.81% $35,087 4.76%
============================================================
Maximum month-end
balance:
Securities sold
under repurchase
agreements 166,481 124,337
Other short-term
borrowings 45,355 17,299
============================================================
</TABLE>
47
<PAGE> 44
ADVANTA CORP. AND SUBSIDIARIES
The weighted average interest rates were calculated by dividing the
interest expense for the period for such borrowings by the average amount
outstanding during the period.
<TABLE>
<CAPTION>
NOTE 15. SELECTED INCOME STATEMENT INFORMATION
- - - ----------------------------------------------------------
NONINTEREST REVENUES YEAR ENDED DECEMBER 31,
- - - ----------------------------------------------------------
1993 1992 1991
- - - ----------------------------------------------------------
<S> <C> <C> <C>
Credit card
securitization income $ 135,785 $ 80,761 $ 42,422
Credit card
servicing income 41,593 28,634 15,362
Income from mortgage
banking activities 24,146 24,633 21,417
Credit card
interchange income 18,843 30,693 31,819
Other credit card
revenues 11,545 11,752 11,966
Leasing
revenues, net 10,317 6,170 3,492
Insurance
revenues, net 9,249 7,406 5,851
Securities gains 2,542 1,869 410
Other 1,560 1,226 618
- - - ----------------------------------------------------------
Total noninterest
revenues $ 255,580 $193,144 $133,357
==========================================================
</TABLE>
<TABLE>
<CAPTION>
OPERATING EXPENSES YEAR ENDED DECEMBER 31,
- - - ----------------------------------------------------------
1993 1992 1991
- - - ----------------------------------------------------------
<S> <C> <C> <C>
Salaries and
employee benefits $ 65,469 $ 51,599 $ 42,566
Marketing 18,742 13,845 8,135
External processing 16,604 12,993 10,871
Credit card
fraud losses 13,779 13,134 10,820
Professional fees 10,761 5,700 3,236
Postage 9,818 7,806 6,278
Credit and collection
expense 7,055 5,273 4,140
Equipment expense 6,550 5,629 5,433
Occupancy expense 6,247 5,272 4,591
Telephone expense 5,402 4,379 3,346
Amortization
of goodwill 315 325 329
Other 13,859 11,645 8,084
- - - ----------------------------------------------------------
Total operating
expenses $ 174,601 $137,600 $107,829
==========================================================
</TABLE>
<TABLE>
<CAPTION>
NOTE 16. SELECTED BALANCE SHEET INFORMATION
- - - ----------------------------------------------------------
INTEREST-BEARING DEPOSITS December 31,
- - - ----------------------------------------------------------
1993 1992
- - - ----------------------------------------------------------
<S> <C> <C>
Amounts due from credit
card trusts(A) $104,714 $106,452
Amounts due from
mortgage trusts(A) 39,718 32,755
Amounts due from
leasing trusts(A) 5,915 0
Certificates of deposit 149 128
Other interest-
bearing deposits 0 80,050
- - - ----------------------------------------------------------
Total interest-bearing deposits $150,496 $219,385
==========================================================
</TABLE>
(A) Represents initial deposits and subsequent excess collections up to the
required amount on each of the credit card, mortgage and leasing
securitizations.
<TABLE>
<CAPTION>
Amounts Due From Securitizations December 31,
- - - ----------------------------------------------------------
1993 1992
- - - ----------------------------------------------------------
<S> <C> <C>
Excess servicing-
credit card securitization $ 64,309 $ 59,128
Excess mortgage
servicing rights 57,017 40,699
Excess servicing-
leasing securitization 1,289 1,663
Due from trustees 30,467 37,254
- - - ----------------------------------------------------------
Amounts due from
securitizations $153,082 $138,744
==========================================================
</TABLE>
<TABLE>
<CAPTION>
OTHER ASSETS DECEMBER 31,
- - - ----------------------------------------------------------
1993 1992
- - - ----------------------------------------------------------
<S> <C> <C>
Accrued interest receivable $ 57,247 $ 43,176
Prepaid assets 16,307 9,420
Goodwill 5,648 5,934
Deferred costs 5,583 3,933
Other real estate(A) 1,447 1,100
Other 28,986 28,399
- - - ----------------------------------------------------------
Total other assets $115,218 $ 91,962
==========================================================
</TABLE>
(A) Carried at the lower of cost or fair market value.
48
<PAGE> 45
ADVANTA CORP. AND SUBSIDIARIES
<TABLE>
<CAPTION>
OTHER LIABILITIES DECEMBER 31,
- - - ----------------------------------------------------------
1993 1992
- - - ----------------------------------------------------------
<S> <C> <C>
Current and deferred
income taxes $37,844 23,161
Accounts payable and
accrued expenses 15,139 13,440
Accrued interest payable 8,387 7,796
Other 8,691 23,382
- - - ----------------------------------------------------------
Total other liabilities $70,061 $67,779
==========================================================
</TABLE>
NOTE 17. CASH, DIVIDEND AND LOAN RESTRICTIONS
- - - -------------------------------------------------
In the normal course of business, the Company and its subsidiaries enter into
agreements, or are subject to regulatory requirements, that result in cash,
debt and dividend restrictions.
At December 31, 1992, Advanta Leasing had $6.3 million of cash related
to its securitizations which is restric-ted as to its use. This cash represents
the initial deposits and subsequent excess collections up to the required amount
on each of the equipment lease-backed securitizations. In 1993, this amount is
included in interest-bearing deposits.
The Federal Reserve Act imposes various legal limitations on the extent
to which banks that are members of the Federal Reserve System can finance or
otherwise supply funds to certain of their affiliates. In particular, Colonial
National is subject to certain restrictions on any extensions of credit to, or
other covered transactions, such as certain purchases of assets, with the
Company or its affiliates. Such restrictions prevent Colonial National from
lending to the Company and its affiliates unless such extensions of credit are
secured by U.S. Government obligations or other specified collateral. Further,
such secured extensions of credit by Colonial National are limited in amount:
(a) as to the Company or any such affiliate, to 10 percent of Colonial
National's capital and surplus, and (b) as to the Com-pany and all such
affiliates in the aggregate, to 20 percent of Colonial National's capital and
surplus.
Under certain grandfathering provisions of the Competitive Equality
Banking Act of 1987, the Company is not required to register as a bank holding
company under the Bank Holding Company Act of 1956, as amended (the "BHCA"), so
long as the Company and Colonial National continue to comply with certain
restrictions on their activities. With respect to Colonial National, these
restric-tions include limiting the scope of its activities to those in which it
was engaged prior to March 5, 1987. Since Colonial National was not making
commercial loans at that time, it must continue to refrain from making
commercial loans--which would include any loans to the Company or any of its
subsidiaries--in order for the Company to maintain its grandfathered exemption
under the BHCA. The Company has no present plans to register as a bank holding
company under the BHCA. Colonial National is subject to various legal
limitations on the amount of dividends that can be paid to its parent, Advanta
Corp. Colonial National is eligible to declare a dividend provided that it is
not greater than the current year's net profits plus net profits of the
preceding two years, as defined. During 1993, Colonial National paid $75.0
million of dividends to Advanta Corp., while $30.5 million of dividends were
paid during 1992.
The Office of the Comptroller of the Currency requires that Colonial
National maintain a risk-based capital ratio of at least 8%. Colonial National's
risk-based capital ratio of 12.06% at December 31, 1993 was in excess of the
required level and exceeded the minimum required capital level of 10% for
designation as a "well capitalized" depository institution.
49
<PAGE> 46
ADVANTA CORP. AND SUBSIDIARIES
NOTE 18. FAIR VALUE OF FINANCIAL INSTRUMENTS
- - - ------------------------------------------------
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
- - - --------------------------------------------------------------------------
1993 1992
---------------------- -----------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- - - --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Financial assets:
Cash $ 31,162 $ 31,162 $ 35,743 $ 35,743
Federal funds
sold 83,700 83,700 92,900 92,900
Interest-bearing
deposits 150,496 150,496 219,385 219,385
Investments 308,026 308,026 209,282 210,377
Loans, net
of reserve
for credit
losses 1,282,653 1,327,455 977,581 1,035,601
Excess servicing rights:
Credit
cards 64,309 125,309 59,128 99,998
Mortgage
loans 57,017 59,217 40,699 42,299
Financial liabilities:
Demand and
savings
deposits $ 254,153 $ 254,153 $ 235,486 $ 235,486
Time deposits
and debt 1,466,940 1,488,660 1,240,167 1,264,081
Senior
subordinated
debentures 0 0 33,150 34,536
Other
borrowings 7,487 7,487 23,614 23,614
Off-balance sheet
financial instruments:
Interest rate swaps
(payable
position) $ 0 $ (5,693) $ 0 $ (5,306)
Forward
contracts (175) (64) (515) (1,202)
Intangibles:
Customer
relationships--
on-and off-
balance
sheet $ 0 $ 502,670 $ 0 $ 342,196
- - - --------------------------------------------------------------------------
</TABLE>
The above values do not necessarily reflect the premium or discount that
could result from offering for sale at one time the Company's entire holdings of
a particular instrument. In addition, these values, derived from the methods and
assumptions described below, do not consider the potential income taxes or other
expenses that would be incurred on an actual sale of an asset or settlement of a
liability.
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value.
CASH, FEDERAL FUNDS SOLD AND INTEREST-BEARING DEPOSITS
For these short-term instruments, the carrying amount is a reasonable estimate
of the fair value.
INVESTMENTS
For investment securities held to maturity and those available for sale, fair
values are based on quoted market prices, dealer quotes or estimated using
quoted market prices for similar securities.
LOANS, NET OF RESERVE FOR CREDIT LOSSES
For credit card receivables and mortgage loans, fair value is estimated using
the quoted market prices for securities backed by similar loans, adjusted for
differences in loan characteristics. The fair value for credit card receivables
and mortgage loans also includes the estimated value of the portion of the
interest payments and fees which are not sold with the securities backed by
these types of loans. The value of the retained interest payments (i.e., excess
servicing) is estimated by discounting the future cash flows, adjusted for
prepayments, net of anticipated charge-offs and allowing for the value of the
servicing. The value of direct finance lease receivables and other loans are
estimated based on the market prices of similar receivables with similar
characteristics.
EXCESS SERVICING-CREDIT CARD AND MORTGAGE SERVICING RIGHTS
The fair values of excess mortgage servicing rights and credit card excess
servicing rights are estimated by dis-counting the future cash flows at rates
which management believes to be reasonable. However, because there is no active
market for these financial instruments, management
50
<PAGE> 47
ADVANTA CORP. AND SUBSIDIARIES
has no basis to determine whether the fair values presented above would be
indicative of the value negotiated in an actual sale. The future cash flows
used to estimate the fair values of these financial instruments are adjusted
for prepayments, net of anticipated charge-offs under recourse provisions, and
allow for the value of servicing.
DEMAND AND SAVINGS DEPOSITS
The fair value of demand deposits, savings accounts, and money market deposits
is the amount payable on demand at the reporting date. This fair value does not
include the benefit that results from the low cost of funding provided by these
deposits compared to the cost of borrowing funds in the market.
TIME DEPOSITS AND DEBT
The fair value of fixed-maturity certificates of deposit and notes are
estimated using the rates currently offered for deposits and notes of similar
remaining maturities.
SENIOR SUBORDINATED DEBENTURES
The fair value of the senior subordinated debentures is based on dealer
quotations.
OTHER BORROWINGS
The other borrowings are all at variable interest rates and therefore the
carrying value approximates a reasonable estimate of the fair value.
INTEREST RATE SWAPS AND FORWARD CONTRACTS
The fair value of interest rate swaps and forward contracts (used for hedging
purposes) is the estimated amount that the Company would pay to terminate the
agreement at the reporting date, taking into account current interest rates and
the current creditworthiness of the counterparty.
CUSTOMER RELATIONSHIPS (BOTH ON- AND OFF-BALANCE SHEET)
The fair value of the credit card relationships, which are not financial
instruments, is estimated using a credit card valuation model which considers
the value of the existing receivables together with the value of new
receivables and the associated fees generated from existing cardholders over
the remaining life of the portfolio.
COMMITMENTS TO EXTEND CREDIT
Although the Company had $12.1 billion of unused commitments to extend credit,
there is no market value associated with these financial instruments, as any
fees charged are consistent with the fees charged by other companies at the
reporting date to enter into similar agreements.
NOTE 19. CALCULATION OF EARNINGS PER COMMON SHARE
- - - --------------------------------------------------------
The following table shows the calculation of earnings per common share for the
years ended December 31, 1993, 1992 and 1991:
<TABLE>
<CAPTION>
- - - ----------------------------------------------------------
1993 1992 1991
- - - ----------------------------------------------------------
<S> <C> <C> <C>
Net income $76,647 $48,037 $25,165
less: preferred dividends (141) (141) (141)
- - - ----------------------------------------------------------
Net income
available to
common shares $76,506 $47,896 $25,024
Average common
stock outstanding 37,170 32,054 28,893
Common stock
equivalents 2,607 2,536 2,151
- - - ----------------------------------------------------------
Weighted
average shares
outstanding 39,777 34,590 31,044
==========================================================
Earnings per
common share $ 1.92 $ 1.38 $ .81
==========================================================
</TABLE>
51
<PAGE> 48
ADVANTA CORP. AND SUBSIDIARIES
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Advanta Corp.:
We have audited the accompanying consolidated balance sheets of Advanta Corp.
(a Delaware corporation) and subsidiaries as of December 31, 1993 and 1992, and
the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Advanta
Corp. and subsidiaries as of December 31, 1993 and 1992, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1993, in conformity with generally accepted accounting
principles.
/S/ ARTHUR ANDERSEN & CO.
-------------------------
Philadelphia, PA
January 25, 1994
REPORT OF MANAGEMENT ON RESPONSIBILITY FOR FINANCIAL REPORTING
To the Stockholders of Advanta Corp.:
The management of Advanta Corp. and its subsidiaries is responsible for the
preparation, content, integrity and objectivity of the financial statements
contained in this Annual Report. These financial statements have been pre-pared
in accordance with generally accepted accounting principles and as such, must,
by necessity, include amounts based upon estimates and judgments made by
management. The other financial information in the Annual Report was also
prepared by management and is consistent with the financial statements.
Management maintains a system of internal controls that provides
reasonable assurance as to the integrity and reliability of the financial
statements. This control system includes: (l) organizational and budgetary
arrangements which provide reasonable assurance that errors or irregularities
would be detected promptly, (2) careful selection of personnel and
communications programs aimed at assuring that policies and standards are
understood by employees, (3) a program of internal audits, and (4) continuing
review and evaluation of the control program itself.
The financial statements in this Annual Report have been audited by
Arthur Andersen & Co., independent public accountants. Their audits were
conducted in accordance with generally accepted auditing standards and
considered the Company's system of internal controls to the extent they deemed
necessary to determine the nature, timing and extent of their audit tests. Their
report is printed herewith.
<TABLE>
<S> <C> <C>
/S/ RICHARD A. GREENAWALT /S/ David D. Wesselink /S/ JOHN J. CALAMARI
------------------------- ------------------------ ---------------------
Richard A. Greenawalt David D. Wesselink John J. Calamari
President and Chief Senior Vice President Vice President,
Operating Officer and Chief Financial Officer Finance
</TABLE>
52
<PAGE> 49
ADVANTA CORP. AND SUBSIDIARIES
QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except per share data)
1993
- - - -----------------------------------------------------------------------------------------------------------------------
December 31, September 30, June 30, March 31,
- - - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income $35,823 $41,189 $38,377 $ 35,992
Interest expense 19,733 19,676 19,665 20,229
-------------------------------------------------------
Net interest income 16,090 21,513 18,712 15,763
Provision for credit losses 8,230 8,027 6,364 7,181
-------------------------------------------------------
Net interest income after provision for credit losses 7,860 13,486 12,348 8,582
Noninterest revenues 75,243 64,948 58,338 57,051
Operating expenses 48,224 44,719 41,650 40,008
-------------------------------------------------------
Income before income taxes and extraordinary item 34,879 33,715 29,036 25,625
Net income before extraordinary item 23,020 20,285 18,471 16,144
Extraordinary item, net 0 0 (1,273) 0
- - - -----------------------------------------------------------------------------------------------------------------------
Net income $23,020 $20,285 $17,198 $ 16,144
=======================================================================================================================
Earnings per common share before extraordinary item $ 0.56 $ 0.50 $ 0.46 $ 0.45
=======================================================================================================================
Earnings per common share $ 0.56 $ 0.50 $ 0.43 $ 0.45
=======================================================================================================================
Weighted average common shares outstanding 41,243 40,732 40,299 35,829
=======================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
1992
- - - -----------------------------------------------------------------------------------------------------------------------
December 31, September 30, June 30, March 31,
- - - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income $34,652 $39,100 $42,248 $ 46,239
Interest expense 21,957 23,096 23,147 25,345
-------------------------------------------------------
Net interest income 12,695 16,004 19,101 20,894
Provision for credit losses 8,300 12,329 10,849 15,660
-------------------------------------------------------
Net interest income after provision for credit losses 4,395 3,675 8,252 5,234
Noninterest revenues 59,454 52,187 41,972 39,531
Operating expenses 40,259 33,695 33,557 30,089
-------------------------------------------------------
Income before income taxes 23,590 22,167 16,667 14,676
- - - -----------------------------------------------------------------------------------------------------------------------
Net income $14,861 $13,744 $10,331 $ 9,101
=======================================================================================================================
Earnings per common share $ 0.43 $ 0.40 $ 0.30 $ 0.26
=======================================================================================================================
Weighted average common shares outstanding 34,899 34,425 34,322 34,434
=======================================================================================================================
</TABLE>
54
<PAGE> 50
ADVANTA CORP. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULES
Allocation of Reserve for Credit Losses
<TABLE>
<CAPTION>
(Dollars in thousands) December 31,
- - - -----------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
------------ ------------ ------------ ------------ ------------
Reserve Reserve Reserve Reserve Reserve
Amount % Amount % Amount % Amount % Amount %
- - - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Credit cards $25,859 83% $35,743 89% $31,193 86% $27,247 86% $19,247 83%
Mortgage loans 2,706 9 2,926 7 2,447 7 1,766 6 1,411 6
Leases 1,826 6 1,442 4 1,119 3 1,594 5 1,363 6
Other loans 836 2 117 -- 200 -- 200 -- 200 1
Unallocated 0 -- 0 -- 1,396 4 894 3 887 4
- - - -----------------------------------------------------------------------------------------------------------------------
Total $31,227 100% $40,228 100% $36,355 100% $31,701 100% $23,108 100%
=======================================================================================================================
</TABLE>
COMPOSITION OF GROSS RECEIVABLES
<TABLE>
<CAPTION>
(Dollars in thousands) December 31,
- - - -----------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
-------------- -------------- -------------- -------------- ---------------
Amount % Amount % Amount % Amount % Amount %
- - - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Credit cards $1,131,367 89% $ 737,485 74% $1,048,325 82% $ 791,447 70% $ 657,032 69%
Mortgage loans 91,340 7 212,273 21 186,820 15 252,339 22 214,843 23
Leases 51,008 4 46,712 5 36,510 3 83,557 8 72,626 8
Other loans 3,590 -- 1,774 -- 1,765 -- 2,150 -- 2,501 --
- - - -----------------------------------------------------------------------------------------------------------------------
Total $1,277,305 100% $ 998,244 100% $1,273,420 100% $1,129,493 100% $ 947,002 100%
=======================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
YIELD AND MATURITY OF INVESTMENTS AVAILABLE FOR SALE AT DECEMBER 31, 1993
(Dollars in thousands)
- - - -----------------------------------------------------------------------------------------------------------------------
Maturing
- - - -----------------------------------------------------------------------------------------------------------------------
After One But After Five But
Within One Year Within Five Years Within Ten Years After Ten Years
--------------- ----------------- ----------------- ----------------
Amount Yield Amount Yield Amount Yield Amount Yield
- - - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U. S. Treasury and other
U.S. Government
securities $59,859 3.38% 95,062 4.48% $ 0 0.00% $ 0 0.00%
State and municipal
securities(A) 0 0.00 75,667 4.70 998 6.92 0 0.00
Other 2,527 3.17 12,305 6.02 28,776 5.97 32,832 5.87
- - - -----------------------------------------------------------------------------------------------------------------------
Total $62,386 3.37% 183,034 4.68% $29,774 6.00% $32,832 5.87%
=======================================================================================================================
</TABLE>
(A) Yield computed on a taxable equivalent basis using a statutory rate of 35%
in 1993.
55
<PAGE> 51
ADVANTA CORP. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULES
MATURITY OF TIME DEPOSITS OF $100,000 OR MORE
<TABLE>
<CAPTION>
(In thousands) December 31,
- - - ----------------------------------------------------------
1993
- - - ----------------------------------------------------------
<S> <C>
Maturity:
3 months or less $ 66,250
Over 3 months through 6 months 43,450
Over 6 months through 12 months 24,203
Over 12 months 20,263
- - - ----------------------------------------------------------
Total $154,166
==========================================================
</TABLE>
53
<PAGE> 52
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
<PAGE> 53
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The text of the Proxy Statement under the caption "Election of
Directors" and the last paragraph under the caption "Security Ownership of
Management" are hereby incorporated herein by reference, as is the text in Part
I of this Report under the caption, "Executive Officers of the Registrant".
Graeme K. Howard, Jr., age 61, who has served as a director of the Company
since 1985, will not stand for re-election when his term expires in May 1994.
ITEM 11. EXECUTIVE COMPENSATION.
The text of the Proxy Statement under the captions "Executive
Compensation" and "Committees, Meetings and Compensation of the Board of
Directors" are hereby incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The text of the Proxy Statement under the captions, "Security Ownership
of Certain Beneficial Owners" and "Security Ownership of Management" are hereby
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The text of the third paragraph under the caption "Election of
Directors -- Nominees for Election for a Term Expiring in 1997" in the Proxy
Statement is hereby incorporated herein by reference.
<PAGE> 54
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.
The following Financial Statements, Schedules, and Other Information of
the Registrant and its subsidiaries are included in this Form 10-K:
(a) (1) Financial Statements
1. Consolidated Balance Sheets at December 31, 1993 and 1992.
2. Consolidated Income Statements for each of the three years
for the period ended December 31, 1993.
3. Consolidated Statements of Changes in Stockholders' Equity for
each of the three years for the period ended December 31, 1993.
4. Consolidated Statements of Cash Flows for each of the three
years for the period ended December 31, 1993.
5. Notes to Consolidated Financial Statements.
(a) (2) Schedules
1. Schedule I -- Marketable Securities.
2. Schedule III -- Condensed Financial Information of Registrant
3. Schedule VIII -- Valuation and Qualifying Accounts.
4. Schedule IX -- Short-Term Borrowings.
5. Report of Independent Public Accountants on Supplemental
Schedules.
Other statements and schedules are not being presented either
because they are not required or the information required by
such statements and schedules is presented elsewhere in the
financial statements.
(a) (3) Exhibits.
3-a Restated Certificate of Incorporation of Registrant, as
amended (incorporated by reference to Exhibit 3 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1988 and Exhibit 3 to the Company's Quarterly
Report on Form 10- Q for the period ended March 31, 1992).
3-b By-Laws of the Registrant, as amended (incorporated by
reference to Exhibit 3 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1989).
4-a* Trust Indenture dated April 22, 1981 between Registrant and
CoreStates Bank, N.A. (formerly, The Philadelphia National
Bank), as Trustee, including Form of Debenture.
4-b Specimen of Class A Common Stock Certificate and specimen of
Class B Common Stock Certificate (incorporated by reference to
Exhibit 1 of the Registrant's Amendment No. 1 to Form 8 and
Exhibit 1 to Registrant's Form 8-A,
<PAGE> 55
respectively, both dated April 22, 1992).
4-c Trust Indenture dated as of November 15, 1993 between the
Registrant and The Chase Manhattan Bank (National
Association), as Trustee (incorporated by reference to Exhibit
4 of the Registrant's Registration Statement on Form S-3 (No.
33-50883), filed November 2, 1993.
9 Inapplicable.
10-a Registrant's Stock Option Plan, as amended (incorporated by
reference to Exhibit 10-b to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1989).**
10-b Advanta Corp. 1992 Stock Option Plan (incorporated by
reference to Exhibit 10-t to the Registrant's Registration
Statement on Form S-3, Registration No. 33-58660, filed
February 23, 1993).
10-c Pooling and Servicing Agreement between Colonial National Bank
USA and Bankers Trust Company, as Trustee, dated as of May 1,
1991 (incorporated by reference to Exhibit 4.1 to Colonial
National's Registration Statement on Form S-1 (No. 33-40368),
filed with Amendment No.1 thereto on May 21, 1991)
10-d Registrant's Advanta Management Incentive Plan (incorporated
by reference to Exhibit 10-n to the Registrant's Registration
Statement on Form S-2, Registration No.33-39343, filed March
8, 1991).**
10-e* Application for membership in VISA U.S.A. Inc. and Membership
Agreement executed by Colonial National Bank USA on March 25,
1983.
10-f* Application for membership in MasterCard International, Inc.
and Card Member License Agreement executed by Colonial
National Bank USA on March 25, 1983.
10-g* Indenture of Trust dated May 11, 1984 between Linda M.
Ominsky, as settlor, and Dennis Alter, as trustee.
10-g(i) Agreement dated October 20, 1992 among Dennis Alter, as
Trustee of the trust established by the Indenture of Trust
filed as Exhibit 10-g (the "Indenture"), Dennis Alter in his
individual capacity, Linda A. Ominsky, and Michael Stolper,
which Agreement modifies the Indenture (incorporated by
reference to Exhibit 10-g(i) to the Registrant's Registration
Statement on Form S-3, Registration No. 33-58660, filed
February 23, 1993).
10-h Agreement dated as of January 21, 1994 betweenn the Registrant
and Alex W. "Pete" Hart (filed herewith).**
10-i Advanta Management Incentive Plan with Stock Election
(incorporated by reference to Exhibit 4-c to Amendment No. 1
to the Registrant's Registration Statement on Form S-8 (No.
33-33350) filed February 21, 1990).**
10-j Pooling and Servicing Agreement between Colonial National Bank
USA and Bankers Trust Company, as Trustee, dated as of August
1, 1990 (incorporated by reference to Exhibit 4 to the
Registrant's Report on Form 8-K filed September 11, 1990).
10-k Pooling and Servicing Agreement between Colonial National Bank
USA and Bankers Trust Company, as Trustee, dated as of
November 15, 1990 (incorporated by reference to Exhibit 4 to
the Registrant's Report on Form 8-K filed November 30, 1990).
<PAGE> 56
10-l Registrant's Advanta Management Incentive Plan With Stock
Election II (incorporated by reference to Exhibit 10-o to the
Registrant's Registration Statement on Form S-2, Registration
No. 33-39343, filed March 8, 1991).**
10-m Pooling and Servicing Agreement between Colonial National Bank
USA and Banker's Trust Company, as Trustee, dated as of
September 1, 1991 (incorporated by reference to Exhibit 4.1 to
Colonial National's Registration Statement on Form S-1 (No.33-
42682), filed with Amendment No. 1 thereto on September 23,
1991).
10-n Pooling and Servicing Agreement between Colonial National Bank
USA and Banker's Trust Company, as Trustee, dated as of
February 1, 1992 (incorporated by reference to Exhibit 4.1 to
Colonial National's Registration Statement on Form S-1 (No.33-
45306), filed with Amendment No.1 thereto on February 3,
1992).
10-o Amended and Restated Master Pooling and Servicing Agreement
between Colonial National Bank USA and Chemical Bank, as
Trustee, dated as of April 1, 1992 (incorporated by reference
to Exhibit 4.1 to Colonial National's Registration Statement
on Form S-1 (No. 33-49602), filed with Amendment No. 1
thereto on August 19, 1992).
10-p Advanta Management Incentive Plan with Stock Election III
(incorporated by reference to Exhibit 10-s to the Registrant's
Registration Statement on Form S-3, Registration No. 33-58660,
filed February 23, 1993).**
10-q Life Insurance Benefit for Certain Key Executives and
Directors (incorporated by reference to Exhibit 10-u to the
Registrant's Registration Statement on Form S-3, Registration
No. 33-58660, filed February 23, 1993).**
10-r $122.5 Million 364-day Unsecured Revolving Credit Agreement
dated as of March 24, 1994 among the Registrant, Mellon Bank,
N.A. as Agent and the several bank parties thereto (filed
herewith).
10-s $122.5 Million 3-year Unsecured Revolving Credit Agreement
dated as of March 24, 1994 among the Registrant, Mellon Bank,
N.A. as Agent and the several bank parties thereto (filed
herewith).
11 Inapplicable.
12 Inapplicable.
13 Inapplicable.
16 Inapplicable.
18 Inapplicable.
21. Subsidiaries of the Registrant (filed herewith).
22 Inapplicable.
23 Consent of independent public accountants (filed herewith).
24 Powers of Attorney of Messrs. Bellis, Botel, Braemer, Brenner,
Dunkelberg and Naples (filed herewith).
<PAGE> 57
28 Inapplicable.
99 Inapplicable.
_________
*Incorporated by reference to the Exhibit with corresponding number
constituting part of the Registrant's Registration Statement on Form S-2 (No.
33-00071), filed on September 4, 1985.
**Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
1. A Report Form 8-K was filed by the Registrant
on October 25, 1993 regarding consolidated
earnings of the Registrant and its
subsidiaries for the fiscal quarter ended
September 30, 1993. Summary earnings and
balance sheet information as of that date
were filed with such report.
2. A Report Form 8-K was filed by the Registrant
on December 3, 1993 regarding the
commencement of the Registrant's $500,000,000
medium-term note program. No financial
statements were filed with such Report.
3. A Report Form 8-K was filed by the Registrant
on January 20, 1994 regarding consolidated
earnings for the Registrant and its
subsidiaries for the fiscal quarter ended and
fiscal year ended December 31, 1993. Summary
earnings and balance sheet information as of
that date were filed with such report.
<PAGE> 58
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ADVANTA Corp.
Dated: March 28, 1994 By: /S/ Dennis Alter
-------------------
Dennis Alter, Chairman
of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 28th day of March, 1994.
<TABLE>
<CAPTION>
Name Title
<S> <C>
/S/ Dennis Alter Chairman of the Board and Chief
- - - ------------------- Executive Officer
Dennis Alter
/S/ Alex W. "Pete" Hart Executive Vice Chairman and
- - - ----------------------- Director
Alex W. "Pete" Hart
/S/ Richard A. Greenawalt President, Chief Operating
- - - ------------------------- Officer and Director
Richard A. Greenawalt
/S/ Warren Kantor Vice Chairman and Director
- - - -----------------
Warren Kantor
/S/ David D. Wesselink Senior Vice President and
- - - ---------------------- Chief Financial Officer
David D. Wesselink
/S/ John J. Calamari Vice President, Finance and
- - - -------------------- Chief Accounting Officer
John J. Calamari
* Director
- - - ----------------------------
Arthur P. Bellis
* Director
- - - ----------------------------
Max Botel
* Director
- - - ----------------------------
Richard Braemer
* Director
- - - ----------------------------
Anthony Brenner
* Director
- - - ----------------------------
William C. Dunkelberg, Ph.D.
Director
- - - ----------------------------
Graeme K. Howard, Jr.
* Director
- - - ----------------------------
Ronald J. Naples
</TABLE>
<PAGE> 59
<TABLE>
<S> <C>
Director
- - - ----------------------------
Phillip Turberg
*By: /s/ Gene S. Schneyer
---------------------
Gene S. Schneyer
Attorney-in-Fact
</TABLE>
<PAGE> 60
FINANCIAL SCHEDULES AND
INDEPENDENT PUBLIC ACCOUNTANTS' REPORT THEREON
<PAGE> 61
Schedule I
ADVANTA CORP. & SUBSIDIARIES
Marketable Securities
December 31, 1993
(Dollars in thousands)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Amount at which
each portfolio
equity security
Market value issues and each
Number of shares or of each issue other security
Name of issuer and or units-principal Cost of at balance issue is carrie
title of each issue of bonds & notes each issue sheet date the balance she
- - - ------------------------------------------------------ -------------------------------
<S> <C> <C> <C> <C>
US Treasury and
other US Govt Secs $154,388 par $154,656 $154,921 $154,921
State and other
municipal securitie $74,370 par 76,077 76,665 76,665
Collateralized
mortgage obligation $21,206 par 21,422 21,270 21,270
Mortgaged backed
securities $44,671 par 45,778 45,569 45,569
Equity securities 197,679 shares 6,947 6,947 6,947
Other $2,073 par 2,709 2,654 2,654
-----------------------------------------
TOTAL $307,589 $308,026 $308,026
=========================================
</TABLE>
<PAGE> 62
ADVANTA CORP. & SUBSIDIARIES
December 31, 1993
Schedule III - Condensed Financial Information of Registrant
Parent Company Only
CONDENSED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31,
--------------------
1993 1992
---- ----
<S> <C> <C>
ASSETS
Cash $ 44,561 $ 13,130
Interest-bearing deposits 0 24,350
Investments 136,523 61,824
Other assets, principally investments in and
advances to wholly owned subsidiaries 582,846 386,589
-------- --------
Total assets $763,930 $485,893
======== ========
LIABILITIES
Accrued expenses and other liabilities $ 4,597 $ 6,705
Subordinated debt and other borrowings 416,592 304,318
-------- --------
Total liabilities 421,189 311,023
-------- --------
STOCKHOLDERS' EQUITY
Preferred stock 1,010 1,010
Common stock 398 342
Other stockholders' equity 341,333 173,518
-------- --------
Total stockholders' equity 342,741 174,870
-------- --------
Total liabilities and stockholders
equity $763,930 $485,893
======== ========
</TABLE>
<PAGE> 63
Schedule III (cont'd)
Parent Company Only
CONDENSED STATEMENT OF INCOME
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Income:
Interest $ 8,545 $ 4,807 $ 3,759
Other 4,163 5,359 4,381
--------- --------- ---------
Total Income 12,708 10,166 8,140
--------- --------- ---------
Expenses:
General and administrative 57,051 30,097 17,834
Interest 21,544 23,434 20,247
--------- --------- ---------
Total Expenses 78,595 53,531 38,081
--------- --------- ---------
Loss before income taxes,
equity in subsidiaries,
and extraordinary item (65,887) (43,365) (29,941)
Benefit for income taxes 25,147 16,728 12,552
--------- --------- ---------
Loss before equity in
subsidiaries and
extraordinary item (40,740) (26,637) (17,389)
Equity in net profit of
subsidiaries 118,660 74,674 42,554
--------- --------- ---------
Net income before
extraordinary item 77,920 48,037 25,165
Extraordinary item, net (1,273) 0 0
--------- --------- ---------
Net income $ 76,647 $ 48,037 $ 25,165
========= ========= =========
</TABLE>
<PAGE> 64
Schedule III (Cont'd)
Parent Company Only
Statement of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------
1993 1992 1991
----------- ------------ -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $ 76,647 $ 48,037 $ 25,165
Adjustments to reconcile net income to
net cash used by operating activities:
Depreciation 335 328 359
Change in other assets (101,210) (98,683) (46,536)
Change in accrued liabilities 1,955 4,078 (9,929)
Loss on repurchase of senior
subordinated debentures 1,928 0 0
- - - --------------------------------------------------------------------------------------------
Net cash used by operating activities (20,345) (46,240) (30,941)
INVESTING ACTIVITIES
Net change in premises & equipment (454) 39 (342)
Purchase of investments (291,548) (61,119) (40,869)
Proceeds from sales of investments 186,051 0 14,788
Proceeds from maturing investments 31,715 22,444 2,942
Principal collected on loans 0 0 10
Capital contribution to subsidiaries 0 0 (12,475)
Dividends received from subsidiaries 61,986 25,239 0
Change in interest-bearing deposits 24,350 (22,722) 35,776
- - - --------------------------------------------------------------------------------------------
Net cash provided/(used) by investing activities 12,100 (36,119) (170)
FINANCING ACTIVITIES
Proceeds from issuance of subordinated debt 85,380 177,321 132,022
Payments on redemption of subordinated debt (103,480) (98,711) (80,916)
Increase in affiliate borrowings (156,915) (13,114) (9,900)
Redemption of senior subordinated debt (36,404) 0 0
Proceeds from issuance of medium-term
notes 164,851 0 0
Cash dividends paid (7,298) (4,028) (2,111)
Purchase of treasury stock 0 0 (62)
Issuance of stock 93,542 3,377 21,300
- - - --------------------------------------------------------------------------------------------
Net cash provided by financing activities 39,676 64,845 60,333
- - - --------------------------------------------------------------------------------------------
Net increase/(decrease) in cash 31,431 (17,514) 29,222
Cash at beginning of year 13,130 30,644 1,422
Cash at end of year $ 44,561 $ 13,130 $ 30,644
============================================================================================
</TABLE>
<PAGE> 65
Schedule VIII
ADVANTA Corp. & Subsidiaries
Valuation & Qualifying Accounts
($000's)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
------------ ------------ ----------------------- ------------ ------------
Additions
-----------------------
Year Balance Charged Charged to Balance
Ended at to Other at
December Beginning Costs and Accounts Deductions End
31, Description of Period Expenses (Describe) (Describe) of Period
- - - ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1993 Reserve for
losses on
securitized
credit cards 108,756 0 69,964 (1) 82,343 (3) 96,377
Reserve for
prepayments
and credit
losses on
securitized HEL 17,861 0 34,436 (1) (2) 11,784 (3) 40,513
Reserve for
losses on
securitized
Leases 3,100 0 4,010 (1) 1,812 (3) 5,298
Reserve for
uncollectable
receivables &
unbillable fees 97 170 0 (1) 244 (3) 23
1992 Reserve for
losses on
securitized
credit cards 48,094 0 123,745 (1) 63,083 (3) 108,756
Reserve for
prepayments
and credit
losses on
securitized HEL 12,081 0 11,203 (1) (4) 5,423 (3) 17,861
Reserve for
losses on
securitized
Leases 2,400 0 1,785 (1) 1,085 (3) 3,100
Reserve for
uncollectable
receivables &
unbillable fees 0 110 0 13 (3) 97
1991 Reserve for
losses on
securitized
credit cards 27,400 0 57,555 (1) 36,861 (3) 48,094
Reserve for
prepayments
and credit
losses on
securitized HEL 10,351 0 3,134 (1) 1,404 (3) 12,081
Reserve for
losses on
securitized
Leases 0 0 2,400 (1) 0 2,400
</TABLE>
(1) Amounts netted against securitization income.
(2) Includes $11.0MM transferred from on-balance sheet unallocated reserves.
(3) Relates to net charge-offs.
(4) Includes $3.3MM transferred from on-balance sheet unallocated reserves.
<PAGE> 66
Schedule IX
ADVANTA CORP. & SUBSIDIARIES
Short-Term Borrowings
($000's)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Year Category of Weighted Maximum Average amount Weighted average
Ended aggregate Balance average outstanding outstanding interest rate
December short-term at end of interest during during the during the
31, borrowings period rate the period period period
- - - ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1993 Securities
sold under
agreements to
repurchase $0 0.00% $166,481 $42,649 3.07%
Notes payable
to banks 0 0.00% 45,355 17,337 5.62%
1992 Securities
sold under
agreements to
repurchase 0 0.00% 124,337 25,216 3.98%
Notes payable
to banks 7,066 7.02% 17,299 9,871 6.76%
1991 Securities
sold under
agreements to
repurchase 101,847 5.10% 101,847 18,836 6.36%
Notes payable
to banks 6,262 7.79% 18,048 8,220 8.87%
</TABLE>
<PAGE> 67
[ARTHUR ANDERSEN LETTERHEAD]
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON
SUPPLEMENTAL SCHEDULES
To Advanta Corp.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in this Form 10-K, and have issued
our report thereon dated January 25, 1994. Our audit was made for the purpose
of forming an opinion on those statements taken as a whole. The supplemental
schedules are the responsibility of the company's management and are presented
for purposes of complying with the Securities and Exchange Commission's rules
and are not part of the basic financial stataments. These schedules have been
subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly state in all material respects
the financial data required to be set forth therein in relation to the basic
financial statements taken as a whole.
/S/ ARTHUR ANDERSEN & CO.
Philadelphia, PA
January 25, 1994
<PAGE> 68
EXHIBIT INDEX
3-a Restated Certificate of Incorporation of Registrant,
as amended (incorporated by reference to Exhibit 3 to
the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1988 and Exhibit 3 to the
Company's Quarterly Report on Form 10-Q for the
period ended March 31, 1992).
3-b By-Laws of the Registrant, as amended (incorporated
by reference to Exhibit 3 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1989).
4-a* Trust Indenture dated April 22, 1981 between
Registrant and CoreStates Bank, N.A. (formerly, The
Philadelphia National Bank), as Trustee, including
Form of Debenture.
4-b Specimen of Class A Common Stock Certificate and
specimen of Class B Common Stock Certificate
(incorporated by reference to Exhibit 1 of the
Registrant's Amendment No. 1 to Form 8 and Exhibit 1
to Registrant's Form 8-A, respectively, both dated
April 22, 1992).
4-c Trust Indenture dated as of November 15, 1993
between the Registrant and The Chase
Manhattan Bank (National Association), as
Trustee (incorporated by reference to Exhibit
4 of the Registrant's Registration Statement
on Form S-3 (No. 33-50883), filed November 2,
1993.
9 Inapplicable.
10-a Registrant's Stock Option Plan, as amended
(incorporated by reference to Exhibit 10-b to the
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1989).**
10-b Advanta Corp. 1992 Stock Option Plan (incorporated by
reference to Exhibit 10-t to the Registrant's
Registration Statement on Form S-3, Registration No.
33-58660, filed February 23, 1993).
10-c Pooling and Servicing Agreement between Colonial
National Bank USA and Bankers Trust Company, as
Trustee, dated as of May 1, 1991 (incorporated by
reference to Exhibit 4.1 to Colonial National's
Registration Statement on Form S-1 (No. 33-40368),
filed with Amendment No.1 thereto on May 21, 1991)
10-d Registrant's Advanta Management Incentive Plan
(incorporated by reference to Exhibit 10-n to the
Registrant's Registration Statement on Form S-2,
Registration No.33-39343, filed March 8, 1991).**
10-e* Application for membership in VISA U.S.A. Inc. and
Membership Agreement executed by Colonial National
Bank USA on March 25, 1983.
10-f* Application for membership in MasterCard
International, Inc. and Card Member License
Agreement executed by Colonial National Bank USA on
March 25, 1983.
10-g* Indenture of Trust dated May 11, 1984 between Linda
M. Ominsky, as settlor, and Dennis Alter, as trustee.
<PAGE> 69
10-g(i) Agreement dated October 20, 1992 among Dennis Alter,
as Trustee of the trust established by the Indenture
of Trust filed as Exhibit 10-g (the "Indenture"),
Dennis Alter in his individual capacity, Linda A.
Ominsky, and Michael Stolper, which Agreement
modifies the Indenture (incorporated by reference to
Exhibit 10-g(i) to the Registrant's Registration
Statement on Form S-3, Registration No. 33-58660,
filed February 23, 1993).
10-h Agreement dated as of January 21, 1994 betweenn the
Registrant and Alex W. "Pete" Hart (filed
herewith).**
10-i Advanta Management Incentive Plan with Stock Election
(incorporated by reference to Exhibit 4-c to
Amendment No. 1 to the Registrant's Registration
Statement on Form S-8 (No. 33-33350) filed February
21, 1990).**
10-j Pooling and Servicing Agreement between Colonial
National Bank USA and Bankers Trust Company, as
Trustee, dated as of August 1, 1990 (incorporated by
reference to Exhibit 4 to the Registrant's Report on
Form 8-K filed September 11, 1990).
10-k Pooling and Servicing Agreement between Colonial
National Bank USA and Bankers Trust Company, as
Trustee, dated as of November 15, 1990 (incorporated
by reference to Exhibit 4 to the Registrant's Report
on Form 8-K filed November 30, 1990).
10-l Registrant's Advanta Management Incentive Plan With
Stock Election II (incorporated by reference to
Exhibit 10-o to the Registrant's Registration
Statement on Form S-2, Registration No. 33-39343,
filed March 8, 1991).**
10-m Pooling and Servicing Agreement between Colonial
National Bank USA and Banker's Trust Company, as
Trustee, dated as of September 1, 1991 (incorporated
by reference to Exhibit 4.1 to Colonial National's
Registration Statement on Form S-1 (No.33-42682),
filed with Amendment No. 1 thereto on September 23,
1991).
10-n Pooling and Servicing Agreement between Colonial
National Bank USA and Banker's Trust Company, as
Trustee, dated as of February 1, 1992 (incorporated
by reference to Exhibit 4.1 to Colonial National's
Registration Statement on Form S-1(No.33-45306),
filed with Amendment No.1 thereto on February 3,
1992).
10-o Amended and Restated Master Pooling and Servicing
Agreement between Colonial National Bank USA and
Chemical Bank, as Trustee, dated as of April 1, 1992
(incorporated by reference to Exhibit 4.1 to Colonial
National's Registration Statement on Form S-1 (No.
33-49602), filed with Amendment No. 1 thereto on
August 19, 1992).
10-p Advanta Management Incentive Plan with Stock Election
III (incorporated by reference to Exhibit 10-s to the
Registrant's Registration Statement on Form S-3,
Registration No. 33-58660, filed February 23,
1993).**
10-q Life Insurance Benefit for Certain Key Executives and
Directors (incorporated by reference to Exhibit 10-u
to the Registrant's Registration Statement on Form
S-3, Registration No. 33-58660, filed February 23,
1993).**
10-r $122.5 Million 364-day Unsecured Revolving Credit
Agreement dated as of March 24, 1994 among the
Registrant, Mellon Bank, N.A. as Agent and the
several bank parties thereto (filed herewith).
<PAGE> 70
10-s $122.5 Million 3-year Unsecured Revolving Credit
Agreement dated as of March 24, 1994 among the
Registrant, Mellon Bank, N.A. as Agent and the
several bank parties thereto (filed herewith).
11 Inapplicable.
12 Inapplicable.
13 Inapplicable.
16 Inapplicable.
18 Inapplicable.
21. Subsidiaries of the Registrant (filed herewith).
22 Inapplicable.
23 Consent of independent public accountants (filed
herewith).
24 Powers of Attorney of Messrs. Bellis, Botel, Braemer,
Brenner, Dunkelberg and Naples (filed herewith).
28 Inapplicable.
99 Inapplicable.
_________
*Incorporated by reference to the Exhibit with corresponding
number constituting part of the Registrant's Registration Statement on Form S-2
(No. 33-00071), filed on September 4, 1985.
**Management contract or compensatory plan or arrangement.
<PAGE> 1
EXHIBIT 10-h
January 21, 1994
Mr. Alex W. "Pete" Hart
c/o Levine Thall & Plotkin
1740 Broadway
New York, New York 10019
Dear Pete:
This letter, when signed by you and us, shall confirm and constitute
the agreement between you and ADVANTA Corp. ("we", "us" or the "Company") as
follows:
1. We hereby engage you and you hereby accept such engagement to
render services to us in accordance with the terms of this letter.
2. While I am CEO of the Company, you shall have such
responsibilities and authority as you and I mutually determine. Currently, we
would hope that in addition to contributing to our current lines of business,
you will: (i) help us expand into related complementary and/or supplementary
businesses and financial services; (ii) investigate and develop complementary
non-financial business opportunities (e.g., data base oriented, direct
response, customer segmentation, marketing, etc.); (iii) help evaluate and
forge joint ventures and strategic alliances between us and other
organizations; and (iv) assist in our evaluating and developing international
expansion opportunities. Obviously, we may mutually agree to different and/or
additional responsibilities in the future.
3. You will be accorded the title of Executive Vice Chairman of
the Company, it being understood that at such time, if any, as I personally
cease serving as CEO I will recommend to the Board of Directors ("Board") that
you be accorded the CEO title and position.
4. You shall be elected to be a member of the Board and the Board
shall nominate you to be elected by the shareholders for a three year term as
director at the Company's 1994 Annual Meeting. We shall at all times maintain
officers' and directors' liability insurance in an amount not less than $5
million.
5. You shall receive a base salary ("Base Salary") of Four
Hundred Ninety-Five Thousand ($495,000) per twelve (12) month period, which
shall be payable in accordance with our customary payroll policies. The Board
shall review and consider increasing your Base Salary at least once annually.
It is specifically agreed that at all times your Base Salary shall be
comparable to the salary paid to me personally and at no time will your Base
Salary be less than Four Hundred Ninety-Five Thousand ($495,000) Dollars.
6. You shall be paid a one-time bonus of Five Hundred Twenty-Five
Thousand ($525,000) Dollars on January 2, 1995; provided that, should your
employment with us terminate prior to that date for any reason whatsoever
(including, without limitation, termination for "proper cause" or without
cause) this bonus shall immediately be due and payable to you (or your Estate).
7. We hereby grant and convey to you two hundred thousand
(200,000) shares of Class B restricted stock (the "Bonus Shares"). The Bonus
Shares shall vest (i.e., become free of restrictions) at the rate of fifty
thousand (50,000) shares on each of the first four anniversaries of the date of
this letter. You will receive non-preferential cash dividends (so long as the
Company is paying dividends on Class B Shares) on all of the Bonus Shares both
before and after they vest. While any Bonus Shares remain restricted, the
restricted Bonus Shares (and any securities received as a dividend or
distribution with respect to such restricted Bonus Shares) may not be sold,
transferred, pledged or hypothecated by you (other than to a family member or
family trust to facilitate your estate planning goals, in which case such
<PAGE> 2
restrictions will apply to the Bonus Shares held by such family member or
family trust). While Bonus Shares remain restricted, the stock certificates
for such shares shall be held by the Company, and copies thereof shall be
delivered to you (as is our practice with respect to all restricted shares
under the AMIP bonus plan). Such restricted shares shall bear a restrictive
legend indicating that they are subject to the restrictions described above
and, in certain circumstances (as more fully set forth below) to forfeiture and
return to the Company without the payment to you of any consideration therefor.
As Bonus Shares vest, certificates for the vested shares (and for any
securities received as a dividend or distribution with respect thereto), free
of the restrictive legend described in the preceding sentences shall be
delivered to you. All of the Bonus Shares shall vest immediately and entirely
upon the occurrence of any of the following events: (i) change of control of
the Company (as such is defined in the Stock Option Agreement attached hereto
as Exhibit A); (ii) if, during the term of your employment, anyone else is
named CEO of the Company to succeed me; (iii) upon your death, disability,
retirement or departure from the Company except for a voluntary departure by
you (not solicited by us) to seek or engage in other employment; or (iv) upon
our termination of your employment for any reason other than "proper cause" as
defined below. In the event you voluntarily depart from the Company (without
our solicitation to do so) to seek or engage in other employment, or we
terminate your employment for "proper cause", any Bonus Shares which have not
at that time already vested shall be forfeited by you and returned to the
Company without payment of any consideration. Except as indicated by the
preceding sentence, it is specifically understood that the Bonus Shares shall
vest without regard to your personal performance or the performance of the
Company during the term of your services.
8. You shall be eligible to receive an annual bonus (the "AMIP
Bonus") under the terms of the Advanta Management Incentive Plan ("AMIP"). It
is understood that your target bonus will be at least forty-five (45%) percent
of your Base Salary and that actual bonus awards will be based upon both your
personal performance and the performance of the Company. Currently, AMIP calls
for annual payment of any amount up to your initial target bonus to be paid in
shares of Class B common stock and any amounts in excess of such initial
target bonus (whether such are the result of a bonus in excess of target due to
your or the Company's performance, or the result of a higher target bonus due
to an increase in your Base Salary) to be paid in cash. For 1994, your AMIP
Bonus shall be pro-rated for the portion of the calendar year for which you
perform services hereunder. Generally, your AMIP Bonus will be determined in
February with respect to the previous calendar year and shall be paid in
February or March.
9. In connection with the delivery of this letter, the
Compensation Committee of the Board of Directors has granted to you, effective
upon the signing of this letter, an option to purchase one hundred thousand
(100,000) shares of Class B common stock (the "Original Options") in accordance
with the Advanta Corp. 1992 Stock Option Plan ("ACSOP"). The price of these
shares shall be equal to the closing sale price on the date of this letter.
Your right to exercise the Original Options shall, in the ordinary course, vest
twenty-five (25%) percent per year on each of the first four (4) anniversaries
of the date of this letter. However, your right to exercise the Original
Options shall vest immediately and entirely upon the occurrence of any of the
events listed in (i) through (iv) in paragraph 7 above. In the event that
unvested Bonus Shares are forfeited pursuant to the penultimate sentence of
paragraph 7, then to the extent that the Original Options have not at that time
already vested and been exercised, they shall be forfeited and terminated
without payment of any consideration. Upon termination of your employment for
other than the circumstances described in the penultimate sentence of paragraph
7, your or your Estate's time to exercise the Original Options shall be two (2)
years, commencing as of the date of your departure from the Company, after
which two year period the Original Options shall expire, unless in any case a
longer period of time to exercise is customarily accorded to senior management
executives, in which case you shall also be accorded such longer time to
exercise. Shortly after the mutual signing of this letter, we will furnish to
you a Stock Option Agreement substantially in the form attached hereto as
Exhibit A, modified to conform to the terms of this paragraph; the final terms
of the Stock Option Agreement shall be subject to discussions between you and
us.
10. The Company shall also award you additional options in
accordance with ACSOP on an annual basis. Generally, these grants are made in
February of each year. We contemplate that commencing with February 1995, you
will be awarded not less than thirty five thousand (35,000) shares annually,
although option grants for all employees are ultimately determined by the
Compensation Committee of the Board of Directors. The terms and conditions of
such annual option grants shall be the
<PAGE> 3
same as the terms and conditions of the annual options granted to other senior
executives of the Company.
11. You shall receive such medical and other benefits as are
accorded to other senior management, including disability insurance coverage
and participation in any pension program we may establish. Currently, our
disability plan provides for coverage at the rate of sixty (60%) percent of an
employee's base salary (subject to a maximum benefit of $21,000 per month, or a
base salary maximum of $420,000) until the age of sixty-five (65), and we are
evaluating obtaining disability coverage for higher level executive base
salaries and the AMIP Bonus as well. To the extent that a pension plan is
established, you will be accorded credit for not less than 15 years of service
to the Company. We shall furnish to you an automobile and related expenditures
consistent with those accorded to other senior management and we shall pay your
initiation fee and annual dues to belong to the country club of your choice.
We shall also furnish to you certain financial planning services consistent
with other senior management, at no cost to you (other than applicable taxes on
this benefit). You shall be entitled to annual vacations, which may be taken
at any time mutually agreed to by you and me.
12. Your services shall be performed primarily in the
Philadelphia, Pennsylvania metropolitan region, subject to reasonable domestic
and overseas travel on our behalf. We will pay or reimburse you for all
transportation, hotel and other expenses incurred by you on business trips
outside the metropolitan Philadelphia area and for all other ordinary
out-of-pocket expenses incurred by you in the context of business on our
behalf, on submission of appropriate expense documentation in accordance with
normal Company practice.
13. We will pay or reimburse you for your temporary living
expenses in the Philadelphia metropolitan region so long as reasonably
necessary (but not beyond one year after you commence performing services), and
we shall pay or reimburse you for any moving expenses incurred by you in moving
from New York to the Philadelphia metropolitan region. To the extent that
these payments or reimbursements constitute taxable income to you, the amounts
payable shall be increased to cover the taxes payable.
14. We agree to reimburse you for the carrying costs (i.e.,
mortgage and coop maintenance fees, including real estate taxes) on your New
York City cooperative residence ("coop") for a period of one (1) year
commencing as of the date hereof, payable on the anniversary date hereof, upon
submission of appropriate documentation by you; provided that, should your
employment with us terminate prior to this date for any reason whatsoever
(including, without limitation, termination for "proper cause" or without
cause) such amounts shall immediately be due and payable to you (or your
Estate) upon submission of appropriate documentation. If you choose thereafter
to retain the coop, the carrying costs shall then be your responsibility. You
and the Company agree that together we shall select two qualified independent
real estate appraisers to appraise the coop, and shall have such appraisals
performed as soon as is practicable. Should you choose to sell the coop at any
time during the four (4) year period commencing on the date hereof, we
guarantee that the sale price shall not be less than the average of the two
appraisals. To the extent that the sale price is less than such average, we
shall pay to you the difference at the time of closing.
15. During the period of your employment, we shall maintain in
effect, at our sole expense, one or more insurance policies on your life
aggregating Ten Million ($10,000,000) Dollars of life insurance, as to which
the Company shall be the beneficiary with respect to Five Million ($5,000,000)
Dollars of such insurance and your designee or a designee selected by the
trustee of a trust created to be the owner of the policy (in either case the
"Beneficiary") shall be the beneficiary with respect to the other Five Million
($5,000,000) Dollars. With respect to the Five Million ($5,000,000) Dollars
payable to the Beneficiary, the policy (the "Trust Policy") providing such
benefit will, if you so request, be owned by your designee or a trust (the
"Owner"), and otherwise shall be owned by us; provided however, that if the
Trust Policy is owned by the Owner, it shall be collaterally assigned to and
held by us to secure any repayment obligations described below. At the end of
your employment with the Company, upon your request, we shall promptly assign
the Trust Policy to the Owner or (if it has been collaterally assigned to us)
reassign it to the Owner; provided that, should your employment terminate under
either of the circumstances described in the penultimate sentence of paragraph
7, you shall, as a condition of such policy assignment or reassignment,
reimburse the Company for the cash value, if any, of the Trust Policy,
<PAGE> 4
as well as for any premiums paid by the Company for the period following
termination of your employment. If your employment terminates for any reason
other than your death or either of the circumstances described in the
penultimate sentence of paragraph 7, then you shall not be required, as a
condition of such assignment or reassignment, to reimburse us for the cash
value, if any, of the Trust Policy or for any premiums paid for the period
following termination of your employment, and we will not withdraw any such
cash value prior to such (re)assignment. You agree that we are not obligated
to structure the Trust Policy so that it builds up a material level of cash
value, but we will attempt to accommodate your requests in connection with the
Trust Policy (and the type of insurance obtained), subject to mutually
agreeable terms. You agree to take a physical examination in connection with
this insurance, it being understood that while your passing the physical is not
a condition of your being employed by us, the results of the examination may
impact the cost or availability of insurance, and our obligation to provide
insurance hereunder shall only apply to the extent that you are insurable at
regular rates, except that if you are insurable at higher rates, you shall have
the right to have such insurance maintained on your life insofar as the Trust
Policy is concerned, should you elect to pay the difference between the regular
rates and such higher rates.
16. Promptly following the mutual signing of this letter, you will
announce to your current employer and make publicly known your plan to join us
as Executive Vice Chairman. The start date of your actual services shall be as
soon as practical thereafter, with the intention that you shall actually
commence services in Horsham, Pennsylvania between February 15 and March 31.
Your Base Salary shall be payable and your AMIP Bonus shall accrue as of the
date you actually commence services with us in Horsham.
17. In the event of your death, permanent disability or
retirement, we shall pay to you or to the legal representative of your estate
(within thirty (30) days after we are notified of the appointment thereof) all
Base Salary due up to the date of such event, and when such becomes payable, if
at all, your AMIP Bonus, pro-rated through the last day of the month of such
event.
18. While either you or we may terminate your services at any time
upon thirty (30) days prior written notice to the other, you and we are
entering into this agreement with the hope and expectation that this will be a
multi-year partnership. We may, by notice to you, terminate your employment
for "proper cause" or without cause. As used herein, "proper cause" shall
mean: (a) your willful refusal or failure to perform a material and substantial
part of your duties hereunder, it being understood that "proper cause" shall
not exist unless and until you have received written notice from us detailing
the alleged willful refusal or failure, and you have been accorded at least
thirty (30) days to cure; or (b) your commission of a felony, or of any act of
fraud, misappropriation or criminal conduct involving or relating in any
material way to the Company, or of personal dishonesty materially injurious to
the Company. If we terminate your employment for "proper cause," you shall be
entitled to receive your Base Salary until the date of termination and your
AMIP Bonus, pro-rated through the date of termination, which AMIP Bonus shall
be subject to the discretion of the Board.
If your employment is terminated by us without cause, we agree: (a) if
such termination is prior to December 31, 1995 to pay your Base Salary and
target AMIP Bonus for a period of two (2) years following the date of
termination; and (b) as set forth above, any unvested Bonus Shares and
Original Options shall immediately and entirely vest. A termination by us for
no reason, or for any reason other than "proper cause" shall be deemed a
termination without cause. In the event you elect to terminate your employment
because of a change of control of the Company, or because someone other than
you is named CEO, such shall be treated as a termination without cause by us.
19. Notices to be furnished hereunder shall be in writing, and
shall be deemed given when delivered personally, sent by electronic means or
mailed by registered or certified mail, return receipt requested, addressed to
the addresses set forth above or such other addresses as may be provided
hereafter.
20. This letter agreement sets forth the entire agreement between
you and us, and cannot be modified except in a writing signed by both parties.
This agreement is made in accordance with the laws of the State of
Pennsylvania, applicable to agreements made and to be wholly performed therein.
<PAGE> 5
We are pleased you are joining ADVANTA and look forward to a long and
mutually beneficial relationship.
Sincerely,
ADVANTA CORP.
By /s/ Dennis Alter
---------------------
DENNIS ALTER
Chairman and
Chief Executive Officer
ACCEPTED AND AGREED:
/s/ Pete Hart
- - - --------------------
<PAGE> 1
EXHIBIT 10-r
U.S. $122,500,000
REVOLVING CREDIT AGREEMENT
Dated as of March 24, 1994
Among
ADVANTA CORP.,
THE BANKS NAMED HEREIN
as Banks
and
MELLON BANK, N.A.
as Agent
and
NATIONSBANK OF TEXAS, N.A.
as Co-Agent
[Facility A]
<PAGE> 2
[Facility A]
T A B L E O F C O N T E N T S
<TABLE>
<CAPTION>
Section Page
- - - ------- ----
<S> <C> <C>
ARTICLE I
DEFINITIONS; CONSTRUCTION
1.01 Certain Definitions............................ 1
1.02 Construction................................... 14
1.03 GAAP/RAP....................................... 15
ARTICLE II
THE CREDITS
2.01 Revolving Loans................................ 15
2.02 Extension of Expiration Date;
Term Loan Option............................. 16
(a) Extension of Expiration Date.............. 16
(b) Term Loan Option.......................... 18
2.03 The Notes...................................... 19
2.04 Making of Revolving Loans...................... 19
2.05 Commitment Fee; Utilization Fee; Closing Fee... 20
(a) Commitment Fee............................. 20
(b) Utilization Fee............................ 21
(c) Closing Fee................................ 21
2.06 Termination or Reduction....................... 21
2.07 Interest Rates; Maturity Periods;
Transactional Amounts........................ 22
(a) Optional Basis of Borrowing................ 22
(i) Base Rate Option....................... 22
</TABLE>
<PAGE> 3
(ii)
<TABLE>
<S> <C> <C>
(ii) Euro-Rate Option...................... 23
(b) Interest Periods.......................... 24
(c) Transactional Amounts..................... 25
(d) Interest After Maturity................... 25
(e) Euro-Rate Unascertainable;
Impracticability......................... 25
2.08 Prepayments.................................... 27
2.09 Interest Payment Dates......................... 27
2.10 Payments....................................... 28
2.11 Additional Compensation in
Certain Cirsumstances........................ 28
(a) Increased Costs or Reduced Return
Resulting from Taxes, Reserves, Capital
Adequacy Requirements, Expenses, etc....... 28
(b) Indemnity.................................. 30
2.12 Taxes.......................................... 31
(a) Payments Net of Taxes..................... 31
(b) Indemnity................................. 32
(c) Withholding and Backup Withholding........ 32
2.13 Funding by Branch, Subsidiary or Affiliate..... 33
(a) Notional Funding.......................... 33
(b) Actual Funding............................ 34
</TABLE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
<TABLE>
<S> <C> <C>
3.01 Organization and Qualification................. 34
3.02 Corporate Power and Authorization.............. 35
3.03 Audited Annual Financial Statements............ 35
3.04 Interim Financial Statements................... 35
3.05 Consolidating Financial Statements............. 35
3.06 CNB Financial Statements....................... 36
3.07 Absence of Material Adverse Changes............ 36
</TABLE>
<PAGE> 4
(iii)
<TABLE>
<S> <C> <C>
3.08 Litigation..................................... 36
3.09 No Conflicting Laws or Agreements;
Consents and Approvals........................ 36
3.10 Execution and Binding Effect................... 37
3.11 Erisa Compliance............................... 37
3.12 Taxes.......................................... 37
3.13 Regulation U................................... 37
3.14 Environmental Matters.......................... 38
3.15 Investment Company; Bank Holding Company;
Public Utility Holding Company............... 39
3.16 CNB Capitalization............................. 39
3.17 Absence of Undisclosed Liabilities............. 39
3.18 Absence of Events of Default................... 39
3.19 Title to Property.............................. 39
3.20 Subsidiaries and Other Investments............. 40
3.21 Accurate and Complete Disclosure............... 40
</TABLE>
ARTICLE IV
CONDITIONS OF LENDING
<TABLE>
<S> <C> <C>
4.01 Initial Loans.................................. 41
(a) Agreement; Notes........................... 41
(b) Corporate Proceedings...................... 41
(c) Good Standing Certificates................. 41
(d) Financial Statements....................... 41
(e) Opinion of Counsel......................... 42
(f) Officers' Certificates..................... 42
(g) Fees, Expenses, etc........................ 42
(h) Details, Proceedings and Documents......... 42
4.02 Conditions to all Loans........................ 42
(a) Notice..................................... 42
(b) Representations and Warranties............. 43
(c) No Defaults................................ 43
</TABLE>
ARTICLE V
AFFIRMATIVE COVENANTS
<TABLE>
<S> <C> <C>
5.01 Basic Reporting Requirements................... 43
(a) Annual Audit Reports....................... 43
</TABLE>
<PAGE> 5
(iv)
<TABLE>
<S> <C> <C>
(b) Quarterly Consolidated Reports............. 44
(c) CNB Financial Statements................... 45
(d) Consolidating Reports...................... 45
(e) Compliance Certificates.................... 45
(f) Asset Quality Reports...................... 46
(g) Certain Other Reports and Information...... 46
(h) Further Information........................ 47
(i) Notice of Certain Events................... 47
(j) Visitation; Verification................... 49
5.02 Insurance...................................... 49
5.03 Payment of Taxes and Other Potential
Charges and Priority Claims.................. 49
5.04 Preservation of Existence and Franchises....... 50
5.05 Maintenance of Properties...................... 50
5.06 Avoidance of Other Conflicts................... 50
5.07 CNB Capitalization............................. 51
5.08 Financial Accounting Practices................. 51
5.09 Use of Proceeds................................ 51
5.10 Continuation of or Change in Business.......... 51
5.11 Consolidated Tax Return........................ 52
5.12 Fiscal Year.................................... 52
5.13 Restrictions on Stock Payments, Etc............ 52
</TABLE>
ARTICLE VI
NEGATIVE COVENANTS
<TABLE>
<S> <C> <C>
6.01 Financial Covenants............................ 52
(a) Consolidated Tangible Net Worth............ 52
(b) Double Leverage Ratio...................... 52
(c) Total Liabilities to
Consolidated Tangible Net Worth............ 52
(d) Consolidated Interest Coverage Ratio....... 52
(e) Contingent Obligations..................... 53
(f) Doubtful Accounts Managed and/or Owned..... 53
6.02 Liens.......................................... 53
6.03 Mergers, Acquisitions, etc..................... 56
6.04 Dispositions of Properties..................... 57
</TABLE>
<PAGE> 6
(v)
<TABLE>
<S> <C> <C>
6.05 Dealings with Affiliates....................... 57
6.06 Limitations on Other Restrictions
on Dividends by Subsidiaries, etc............ 58
</TABLE>
ARTICLE VII
EVENTS OF DEFAULT
<TABLE>
<S> <C> <C>
7.01 Events of Default.............................. 60
</TABLE>
ARTICLE VIII
THE AGENT
<TABLE>
<S> <C> <C>
8.01 Appointment.................................... 63
8.02 Delegation of Duties........................... 63
8.03 Exculpatory Provisions......................... 63
8.04 Reliance by Agent.............................. 64
8.05 Notice of Default.............................. 65
8.06 Non-Reliance on Agent and Other Banks.......... 65
8.07 Indemnification................................ 66
8.08 Agent In Its Individual Capacity............... 66
8.09 Successor Agent................................ 66
8.10 Calculations................................... 67
8.11 Agent's Fees................................... 67
8.12 Funding by Agent............................... 67
8.13 Co-Agent....................................... 68
</TABLE>
ARTICLE IX
MISCELLANEOUS
<TABLE>
<S> <C> <C>
9.01 Holidays...................................... 68
9.02 Records....................................... 68
9.03 Amendments and Waivers........................ 68
9.04 No Implied Waiver; Cumulative Remedies........ 69
</TABLE>
<PAGE> 7
(vi)
<TABLE>
<S> <C> <C>
9.05 Notices....................................... 70
9.06 Expenses; Taxes; Indemnity.................... 70
9.07 Severability.................................. 72
9.08 Prior Understandings.......................... 72
9.09 Duration; Survival............................ 72
9.10 Counterparts.................................. 72
9.11 Limitation on Payments........................ 72
9.12 Set-Off....................................... 73
9.13 Sharing of Collections........................ 73
9.14 Successors and Assigns;
Participations; Assignments................. 74
(a) Successors and Assigns................... 74
(b) Participations........................... 74
(c) Assignments.............................. 75
(d) Register................................. 77
(e) Financial and Other Information.......... 77
(f) Assignments to Federal Reserve Bank...... 78
9.15 Governing Law; Submission to Jursidiction
Waiver of Jury Trial; Limitation of
Liability................................... 78
(a) Governing Law............................ 78
(b) Certain Waivers.......................... 78
(c) Limitation of Liability.................. 79
EXHIBIT A Promissory Note...........................
EXHIBIT B Form of Loan Request......................
EXHIBIT C Term Loan Note............................
</TABLE>
<PAGE> 8
Facility A
REVOLVING CREDIT AGREEMENT
This AGREEMENT, dated as of March 24, 1994, by and among
ADVANTA CORP., a Delaware Corporation (hereinafter called the
"Company"), the Banks named in Section 2.01 hereof
(hereinafter each called a "Bank" and collectively called the
"Banks") and MELLON BANK, N.A., a national banking
association, as agent for the Banks under this Agreement
(hereinafter in such capacity called the "Agent");
PRELIMINARY STATEMENT:
WHEREAS, the Company has requested and the Banks and the
Agent are willing to make available to the Company, upon all
of the terms and conditions herein set forth, a revolving
credit 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
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
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 preceeding the date of
determination.
"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, (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 who is an Affiliate of the Specified Person
within the meaning of the preceding clause (a). For purposes
<PAGE> 9
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 Revolving Credit Agreement as
amended, modified or supplemented from time to time.
"Applicable Closing Fee Percentage" shall mean, for each
Bank, the percentage set forth below opposite the amount of
the Initially Offered Combined Commitment Amount of such
Bank. The "Initially Offered Combined Commitment Amount" of
each Bank shall be an amount equal to the sum of (i) the
amount of the Commitment to this Agreement initially offered
by such Bank to the Agent; plus (ii) the amount of the
commitment to the Three Year Revolving Credit Agreement
initially offered by such Bank to the Agent both as
determined by the Agent and in each case unreduced by any
subsequent allocation or reduction by the Agent.
<TABLE>
<CAPTION>
Initially Offered Combined Applicable Closing
Commitment Amount Fee Percentage
-------------------------- ------------------
<S> <C>
$20,000,000 or higher .15%
$15,000,000 - $19,999,999 .10%
$10,000,000 - $14,999,999 .075%
</TABLE>
"Applicable Commitment Fee Percentage" shall mean, for
any day, (i) .1875% for any such day during which the Rating
Level is 1-7; (ii) .25% for any such day during which the
Rating Level is 8 or 9; (iii) .35% for any such day during
which the Rating Level is 10; and (iv) .45% for any such day
during which the Rating Level is 11. Each change in the
Applicable Commitment Fee Percentage resulting from a change
of the Rating Level shall become effective on the effective
date of such change in the Rating Level.
"Applicable Margin" shall mean, for any day, the
percentage set forth below which corresponds to the Rating
Level in effect on any such day. Each change in the
Applicable Margin for any Loan which results from a change in
the Rating Level shall become effective on the effective date
of such change in the Rating Level.
- 2 -
<PAGE> 10
<TABLE>
<CAPTION>
Rating Level Percentage
------------ ----------
<S> <C>
1 - 7 .625%
8 or 9 .75%
10 1.00%
11 1.50%
</TABLE>
"Applicable Utilization Fee Percentage" shall mean, for
each day, (a) .25% for any such day during which the Rating
Level is 1-7; (b) .325% for any such day during which the
Rating Level is 8 or 9; (c) .5% for any such day during which
the Rating Level is 10; and (d) .75% for any such day during
which the Rating Level is 11. Each change in the Applicable
Utilization Fee resulting from a change in the Rating Level
shall become effective on the effective date of such change
in the Rating Level.
"Assignment Notice" shall have the meaning assigned to
such term in Section 9.14(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.
"Base Rate" and "Base Rate Option" shall have the
meanings assigned to those terms in Section 2.07(a)(i) hereof.
"Base Rate Loan" shall mean any Loan bearing interest
under the Base Rate Option.
"Business Day" shall mean any day other than a Saturday,
Sunday, public holiday under the laws of the Commonwealth of
Pennsylvania or other day on which banking institutions are
authorized or obligated to close in New York or Pennsylvania.
"Call Reports" shall mean Consolidated Reports of
Condition and Income prepared in accordance with rules
prescribed by the Federal Financial Institutions Examination
Council.
"Change of Control" shall mean that Dennis Alter shall
cease for any reason (other than by reason of death or
disability) to serve as Chairman of the Board of Directors of
the Company, or shall cease to own directly or indirectly (or
by or through his estate) at least 10% of the issued and
outstanding voting capital stock of the Company.
- 3 -
<PAGE> 11
"Closing Date" shall mean March 24, 1994.
"CNB" shall mean Colonial National Bank USA, an indirect
wholly (except for directors' qualifying shares) owned
banking Subsidiary of the Company.
"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 Code shall be
construed to also refer to any successor sections.
"Commitment" and "Current Commitment" shall have the
meanings assigned to those terms in Section 2.01 hereof.
"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, non-cash
extraordinary items.
"Consolidated Net Worth" shall mean the consolidated
stockholder's equity of the Company and its Consolidated
Subsidiaries determined and consolidated in accordance with
GAAP.
- 4 -
<PAGE> 12
"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 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.
"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 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.
"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.
"Duff & Phelps" shall mean Duff & Phelps Credit Rating
Company.
"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.
- 5 -
<PAGE> 13
"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 National
Priorities List, 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
- 6 -
<PAGE> 14
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.
"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.
"ERISA Group Member" means each trade or business
(whether or not incorporated and whether controlled by,
controlling or under common control with the Company) which
together with the Company is treated as a single employer
under Section 414(b) or 414(c) of the Code.
"Euro-Rate" and "Euro-Rate Option" shall have the
meanings assigned to those terms in Section 2.07(a)(ii)
hereof.
"Event of Default" shall mean any of the Events of
Default described in Article VII hereof.
"Expiration Date" shall be March 22, 1995, or if extended
in accordance with Section 2.02, such extended date.
"Federal Funds Effective Rate" shall have the meaning
assigned to such term in Section 2.07(a)(i) hereof.
"Fitch" shall mean Fitch Investors' Services, Inc.
"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
concur), applied both to classification of items and amounts.
"Guaranty" shall mean, with respect to any Person, any
obligation, contingent or otherwise, of such Person directly
or indirectly guaranteeing any 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
- 7 -
<PAGE> 15
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.
"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);
(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 9.06(c) hereof.
"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
- 8 -
<PAGE> 16
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.
"Interest Period" shall have the meaning assigned to that
term in Section 2.07(b) hereof.
"Law" shall mean any law (including common law),
constitution, statute, treaty, regulation, rule, ordinance,
order, injunction, writ, decree or award of any Official Body.
"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 loan made by a Bank to the Company
under this Agreement, and "Loans" shall mean the loans made
by the Banks under this Agreement.
"Loan Documents" shall mean this Agreement, the Notes,
the Term Notes and all other ancillary agreements,
instruments, certificates and/or documents which are required
to be or are otherwise executed and delivered by the Company
to the Agent and/or to any Bank in connection with this
Agreement, in each case as the same may be amended,
supplemented or modified from time to time hereafter.
"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.
"Material Subsidiary" shall mean: (i) Advanta Leasing
Holding Corp., a Delaware corporation ("ALHC"); Advanta
Leasing Corp., a Delaware corporation ("ALC"); Advanta
Mortgage Holding Company, a Delaware corporation; Advanta
Mortgage Corp. U.S.A., a Delaware corporation; and (ii) any
Subsidiary of the Company which at the time of determination
has or had Assets constituting 10% or more of Consolidated
- 9 -
<PAGE> 17
Assets at any time during the Rolling Period immediately
preceeding the date of determination or accounts for 10% or
more of Consolidated Net Income for the Rolling Period
immediately preceeding the date of determination; provided,
however, that ALHC and ALC shall cease to be Material
Subsidiaries by virtue of (i) above on the earlier of the
date which is the first anniversary of the Closing Date or
the date upon which the Company complies with the provisions
of Section 5.13 hereof but shall, in any event, each
thereafter remain subject to (ii) above.
"Maturity Date" shall have the meaning assigned to that
term in Section 2.07(b) hereof.
"Moody's" shall mean Moody's Investors Service, Inc.
"month", with respect to a Euro-Rate Interest Period, has
the following meaning unless a calendar month is specified or
the context otherwise clearly requires:
(i) if the first day of such Euro-Rate Interest
Period is the last day of a calendar month, a "month" is
the interval between the last days of consecutive
calendar months;
(ii) otherwise, a "month" is the interval between
the days in consecutive calendar months numerically
corresponding to the first day of such Euro-Rate Interest
Period or, if there is no such numerically corresponding
day in a particular calendar month, then the last day of
such calendar month.
"Note" shall mean a promissory note of the Company
executed and delivered pursuant to Section 2.03 of this
Agreement, 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 2.13(a) hereof.
"OCC" shall mean the Office of the Comptroller of the
Currency or any successor thereto.
"Office", when used in connection with the Agent, shall
mean its office located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, or at such other office or
offices within the United States of the Agent or branch,
Subsidiary or Affiliate thereof as may be designated in
writing from time to time by the Agent to the Company and the
Banks.
- 10 -
<PAGE> 18
"Official Body" shall mean any government or political
subdivision or any agency, authority, bureau, central bank,
commission, department or instrumentality of 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 9.14(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.
"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 which is
covered by Title IV of ERISA and (i) which is maintained for
employees of the Company or any ERISA Group Member; or (ii)
to which the Company or any ERISA Group Member made, or was
required to make, contributions at any time within the
preceding five years.
"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.
"Purchasing Bank" shall have the meaning assigned to such
term in Section 9.14(c) hereof.
"RAP" shall mean regulatory accounting principles as in
effect from time to time.
"Rating Level" 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
the Company by Moody's, S&P, Fitch, Duff & Phelps or
Thomson's. If the Company's long-term senior unsecured debt
is not rated by any of the foregoing, then the ratings of
CNB's subordinated debt will be used to determine the Rating
Level. If the Company (or CNB, if applicable) is rated by
two or more agencies and different Rating Levels result, then
the Rating Level shall be that which corresponds to the lower
- 11 -
<PAGE> 19
of the two highest ratings. Each change in the Company's
Rating Level shall take effect on the effective date of any
change in the Company's long-term senior unsecured debt
rating (or CNB's subordinated debt rating, if applicable).
<TABLE>
<CAPTION>
Senior Debt Ratings of Company
------------------------------
(or Subordinated Debt Rating of CNB, if applicable)
Rating
Level Moody's S&P Fitch Duff & Phelps Thomson's
- - - ----- ------- --- ----- ------------- ---------
<S> <C> <C> <C> <C> <C>
1 Aaa AAA AAA AAA AAA
2 Aa1 AA+ AA+ AA+ AA+
3 Aa2 AA AA AA AA
4 Aa3 AA- AA- AA- AA-
5 A1 A+ A+ A+ A+
6 A2 A A A A
7 A3 A- A- A- A-
8 Baal BBB+ BBB+ BBB+ BBB+
9 Baa2 BBB BBB BBB BBB
10 Baa3 BBB- BBB- BBB- BBB-
11 Below Baa3 Below Below Below Below
or Not BBB- or BBB- or BBB- or BBB- or
Rated Not Not Not Not
Rated Rated Rated Rated
</TABLE>
"Reference Banks" shall mean Mellon Bank, N.A. and
NationsBank of Texas, N.A.
"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, or (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 4062(e) of ERISA.
"Required Banks" shall mean, as of any date, Banks which
have made Loans constituting, in the aggregate, at least 66
2/3% of the principal amount of Loans outstanding on such
date, or if no Loans are outstanding on such date, Banks
which have Commitments constituting, in the aggregate, at
least 66 2/3% of the Total Current Commitments of all the
Banks.
"Responsible Officer" shall mean the Chief Executive
Officer, Chief Financial Officer, President, Treasurer or
- 12 -
<PAGE> 20
Controller of the Company, or such other officer or officers
as the Company may designate from time to time and otherwise
acceptable to the Agent.
"Rolling Period" shall mean with respect to any fiscal
quarter, such fiscal quarter and the three immediately
preceeding fiscal quarters considered as a single accounting
period.
"Set" of Loans shall mean those Loans made concurrently
by the Banks hereunder requested by the Company to be made on
a given day, having the same Maturity Date and bearing
interest at the same Interest Rate Option.
"S&P" shall mean Standard & Poor's Corporation.
"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 Set of
Base Rate Loans or any Term Loan Segment to bear interest
at the Base Rate Option;
(ii) at least three London Business Days in advance
in the case of any Set of Euro-Rate Loans or any Term
Loan Segment to bear interest at the Euro-Rate Option.
Standard Notice must be provided on or before 12:00 o'clock
noon, Pittsburgh 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 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.
- 13 -
<PAGE> 21
"Term Loan" shall have the meaning assigned to such term
in Section 2.02(b) hereof.
"Term Loan Effective Date" shall have the meaning
assigned to such term in Section 2.02(b) hereof.
"Term Loan Maturity Date" shall have the meaning assigned
to such term in Section 2.02(b) hereof.
"Term Loan Note" shall have the meaning assigned to such
term in Section 2.02(b) hereof.
"Term Loan Notice" shall have the meaning assigned to
such term in Section 2.02(b) hereof.
"Term Loan Period" shall mean the one year period
beginning on the Term Loan Effective Date and ending on the
Term Loan Maturity Date.
"Term Loan Segment" shall mean any portion of the
outstanding principal amount of the Term Loan to which at the
time in question there is applicable a particular Interest
Rate Option and Interest Period.
"Three Year Revolving Credit Agreement" shall mean that
certain Three Year Revolving Credit Agreement by and between
the Company, the Banks and the Agent of even date herewith as
the same may be amended, modified or supplemented from time
to time.
"Thomson's" shall mean Thomson BankWatch.
"Total Commitment" or "Total Current Commitment" shall
have the meaning assigned to such term in Section 2.01 hereof.
"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.
"Uninsured Subsidiaries" of the Company shall mean all
Subsidiaries of the Company except CNB, Colonial National
Financial Corp. and any other Subsidiaries of the Company
which accept deposits which are insured by the Federal
Deposit Insurance Corporation or any successor thereto.
"Unused Current Commitment" shall mean the Current
Commitment of each Bank minus the aggregate outstanding
principal amount of such Bank's Loans hereunder.
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
- 14 -
<PAGE> 22
"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 shall, unless
otherwise expressly noted, refer to the time in Pittsburgh,
Pennsylvania.
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 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, the Company 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 financial
covenants after taking into account such change in GAAP or
RAP, as the case may be.
ARTICLE II
THE CREDITS
2.01 Revolving Loans. Subject to the terms and conditions
and relying upon the representations and warranties herein
set forth, each Bank severally agrees (such agreement being
herein called such Bank's "Commitment") to make Loans to the
Company at any time or from time to time on or after the
Closing Date and to but not including the earlier of the
Expiration Date; the Term Loan Effective Date; or other
termination of the Commitment of such Bank, in an aggregate
principal amount not exceeding at any one time outstanding
the amount of such Bank's Current Commitment. The "Current
Commitment" of each Bank at any time shall mean the
Commitment amount set opposite its name below as such amount
may have been reduced under Section 2.06 hereof at such
time. Each Set of such Revolving Loans shall be made ratably
- 15 -
<PAGE> 23
by the Banks in accordance with the percentage set opposite
the name of each Bank below:
<TABLE>
<CAPTION>
Name of Bank Commitment Amount Percentage
- - - ------------ ----------------- ----------
<S> <C> <C>
Mellon Bank, N.A. $15,000,000 12.245%
NationsBank of Texas, N.A. $15,000,000 12.245%
Chemical Bank $12,500,000 10.204%
PNC Bank, N.A. $12,500,000 10.204%
CIBC Inc. $10,000,000 8.163%
Shawmut Bank
Connecticut, N.A. $10,000,000 8.163%
The First National
Bank of Chicago $10,000,000 8.163%
The Bank of Tokyo
Trust Company $ 7,500,000 6.122%
The Daiwa Bank, Ltd. $ 7,500,000 6.122%
Harris Trust and
Savings Bank $ 7,500,000 6.122%
Meridian Bank $ 7,500,000 6.122%
Union Bank $ 7,500,000 6.122%
Total Commitment $122,500,000 100%
</TABLE>
Within such limits of time and amount and subject to the
provisions of this Agreement, the Company may borrow, repay
and reborrow hereunder. The aggregate Current Commitments of
all the Banks at any time is sometimes referred to as the
"Total Commitment" or "Total Current Commitment".
2.02. Extension of Expiration Date; Term Loan Option.
(a) Extension of Expiration Date. Provided that no
Potential Default or Event of Default shall have occurred and
be continuing, the Company may, prior to the then effective
Expiration Date, request that the then effective Expiration
Date be extended for an additional period of 364 days by
providing written notice to the Agent requesting such
extension not more than 90 days or less than 60 days before
- 16 -
<PAGE> 24
each such then effective Expiration Date (each an "Extension
Request"). The Agent shall, promptly upon its receipt of any
Extension Request, notify the Banks of such request. At
least thirty days prior to such then effective Expiration
Date, each Bank shall provide the Agent with written notice
of its approval or denial of the Company's Extension Request
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 shall be deemed a
rejection of the Extension Request). Promptly upon receipt
of such notice (or deemed notice) from each Bank, the Agent
shall notify the Company of the approval or denial by each
Bank of the Extension Request.
Any extension of the Expiration Date shall be effective only
if approved by the Required Banks and shall be binding only
upon the Banks approving such Extension Request. Upon the
approval of the Required Banks of any Extension Request, but
effective on the day next immediately following the then
effective Expiration Date, the Expiration Date shall be
automatically extended for a period of 364 days from the then
effective Expiration Date to the extent of the Current
Commitments of the Banks approving such extension. In the
event any Bank denies (or is deemed to have denied) an
Extension Request (each a "Non-Extending Bank") which is
otherwise approved by the Required Banks then (i) on the then
scheduled Expiration Date, such Non-Extending Bank's
Commitment shall terminate and taking into account any
purchase of the Notes of such Non-Extending Bank by a
Replacement Bank as provided below, the Company shall pay to
the Agent for distribution to such Non-Extending Bank, the
unpaid principal balance of the Loans of such Non-Extending
Bank together with accrued and unpaid interest, fees or other
amounts due such Non-Extending Bank pursuant to this
Agreement; and (ii) the Company 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 effective as of the then scheduled
Expiration Date unless otherwise agreed by and between the
Non-Extending Bank and the Replacement Bank. 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 Note of
such Non-Extending Bank, which shall sell the same without
recourse or warranty (except as to the amount due thereon,
its title to such Note 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 Loans
of the Non-Extending Bank assumed whereupon (x) the then
- 17 -
<PAGE> 25
effective Expiration Date with respect to the Commitment
assumed shall be extended for a period of 364 days commencing
on the day next immediately following the then effective
Expiration Date, (y) each Replacement Bank, if applicable,
shall be deemed to be a "Bank" for purposes of this
Agreement, and (z) each Non-Extending Bank shall cease to be
a "Bank" for purposes of this Agreement (except with respect
to any unpaid interest due on the Notes it has sold, to any
unpaid principal and interest due on the Notes it has not
sold and 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
obligations hereunder.
(b) Term Loan Option. (i) Provided that no Potential
Default or Event of Default shall have occurred and be
continuing and subject to the other provisions of this
Agreement, the Company may at any time prior to the then
effective Expiration Date, elect to convert the aggregate
principal amount of all (but not less than all), of the then
outstanding Loans to a single one year term loan (the "Term
Loan") by providing to the Agent (a) written notice of such
election (the "Term Loan Notice") specifying the date upon
which such conversion shall become effective which date shall
not be less than 1 or more than 3 Business Days from the date
of such Notice (the "Term Loan Effective Date") and (b) a
single Term Loan Note for each Bank (each a "Term Loan Note"
and collectively the "Term Loan Notes") duly executed on
behalf of the Company in substantially the form attached
hereto as Exhibit C with the blanks appropriately completed,
dated as of the Term Loan Effective Date and payable to the
order of each such Bank in the amount equal to such Bank's
pro-rata share of the Term Loan. The Agent shall, promptly
upon receipt of such Term Loan Notice, notify the Banks
thereof. Effective immediately upon the Term Loan Effective
Date: (w) the Commitments of the Banks shall terminate and
shall not thereafter be reinstated; (x) the aggregate
outstanding principal amount of all Loans shall constitute a
single Term Loan consisting of one or more Term Loan
Segments, which shall initially correspond in amount,
applicable Option and Interest Period to each Set of Loans
initially converted to comprise the Term Loan; (y) the
Company may not reborrow any amounts repaid or prepaid with
respect to the Term Loan; and (z) the Term Loan Note of each
Bank shall supersede and replace the Note. The Term Loan as
so comprised shall have a term of one year commencing on the
Term Loan Effective Date and ending on the date which is one
year from the Term Loan Effective Date (the "Term Loan
Maturity Date"). The Interest Period and Interest Rate
Option applicable to each Set of Loans comprising the Term
- 18 -
<PAGE> 26
Loan, as of the Term Loan Effective Date, shall remain in
effect until the last day of the Interest Period applicable
thereto at which time the Company may select, in accordance
with and subject to Section 2.07 hereof, the Interest Rate
Option and Interest Period to apply to each Term Loan Segment
by providing Standard Notice thereof to the Agent specifying
the Interest Rate Option and the Interest Period to apply to
each such Term Loan Segment, provided, however, that at no
time shall the Term Loan consist of more than 10 Term Loan
Segments. In the absence of such Standard Notice prior to
the last day of any Interest Period applicable to any Term
Loan Segment comprising a part of the Term Loan, the Company
will be deemed to have selected the Base Rate Option to apply
to such Term Loan Segment. For and during the Term Loan
Period, all references in Section 2.07 hereof to the
Expiration Date shall be deemed to refer instead to the Term
Loan Maturity Date. Interest shall be payable on the Term
Loan in accordance with Section 2.09. The outstanding
principal amount of the Term Loan together with all interest
accrued thereon but unpaid shall be due and payable on the
Term Loan Maturity Date.
2.03 The Notes. The obligations of the Company to repay the
aggregate unpaid principal amount of the Loans made by each
Bank to the Company pursuant to Section 2.01 hereof and to
pay interest thereon shall be evidenced in part by a single
promissory note of the Company for each Bank dated on or
prior to the Closing Date in substantially the form attached
hereto as Exhibit A, with the blanks appropriately filled and
payable to the order of the Bank in the amount of the lesser
of such Bank's Commitment or the unpaid principal amount of
all Loans made to the Company by such Bank. 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 Company to the Agent on or prior to
the Closing Date and the Agent shall promptly furnish such
Notes to the respective Banks.
2.04 Making of Revolving Loans. (a) Whenever the Company
desires that the Banks make a Set of Loans hereunder it shall
give Standard Notice thereof to the Agent setting forth the
following information substantially in the form of Loan
Request attached hereto as Exhibit B:
(i) The date, which shall be a Business Day, on which
such Loans are to be made;
- 19 -
<PAGE> 27
(ii) The Interest Rate Option applicable to such Set of
Loans, selected in accordance with Section 2.07(a) hereof;
(iii) The Interest Period to apply to such Set of Loans,
selected in accordance with Section 2.07(b) hereof; and
(iv) The total principal amount of such Set of Loans,
selected in accordance with Section 2.07(c) hereof.
Standard Notice having been so given, the Agent shall
promptly advise each Bank of the information set forth
therein and of the amount of such Bank's Loan. On the date
specified in such Notice each Bank shall make the proceeds of
its Loan available to the Company at the Agent's Office no
later than 1:00 o'clock p.m., in funds immediately available
at such office. The failure of any Bank to fund any Loan
required of such Bank hereunder 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 Set of
Loans may be applied by the Agent in whole or in part ratably
against amounts then due and payable by the Company to the
Agent or any Bank hereunder.
(b) Absent contrary notice from the Company by 12:00
o'clock noon, three Business Days prior to any Maturity Date,
the Company shall, at the Agent's option, be deemed to have
given the Agent notice at such time pursuant to Section
2.04(a) hereof to the effect that the Company requests that
the Banks make a Set of Loans to the Company on such Maturity
Date at the Base Rate Option in an aggregate principal amount
equal to the aggregate principal amount of the Loans becoming
due and payable on such Maturity Date.
2.05. Commitment Fee; Utilization Fee; Closing Fee.
(a) Commitment Fee. The Company agrees as a
consideration for the Commitments of the Banks hereunder, to
pay to the Agent for the ratable account of the Banks, a
commitment fee (the "Commitment Fee") for the period from the
Closing Date to and including the Expiration Date 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 Commitment Fee Percentage of the daily average
aggregate Unused Current Commitments in effect during the
calendar quarter (or other period, if shorter than a calendar
quarter) for which the Commitment Fee is to be determined.
The Commitment Fee shall be payable quarterly in arrears
beginning on the first day of July, 1994 (for the period from
the Closing Date through June 30, 1994) and on the first day
of each October, January, April and July thereafter, and on
the Expiration Date or the date of complete termination of
- 20 -
<PAGE> 28
the Commitments of the Banks hereunder, in each case for the
immediately preceding calendar quarter or other period for
which such fee has not been paid.
(b) Utilization Fee. The Company agrees as a
consideration for the Commitments of the Banks hereunder and
in addition to any other fees payable by the Company pursuant
hereto, to pay to the Agent for the ratable account of the
Banks, a utilization fee (the "Utilization Fee") for the
period from the Closing Date to and including the Expiration
Date 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 Utilization Fee Percentage of the daily
average principal amount of all Loans outstanding during each
calendar quarter (or other period, if shorter than a calendar
quarter) from and after the Closing Date. The Utilization
Fee shall be payable quarterly in arrears beginning on the
first day of July, 1994 (for the period from the Closing Date
through June 30, 1994) and on the first day of each October,
January, April and July thereafter and on the Expiration Date
or the date of complete termination of the Commitments of the
Banks hereunder, in each case for the immediately preceding
calendar quarter or other period for which such Utilization
Fee has not been paid.
(c) Closing Fee. The Company agrees, as a consideration
for the Commitments of the Banks hereunder and in addition to
all other fees payable by the Company pursuant hereto, to pay
to the Agent on or before the Closing Date, for the account
of each Bank a closing fee (the "Closing Fee") in an
aggregate amount equal to the Applicable Closing Fee
Percentage for each such Bank multiplied by the Commitment
Amount of each such Bank set forth opposite each such Bank's
name in Section 2.01 hereof.
2.06. Termination or Reduction. The Company may at any time
at which there are no Loans outstanding hereunder terminate
in whole the Total Current Commitments of the Banks or at any
time or from time to time terminate ratably in part the
Current Commitments of the Banks to an amount not less than
the sum of the aggregate principal amount of the Loans then
outstanding plus the principal amount of all Loans not yet
made as to which notice has been given by the Company under
Section 2.04, in either case by giving not less than thirty
(30) Business Days' prior written or telephonic notice
confirmed in writing to the Agent; provided that any such
partial termination shall be in a minimum aggregate amount of
$1,000,000 or an integral multiple thereof; and provided
further that the minimum Total Current Commitment shall be at
least $10,000,000 after giving effect to any partial
termination. After each such partial termination, the
Commitment Fee shall be calculated upon the amount of the
- 21 -
<PAGE> 29
total Unused Current Commitments of the Banks as so reduced.
Any partial or complete termination of the Current
Commitments pursuant hereto shall be permanent and
irrevocable and may not therafter be reinstated.
2.07. Interest Rates; Maturity Periods; Transactional
Amounts.
(a) Optional Basis of Borrowing. Each Loan (and during
the Term Loan Period, if any, each Term Loan Segment) shall
bear interest for each day until due on a single basis
selected by the Company from among the Interest Rate Options
set forth below, it being understood that subject to the
provisions of this Agreement all Loans within a single Set of
Loans and each Term Loan Segment shall be subject to the same
Option, but the Company may select different Options to apply
simultaneously to different Sets of Loans and, during the
Term Loan Period, to different Term Loan Segments:
(i) Base Rate Option: A rate per annum (computed
on the basis of a year of 365 or 366 days, as the case
may be) for each day equal to the Base Rate for such day,
such interest rate to change automatically from time to
time effective as of the effective date of each change in
the Base Rate. "Base Rate", as used herein, shall mean
the interest rate per annum equal to the higher of: (A)
the Prime Rate for such day; or (B) the Federal Funds
Effective Rate for such day plus 1/2 of 1%. As used
herein "Prime Rate" shall mean that rate of interest per
annum announced from time to time by Mellon Bank, N.A. as
its Prime Rate. The Prime Rate may be greater or less
than other interest rates charged by Mellon Bank, N.A.
(or any of the Banks) to other borrowers and is not
solely based or dependent upon the interest rate which
Mellon Bank, N.A. (or any other Bank) may charge a
particular borrower or class of borrowers. "Federal
Funds Effective Rate" for any day, as used herein, shall
mean the rate per annum (rounded upward to the nearest
1/100 of 1%) determined by the Agent (which determination
shall 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 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
- 22 -
<PAGE> 30
Effective Rate" for such day shall be the Federal Funds
Effective Rate for the last day on which such rate was
announced. The Agent shall promptly notify the Company
and each Bank of each change in the Base Rate and the
effective date thereof, but any failure of the Agent to
so notify shall not relieve the Company of its
obligations hereunder, under the Notes, or under the Term
Loan Notes.
(ii) Euro-Rate Option: A rate per annum (based on a
year of 360 days and actual days elapsed) for each day
equal to the Euro-Rate for such day plus the Applicable
Margin. "Euro-Rate" for any day, as used herein, shall
mean for each Set of Euro-Rate Loans (or Term Loan
Segment bearing interest at the Euro-Rate Option)
corresponding to a proposed or existing Euro-Rate
Interest Period the rate per annum determined by the
Agent by dividing (the resulting quotient to be rounded
upward to the nearest 1/100 of 1%) (x) the rate of
interest (which shall be the same for each day in such
Euro-Rate Interest Period) determined in good faith by
the Agent (which determination shall be conclusive) to be
the average of the rates per annum for deposits in
Dollars offered to each of the Reference Banks in the
London interbank market at approximately 11:00 o'clock
a.m., London time, two London Business Days prior to the
first day of such Euro-Rate Interest Period for delivery
on the first day of such Euro-Rate Interest Period in
amounts comparable to the amount of such Set of Euro-Rate
Loans (or such Term Loan Segment) and for a period
comparable to such Euro-Rate Interest Period by (y) a
number equal to 1.00 minus the Euro-Rate Reserve
Percentage as defined below.
The "Euro-Rate" described in this Section
2.07(a)(ii) may also be expressed by the following formula:
<TABLE>
<S> <C>
[average of the rates offered to Reference ]
[Banks in the London interbank market ]
[determined by the Agent per subsection (ii) ]
Euro-Rate = [of this Section 2.07(a) ]
-------------------------------------------
[1.00 - Euro-Rate Reserve Percentage ]
</TABLE>
The "Euro-Rate Reserve Percentage" for any day is
the maximum effective percentage (expressed as a decimal
fraction, rounded upward to the nearest 1/100 of 1%), as
determined in good faith by the Agent (which
determination shall be conclusive), which is in effect on
such day as prescribed by the Board of Governors of the
Federal Reserve System (or any successor) for determining
- 23 -
<PAGE> 31
the reserve requirements (including, without limitation,
supplemental, marginal and emergency reserve
requirements) with respect to Eurocurrency funding
(currently referred to as "Eurocurrency Liabilities") of
a member bank in such System but only to the extent
actually incurred by any Bank. The Euro-Rate shall be
adjusted automatically as of the effective date of each
change in the Euro-Rate Reserve Percentage.
The Agent shall give prompt notice to the Company and the
Banks by telephone, telecopier or facsimile of the Euro-Rate
so offered or adjusted from time to time and the Agent's
determination thereof shall be conclusive in the absence of
manifest error.
(b) Interest Periods. At any time when the Company
shall request the Banks to make a Set of Loans (or shall
select an Option to apply to any Term Loan Segment), the
Company shall specify the term of such Loans (or of such Term
Loan Segment, as the case may be) (the "Interest Period" of
each such Set of Loans or Term Loan Segment) within the
limitations set forth in the chart below:
<TABLE>
<CAPTION>
Type of Loan Available Interest Periods
or Term Loan --------------------------
Segment Option
--------------
<S> <C>
Base Rate Any number of days not exceeding the
number of days remaining until the
Expiration Date ("Base Rate Interest
Period")
Euro-Rate One, two, or three months ("Euro-Rate
Interest Period")
</TABLE>
provided, that:
(i) Each Base Rate Interest Period beginning before
the Expiration Date, which would otherwise end after the
Expiration Date, shall instead end on the Expiration Date;
(ii) Each Base Rate Interest Period 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 in which
event such Base Rate 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;
- 24 -
<PAGE> 32
(iv) Notwithstanding any other provision of this
Agreement, the Company may not fix an Interest Period
which would end after the Expiration Date;
The principal amount of each Loan (other than the Term Loan)
shall be due and payable on the last day of the Interest
Period corresponding thereto (the "Maturity Date" therefor).
(c) Transactional Amounts. Every request for a Set of
Loans and every Term Loan Segment and every prepayment of a
Set of Loans or Term Loan Segment shall be in a principal
amount such that after giving effect thereto the principal
amount of such Set of Loans or Term Loan Segment, as the case
may be, shall be as set forth in the table below:
<TABLE>
<CAPTION>
Type of Loan or Allowable Principal Amounts
Term Loan Segment ---------------------------
Option
- - - -----------------
<S> <C>
Base Rate $1,000,000 plus an integral multiple
of $1,000,000
Euro-Rate $1,000,000 plus an integral multiple
of $1,000,000
</TABLE>
(d) Interest After Maturity. After the principal amount
of any Loan or the Term Loan shall have become due (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 either Reference Bank (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 (or Term Loan Segment bearing
interest at the Euro-Rate Option) from a Corresponding
Source of Funds shall exceed the Euro-Rate applicable to
such Loan or Term Loan Segment, or
- 25 -
<PAGE> 33
(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
(or Term Loan Segment bearing or to bear interest at the
Euro-Rate Option) 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 Reference Bank or Bank, as
the case may be, 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) the
obligation of the Banks to allow the Company to select the
Euro-Rate Option shall be suspended until the Agent shall
have later notified the Company of such Reference Bank'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, prior to the Term Loan Period, the Agent notifies the
Company of a determination under subsection (ii) of this
Section 2.07(e), all Euro-Rate Loans then outstanding shall
be due and payable on the date specified in such notice.
Absent contrary notice from the Company by 12:00 o'clock
noon, on such specified date, the Company shall be deemed to
have given the Agent notice at such time pursuant to Section
2.04(a) hereof to the effect that the Company requests a Set
of Loans hereunder at the Base Rate Option in principal
amount equal to the principal amount becoming due and payable
pursuant to the preceding sentence. If during the Term Loan
Period, the Agent notifies the Company of a determination
under subsection (ii) of this Section 2.07(e), all Term Loan
Segments then bearing interest at the Euro-Rate Option shall
cease to bear interest at such rate upon the date specified
in such notice and shall thereafter instead bear interest at
the Base Rate Option which for purposes of Section 2.11(b)
hereof shall be deemed to constitute a prepayment of such
Term Loan Segment.
If at the time a Bank makes a determination under this
Section 2.07(e) and the Company has previously notified the
Agent that it wishes the Banks to make a Set of Euro-Rate
Loans or that it selects the Euro-Rate Option to apply to a
Term Loan Segment but such Loans have not yet been made or
such Euro-Rate Option has not yet applied to such Term Loan
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<PAGE> 34
Segment, as the case may be, such notification shall be
deemed to request the making of Base Rate Loans instead of
Euro-Rate Loans or the application of the Base Rate Option
instead of the Euro-Rate Option, as the case may be.
2.08. Prepayments. The Company shall have the right at its
option from time to time to prepay any Set of Loans or any
Term Loan Segment of the Term Loan in whole or in part upon
at least: (i) one Business Day prior written notice to the
Agent in the case of any Set of Base Rate Loans or Term Loan
Segment bearing interest at the Base Rate Option; and (ii)
subject to the provisions of Section 2.11(b) hereof, five
Business Days' prior written notice to the Agent in the case
of any Set of Euro-Rate Loans or Term Loan Segments bearing
interest at the Euro-Rate Option. Whenever the Company
desires to prepay any part of any Set of Loans or any Term
Loan Segment, it shall provide the foregoing notice 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 or, in the case of a Term
Loan Segment, the last day of the Interest Period
applicable thereto, principal amount of, and Interest
Rate Option applicable to, the Set of Loans or Term Loan
Segment to be prepaid; and
(c) The principal amount selected in accordance
with Section 2.07(c) hereof to be prepaid.
Upon receiving the foregoing notice, the Agent shall promptly
advise each Bank of the information set forth therein and on
the date specified in such notice the principal amount of the
Set of Loans (or Term Loan Segment, as the case may be)
specified in such notice, together with interest on such
principal amount to such date, shall be due and payable.
2.09. Interest Payment Dates. (a) Interest on each Set of
Base Rate Loans shall be due and payable on the Maturity Date
thereof and, if the corresponding Base Rate Interest Period
is longer than 90 days, also every 90th day during such
Interest Period. Interest on each Set of Euro-Rate Loans
shall be due and payable on the Maturity Date thereof and, if
the corresponding Euro-Rate Interest Period is longer than
three 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 2.08(a)
hereof; or specified for a required prepayment of Euro-Rate
Loans in a notice to be provided pursuant to Section 2.07(e)
hereof; (b) Interest on each Term Loan Segment bearing
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<PAGE> 35
interest at the Base Rate Option shall be due and payable on
the last day of the Interest Period thereof and, if such
Interest Period is longer than 90 days, also every 90th day
during such Interest Period. Interest on each Term Loan
Segment bearing interest at the Euro-Rate Option shall be due
and payable on the last day of the Interest Period thereof
and, if the corresponding Euro-Rate Interest Period is longer
than 3 months, also every third month during such Interest
Period; and (c) After maturity of any Set of Loans or of the
Term Loan (by acceleration or otherwise), interest on such
Loans or the Term Loan, as the case may be, shall be due and
payable on demand.
2.10. Payments. All payments and prepayments to be made in
respect of principal, interest, Commitment Fee, Utilization
Fee or other amounts due from the Company hereunder or under
any Note or any Term Loan Note shall be payable at 12:00
o'clock noon, on the day when due without presentment,
demand, protest or notice of any kind, all of which are
hereby expressly waived, and an action therefore shall
immediately accrue. Such payments shall be made to the Agent
at its Office in Dollars in funds immediately available at
such Office and shall be promptly distributed by the Agent
ratably to each Bank. All such payments shall be made
without setoff, counterclaim or other deduction of any
nature, except only that the principal amount of any Loan
then due by the Company to any Bank shall automatically be
set-off against the principal amount of any Loan then due
from such Bank to the Company hereunder. To the extent
permitted by law, after there shall have become due (by
acceleration or otherwise) interest, Commitment Fee,
Utilization Fee or any other amounts due from the Company
hereunder, under the Notes or under the Term Loan Notes
(excluding overdue principal, which shall bear interest as
described in Section 2.07(d) hereof, but including interest
payable under this Section 2.10), 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.
2.11. 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
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<PAGE> 36
any request or directive of any Official 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 Note or Term Loan Note
held by such Bank, the Loans, Term Loans or payments by
the Company of principal, interest, Commitment Fee,
Utilization Fee or other amounts due from the Company
hereunder or under any such note (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 expressly included herein
in the determination of the Euro-Rate hereunder),
(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 Note or
the Term Loan Note held by such Bank or its making,
maintenance or funding of any Loans or of any Term Loan
Segments;
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 or any
Notional Euro-Rate Funding Office of such Bank with
respect to this Agreement, the Note or Term Note held by
such Bank or the making, maintenance or funding of any
part of any Loan or of any Term Loan Segment or, in the
case of any capital adequacy or similar requirement, to
have the effect of reducing the return on any Bank's
capital, (taking into account such Bank's policies with
respect to capital adequacy) by an amount which such Bank
deems to be material (such Bank being deemed for this
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<PAGE> 37
purpose to have made, maintained or funded each Euro-Rate
Loan and/or Term Loan Segment bearing interest at the
Euro-Rate Option 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 or
such Notional Euro-Rate Funding Office 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.
Such amount shall be due and payable by the Company to
such Bank ten Business Days after such notice is given.
If the Company is required to make a payment to a Bank
under this Section 2.11(a) prior to the Term Loan
Effective Date, 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(a) shall apply except that in
applying the provisions of Section 2.02(a) for purposes
of this Section 2.11(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.
(b) Indemnity. In addition to the compensation required
by subsection (a) of this Section 2.11, the Company 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 of any Term Loan Segment bearing
interest at the Euro-Rate Option 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 the Company 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 2.11(b) or (B) to treat such
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<PAGE> 38
attempted revocation as having no force or effect, as if
never made), or
(iii) default by the Company in the performance or
observance of any covenant or condition contained in this
Agreement, the Notes or the Term Loan Notes, including
without limitation any failure of the Company to pay when
due (by acceleration or otherwise) any principal,
interest, Commitment Fee, Utilization Fee or any other
amount due hereunder or under any such 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 and each Term Loan Segment
bearing interest at the Euro-Rate Option 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 Company
to such Bank ten Business Days after such notice is given.
As to any Bank, the indemnity set forth herein shall not
apply to the extent caused by the wilful misconduct or
negligence of such Bank.
2.12. Taxes.
(a) Payments Net of Taxes. All payments made by the
Company 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 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 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 by any jurisdiction in which such Bank's
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<PAGE> 39
lending offices which made or book Loans or the Term Loan
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").
If any Taxes are required to be withheld or deducted from any
amounts payable to the Agent or any Bank under this
Agreement, the Company 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 the Company with respect to payments made in
connection with this Agreement, as promptly as possible
thereafter, the Company 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 Company showing payment thereof.
(b) Indemnity. The Company hereby indemnifies the Agent
and each of the Banks for the full amount of all Taxes
attributable to payments by or on behalf of the Company
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 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
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<PAGE> 40
(ii) 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 From 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
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 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.
2.13. 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 Company, to deem any branch, Subsidiary or
Affiliate of such Bank to have made, maintained or funded any
of such Bank's Euro-Rate Loans (or each Bank's share of any
Term Loan Segment bearing interest at the Euro-Rate Option)
at any time. Any branch, Subsidiary or Affiliate so deemed
shall be known as a "Notional Euro-Rate Funding Office". The
Bank shall deem any of its Euro-Rate Loans or its share of
any Term Loan Segment 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 2.07(e) hereof or would lessen
compensation payable by the Company under Section 2.11
hereof, and if the Bank determines in its sole discretion
that such transfer would be practicable and would not have a
material adverse effect on such Loans (or such Bank's share
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<PAGE> 41
of such Term Loan Segment), the Bank or any Notional
Euro-Rate Funding Office (it being assumed for purposes of
such determination that each such Euro-Rate Loan (or each
such share of a Term Loan Segment bearing interest at the
Euro-Rate Option) 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 the Term Loan 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 (or Term
Loan Segment bearing interest at the Euro-Rate Option) by
arranging for a branch, Subsidiary or Affiliate of such Bank
to make or maintain such Loan or Term Loan Segment. Each
Bank shall have the right to (i) hold any applicable Note or
Term Loan Note payable to its order for the benefit and
account of such branch, Subsidiary or Affiliate or (ii)
request the Company to issue one or more promissory notes in
the principal amount of such Euro-Rate Loan (or Term Loan
Segment) in substantially the form attached hereto as Exhibit
A, 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 Company. The Company agrees to
comply promptly with any request under subsection (ii) of
this Section 2.13(b). If such Bank causes a branch,
Subsidiary or Affiliate to make or maintain any Loan (or Term
Loan Segment) hereunder, all terms and conditions of this
Agreement shall, except where the context clearly requires
otherwise, be applicable to such Loan (or Term Loan Segment)
and to any Note or Term Loan Note payable to the order of
such branch, Subsidiary or Affiliate to the same extent as if
such Loan (or Term Loan Segment) were made or maintained by
the Bank and such note were a Note or Term Loan Note payable
to the Bank's order.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to the Agent and
each Bank as follows:
3.01. 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
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<PAGE> 42
advisable and where failure to so qualify could have a
material adverse effect upon the business, operations or
conditions (financial or otherwise) of the Company.
3.02. Corporate Power and Authorization. The Company 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, the Notes and the other
Loan Documents and to perform its obligations hereunder and
under the Notes; and all such action has been duly authorized
by all necessary corporate proceedings on its part.
3.03. 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, 1992 and the related
consolidated statements of income, cash flows and changes in
stockholders' equity for the fiscal years then ended, as
examined and reported on by Arthur Andersen & Co.,
independent certified public accountants for the Company, who
delivered an unqualified opinion in respect thereof. Such
financial statements (including the notes thereto) present
fairly the financial condition of the Company and its
Consolidated Subsidiaries as of the end of such fiscal year
and the results of their operations and their cash flows for
the fiscal year then ended, all in conformity with GAAP.
3.04. Interim Financial Statements. The Company has
heretofore furnished to the Agent and each Bank unaudited
interim consolidated balance sheets of the Company and its
Consolidated Subsidiaries as of the end of the third fiscal
quarter of 1993 ending on September 30, 1993, together with
the related unaudited consolidated statements of income for
the applicable fiscal periods ending on each such date. Such
financial statements (including the notes thereto) present
fairly the financial condition of the Company and its
Consolidated Subsidiaries as of the end of each such fiscal
quarter and the results of their operations for the fiscal
periods then ended, all in conformity with GAAP subject to
normal year-end adjustments.
3.05. 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, 1992, together with the
related consolidating statements of income for the applicable
fiscal periods ending on each such date. Such financial
statements (including the notes thereto) present fairly the
financial condition of the Company and its Consolidated
Subsidiaries as of the end of such fiscal period and the
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<PAGE> 43
results of their operations for the fiscal period then ended,
all in conformity with GAAP.
3.06. CNB 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
CNB for the fiscal year ending December 31, 1992 and for the
fiscal quarter ending September 30, 1993. Such Call Reports
present fairly the financial condition of CNB as of the end
of such fiscal year and of each such fiscal quarter and the
results of its operations, its capital position and its cash
flows for the fiscal periods then ended, all in conformity
with RAP.
3.07. Absence of Material Adverse Changes. Except as
otherwise disclosed in Schedule 3.07 hereof, since December
31, 1992 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.
3.08. Litigation. Except as set forth in the Company's 10-K
report for the fiscal year ending December 31, 1992, copies
of which have been provided to the Agent and the Banks, there
is no litigation or governmental proceeding by or against the
Company, CNB, or any other Subsidiary of the Company pending
or, to the knowledge of the Company, after due inquiry,
threatened, which in the reasonable judgment of the Company,
and if determined adversely, either individually or in the
aggregate is likely to have any material adverse effect on
the financial condition or business of the Company or CNB.
3.09. No Conflicting Laws or Agreements; Consents and
Approvals.
(a) Neither the execution and delivery of this
Agreement, the consummation of the transactions herein
contemplated nor compliance with the terms and provisions
hereof, of the Notes, the Term Loan Notes or of any other
Loan Document will 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 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 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.
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<PAGE> 44
(b) No authorization, consent, approval, license,
exemption or other action by, and no registration,
qualification, designation, declaration or filing with, any
Official Body is or will be necessary or advisable in
connection with execution and delivery of this Agreement, the
Notes, the Term Loan Notes, consummation of the transactions
herein or therein contemplated, or the performance of or
compliance with the terms and conditions hereof or thereof.
3.10. Execution and Binding Effect. This Agreement has been
duly and validly executed and delivered by the Company. This
Agreement constitutes, and the Notes, Term Loan Notes and
other Loan Documents when duly executed and delivered by the
Company pursuant to the provisions hereof will constitute,
legal, valid and binding obligations of the Company,
enforceable in accordance with the terms thereof except, as
to the enforcement of remedies, for limitations imposed by
bankruptcy, insolvency, reorganization, moratorium or other
similar Laws affecting the enforcement of creditors' rights
generally or by Laws limiting the right of specific
performance.
3.11. ERISA Compliance. Each ERISA Group Member has
fulfilled its obligations under the minimum funding standards
of ERISA and the Code in all material respects with respect
to each Plan and is in compliance in all material respects
with the presently applicable provisions of ERISA and the
Code with respect to each Plan. No ERISA Group Member has
(i) sought a waiver of the minimum funding standard under
Section 412 of the Code in respect of any Plan, (ii) failed
to make any contribution or payment to any Plan, or made any
amendment to any Plan which has resulted or could result in
the imposition of a Lien or the posting of a bond or other
security under ERISA or the Code or (iii) incurred any
material liability under Title IV of ERISA other than a
liability to the PBGC for premiums under Section 4007 of
ERISA or for the payment of benefits in the ordinary course.
3.12. Taxes. All tax and information returns required to be
filed by the Company or any Subsidiary of the Company have
been properly prepared, executed and filed. All taxes,
assessments, fees and other governmental charges upon the
Company and its Subsidiaries or upon their respective
properties, incomes or sales which are due and payable have
been paid. 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 period.
3.13. Regulation U. The Company will make no borrowing
hereunder for the purpose of buying or carrying any "margin
stock" as such term is used in Regulation U of the Board of
Governors of the Federal Reserve System.
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<PAGE> 45
3.14. Environmental Matters. (a) The Company and each of
its 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, the Company and each of its 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, 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 or any of its
Environmental Affiliates, except for matters which, if
adversely decided, 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.
(d) To the best of the knowledge of all Responsible
Officers and except as disclosed in Schedule 3.14(d) hereof,
no facility or property now or previously owned, operated or
leased by the Company or any of its Environmental Affiliates
is an Environmental Cleanup Site and neither the Company nor
any of its 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 or any of its Environmental
Affiliates, under any Environmental Law.
(e) To the best of the knowledge of all Responsible
Officers, 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
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<PAGE> 46
transferability of facilities or properties now or previously
owned, operated or leased by the Company or any of its
Environmental Affiliates.
3.15. Investment Company; Bank Holding Company; Public
Utility Holding Company. The Company: (a) is not and is not
controlled by an investment company within the meaning of the
Investment Company Act of 1940, as amended; (b) is not a
registered bank holding company under the Bank Holding
Company Act of 1956, as amended; and (c) is not 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.
3.16. CNB Capitalization. As of the Closing Date, CNB is
"Well Capitalized" as defined under and determined pursuant
to the regulations of the OCC.
3.17. 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 3.03,
3.04, 3.05 and 3.06 hereof, (b) matters that, individually or
in the aggregate, could not 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, 1992 in the ordinary
course of business and consistent with past practices; and
(d) matters disclosed on Schedule 3.17 hereof.
3.18. 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.
3.19. 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 3.03 hereof or submitted pursuant to
Section 5.01(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.
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<PAGE> 47
3.20. Subsidiaries and Other Investments. Annexed hereto as
Schedule 3.20 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. 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 3.20 (other than directors'
qualifying shares in the case of CNB), 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 except as disclosed in
Schedule 3.20 and except for investments by the Company in
the ordinary course of business and which individually or in
the aggregate are not material. 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 3.20, 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 3.20. All of the outstanding
shares of stock directly or indirectly owned by the Company
in each corporation listed in Schedule 3.20 are duly
authorized, validly issued, fully paid and nonassessable
(subject, in the case of the shares issued by CNB, 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 each 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.
3.21. 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 upon the business,
operations, performance or condition, financial or otherwise,
of the Company or any Material Subsidiary or otherwise) the
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<PAGE> 48
ability of the Company to perform its obligations under this
Agreement, the Notes, and the Term Loan Notes.
ARTICLE IV
CONDITIONS OF LENDING
4.01. Initial Loans. The obligation of each Bank to make
initial Loans hereunder is subject to the satisfaction of the
following conditions precedent in addition to the conditions
set forth in Section 4.02 hereof
(a) Agreement; Notes. The Agent shall have received an
executed counterpart of this Agreement for each Bank, duly
executed by the Company, and executed Notes, conforming to
the requirements hereof, duly executed on behalf of the
Company.
(b) Corporate Proceedings. The Agent shall have
received, with a counterpart for each Bank, certificates by
the Secretary or Assistant Secretary of the Company and each
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 the Company and each Material
Subsidiary in effect on such date which shall be certified to
be true, correct and complete by such Secretary not more than
30 days before the Closing Date, (ii) true copies of all
corporate action taken by the Company relative to this
Agreement and the Notes and (iii) the authority, incumbency
and signature of the respective officers of the Company
executing this Agreement and the Notes and of the Responsible
Officers authorized to sign any certificate or other document
required to be provided on behalf of the Company purusant
hereto, all together with satisfactory evidence of the
incumbency of such Secretary or Assistant Secretary.
(c) 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 30 days before the Closing Date
showing the good standing of the Company and each Material
Subsidiary in its state of incorporation or jurisdiction of
organization.
(d) 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 3.03, 3.04, 3.05 and 3.06
hereof respectively.
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<PAGE> 49
(e) 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 3.01, 3.02, 3.08, 3.09, 3.10 and 3.15
except that as to the matters referred to in Section 3.08
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.
(f) Officers' Certificates. The Agent shall have
received, with an executed counterpart for each Bank,
certificates from Responsible Officers as to such matters as
the Agent may reasonably request.
(g) 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 letter
from the Agent to the Company dated November 24, 1993 shall
have been paid or received by the Agent.
(h) 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.
4.02. Conditions to all Loans. The obligation of each Bank
to make each and any Loan (including initial Loans) and to
permit the conversion of Loans to the Term Loan pursuant to
Section 2.02(b) hereof, is subject to the performance by the
Company of its obligations to be performed hereunder on or
before the date of such Loan or such Term Loan conversion, as
the case may be, satisfaction of the conditions set forth in
Section 4.01 hereof, and the satisfaction of the following
further conditions precedent on and as of the date of each
Loan hereunder or the Term Loan Effective Date, as the case
may be.
(a) Notice. Standard Notice of such Loan shall have
been given by the Company to the Agent as provided in Section
2.04 hereof or Term Loan Notice of such conversion shall have
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<PAGE> 50
been given by the Company as provided in Section 2.02(b)
hereof, as the case may be.
(b) Representations and Warranties. The representations
and warranties contained in Article III hereof shall be true
and correct in all material respects on and as of the date of
each Loan or the Term Loan Effective Date, as the case may
be, as if made on and as of such date, both before and after
giving effect to the Loans requested to be made on such date
(except for the representations and warranties set forth at
Sections 3.07, 3.16 and 3.20 hereof which are made solely as
of the Closing Date).
(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 on such
date.
Each request by the Company for any Loan and any Term Loan
Notice shall constitute a representation and warranty by the
Company that the conditions set forth in this Section 4.02
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 before the Term Loan is
given effect shall constitute a further representation and
warranty by the Company that the conditions referred to in
this Section 4.02 have been satisfied as of the date such
Loan is made or the Term Loan Effective Date, as the case may
be.
ARTICLE V
AFFIRMATIVE COVENANTS
The Company hereby covenants to the Agent and each Bank as
follows:
5.01. 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, (i) statements of income, cash
flows and changes in stockholders' equity of the Company for
such fiscal year and a balance sheet of the Company as of the
close of such fiscal year; and (ii) 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
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<PAGE> 51
forth in comparative form the corresponding figures for the
preceding fiscal year. All such financial statements shall
be accompanied by an opinion of independent certified public
accountants of recognized national standing selected by the
Company. 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 individually, and the Company and its
Consolidated Subsidiaries, as appropriate, as of the end of
such fiscal year and the results of their operations and
their cash flows and changes in stockholders' equity for such
fiscal year, 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, (i) unaudited statements of income
of the Company 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 balance sheet of the Company
as of the close of such fiscal quarter; and (ii) unaudited
consolidated statements of income 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 or as of the same
date 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 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 year, in conformity with GAAP, subject to normal
and recurring year-end audit adjustments.
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<PAGE> 52
(c) CNB Financial Statements. As soon as practical and
in any event within 90 days after the close of each fiscal
year of the Company (in the case of annual Call Reports) and
within 45 days after the close of each fiscal quarter of the
Company (in the case of quarterly Call Reports), 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 CNB and all
other banking Subsidiaries of the Company for which such
reports are required by the OCC for the immediately preceding
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 the financial
condition of CNB, or such banking Subsidiary of the Company,
as the case may be, as of the end of the fiscal period to
which they pertain and the results of CNB's (or such banking
Subsidiaries, as the case may be) operations, capital
position and cash flows for such fiscal periods, all in
conformity with RAP.
(d) Consolidating Reports. As soon 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 on behalf of the Company by a
Responsible Officer as presenting fairly 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), (c) and (d) of this Section 5.01) the
Company shall deliver to the Agent, with a copy for each
Bank, a compliance certificate dated as of the end of such
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<PAGE> 53
fiscal year or quarter, duly executed on behalf of the
Company by a Responsible Officer of the Company in form
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 Section 6.01 hereof and providing in reasonable
detail the information and calculations necessary or, in the
judgment of the Agent, appropriate to establish compliance
with Section 6.01 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 reports required pursuant to Sections
5.01(a) and 5.01(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
material reports, letters, comments or other results of any
examination of, or otherwise pertaining to, CNB prepared or
provided by the OCC 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 CNB shall
file with or otherwise provide to the OCC, the Board of
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<PAGE> 54
Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation (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 the
Company's Rating Level is 11 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 action, suit,
proceeding or investigation by or before any Official
Body (including, without limitation, the OCC, the Federal
Reserve Board or the Federal Deposit Insurance
Corporation 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, condition
(financial or otherwise) of the Company and its
Subsidiaries taken as a whole.
(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.
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<PAGE> 55
(iv) Any Reportable Event with respect to a Plan or
that action has been or will be taken by any person to
terminate any Plan in accordance with Section 4041 of
ERISA or otherwise, or the Company, any ERISA group
member or any administrator of a Plan files a notice of
intent to terminate a Plan with the Internal Revenue
Service or the PBGC; or files with the Internal Revenue
Service a request pursuant to Section 412 of the Code for
a variance from the minimum funding standard for a Plan;
or files a return with the Internal Revenue Service with
respect to the tax imposed under Section 4971(a) of the
Code for failure to meet the minimum funding standards
established under Section 412 of the Code for a Plan, the
Company will furnish to the Agent a copy of any notice,
return or other written materials applicable or required
to be filed by the Company in respect thereof; the most
recent Annual Report (Form 5500 Series) and attachments
thereto for the Plan; the most recent actuarial report
for the Plan; and a written statement of a Responsible
Officer of the Company describing the event or the action
taken and the reasons therefor.
(v) Any 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
Environmental Claim.
(vi) Any change in the Company's senior unsecured
debt rating (or CNB's subordinated debt rating, as the
case may be) by Moodys, S&P, Fitch, Duff & Phelps and/or
Thompsons.
(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
is designated in Schedule 3.20 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.
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<PAGE> 56
(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.
5.02. 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.
5.03. 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
(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 applicable insolvency 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
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<PAGE> 57
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.
5.04. 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 6.03 hereof, the Company
shall and shall cause each Material Subsidiary to: (a)
maintain its corporate existence and 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.
5.05. 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.
5.06. Avoidance of Other Conflicts. The Company shall not,
and shall not permit any of its Subsidiaries to, violate or
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 any of them or any of their respective
Subsidiaries is a party or by which any of them or any of
their respective Assets (now owned or hereafter acquired) may
be subject or bound.
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5.07. CNB Capitalization. The Company shall at all times
cause CNB and all other banking Subsidiaries of the Company
which are regulated by the OCC to be at least "adequately
capitalized" as determined and defined pursuant to the
regulations of the OCC.
5.08. Financial Accounting Practices. The Company shall,
and shall cause each of its Material 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, (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.
5.09. Use of Proceeds. The Company shall use the proceeds
of all Loans hereunder only for its general corporate
purposes. The Company shall not use the proceeds of any
Loans hereunder for the purpose of buying or carrying any
"margin stock" as such term is defined in Regulation U of the
Board of Governors of the Federal Reserve System and will not
directly or indirectly use the proceeds of any Loans
hereunder for any unlawful purpose or in any manner
inconsistent with any other provision hereof.
5.10. 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 business(es)
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) (in the case of commercial products and services,
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
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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
financial products and services referred to above).
5.11. 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.
5.12. Fiscal Year. The Company shall not, and shall not
suffer any of its Subsidiaries to, change its fiscal year or
fiscal quarter.
5.13. Restrictions on Stock Payments, Etc. On or before
December 31, 1994, the Company shall terminate, remove or
otherwise cause to be terminated or removed all restrictions
referred to in Section 6.06(g) hereof including, without
limitation, the termination of the Capital Support Agreement
referred to in such Section.
ARTICLE VI
NEGATIVE COVENANTS
The Company covenants to the Agent and each Bank as follows:
6.01. Financial Covenants.
(a) Consolidated Tangible Net Worth. Consolidated
Tangible Net Worth shall not at any time be less than the sum
of (i) $270,000,000 plus (ii) an amount equal to 50% of the
aggregate of positive Consolidated Net Income for each fiscal
quarter which begins after September 30, 1993 and ends prior
to the date for which compliance with this Section 6.01(a) is
being determined.
(b) Double Leverage Ratio. 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.
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(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 loan loss reserves maintained
by the Company and its Consolidated Subsidiaries, on a
managed and/or owned basis, against and in respect of all
accounts receivable either managed or owned by the Company
and its Consolidated Subsidiaries be less than an amount
equal to 75% of the total of all such accounts receivable
which are either managed or owned by the Company and its
Consolidated Subsidiaries which are 90 or more days
contractually past due.
6.02. 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 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 6.02(a);
(b) Liens arising from taxes, assessments, charges,
levies or claims described in Section 5.03 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 5.03;
(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, 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 of such property by the
Company or such Subsidiary;
(ii) each such Lien is confined solely to the
property so purchased, improvements thereto and proceeds
thereof, and
(iii) the aggregate amount of the obligations
secured by all such Liens on any particular property at
any time purchased by the Company or such Subsidiary,
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shall not exceed 90% of the lesser of the fair market
value of such property at such time or the actual
purchase price of such property.
(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 CNB 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 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.
(i) Liens granted by Advanta Mortgage Holding Corp.
("AMHC") and/or Advanta Mortgage Corp. USA ("AMC USA") to
secure Indebtedness or other obligations of AMC USA or AMHC,
as the case may be, incurred in anticipation of and relating
to the securitization of Mortgage Loan Assets of and by AMC
or AMHC, as the case may be, in the ordinary course of
business, provided, however, that neither the aggregate
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amount of all Indebtedness or other obligations so secured
nor the aggregate value of all Mortgage Loan Assets upon
which such Liens are granted shall at any time exceed
$100,000,000 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. For
purposes hereof "Mortgage Loan Assets" shall mean mortgage
loans secured by residential real property made or acquired
by AMHC and/or AMC, each of which is evidenced by a note and
secured by a mortgage (each a "Mortgage Loan"). For purposes
hereof, the value of a Mortgage Loan Asset shall be
determined by reference to, and shall be equal to, the unpaid
principal amount of all accounts and instruments (as those
terms are defined in the Uniform Commercial Code of
Pennsylvania) representing or evidencing a Mortgage Loan made
or acquired by AMHC or AMC, as the case may be.
(j) Liens granted by Advanta Leasing Holding Corp.
("ALHC") and/or Advanta Leasing Corp. ("ALC") to secure
Indebtedness or any other obligations of ALHC and/or ALC
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 the following amounts at any time during
the periods indicated;
(i) $63,500,000 from the Closing Date to March 31,
1994;
(ii) $53,500,000 from April 1, 1994 to April 30, 1994;
(iii) $50,500,000 from May 1, 1994 to May 31, 1994;
(iv) $37,500,000 from June 1, 1994 to June 30, 1994;
(v) $ 5,000,000 from July 1, 1994 to December 31,
1994; and
(vi) $ 100,000 at any time thereafter.
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 ALC or ALHC, as the case may be,
of all Assets consisting of accounts, instruments, notes or
other evidences of Indebtedness; the net lease amount
determined in accordance with GAAP and reflected on the
balance sheet of ALC or ALHC, as the case may be, in the case
of all Assets consisting of leases; and the fair market value
of all tangible or other Assets.
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(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 as provided in Section 5.03.
(l) "Permitted Lien" shall in no event include any Lien
imposed by, or required to be granted pursuant to, ERISA or
any Environmental Law.
6.03. 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 all or
any substantial portion of the properties of any going
concern or going line of business, (y) acquire all or any
substantial portion of the properties of any other Person
other than in the ordinary 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 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
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5.10 hereof) as the Company and its Subsidiaries except as
otherwise permitted pursuant to Section 5.10 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.
6.04. Dispositions of Properties. (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. (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 6.04 (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
6.05 hereof; and
(iii) Sales, conveyances, assignments or other transfers
or dispositions in immediate exchange for cash or tangible
Assets, provided that such transaction shall not otherwise be
prohibited by any other provision of this Agreement and no
Event of 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 6.04(b): any disposition of
accounts, chattel paper or general Intangibles, with or
without recourse; and any disposition of any leasehold
interest. Nothing in this Section 6.04(b) shall be construed
to limit the restriction set forth in Section 6.04(a) hereof
or any other restriction on dispositions of property imposed
by this Agreement.
6.05. 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 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
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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) Existence and 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, and the board of
directors of the Company or such Subsidiary (including a
majority of the directors having no direct or indirect
interest in such transaction) approve the same;
(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.
6.06. 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 Subsidiary, (x) pay any
Indebtedness, obligations or liabilities from time to time
owed to the Company or any 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:
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(a) Restrictions pursuant to this Agreement;
(b) Legal restrictions of general applicability under
the corporation law under which such Subsidiary is
incorporated, and fraudulent conveyance or similar laws or
general applicability for the benefit of creditors of such
Subsidiary generally;
(c) With respect to clause (z) above: (i) non-assignment
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 Corp. USA ("AMC USA") 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 AMC USA, in each case,
requiring AMC USA and/or its parent Advanta Mortgage Holding
Corp. ("AMHC"), to maintain minimum equity in or of AMC USA
to the extent that the failure to comply with such
requirements would be likely to have a material adverse
effect on the business, operations, condition, (financial or
otherwise) of AMC USA and/or AMHC and provided further that
in no event shall the Company agree to, or cause or permit
any agreement by AMC USA or AMHC to, maintain or cause to be
maintained equity in AMC USA in excess of $10,000,000.
(g) Until December 31, 1994 (and not thereafter)
restrictions resulting from requirements contained in lending
arrangements existing as of the Closing Date between Advanta
Leasing Holding Corp. ("ALHC") and various financial
institutions restricting the ability of ALHC and Advanta
Leasing Corp. ("ALC") to pay dividends, to make advances to
the Company, to repay certain subordinated debt or to
transfer property as well as requiring them to maintain the
leverage position specified in that certain Capital Support
Agreement dated April 2, 1993 among the Company, ALHC and ALC
and requirements contained in such Capital Support Agreement
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requiring the Company to provide certain capital support to
such Subsidiaries, provided, however, that in no event shall
the Company, or shall the Company permit either ALHC or ALC
to, provide or agree to provide capital support or to
maintain a leverage position, as the case may be, in an
amount greater than that which is specified in such Capital
Support Agreement as of the date hereof.
ARTICLE VII
EVENTS OF DEFAULT
7.01 If one or more of the following described Events of
Default shall occur, that is to say:
(a) The Company shall default in the payment when due of
principal of any Note or any Term Loan Note; or
(b) The Company shall default in the payment when due of
interest on any Note, on any Term Loan Note or of any
Commitment Fee, Utilization Fee or other fee payable
hereunder, 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 VI hereof, or any of the covenants contained in
Sections 5.01(j), 5.04(a), 5.04(b), 5.07, 5.09 or 5.10
hereof; or
(d) Any representation or warranty made by the Company
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) The Company shall default in the observance,
performance or fulfillment of any other covenant, condition
or provision hereof (not otherwise referred to in (a), (b),
(c) or (d) above) 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 or Term Loan
Note issued hereunder; or
(f) The Company or any Subsidiary of the Company shall
default (i) in any payment of principal of or interest on any
Indebtedness in principal amount of $10,000,000 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
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Indebtedness is created, 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 ERISA Group Member shall fail to pay when due
any amount which it shall have become liable to pay under
Title IV of ERISA; or notice of an intent to terminate any
Plan shall be filed under Title IV of ERISA by any ERISA
Group Member, any Plan Administrator or any combination of
the foregoing unless the assets of the Plan to be terminated
are sufficient to discharge when due all obligations of such
Plan; or the PBGC shall institute proceedings under Title IV
of ERISA to terminate, to impose liability in respect of, or
to cause a trustee to be appointed to administer any Plan; or
a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any Plan must
be terminated or there shall occur a complete or partial
withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Plans which
could cause one or more ERISA Group Members to incur a
current payment obligation; 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 $10,000,000
in the aggregate and such judgment or judgments shall have
remained undischarged and unstayed for a period of thirty
days; or
(i) This Agreement 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 action or proceeding is initiated against the
Company or any Material Subsidiary of the Company by any
Official Body 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 Company to repay outstanding loans hereunder; or
(k) A Change of Control shall have occurred.
(l) Any "Event of Default" under and as defined in the
Three Year Revolving Credit Agreement shall have occurred and
be continuing.
(m) An involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of the Company or
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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, 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
such proceeding or petition shall continue undismissed for 60
days or an order or decree approving or ordering any of the
foregoing shall be entered; or
(n) 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 consent
to the appointment of a receiver or 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 (l) of this Article VII, the Banks
shall be under no further obligation to make Loans hereunder
and the Agent shall, upon the request of the Required Banks,
by notice to the Company, declare the unpaid balance of all
Notes (or, if during the Term Loan Period, the Term Loan
Notes) then outstanding and interest accrued thereon and all
other liabilities of the Company hereunder and thereunder to
be forthwith due and payable, and the same shall thereupon
become and be immediately due and payable, without
presentment, demand, protest or notice or any kind, all of
which are hereby expressly waived; and (ii) as to any Event
of Default specified under subsections (m) or (n) of this
Article VII, the Banks shall be under no further obligation
to make Loans hereunder and the unpaid balance of all Notes
(or, if during the Term Loan Period, the Term Loan Notes)
outstanding hereunder and interest accrued thereon and all
other liabilities of the Company hereunder and thereunder
shall be immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which are
hereby expressly waived.
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ARTICLE VIII
THE AGENT
8.01. Appointment. Each Bank hereby appoints Mellon Bank,
N.A. as Agent for such Bank under this Agreement and
irrevocably authorizes the Agent to take such action on its
behalf under the provisions of this Agreement and to exercise
such powers and perform such duties as are expressly
delegated to the Agent by the terms of this Agreement,
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 VIII. Notwithstanding
any provision to the contrary elsewhere in this Agreement,
the Agent shall have no duties or responsibilities, except
those expressly set forth herein, or any fiduciary
relationship with any Bank, and no implied covenants,
functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or otherwise
exist against the Agent. The provisions of this Article VIII
are solely for the benefit of the Agent and the Banks, and
neither the Company 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 this
Agreement, the Agent shall act solely as Agent of the Banks
and shall not be deemed to have assumed any obligation or
relationship of agency or trust with or for the Company.
Each Bank agrees that the rights and remedies granted to the
Agent under this Agreement 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.
8.02. Delegation of Duties. The Agent may execute any of
its duties under this Agreement 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 8.03.
8.03. Exculpatory Provisions. None of the Agent or any of
its officers, directors, employees, representatives, agents,
attorneys-in-fact or Affiliates shall be (i) liable to the
Banks for any action lawfully taken or omitted to be taken by
it for such person under or in connection with this Agreement
(except for its or such person's own gross negligence or
willful misconduct), or (ii) responsible in any manner to any
of the Banks for any recitals, statements, representations or
warranties made by the Company or any of its officers
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contained in this Agreement 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 for any failure of the Company or any of its
officers to perform its obligations hereunder or thereunder.
The Agent shall be under no obligation to any Bank or
ascertain or to inquire as to the observance or performance
of any of the agreements contained in, or conditions of, this
Agreement, or to inspect the properties, books or records of
the Company. The Agent shall not be responsible to any Bank
for the 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 the Company
to the Agent or any Bank, or be required to ascertain or
inquire as to the performance or observance of any of the
terms, conditions, provisions, covenants or agreements
contained herein or therein or as to the use of the proceeds
of the Loans or of the existence or possible existence of any
Potential Default or Event of Default. 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 if the Agent
believes in good faith that taking such action may conflict
with any Law or provision of this Agreement.
8.04. Reliance by Agent. The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note,
writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, telegram, facsimile, telex or teletype
message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been
signed, sent or made by the proper person or persons and upon
advice and statements of legal counsel (including without
limitation counsel to the Company), independent accountants
and other experts selected by the Agent. The Agent shall be
fully justified in failing or refusing to take or continue to
take any action under this Agreement 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 or it shall first be
indemnified to its satisfaction by the Banks against any and
all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement in accordance
with a request of the Required Banks (or to the extent
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specifically provided, of all the Banks), and such request
and any action taken or failure to act pursuant thereto shall
be binding upon all the Banks.
8.05. 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 the Company 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. The
Agent shall take such action with respect to such Potential
Default or Event of Default as shall be reasonably directed
by the Required Banks, provided that, unless and until the
Agent shall have received such directions, the Agent may (but
shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Potential Default or
Event of Default as it shall deem advisable in the best
interests of the Banks.
8.06. Non-Reliance on Agent and Other Banks. Each Bank
expressly acknowledges that none 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, shall be deemed to
constitute any representation or warranty by the Agent 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 Company 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, appraisals and decisions in taking or not taking
action under this Agreement, and to 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 Company. Except for
notices, reports and other documents expressly required to be
furnished to the Banks by the Agent, the Agent shall not have
any duty or responsibility 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 Company which may come
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into the possession of the Agent or any of its officers,
directors, employees, agents, representatives,
attorneys-in-fact or Affiliates.
8.07. Indemnification. The Banks agree to indemnify the
Agent in its capacity as such ratably according to their
respective Commitments (or if the Total Commitment has been
terminated and 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, actions, judgments,
suits, costs, reasonable expenses or disbursements of any
kind whatsoever which may at any time (including without
limitation at any time following the repayment of the Loan)
be imposed on, incurred by or asserted against the Agent in
its capacity as such 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 any action taken or omitted to be
taken by the Agent 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 for the
payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the gross
negligence or willful misconduct of the Agent. The
agreements in this Section 8.07 shall survive the payment of
all the Loans.
8.08. 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 the Loan made by it, the Agent
shall have the same rights and powers under this Agreement as
any Bank and may exercise the same as though it were not the
Agent and the terms "Bank" and "Banks" shall include the
Agent in its individual capacity.
8.09. Successor Agent. The Agent may resign at any time by
giving 30 days' prior written notice thereof to the Banks and
the Company. Upon any such resignation, the Required Banks
shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed, and shall have
accepted such appointment, within 30 days after such notice
of resignation, then the retiring Agent may, on behalf of the
Banks, appoint a successor Agent. 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
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duties of the former Agent, without further act, deed or
conveyance. Upon the effective date of resignation of a
retiring Agent, such Agent shall be discharged from its
duties as Agent under this Agreement 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 Company or Bank for whose account such payment is made.
8.10. 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.
8.11. 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 by letter from the Agent to the
Company dated November 24, 1993.
8.12. Funding by Agent. Unless the Agent shall have been
notified in writing by any Bank not later than the close of
business on the day before the day on which Loans are
requested by the Company to be made that such Bank will not
make its ratable share of such Loans, the Agent may assume
that such Bank will make its ratable share of the Loans, and
in reliance upon such assumption the Agent may (but in no
circumstances shall be required to) make available to the
Company 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, the Company shall
pay such amount on demand), 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 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
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Office, without set-off, withholding, counterclaim or other
deduction of any nature.
8.13. Co-Agent. None of the Banks identified on the facing
page or signature pages of this Agreement as a "co-agent"
shall have any right, power, obligation, liability,
responsibility or duty under this Agreement other than those
applicable to all Banks as such. Each Bank acknowledges that
it has not relied, and will not rely, on any of the Banks so
identified in deciding to enter into this Agreement or in
taking or not taking action hereunder.
ARTICLE IX
MISCELLANEOUS
9.01. Holidays. Unless specifically otherwise provided
herein, whenever any payment or action to be made or taken
hereunder 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.
9.02. 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 Commitment
Fees and Utilization Fees shall at all times be ascertained
from the records of the Agent, which shall be conclusive
absent manifest error.
9.03. 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 Company 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 the Company, the Agent
or any Bank. Any such amendment, modification or supplement
made by the Company and the Agent in accordance with the
provisions of this Section shall be binding upon the Company,
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:
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(a) Increase the Commitment of any Bank over the amount
thereof then in effect, or extend any Maturity Date or the
Term Loan Maturity Date 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 Commitment Fee or the
Utilization Fee or reduce or postpone the date for payment of
any other fees, expenses, indemnities or amounts payable
under this Agreement, without the written consent of each
Bank affected thereby;
(c) Change the definition of "Required Banks" or amend
this Section 9.03, without the written consent of all the
Banks;
(d) Amend or waive any of the provisions of Article VIII
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 any such amendment, modification
or supplement must be in 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.
9.04. 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 Note shall affect any other or future exercise thereof
or 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 the Notes 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.
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9.05. 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 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 at the address stated on the signature pages
hereof or in accordance with the last unrevoked written
direction from such party to the other parties hereto, in all
cases with postage or other charges prepaid. Any such
properly given notice to the Agent or any Bank shall be
effective when received. Any such properly given notice to
the Company 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 the Company 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 the Company, and neither
the Agent nor any Bank shall have any duty to verify the
identity or authority of any Person giving such notice.
9.06. 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-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) 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, and (ii) the enforcement or
preservation of rights under this Agreement (including but
not limited to any such costs or expenses arising from or
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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 proceeding), dispute, work-out, restructuring
or rescheduling related in any way to this Agreement).
(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
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 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 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) 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 or 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, as finally determined by a court of competent
jurisdiction. If and to the extent that the foregoing
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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.
9.07. Severability. The provisions of this Agreement are
intended to be severable. If any provision of this Agreement
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 hereof in any jurisdiction.
9.08. 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.
9.09. Duration; Survival. All representations and
warranties contained herein or made in connection herewith
shall survive the making of, and shall not be waived by the
execution and delivery, of this Agreement, any investigation
by or knowledge of the Agent or any Bank, the making of any
Loan, or any other event or condition whatever. All
covenants and agreements contained herein shall continue in
full force and effect from and after the date hereof so long
as the Company may borrow hereunder and until payment in full
of all obligations. Without limitation, all obligations of
the Company hereunder to make payments to or indemnify the
Agent or any Bank shall survive the payment in full of all
other obligations hereunder, termination of the Company's
right to borrow hereunder, and all other events and
conditions whatever.
9.10. Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto 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.
9.11. 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, the Company 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 the Company, to the extent that such
requirement or such failure to refund would violate or
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conflict with nonwaivable provisions of applicable Laws
limiting the maximum amount of interest which may be charged
or collected by such Bank.
9.12. Set-Off. The Company 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 the Company hereunder
shall be due and payable (by acceleration or otherwise), each
Bank shall have the right, without notice to the Company, to
set-off against and to appropriate and apply to such
obligation any Indebtedness, liability or obligation of any
nature owing to the Company 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 the Company 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 the Company or any other Person, whether
such Indebtedness, obligation or liability owed to the
Company 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.
The Company 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 the Company). The rights provided by this
Section are in addition to all other rights and remedies
which any Bank (or any such Participant, branch, Subsidiary
or Affiliate) may otherwise have under this Agreement, at Law
or in equity, or otherwise, and nothing in this Agreement
shall be deemed a waiver or prohibition of or restriction on
the rights of set-off or bankers' lien of any such Person.
9.13. 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, interest thereon,
or any other obligation contemplated by this Agreement to be
made by the Company pro rata to all Banks in greater
proportion than any such amount received by any other Bank,
then the Bank receiving such proportionately greater payment
shall notify each other Bank and the Agent of such receipt,
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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 Banks. The 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 applicable Banks
a participation in the applicable obligations owed to such
other Banks in such amount as shall result in a ratable
sharing by all 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 amounts, if
any, required by Law to be paid by the Bank making such
purchase. The Company hereby consents to and confirms the
foregoing arrangements. Each Participant shall be bound by
this Section as fully as if it were a Bank hereunder.
9.14. Successors and Assigns; Participations; Assignments.
(a) Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Company, the
Banks, all future holders of the Notes, or the Term Loan
Notes, the Agent and their respective successors and assigns,
except that the Company may not assign or transfer any of its
rights hereunder or interests herein 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 obligations under this Agreement
(including, without limitation, all or a portion of its
Commitments and the Loans owing to it and any Note or Term
Loan 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
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(iv) such Participant shall be bound by the
provisions of Section 9.13 hereof.
The Company agrees that any such Participant shall be
entitled to the benefits of Sections 2.11, 2.12 and 9.06 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 (including, without limitation, all or
any portion of its Commitments and Loans owing to it and any
Note or Term Loan Note held by it) 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 Section
9.14(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, such transferor Bank shall retain,
after such assignment, a minimum principal amount of
$5,000,000 of its Commitment and Loans then outstanding,
and such assignment shall be in a minimum aggregate
principal amount of $2,500,000 of the Commitments and
Loans then outstanding,
(iii) each such assignment shall be of a constant,
and not a varying, percentage of each Commitment of the
transferor Bank and of all of the transferor Bank's
rights and obligations under this Agreement, and
(iv) each such assignment shall be made pursuant to
assignment documentation reasonably satisfactory to the
Agent and, so long as no Potential Default or Event of
Default exists or is continuing, the Company (the
"Assignment Document").
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In order to effect any such assignment, the transferor Bank
and the Purchasing Bank shall execute and deliver to the
Agent a notice of such assignment (which shall be signed on
behalf of the Purchasing Bank and the transferor Bank and
shall include the effective date of such assignment (the
"Assignment Effective Date"), the portion of the Commitment
and Loans being assigned, the name, address and payment and
notice instructions of the Purchasing Bank and the consents
required in Clause (i) above) (the "Assignment Notice"),
together with any Note or Term Loan Note subject to such
assignment (the "Transferor Bank Notes") and a processing and
recording fee of $2,000; and, upon receipt thereof, the Agent
shall accept such Assignment Notice and the Agent 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 Notice
(x) the Purchasing Bank shall be a party hereto
and, to the extent provided in such Assignment Notice,
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
Notice 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 Notice, the Company, at its expense, shall execute
and deliver to the Agent (for delivery to the Purchasing
Bank) a new Note or Term Loan Note evidencing such Purchasing
Bank's assigned Commitments or Loans and (for delivery to the
transferor Bank) a replacement Note or Term Loan Note in the
principal amount of the Loans or Commitments retained by the
transferor Bank (such Notes or Term Loan Notes to be in
exchange for, but not in payment of, those notes then held by
such transferor Bank). Each such replacement Note or Term
Loan Note shall be dated the date and be substantially in the
form of the precedessor Note. The Agent shall mark the
predecessor Notes or the Term Loan Note, as the case may be,
"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 or Term Loan Note, as the case may be, and this
Agreement.
- 76 -
<PAGE> 84
(d) Register. The Agent shall maintain at its office 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 from time
to time. The entries in the Register shall be conclusive
(absent manifest error) and the Company, 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 Company 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 9.14(e),
the Company authorizes 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 Company in connection with this
Agreement or the Agent's or such Bank's credit evaluation of
the Company and its 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 Company 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
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
- 77 -
<PAGE> 85
any Bank or the Agent be obligated or required to return any
materials furnished by the Company. Each Bank agrees that it
will not use any non-public information supplied to it by the
Company pursuant to this Agreement for any purpose unrelated
to this Agreement and the Loans.
(f) Assignments to Federal Reserve Bank. 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 or Term Loan Note held by it to a Federal
Reserve Bank. No such assignment shall relieve the
transferor Bank from its obligations hereunder.
9.15. Governing Law; Submission to Jurisdiction; Waiver of
Jury Trial; Limitation of Liability.
(a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA, WITHOUT REGARD TO CHOICE OF LAW
PRINCIPLES.
(b) Certain Waivers. THE COMPANY HEREBY IRREVOCABLY AND
UNCONDITIONALLY:
(i) AGREES THAT ANY ACTION, SUIT OR PROCEEDING BY
ANY PERSON ARISING FROM OR RELATING TO THIS AGREEMENT 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 ALLEGHENY COUNTY, PENNSYLVANIA, 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);
(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 THE COMPANY;
(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 THE COMPANY AT THE ADDRESS FOR NOTICES
DESCRIBED IN SECTION 9.05 HEREOF (TO THE ATTENTION OF
"GENERAL COUNSEL"), AND CONSENTS AND AGREES THAT SUCH
SERVICE SHALL CONSTITUTE IN EVERY RESPECT VALID AND
- 78 -
<PAGE> 86
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 THE COMPANY 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
- 79 -
<PAGE> 87
OR ANY OTHER THEORY OF LIABILITY). THE COMPANY 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.
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.
By:
---------------------
(Signature)
Name: David D. Wesselink
Title: Senior Vice President & Chief Financial Officer
Address for Notices:
300 Welsh Road, Building 4
Horsham, PA 19044
Attention: Mike Nixon
Telephone: (215) 784-5315
Telecopier: (215) 657-0504
With a Copy to:
Advanta Corp.
300 Welsh Road, Building 5
Horsham, PA 19044
Attention: Gene S. Schneyer
Telephone: (215) 784-5343
Telecopier: (215) 784-5350
MELLON BANK, N.A., individually and as Agent
By:
---------------------
(Signature)
Name:
-------------------
Title:
------------------
Address for Notices:
One Mellon Bank Center
Pittsburgh, PA 15158
Attention: Henry J. Voorhees
Telephone: (412) 234-2905
Telecopier: (412) 234-8087
10640
- 80 -
<PAGE> 88
THE BANK OF TOKYO TRUST COMPANY
By:
---------------------
(Signature)
Name:
-------------------
Title:
------------------
Address for Notices:
1251 Avenue of the Americas
12th Floor, National Banking Dept.
New York, NY 10116-3138
Attention: John R. Jeffers, Vice President
Telephone: (212) 782-4311
Telecopier: (212) 782-6445
CIBC INC.
By: --------------------
(Signature)
Name:
-------------------
Title:
------------------
Address for Notices:
425 Lexington Avenue
New York, NY 10017
Attention: LuAnn Bowers, Vice President
Telephone: (212) 856-3638
Telecopier: (212) 856-3613
- 81 -
<PAGE> 89
CHEMICAL BANK
By:
---------------------
(Signature)
Name:
-------------------
Title:
------------------
Address for Notices:
270 Park Avenue, 9th Floor
New York, NY 10172
Attention: Roger A. Parker, Vice President
Telephone: (212) 270-3751
Telecopier: (212) 270-1789
THE DAIWA BANK, LTD.
By: By:
--------------------- ---------------------
(Signature) (Signature)
Name: By:
------------------- ---------------------
Title: By:
------------------ ---------------------
Address for Notices:
One Liberty Place
1650 Market Street, Suite 2860
Philadelphia, PA 19103
Attention: Michael Fox, Vice President
Telephone: (215) 636-4440
Telecopier: (215) 636-4446
- 82 -
<PAGE> 90
HARRIS TRUST AND SAVINGS BANK
By:
---------------------
(Signature)
Name:
-------------------
Title:
------------------
Address for Notices:
111 West Monroe Street
P.O. Box 755
Chicago, IL 60690
Attention: Michael J. Houlihan, Credit Officer
Telephone: (312) 461-4514
Telecopier: (312) 765-8382
MERIDIAN BANK
By:
---------------------
(Signature)
Name:
-------------------
Title:
------------------
Address for Notices:
1650 Market Street
Mailing Address: OL3620
P.O. Box 7588
Philadelphia, PA 19103
Attention: John M. Fessick, Vice President
Telephone: (215) 854-3136
Telecopier: (215) 854-3774
- 83 -
<PAGE> 91
NATIONSBANK OF TEXAS, N.A.
By:
---------------------
(Signature)
Name:
-------------------
Title:
------------------
Address for Notices:
901 West Main Street, Suite 6600
Dallas, TX 75201
Attention: Patrick K. Doyle, Senior Vice President
Telephone: (214) 508-0569
Telecopier: (214) 508-0604
PNC BANK, N.A.
By:
---------------------
(Signature)
Name:
-------------------
Title:
------------------
Address for Notices:
Land Title Building
Broad and Chestnut Streets
Philadelphia, PA 19101
Attention: Karen L. Voight, Assistant Vice President
Telephone: (215) 585-5224
Telecopier: (215) 585-7615
- 84 -
<PAGE> 92
SHAWMUT BANK CONNECTICUT, N.A.
By:
---------------------
(Signature)
Name:
-------------------
Title:
------------------
Address for Notices:
777 Main Street
Hartford, CT 06115
Attention: Phil S. Walker, Assistant Vice President
Telephone: (203) 986-5366
Telecopier: (203) 986-5367
THE FIRST NATIONAL BANK OF CHICAGO
By:
---------------------
(Signature)
Name:
-------------------
Title:
------------------
Address for Notices:
One First National Plaza, Mail Suite 0084
Chicago, IL 60670-0084
Attention: Mark C. Kramer, Vice President
Telephone: (312) 732-2293
Telecopier: (312) 732-5296
- 85 -
<PAGE> 93
UNION BANK
By:
---------------------
(Signature)
Name:
-------------------
Title:
------------------
Address for Notices:
350 California Street, 11th Floor
San Francisco, CA 94104
Attention: Donald H. Rubin, Vice President, Manager
Telephone: (415) 705-7060
Telecopier: (415) 705-7037
10640
- 86 -
<PAGE> 1
EXHIBIT 10-s
U.S. $122,500,000
REVOLVING CREDIT AGREEMENT
Dated as of March 24, 1994
Among
ADVANTA CORP.,
THE BANKS NAMED HEREIN
as Banks
and
MELLON BANK, N.A.
as Agent
and
NATIONSBANK OF TEXAS, N.A.
as Co-Agent
[Facility B]
<PAGE> 2
[Facility B]
T A B L E O F C O N T E N T S
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
ARTICLE I
DEFINITIONS; CONSTRUCTION
1.01 Certain Definitions............................ 1
1.02 Construction................................... 14
1.03 GAAP/RAP....................................... 14
ARTICLE II
THE CREDITS
2.01 Revolving Credit Loans......................... 15
2.02 Extension of Expiration Date................... 16
2.03 The Notes...................................... 17
2.04 Making of Revolving Loans...................... 18
2.05 Commitment Fee; Utilization Fee; Closing Fee... 18
(a) Commitment Fee............................. 19
(b) Utilization Fee............................ 19
(c) Closing Fee................................ 19
2.06 Termination or Reduction....................... 19
2.07 Interest Rates; Maturity Periods;
Transactional Amounts........................ 20
(a) Optional Basis of Borrowing................ 20
(i) Base Rate Option....................... 20
</TABLE>
<PAGE> 3
(ii)
<TABLE>
<S> <C> <C>
(ii) Euro-Rate Option...................... 21
(b) Interest Periods.......................... 22
(c) Transactional Amounts..................... 23
(d) Interest After Maturity................... 23
(e) Euro-Rate Unascertainable;
Impracticability......................... 23
2.08 Prepayments.................................... 25
2.09 Interest Payment Dates......................... 25
2.10 Payments....................................... 25
2.11 Additional Compensation in
Certain Cirsumstances........................ 26
(a) Increased Costs or Reduced Return
Resulting from Taxes, Reserves, Capital
Adequacy Requirements, Expenses, etc....... 26
(b) Indemnity.................................. 27
2.12 Taxes.......................................... 28
(a) Payments Net of Taxes..................... 28
(b) Indemnity................................. 29
(c) Withholding and Backup Withholding........ 29
2.13 Funding by Branch, Subsidiary or Affiliate..... 30
(a) Notional Funding.......................... 30
(b) Actual Funding............................ 31
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.01 Organization and Qualification................. 31
3.02 Corporate Power and Authorization.............. 32
3.03 Audited Annual Financial Statements............ 32
3.04 Interim Financial Statements................... 32
3.05 Consolidating Financial Statements............. 32
3.06 CNB Financial Statements....................... 33
3.07 Absence of Material Adverse Changes............ 33
</TABLE>
<PAGE> 4
(iii)
<TABLE>
<S> <C> <C>
3.08 Litigation..................................... 33
3.09 No Conflicting Laws or Agreements;
Consents and Approvals........................ 33
3.10 Execution and Binding Effect................... 34
3.11 Erisa Compliance............................... 34
3.12 Taxes.......................................... 34
3.13 Regulation U................................... 34
3.14 Environmental Matters.......................... 35
3.15 Investment Company; Bank Holding Company;
Public Utility Holding Company............... 36
3.16 CNB Capitalization............................. 36
3.17 Absence of Undisclosed Liabilities............. 36
3.18 Absence of Events of Default................... 36
3.19 Title to Property.............................. 36
3.20 Subsidiaries and Other Investments............. 37
3.21 Accurate and Complete Disclosure............... 37
ARTICLE IV
CONDITIONS OF LENDING
4.01 Initial Loans.................................. 38
(a) Agreement; Notes........................... 38
(b) Corporate Proceedings...................... 38
(c) Good Standing Certificates................. 38
(d) Financial Statements....................... 38
(e) Opinion of Counsel......................... 38
(f) Officers' Certificates..................... 39
(g) Fees, Expenses, etc........................ 39
(h) Details, Proceedings and Documents......... 39
4.02 Conditions to all Loans........................ 39
(a) Notice..................................... 39
(b) Representations and Warranties............. 39
(c) No Defaults................................ 40
ARTICLE V
AFFIRMATIVE COVENANTS
5.01 Basic Reporting Requirements................... 40
</TABLE>
<PAGE> 5
(iv)
<TABLE>
<S> <C> <C>
(a) Annual Audit Reports....................... 40
(b) Quarterly Consolidated Reports............. 41
(c) CNB Financial Statements................... 41
(d) Consolidating Reports...................... 42
(e) Compliance Certificates.................... 42
(f) Asset Quality Reports...................... 43
(g) Certain Other Reports and Information...... 43
(h) Further Information........................ 44
(i) Notice of Certain Events................... 44
(j) Visitation; Verification................... 45
5.02 Insurance...................................... 46
5.03 Payment of Taxes and Other Potential
Charges and Priority Claims.................. 46
5.04 Preservation of Existence and Franchises....... 46
5.05 Maintenance of Properties...................... 47
5.06 Avoidance of Other Conflicts................... 47
5.07 CNB Capitalization............................. 47
5.08 Financial Accounting Practices................. 47
5.09 Use of Proceeds................................ 48
5.10 Continuation of or Change in Business.......... 48
5.11 Consolidated Tax Return........................ 48
5.12 Fiscal Year.................................... 49
5.13 Restrictions on Stock Payments, Etc............ 49
ARTICLE VI
NEGATIVE COVENANTS
6.01 Financial Covenants............................ 49
(a) Consolidated Tangible Net Worth............ 49
(b) Double Leverage Ratio...................... 49
(c) Total Liabilities to
Consolidated Tangible Net Worth............ 49
(d) Consolidated Interest Coverage Ratio....... 49
(e) Contingent Obligations..................... 49
(f) Doubtful Accounts Managed and/or Owned..... 49
6.02 Liens.......................................... 50
6.03 Mergers, Acquisitions, etc..................... 53
6.04 Dispositions of Properties..................... 53
</TABLE>
<PAGE> 6
(v)
<TABLE>
<S> <C> <C>
6.05 Dealings with Affiliates....................... 54
6.06 Limitation on Other Restrictions
on Dividends by Subsidiaries, etc............ 55
ARTICLE VII
EVENTS OF DEFAULT
7.01 Events of Default.............................. 56
ARTICLE VIII
THE AGENT
8.01 Appointment.................................... 59
8.02 Delegation of Duties........................... 60
8.03 Exculpatory Provisions......................... 60
8.04 Reliance by Agent.............................. 61
8.05 Notice of Default.............................. 61
8.06 Non-Reliance on Agent and Other Banks.......... 62
8.07 Indemnification................................ 62
8.08 Agent In Its Individual Capacity............... 63
8.09 Successor Agent................................ 63
8.10 Calculations................................... 63
8.11 Agent's Fees................................... 64
8.12 Funding by Agent............................... 64
8.13 Co-Agent....................................... 64
ARTICLE IX
MISCELLANEOUS
9.01 Holidays...................................... 64
9.02 Records....................................... 65
9.03 Amendments and Waivers........................ 65
9.04 No Implied Waiver; Cumulative Remedies........ 66
</TABLE>
<PAGE> 7
(vi)
<TABLE>
<S> <C> <C>
9.05 Notices....................................... 66
9.06 Expenses; Taxes; Indemnity.................... 67
9.07 Severability.................................. 68
9.08 Prior Understandings.......................... 68
9.09 Duration; Survival............................ 69
9.10 Counterparts.................................. 69
9.11 Limitation on Payments........................ 69
9.12 Set-Off....................................... 69
9.13 Sharing of Collections........................ 70
9.14 Successors and Assigns;
Participations; Assignments................. 70
(a) Successors and Assigns................... 71
(b) Participations.......................... 71
(c) Assignments.............................. 71
(d) Register................................. 73
(e) Financial and Other Information.......... 73
(f) Assignments to Federal Reserve Bank...... 74
9.15 Governing Law; Submission to Jursidiction
Waiver of Jury Trial; Limitation of
Liability................................... 74
(a) Governing Law............................ 74
(b) Certain Waivers.......................... 74
(c) Limitation of Liability.................. 75
</TABLE>
EXHIBIT A Promissory Note...........................
EXHIBIT B Form of Loan Request......................
<PAGE> 8
Facility B
REVOLVING CREDIT AGREEMENT
This AGREEMENT, dated as of March 24, 1994, by and among
ADVANTA CORP., a Delaware Corporation (hereinafter called the
"Company"), the Banks named in Section 2.01 hereof
(hereinafter each called a "Bank" and collectively called the
"Banks") and MELLON BANK, N.A., a national banking
association, as agent for the Banks under this Agreement
(hereinafter in such capacity called the "Agent");
PRELIMINARY STATEMENT:
WHEREAS, the Company has requested and the Banks and the
Agent are willing to make available to the Company, upon all
of the terms and conditions herein set forth, a revolving
credit 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
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
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 preceeding the date of
determination.
"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, (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 who is an Affiliate of the Specified Person
within the meaning of the preceding clause (a). For purposes
<PAGE> 9
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 Revolving Credit Agreement as
amended, modified or supplemented from time to time.
"Applicable Closing Fee Percentage" shall mean, for each
Bank, the percentage set forth below opposite the amount of
the Initially Offered Combined Commitment Amount of such
Bank. The "Initially Offered Combined Commitment Amount" of
each Bank shall be an amount equal to the sum of (i) the
amount of the Commitment to this Agreement initially offered
by such Bank to the Agent; plus (ii) the amount of the
commitment to the 364 Day Revolving Credit Agreement
initially offered by such Bank to the Agent both as
determined by the Agent and in each case unreduced by any
subsequent allocation or reduction by the Agent.
<TABLE>
<CAPTION>
Initially Offered Combined Applicable Closing
Commitment Amount Fee Percentage
-------------------------- ------------------
<S> <C>
$20,000,000 or higher .15%
$15,000,000 - $19,999,999 .10%
$10,000,000 - $14,999,999 .075%
</TABLE>
"Applicable Commitment Fee Percentage" shall mean, for
any day, (i) .25% for any such day during which the Rating
Level is 1-7; (ii) .325% for any such day during which the
Rating Level is 8 or 9; (iii) .375% for any such day during
which the Rating Level is 10; and (iv) .5% for any such day
during which the Rating Level is 11. Each change in the
Applicable Commitment Fee Percentage resulting from a change
of the Rating Level shall become effective on the effective
date of such change in the Rating Level.
"Applicable Margin" shall mean, for any day, the
percentage set forth below which corresponds to the Rating
Level in effect on any such day. Each change in the
Applicable Margin for any Loan which results from a change in
the Rating Level shall become effective on the effective date
of such change in the Rating Level.
- 2 -
<PAGE> 10
<TABLE>
<CAPTION>
Rating Level Percentage
------------ ----------
<S> <C>
1 - 7 .625%
8 or 9 .75%
10 1.00%
11 1.50%
</TABLE>
"Applicable Utilization Fee Percentage" shall mean, for
each day, (i) during any such time as the outstanding
principal amount of all Loans is less than or equal to 50% of
the Total Commitment, then the Applicable Utilization Fee
Percentage shall be (a) 0% for each such day during which the
Rating Level is 1-9; (b) .25% for each such day during which
the Rating Level is 10; and (c) .325% for each such day
during which the Rating Level is 11; and (ii) during any such
time as the outstanding principal amount of all Loans is
greater than 50% of the Total Commitment then (w) 0% for each
such day during which the Rating Level is 1-7; (x) .25% for
each such day during which the Rating Level is 8 or 9; (y)
..325% for each such day during which the Rating Level is 10;
and (z) .5% for each such day during which the Rating Level
is 11. Each change in the Applicable Utilization Fee
resulting from a change in the Rating Level shall become
effective on the effective date of such change in the Rating
Level.
"Assignment Notice" shall have the meaning assigned to
such term in Section 9.14(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.
"Base Rate" and "Base Rate Option" shall have the
meanings assigned to those terms in Section 2.07(a)(i) hereof.
"Base Rate Loan" shall mean any Loan bearing interest
under the Base Rate Option.
"Business Day" shall mean any day other than a Saturday,
Sunday, public holiday under the laws of the Commonwealth of
Pennsylvania or other day on which banking institutions are
authorized or obligated to close in New York or Pennsylvania.
"Call Reports" shall mean Consolidated Reports of
Condition and Income prepared in accordance with rules
prescribed by the Federal Financial Institutions Examination
Council.
- 3 -
<PAGE> 11
"Change of Control" shall mean that Dennis Alter shall
cease for any reason (other than by reason of death or
disability) to serve as Chairman of the Board of Directors of
the Company, or shall cease to own directly or indirectly (or
by or through his estate) at least 10% of the issued and
outstanding voting capital stock of the Company.
"Closing Date" shall mean March 24, 1994.
"CNB" shall mean Colonial National Bank USA, an indirect
wholly owned (except for directors' qualifying shares)
banking Subsidiary of the Company.
"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 Code shall be
construed to also refer to any successor sections.
"Commitment" and "Current Commitment" shall have the
meanings assigned to those terms in Section 2.01 hereof.
"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, non-cash
extraordinary items.
- 4 -
<PAGE> 12
"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 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.
"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 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.
"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.
"Duff & Phelps" shall mean Duff & Phelps Credit Rating
Company.
"Environment" shall mean (without limitation) all air,
surface water, water vapor, groundwater, drinking water
- 5 -
<PAGE> 13
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 National
Priorities List, 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
- 6 -
<PAGE> 14
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.
"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.
"ERISA Group Member" means each trade or business
(whether or not incorporated and whether controlled by,
controlling or under common control with the Company) which
together with the Company is treated as a single employer
under Section 414(b) or 414(c) of the Code.
"Euro-Rate" and "Euro-Rate Option" shall have the
meanings assigned to those terms in Section 2.07(a)(ii)
hereof.
"Event of Default" shall mean any of the Events of
Default described in Article VII hereof.
"Expiration Date" shall be March 23, 1997, or if extended
in accordance with Section 2.02, such extended date.
"Federal Funds Effective Rate" shall have the meaning
assigned to such term in Section 2.07(a)(i) hereof.
"Fitch" shall mean Fitch Investors' Services, Inc.
"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
concur), applied both to classification of items and amounts.
"Guaranty" shall mean, with respect to any Person, any
obligation, contingent or otherwise, of such Person directly
or indirectly guaranteeing any 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
- 7 -
<PAGE> 15
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.
"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);
(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 9.06(c) hereof.
"Intangibles" shall mean all intangible Assets determined
in accordance with GAAP, including but not limited to
goodwill, organization costs, patents, copyrights,
- 8 -
<PAGE> 16
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.
"Interest Period" shall have the meaning assigned to that
term in Section 2.07(b) hereof.
"Law" shall mean any law (including common law),
constitution, statute, treaty, regulation, rule, ordinance,
order, injunction, writ, decree or award of any Official Body.
"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 loan made by a Bank to the Company
under this Agreement, and "Loans" shall mean the loans made
by the Banks under this Agreement.
"Loan Documents" shall mean this Agreement, the Notes and
all other ancillary agreements, instruments, certificates
and/or documents which are required to be or are otherwise
executed and delivered by the Company to the Agent and/or to
any Bank in connection with this Agreement, in each case as
the same may be amended, supplemented or modified from time
to time hereafter.
"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.
"Material Subsidiary" shall mean: (i) Advanta Leasing
Holding Corp., a Delaware corporation ("ALHC"); Advanta
Leasing Corp., a Delaware corporation ("ALC"); Advanta
Mortgage Holding Company, a Delaware corporation; Advanta
Mortgage Corp. U.S.A., a Delaware corporation; and (ii) any
- 9 -
<PAGE> 17
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
preceeding the date of determination or accounts for 10% or
more of Consolidated Net Income for the Rolling Period
immediately preceeding the date of determination; provided,
however, that ALHC and ALC shall cease to be Material
Subsidiaries by virtue of (i) above on the earlier of the
date which is the first anniversary of the Closing Date or
the date upon which the Company complies with the provisions
of Section 5.13 hereof but, in any event, shall each
thereafter remain subject to (ii) above.
"Maturity Date" shall have the meaning assigned to that
term in Section 2.07(b) hereof.
"Moody's" shall mean Moody's Investors Service, Inc.
"month", with respect to a Euro-Rate Interest Period, has
the following meaning unless a calendar month is specified or
the context otherwise clearly requires:
(i) if the first day of such Euro-Rate Interest
Period is the last day of a calendar month, a "month" is
the interval between the last days of consecutive
calendar months;
(ii) otherwise, a "month" is the interval between
the days in consecutive calendar months numerically
corresponding to the first day of such Euro-Rate Interest
Period or, if there is no such numerically corresponding
day in a particular calendar month, then the last day of
such calendar month.
"Note" shall mean a promissory note of the Company
executed and delivered under this Agreement, or any note
executed and delivered pursuant to Section 2.03 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 2.13(a) hereof.
"OCC" shall mean the Office of the Comptroller of the
Currency or any successor thereto.
"Office", when used in connection with the Agent, shall
mean its office located at One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258, or at such other office or
offices within the United States of the Agent or branch,
Subsidiary or Affiliate thereof as may be designated in
writing from time to time by the Agent to the Company and the
Banks.
- 10 -
<PAGE> 18
"Official Body" shall mean any government or political
subdivision or any agency, authority, bureau, central bank,
commission, department or instrumentality of 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 9.14(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.
"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 which is
covered by Title IV of ERISA and (i) which is maintained for
employees of the Company or any ERISA Group Member; or (ii)
to which the Company or any ERISA Group Member made, or was
required to make, contributions at any time within the
preceding five years.
"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.
"Purchasing Bank" shall have the meaning assigned to such
term in Section 9.14(c) hereof.
"RAP" shall mean regulatory accounting principles as in
effect from time to time.
"Rating Level" 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
the Company by Moody's, S&P, Fitch, Duff & Phelps or
Thomson's. If the Company's long-term senior unsecured debt
is not rated by any of the foregoing, then the ratings of
CNB's subordinated debt will be used to determine the Rating
Level. If the Company (or CNB, if applicable) is rated by
two or more agencies and different Rating Levels result, then
the Rating Level shall be that which corresponds to the lower
- 11 -
<PAGE> 19
of the two highest ratings. Each change in the Company's
Rating Level shall take effect on the effective date of any
change in the Company's long-term senior unsecured debt
rating (or CNB's subordinated debt rating, if applicable).
<TABLE>
<CAPTION>
Senior Debt Ratings of Company
------------------------------
(or Subordinated Debt Rating of CNB, if applicable)
Rating
Level Moody's S&P Fitch Duff & Phelps Thomson's
- - - ----- ------- --- ----- ------------- ---------
<S> <C> <C> <C> <C> <C>
1 Aaa AAA AAA AAA AAA
2 Aa1 AA+ AA+ AA+ AA+
3 Aa2 AA AA AA AA
4 Aa3 AA- AA- AA- AA-
5 A1 A+ A+ A+ A+
6 A2 A A A A
7 A3 A- A- A- A-
8 Baal BBB+ BBB+ BBB+ BBB+
9 Baa2 BBB BBB BBB BBB
10 Baa3 BBB- BBB- BBB- BBB-
11 Below Baa3 Below Below Below Below
or Not BBB- or BBB- or BBB- or BBB- or
Rated Not Not Not Not
Rated Rated Rated Rated
</TABLE>
"Reference Banks" shall mean Mellon Bank, N.A. and
NationsBank of Texas, N.A.
"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, or (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 4062(e) of ERISA.
"Required Banks" shall mean, as of any date, Banks which
have made Loans constituting, in the aggregate, at least 66
2/3% of the principal amount of Loans outstanding on such
date, or if no Loans are outstanding on such date, Banks
which have Commitments constituting, in the aggregate, at
least 66 2/3% of the Total Current Commitments of all the
Banks.
- 12 -
<PAGE> 20
"Responsible Officer" shall mean the Chief Executive
Officer, Chief Financial Officer, President, Treasurer or
Controller of the Company, or such other officer or officers
of the Company as the Company may designate from time to time
and otherwise acceptable to the Agent.
"Rolling Period" shall mean with respect to any fiscal
quarter, such fiscal quarter and the three immediately
preceeding fiscal quarters considered as a single accounting
period.
"Set" of Loans shall mean those Loans made concurrently
by the Banks hereunder requested by the Company to be made on
a given day, having the same Maturity Date and bearing
interest at the same Interest Rate Option.
"S&P" shall mean Standard & Poor's Corporation.
"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 Set of
Base Rate Loans;
(ii) at least three London Business Days in advance
in the case of any Set of Euro-Rate Loans.
Standard Notice must be provided on or before 12:00 o'clock
noon, Pittsburgh 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 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.
- 13 -
<PAGE> 21
"Thomson's" shall mean Thomson BankWatch.
"Total Commitment" or "Total Current Commitment" shall
have the meaning assigned to such term in Section 2.01 hereof.
"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.
"Uninsured Subsidiaries" of the Company shall mean all
Subsidiaries of the Company except CNB, Colonial National
Financial Corp. and any other Subsidiaries of the Company
which accept deposits which are insured by the Federal
Deposit Insurance Corporation or any successor thereto.
"Unused Current Commitment" shall mean the Current
Commitment of each Bank minus the aggregate outstanding
principal amount of such Bank's Loans hereunder.
"364 Day Revolving Credit Agreement" shall mean that
certain 364 Day Revolving Credit Agreement by and between the
Company, the Banks and the Agent of even date herewith as the
same may be amended, modified or supplemented from time to
time.
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 shall, unless
otherwise expressly noted, refer to the time in Pittsburgh,
Pennsylvania.
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 violation of one or more provisions of
this Agreement shall have occurred (or in the opinion of the
- 14 -
<PAGE> 22
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, the Company 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 financial
covenants after taking into account such change in GAAP or
RAP, as the case may be.
ARTICLE II
THE CREDITS
2.01 Revolving Credit Loans. Subject to the terms and
conditions and relying upon the representations and
warranties herein set forth, each Bank severally agrees (such
agreement being herein called such Bank's "Commitment") to
make Loans to the Company at any time or from time to time on
or after the Closing Date and to but not including the
earlier of the Expiration Date or the termination of the
Commitment of such Bank, in an aggregate principal amount not
exceeding at any one time outstanding the amount of such
Bank's Current Commitment. The "Current Commitment" of each
Bank at any time shall mean the Commitment amount set
opposite its name below as such amount may have been reduced
under Section 2.06 hereof at such time. Each Set of such
Loans shall be made ratably by the Banks in accordance with
the percentage set opposite the name of each Bank below:
<TABLE>
<CAPTION>
Name of Bank Commitment Amount Percentage
- - - ------------ ----------------- ----------
<S> <C> <C>
Mellon Bank, N.A. $15,000,000 12.245%
NationsBank of Texas, N.A. $15,000,000 12.245%
Chemical Bank $12,500,000 10.204%
PNC Bank, N.A. $12,500,000 10.204%
CIBC Inc. $10,000,000 8.163%
Shawmut Bank
Connecticut, N.A. $10,000,000 8.163%
The First National
Bank of Chicago $10,000,000 8.163%
The Bank of Tokyo
Trust Company $ 7,500,000 6.122%
The Daiwa Bank, Ltd. $ 7,500,000 6.122%
</TABLE>
- 15 -
<PAGE> 23
<TABLE>
<S> <C> <C>
Harris Trust and
Savings Bank $ 7,500,000 6.122%
Meridian Bank $ 7,500,000 6.122%
Union Bank $ 7,500,000 6.122%
Total Commitment $ 122,500,000 100%
</TABLE>
Within such limits of time and amount and subject to the
provisions of this Agreement, the Company may borrow, repay
and reborrow hereunder. The aggregate Current Commitments of
all the Banks at any time is sometimes referred to as the
"Total Commitment" or "Total Current Commitment".
2.02. Extension of Expiration Date. (a) Provided that no
Potential Default or Event of Default shall have occurred and
be continuing, the Company may, prior to the date of each of
the first and second anniversaries of the Closing Date hereof
(each an "Anniversary Date"), request that the then effective
Expiration Date be extended (in each case) for one additional
year by providing written notice to the Agent requesting such
extension not later than 90 days before each such Anniversary
Date hereof (each an "Extension Request"). The Agent shall,
promptly upon its receipt of any Extension Request, notify
the Banks of such request. At least thirty days prior to
such Anniversary Date, each Bank shall provide the Agent with
written notice of its approval or denial of the Company's
Extension Request 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 shall be deemed a rejection of the Extension
Request). Promptly upon receipt of such notice (or deemed
notice) from each Bank, the Agent shall notify the Company of
the approval or denial by each Bank of the Extension Request.
(b) Any extension of the Expiration Date shall be
effective only if approved by the Required Banks and shall be
binding only upon the Banks approving such Extension
Request. Upon the approval of the Required Banks of any
Extension Request, but effective on the then effective
Expiration Date, the Expiration Date shall be automatically
extended for a period of one year from the then effective
Expiration Date to the extent of the Current Commitments of
the Banks approving such extension. Notwithstanding any
other provisions hereof, the Expiration Date may not be
extended beyond January 31, 1999. In the event any Bank
denies (or is deemed to have denied) an Extension Request
(each a "Non-Extending Bank") which is otherwise approved by
the Required Banks then (i) on the then scheduled Expiration
- 16 -
<PAGE> 24
Date, such Non-Extending Bank's Commitment shall terminate
and taking into account any purchase of the Notes of such
Non-Extending Bank by a Replacement Bank as provided below,
the Company shall pay to the Agent for distribution to such
Non-Extending Bank, the unpaid principal balance of the Loans
of such Non-Extending Bank together with accrued and unpaid
interest, fees or other amounts due such Non-Extending Bank
pursuant to this Agreement; and (ii) the Company 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 effective as of the then scheduled
Expiration Date unless otherwise agreed by and between the
Non-Extending Bank and the Replacement Bank. 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 Note of
such Non-Extending Bank, which shall sell the same without
recourse or warranty (except as to the amount due thereon,
its title to such Note 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 Loans
of the Non-Extending Bank assumed whereupon (a) the then
effective Expiration Date with respect to the Commitment
assumed shall be extended for the period requested by the
Company, (b) each Replacement Bank, if applicable, shall be
deemed to be a "Bank" for purposes of this Agreement, and (c)
each Non-Extending Bank shall cease to be a "Bank" for
purposes of this Agreement (except with respect to any unpaid
interest due on the Notes it has sold, to any unpaid
principal and interest due on the Notes it has not sold and
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
obligations hereunder.
2.03 The Notes. The obligations of the Company to repay the
aggregate unpaid principal amount of the Loans made by each
Bank to the Company hereunder and to pay interest thereon
shall be evidenced in part by a single promissory note of the
Company for each Bank dated on or prior to the Closing Date
in substantially the form attached hereto as Exhibit A, with
the blanks appropriately filled and payable to the order of
the Bank in the amount of the lesser of such Bank's
Commitment or the unpaid principal amount of all Loans made
to the Company by such Bank. 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
- 17 -
<PAGE> 25
determined from the Agent's records, which shall be presumed
correct absent manifest error. The executed Notes shall be
delivered by the Company to the Agent on or prior to the
Closing Date and the Agent shall promptly furnish such Notes
to the respective Banks.
2.04 Making of Revolving Loans. (a) Whenever the Company
desires that the Banks make a Set of Loans hereunder it shall
give Standard Notice thereof to the Agent setting forth the
following information substantially in the form of Loan
Request attached hereto as Exhibit B:
(i) The date, which shall be a Business Day, on which
such Loans are to be made;
(ii) The Interest Rate Option applicable to such Set of
Loans, selected in accordance with Section 2.07(a) hereof;
(iii) The Interest Period to apply to such Set of Loans,
selected in accordance with Section 2.07(b) hereof; and
(iv) The total principal amount of such Set of Loans,
selected in accordance with Section 2.07(c) hereof.
Standard Notice having been so given, the Agent shall
promptly advise each Bank of the information set forth
therein and of the amount of such Bank's Loan. On the date
specified in such Notice each Bank shall make the proceeds of
its Loan available to the Company at the Agent's Office no
later than 1:00 o'clock p.m., in funds immediately available
at such office. The failure of any Bank to fund any Loan
required of such Bank hereunder 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 Set of
Loans may be applied by the Agent in whole or in part ratably
against amounts then due and payable by the Company to the
Agent or any Bank hereunder.
(b) Absent contrary notice from the Company by 12:00
o'clock noon, three Business Days prior to any Maturity Date,
the Company shall, at the Agent's option, be deemed to have
given the Agent notice at such time pursuant to Section
2.04(a) hereof to the effect that the Company requests that
the Banks make a Set of Loans to the Company on such Maturity
Date at the Base Rate Option in an aggregate principal amount
equal to the aggregate principal amount of the Loans becoming
due and payable on such Maturity Date.
2.05. Commitment Fee; Utilization Fee; Closing Fee.
- 18 -
<PAGE> 26
(a) Commitment Fee. The Company agrees as a
consideration for the Commitments of the Banks hereunder, to
pay to the Agent for the ratable account of the Banks, a
commitment fee (the "Commitment Fee") for the period from the
Closing Date to and including the Expiration Date 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 Commitment Fee Percentage of the daily average
aggregate Unused Current Commitments in effect during the
calendar quarter (or other period, if shorter than a calendar
quarter) for which the Commitment Fee is to be determined.
The Commitment Fee shall be payable quarterly in arrears
beginning on July 1, 1994 (for the period from the Closing
Date through June 30, 1994) and on the first day of each
October, January, April and July thereafter, and on the
Expiration Date or the date of complete termination of the
Commitments of the Banks hereunder, in each case for the
immediately preceding calendar quarter or other period for
which such fee has not been paid.
(b) Utilization Fee. The Company agrees as a
consideration for the Commitments of the Banks hereunder and
in addition to any other fees payable by the Company pursuant
hereto, to pay to the Agent for the ratable account of the
Banks, a utilization fee (the "Utilization Fee") for the
period from the Closing Date to and including the Expiration
Date 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 Utilization Fee Percentage of the daily
average principal amount of all Loans outstanding during each
calendar quarter (or other period, if shorter than a calendar
quarter) from and after the Closing Date. The Utilization
Fee shall be payable quarterly in arrears beginning on July
1, 1994 (for the period from the Closing Date through June
30, 1994) and on the first day of each October, January,
April and July thereafter, and on the Expiration Date or the
date of complete termination of the Commitments of the Banks
hereunder, in each case for the immediately preceding
calendar quarter or other period for which such Utilization
Fee has not been paid.
(c) Closing Fee. The Company agrees, as a consideration
for the Commitments of the Banks hereunder and in addition to
all other fees payable by the Company pursuant hereto, to pay
to the Agent on or before the Closing Date, for the account
of each Bank a closing fee (the "Closing Fee") in an
aggregate amount equal to the Applicable Closing Fee
Percentage for each such Bank multiplied by the Commitment
Amount of each such Bank set forth opposite each such Bank's
name in Section 2.01 hereof.
2.06. Termination or Reduction. The Company may at any time
at which there are no Loans outstanding hereunder terminate
in whole the Total Current Commitments of the Banks or at any
- 19 -
<PAGE> 27
time or from time to time terminate ratably in part the
Current Commitments of the Banks to an amount not less than
the sum of the aggregate principal amount of the Loans then
outstanding plus the principal amount of all Loans not yet
made as to which notice has been given by the Company under
Section 2.04, in either case by giving not less than thirty
(30) Business Days' prior written or telephonic notice
confirmed in writing to the Agent; provided that any such
partial termination shall be in a minimum aggregate amount of
$1,000,000 or an integral multiple thereof; and provided
further that the minimum Total Current Commitment shall be at
least $10,000,000 after giving effect to any partial
termination. After each such partial termination, the
Commitment Fee shall be calculated upon the amount of the
total Unused Current Commitments of the Banks as so reduced.
Any partial or complete termination of the Current
Commitments pursuant hereto shall be permanent and
irrevocable and may not therafter be reinstated.
2.07. Interest Rates; Maturity Periods; Transactional
Amounts.
(a) Optional Basis of Borrowing. Each Loan shall bear
interest for each day until due on a single basis selected by
the Company from among the Interest Rate Options set forth
below, it being understood that subject to the provisions of
this Agreement all Loans within a single Set of Loans shall
be subject to the same Option, but the Company may select
different Options to apply simultaneously to different Sets
of Loans:
(i) Base Rate Option: A rate per annum (computed
on the basis of a year of 365 or 366 days, as the case
may be) for each day equal to the Base Rate for such day,
such interest rate to change automatically from time to
time effective as of the effective date of each change in
the Base Rate. "Base Rate", as used herein, shall mean
the interest rate per annum equal to the higher of: (A)
the Prime Rate for such day; or (B) the Federal Funds
Effective Rate for such day plus 1/2 of 1%. As used
herein "Prime Rate" shall mean that rate of interest per
annum announced from time to time by Mellon Bank, N.A. as
its Prime Rate. The Prime Rate may be greater or less
than other interest rates charged by Mellon Bank, N.A.
(or any of the Banks) to other borrowers and is not
solely based or dependent upon the interest rate which
Mellon Bank, N.A. (or any other Bank) may charge a
particular borrower or class of borrowers. "Federal
Funds Effective Rate" for any day, as used herein, shall
mean the rate per annum (rounded upward to the nearest
1/100 of 1%) determined by the Agent (which determination
- 20 -
<PAGE> 28
shall 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 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. The Agent shall promptly notify the Company
and each Bank of each change in the Base Rate and the
effective date thereof, but any failure of the Agent to
so notify shall not relieve the Company of its
obligations hereunder or under the Notes.
(ii) Euro-Rate Option: A rate per annum (based on a
year of 360 days and actual days elapsed) for each day
equal to the Euro-Rate for such day plus the Applicable
Margin. "Euro-Rate" for any day, as used herein, shall
mean for each Set of Euro-Rate Loans corresponding to a
proposed or existing Euro-Rate Interest Period the rate
per annum determined by the Agent by dividing (the
resulting quotient to be rounded upward to the nearest
1/100 of 1%) (x) the rate of interest (which shall be
the same for each day in such Euro-Rate Interest Period)
determined in good faith by the Agent (which
determination shall be conclusive) to be the average of
the rates per annum for deposits in Dollars offered to
each of the Reference Banks in the London interbank
market at approximately 11:00 o'clock a.m., London time,
two London Business Days prior to the first day of such
Euro-Rate Interest Period for delivery on the first day
of such Euro-Rate Interest Period in amounts comparable
to the amount of such Set of Euro-Rate Loans and for a
period comparable to such Euro-Rate Interest Period by
(y) a number equal to 1.00 minus the Euro-Rate Reserve
Percentage as defined below.
The "Euro-Rate" described in this Section
2.07(a)(ii) may also be expressed by the following formula:
[average of the rates offered to Reference ]
[Banks in the London interbank market ]
[determined by the Agent per subsection (ii) ]
Euro-Rate = [of this Section 2.07(a) ]
--------------------------------------------
[1.00 - Euro-Rate Reserve Percentage ]
- 21 -
<PAGE> 29
The "Euro-Rate Reserve Percentage" for any day is
the maximum effective percentage (expressed as a decimal
fraction, rounded upward to the nearest 1/100 of 1%), as
determined in good faith by the Agent (which
determination shall be conclusive), which is in effect on
such day as prescribed by the Board of Governors of the
Federal Reserve System (or any successor) for determining
the reserve requirements (including, without limitation,
supplemental, marginal and emergency reserve
requirements) with respect to Eurocurrency funding
(currently referred to as "Eurocurrency Liabilities") of
a member bank in such System but only to the extent
actually incurred by any Bank. The Euro-Rate shall be
adjusted automatically as of the effective date of each
change in the Euro-Rate Reserve Percentage.
The Agent shall give prompt notice to the Company and the
Banks by telephone, telecopier or facsimile of the Euro-Rate
so offered or adjusted from time to time and the Agent's
determination thereof shall be conclusive in the absence of
manifest error.
(b) Interest Periods. At any time when the Company
shall request the Banks to make a Set of Loans, the Company
shall specify the term of such Loans (the "Interest Period"
of each such Set of Loans) within the limitations set forth
in the chart below:
<TABLE>
<CAPTION>
Type of Loan Available Interest Periods
------------ --------------------------
<S> <C>
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, or three months ("Euro-Rate
Interest Period")
</TABLE>
provided, that:
(i) Each Base Rate Interest Period beginning before
the Expiration Date, which would otherwise end after the
Expiration Date, shall instead end on the Expiration Date;
(ii) Each Base Rate Interest Period 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 in which
event such Base Rate Interest Period shall end on the
immediately preceding Business Day;
- 22 -
<PAGE> 30
(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;
(iv) Notwithstanding any other provision of this
Agreement, the Company may not fix an Interest Period
which would end after the Expiration Date;
The principal amount of each Loan shall be due and payable on
the last day of the Interest Period corresponding thereto
(the "Maturity Date" therefor).
(c) Transactional Amounts. Every request for a Set of
Loans and every prepayment of a Set of Loans shall be in a
principal amount such that after giving effect thereto the
principal amount of such Set of Loans shall be as set forth
in the table below:
<TABLE>
<CAPTION>
Type of Loan Allowable Principal Amounts
- - - ------------ ---------------------------
<S> <C>
Base Rate Loan $1,000,000 plus an integral multiple
of $1,000,000
Euro-Rate Loan $1,000,000 plus an integral multiple
of $1,000,000
</TABLE>
(d) Interest After Maturity. After the principal amount
of any Loan shall have become due (on a Maturity Date, the
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 either Reference Bank (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
- 23 -
<PAGE> 31
of Funds shall exceed the Euro-Rate applicable to such
Loan, or
(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 Reference Bank or Bank, as
the case may be, 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) the
obligation of the Banks to allow the Company to select the
Euro-Rate Option shall be suspended until the Agent shall
have later notified the Company of such Reference Bank'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 the Agent notifies the Company of a determination
under subsection (ii) of this Section 2.07(e), all Euro-Rate
Loans then outstanding shall be due and payable on the date
specified in such notice. Absent contrary notice from the
Company by 12:00 o'clock noon, on such specified date, the
Company shall be deemed to have given the Agent notice at
such time pursuant to Section 2.04(a) hereof to the effect
that the Company requests a Set of Loans hereunder at the
Base Rate Option in principal amount equal to the principal
amount becoming due and payable pursuant to the preceding
sentence.
If at the time a Bank makes a determination under this
Section 2.07(e) and the Company has previously notified the
Agent that it wishes the Banks to make a Set of Euro-Rate
Loans but such Loans have not yet been made, such
notification shall be deemed to request the making of Base
Rate Loans instead of Euro-Rate Loans.
2.08. Prepayments. The Company shall have the right at its
option from time to time to prepay any Set of Loans in whole
or in part upon at least: (i) one Business Day prior written
notice to the Agent in the case of any Set of Base Rate
Loans; and (ii) subject to the provisions of Section 2.11(b)
hereof, five Business Days' prior written notice to the Agent
- 24 -
<PAGE> 32
in the case of any Set of Euro-Rate Loans. Whenever the
Company desires to prepay any part of any Set of Loans, it
shall provide the foregoing notice 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
Interest Rate Option applicable to, the Set of Loans to
be prepaid; and
(c) The principal amount selected in accordance
with Section 2.07(c) hereof to be prepaid.
Upon receiving the foregoing notice, the Agent shall promptly
advise each Bank of the information set forth therein and on
the date specified in such notice the principal amount of the
Set of Loans specified in such notice, together with interest
on such principal amount to such date, shall be due and
payable.
2.09. Interest Payment Dates. Interest on each Set of Base
Rate Loans shall be due and payable on the Maturity Date
thereof and, if the corresponding Base Rate Interest Period
is longer than 90 days, also every 90th day during such
Interest Period. Interest on each Set of Euro-Rate Loans
shall be due and payable on the Maturity Date thereof and, if
the corresponding Euro-Rate Interest Period is longer than
three 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 2.08(a)
hereof or specified for a required prepayment of Euro-Rate
Loans in a notice to be provided pursuant to Section 2.07(e)
hereof. After maturity of any Set of Loans (on a Maturity
Date, Expiration Date, by acceleration or otherwise),
interest on such Loans shall be due and payable on demand.
2.10. Payments. All payments and prepayments to be made in
respect of principal, interest, Commitment Fee, Utilization
Fee or other amounts due from the Company hereunder or under
any Note shall be payable at 12:00 o'clock noon, on the day
when due without presentment, demand, protest or notice of
any kind, all of which are hereby expressly waived, and an
action therefore shall immediately accrue. Such payments
shall be made to the Agent at its Office in Dollars in funds
immediately available at such Office and shall be promptly
distributed by the Agent ratably to each Bank. All such
payments shall be made without setoff, counterclaim or other
deduction of any nature, except only that the principal
amount of any Loan then due by the Company to any Bank shall
- 25 -
<PAGE> 33
automatically be set-off against the principal amount of any
Loan then due from such Bank to the Company hereunder. To
the extent permitted by law, after there shall have become
due (on a Maturity Date, Expiration Date, by acceleration or
otherwise) interest, Commitment Fee, Utilization Fee or any
other amounts due from the Company hereunder or under the
Notes (excluding overdue principal, which shall bear interest
as described in Section 2.07(d) hereof, but including
interest payable under this Section 2.10), 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.
2.11. 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 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 Note held by such Bank,
the Loans or payments by the Company of principal,
interest, Commitment Fee, Utilization Fee or other
amounts due from the Company hereunder or under such Note
(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 expressly included herein
in the determination of the Euro-Rate hereunder),
(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
- 26 -
<PAGE> 34
(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 Note held
by such Bank or its making, maintenance or funding of any
Loans;
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 or any
Notional Euro-Rate Funding Office of such Bank with
respect to this Agreement, the Notes held by such Bank or
the making, maintenance or funding of any part of any
Loan or, in the case of any capital adequacy or similar
requirement, to have the effect of reducing the return on
any Bank's capital, (taking into account such Bank'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 or such Notional Euro-Rate Funding Office 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. Such amount shall be due and payable by the
Company to such Bank ten Business Days after such notice
is given. If the Company is required to make a payment
to a Bank under this Section 2.11(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 2.11(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.
(b) Indemnity. In addition to the compensation required
by subsection (a) of this Section 2.11, the Company 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
- 27 -
<PAGE> 35
(i) payment or prepayment of any part of any
Euro-Rate Loan 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 the Company 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 2.11(b) or (B) to treat such
attempted revocation as having no force or effect, as if
never made), or
(iii) default by the Company in the performance or
observance of any covenant or condition contained in this
Agreement or the Notes, including without limitation any
failure of the Company to pay when due (on a Maturity
Date, Expiration Date, by acceleration or otherwise) any
principal, interest, Commitment 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 Company to such Bank
ten Business Days after such notice is given. As to any
Bank, the indemnity set forth herein shall not apply to the
extent caused by the wilful misconduct or negligence of such
Bank.
2.12. Taxes.
(a) Payments Net of Taxes. All payments made by the
Company 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 imposed, levied, collected, withheld or
assessed by any Official Body, and all liabilities with
respect thereto, excluding
- 28 -
<PAGE> 36
(i) in the case of the Agent and each Bank, income
or franchise taxes imposed on 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 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").
If any Taxes are required to be withheld or deducted from any
amounts payable to the Agent or any Bank under this
Agreement, the Company 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 the Company with respect to payments made in
connection with this Agreement, as promptly as possible
thereafter, the Company 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 Company showing payment thereof.
(b) Indemnity. The Company hereby indemnifies the Agent
and each of the Banks for the full amount of all Taxes
attributable to payments by or on behalf of the Company
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 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
- 29 -
<PAGE> 37
(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) 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 From 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
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 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.
2.13. 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 Company, 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". The 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
- 30 -
<PAGE> 38
if such transfer would avoid or cure an event or condition
described in Section 2.07(e) hereof or would lessen
compensation payable by the Company under Section 2.11
hereof, and if the Bank determines in its sole discretion
that such transfer would be practicable and would not have a
material adverse effect on such Loans, 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 Company to issue one or more
promissory notes in the principal amount of such Euro-Rate
Loan in substantially the form attached hereto as Exhibit A,
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 Company. The Company agrees to
comply promptly with any request under subsection (ii) of
this Section 2.13(b). If such Bank causes a branch,
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
REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to the Agent and
each Bank as follows:
3.01. 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
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<PAGE> 39
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
conditions (financial or otherwise) of the Company.
3.02. Corporate Power and Authorization. The Company 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, the Notes and the other
Loan Documents and to perform its obligations hereunder and
under the Notes; and all such action has been duly authorized
by all necessary corporate proceedings on its part.
3.03. 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, 1992 and the related
consolidated statements of income, cash flows and changes in
stockholders' equity for the fiscal years then ended, as
examined and reported on by Arthur Andersen & Co.,
independent certified public accountants for the Company, who
delivered an unqualified opinion in respect thereof. Such
financial statements (including the notes thereto) present
fairly the financial condition of the Company and its
Consolidated Subsidiaries as of the end of such fiscal year
and the results of their operations and their cash flows for
the fiscal year then ended, all in conformity with GAAP.
3.04. Interim Financial Statements. The Company has
heretofore furnished to the Agent and each Bank unaudited
interim consolidated balance sheets of the Company and its
Consolidated Subsidiaries as of the end of the third fiscal
quarter of 1993 ending on September 30, 1993, together with
the related unaudited consolidated statements of income for
the applicable fiscal periods ending on each such date. Such
financial statements (including the notes thereto) present
fairly the financial condition of the Company and its
Consolidated Subsidiaries as of the end of each such fiscal
quarter and the results of their operations for the fiscal
periods then ended, all in conformity with GAAP subject to
normal year-end adjustments.
3.05. 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, 1992, together with the
related consolidating statements of income for the applicable
fiscal periods ending on each such date. Such financial
statements (including the notes thereto) present fairly the
financial condition of the Company and its Consolidated
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<PAGE> 40
Subsidiaries as of the end of such fiscal period and the
results of their operations for the fiscal period then ended,
all in conformity with GAAP.
3.06. CNB 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
CNB for the fiscal year ending December 31, 1992 and for the
fiscal quarter ending September 30, 1993. Such Call Reports
present fairly the financial condition of CNB as of the end
of such fiscal year and of each such fiscal quarter and the
results of its operations, its capital position and its cash
flows for the fiscal periods then ended, all in conformity
with RAP.
3.07. Absence of Material Adverse Changes. Except as
otherwise disclosed in Schedule 3.07 hereof, since December
31, 1992 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.
3.08. Litigation. Except as set forth in the Company's 10-K
report for the fiscal year ending December 31, 1992, copies
of which have been provided to the Agent and the Banks, there
is no litigation or governmental proceeding by or against the
Company, CNB, or any other Subsidiary of the Company pending
or, to the knowledge of the Company, after due inquiry,
threatened, which in the reasonable judgment of the Company,
and if determined adversely, either individually or in the
aggregate is likely to have any material adverse effect on
the financial condition or business of the Company or CNB.
3.09. No Conflicting Laws or Agreements; Consents and
Approvals.
(a) Neither the execution and delivery of this
Agreement, the consummation of the transactions herein
contemplated nor compliance with the terms and provisions
hereof, of the Notes or of any other Loan Document will
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 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 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.
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<PAGE> 41
(b) No authorization, consent, approval, license,
exemption or other action by, and no registration,
qualification, designation, declaration or filing with, any
Official Body is or will be necessary or advisable in
connection with execution and delivery of this Agreement, the
Notes, consummation of the transactions herein or therein
contemplated, or the performance of or compliance with the
terms and conditions hereof or thereof.
3.10. Execution and Binding Effect. This Agreement has been
duly and validly executed and delivered by the Company. This
Agreement constitutes, and the Notes and other Loan Documents
when duly executed and delivered by the Company pursuant to
the provisions hereof will constitute, legal, valid and
binding obligations of the Company, enforceable in accordance
with the terms thereof except, as to the enforcement of
remedies, for limitations imposed by bankruptcy, insolvency,
reorganization, moratorium or other similar Laws affecting
the enforcement of creditors' rights generally or by Laws
limiting the right of specific performance.
3.11. ERISA Compliance. Each ERISA Group Member has
fulfilled its obligations under the minimum funding standards
of ERISA and the Code in all material respects with respect
to each Plan and is in compliance in all material respects
with the presently applicable provisions of ERISA and the
Code with respect to each Plan. No ERISA Group Member has
(i) sought a waiver of the minimum funding standard under
Section 412 of the Code in respect of any Plan, (ii) failed
to make any contribution or payment to any Plan, or made any
amendment to any Plan which has resulted or could result in
the imposition of a Lien or the posting of a bond or other
security under ERISA or the Code or (iii) incurred any
material liability under Title IV of ERISA other than a
liability to the PBGC for premiums under Section 4007 of
ERISA or for the payment of benefits in the ordinary course.
3.12. Taxes. All tax and information returns required to be
filed by the Company or any Subsidiary of the Company have
been properly prepared, executed and filed. All taxes,
assessments, fees and other governmental charges upon the
Company and its Subsidiaries or upon their respective
properties, incomes or sales which are due and payable have
been paid. 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 period.
3.13. Regulation U. The Company will make no borrowing
hereunder for the purpose of buying or carrying any "margin
stock" as such term is used in Regulation U of the Board of
Governors of the Federal Reserve System.
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<PAGE> 42
3.14. Environmental Matters. (a) The Company and each of
its 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, the Company and each of its 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, 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 or any of its
Environmental Affiliates, except for matters which, if
adversely decided, 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.
(d) To the best of the knowledge of all Responsible
Officers and except as disclosed in Schedule 3.14(d) hereof,
no facility or property now or previously owned, operated or
leased by the Company or any of its Environmental Affiliates
is an Environmental Cleanup Site and neither the Company nor
any of its 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 or any of its Environmental
Affiliates, under any Environmental Law.
(e) To the best of the knowledge of all Responsible
Officers, 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
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<PAGE> 43
transferability of facilities or properties now or previously
owned, operated or leased by the Company or any of its
Environmental Affiliates.
3.15. Investment Company; Bank Holding Company; Public
Utility Holding Company. The Company: (a) is not and is not
controlled by an investment company within the meaning of the
Investment Company Act of 1940, as amended; (b) is not a
registered bank holding company under the Bank Holding
Company Act of 1956, as amended; and (c) is not 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.
3.16. CNB Capitalization. As of the Closing Date, CNB is
"Well Capitalized" as defined under and determined pursuant
to the regulations of the OCC.
3.17. 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 3.03,
3.04, 3.05 and 3.06 hereof, (b) matters that, individually or
in the aggregate, could not 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, 1992 in the ordinary
course of business and consistent with past practices; and
(d) matters disclosed on Schedule 3.17 hereof.
3.18. 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.
3.19. 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 3.03 hereof or submitted pursuant to
Section 5.01(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.
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<PAGE> 44
3.20. Subsidiaries and Other Investments. Annexed hereto as
Schedule 3.20 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. 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 3.20, (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
except as disclosed in Schedule 3.20 and except for
investments by the Company in the ordinary course of business
and which individually or in the aggregate are not material.
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 3.20, 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 3.20. All of the outstanding shares of stock
directly or indirectly owned by the Company in each
corporation listed in Schedule 3.20 are duly authorized,
validly issued, fully paid and nonassessable (subject, in the
case of the shares of CNB, 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 each 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.
3.21. 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 upon the business,
operations, performance or condition, financial or otherwise,
of the Company or any Material Subsidiary or otherwise) the
ability of the Company to perform its obligations under this
Agreement and the Notes.
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<PAGE> 45
ARTICLE IV
CONDITIONS OF LENDING
4.01. Initial Loans. The obligation of each Bank to make
initial Loans hereunder is subject to the satisfaction of the
following conditions precedent in addition to the conditions
set forth in Section 4.02 hereof
(a) Agreement; Notes. The Agent shall have received an
executed counterpart of this Agreement for each Bank, duly
executed by the Company, and executed Notes, conforming to
the requirements hereof, duly executed on behalf of the
Company.
(b) Corporate Proceedings. The Agent shall have
received, with a counterpart for each Bank, certificates by
the Secretary or Assistant Secretary of the Company and each
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 the Company and each Material
Subsidiary in effect on such date which shall be certified to
be true, correct and complete by such Secretary not more than
30 days before the Closing Date, (ii) true copies of all
corporate action taken by the Company relative to this
Agreement and the Notes and (iii) the authority, incumbency
and signature of the respective officers of the Company
executing this Agreement and the Notes and of the Responsible
Officers authorized to sign any certificate or other document
required to be provided on behalf of the Company purusant
hereto, all together with satisfactory evidence of the
incumbency of such Secretary or Assistant Secretary.
(c) 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 30 days before the Closing Date
showing the good standing of the Company and each Material
Subsidiary in its state of incorporation or jurisdiction of
organization.
(d) 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 3.03, 3.04, 3.05 and 3.06
hereof respectively.
(e) 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
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<PAGE> 46
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 3.01, 3.02, 3.08, 3.09, 3.10 and 3.15
except that as to the matters referred to in Section 3.08
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.
(f) Officers' Certificates. The Agent shall have
received, with an executed counterpart for each Bank,
certificates from Responsible Officers as to such matters as
the Agent may reasonably request.
(g) 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 letter
from the Agent to the Company dated November 24, 1993 shall
have been paid or received by the Agent.
(h) 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.
4.02. Conditions to all Loans. The obligation of each Bank
to make each and any Loan (including initial Loans) is
subject to the performance by the Company of its obligations
to be performed hereunder on or before the date of such Loan,
satisfaction of the conditions set forth in Section 4.01
hereof, and the satisfaction of the following further
conditions precedent on and as of the date of each Loan
hereunder.
(a) Notice. Standard Notice of such Loan shall have
been given by the Company to the Agent as provided in Section
2.04 hereof.
(b) Representations and Warranties. The representations
and warranties contained in Article III hereof shall be true
and correct in all material respects on and as of the date of
each Loan as if made on and as of such date, both before and
after giving effect to the Loans requested to be made on such
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<PAGE> 47
date (except for the representations and warranties set forth
at Sections 3.07, 3.16 and 3.20 hereof which are made solely
as of the Closing Date).
(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 on such
date.
Each request by the Company for any Loan shall constitute a
representation and warranty by the Company that the
conditions set forth in this Section 4.02 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 shall constitute a further representation and
warranty by the Company that the conditions referred to in
this Section 4.02 have been satisfied as of the date such
Loan is made.
ARTICLE V
AFFIRMATIVE COVENANTS
The Company hereby covenants to the Agent and each Bank as
follows:
5.01. 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, (i) statements of income, cash
flows and changes in stockholders' equity of the Company for
such fiscal year and a balance sheet of the Company as of the
close of such fiscal year; and (ii) 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. All such financial statements shall
be accompanied by an opinion of independent certified public
accountants of recognized national standing selected by the
Company. 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
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<PAGE> 48
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 individually, and the Company and its
Consolidated Subsidiaries, as appropriate, as of the end of
such fiscal year and the results of their operations and
their cash flows and changes in stockholders' equity for such
fiscal year, 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, (i) unaudited statements of income
of the Company 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 balance sheet of the Company
as of the close of such fiscal quarter; and (ii) unaudited
consolidated statements of income 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 or as of the same
date 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 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 year, in conformity with GAAP, subject to normal
and recurring year-end audit adjustments.
(c) CNB Financial Statements. As soon as practical and
in any event within 90 days after the close of each fiscal
year of the Company (in the case of annual Call Reports) and
within 45 days after the close of each fiscal quarter of the
Company (in the case of quarterly Call Reports), 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 CNB and all
other banking Subsidiaries of the Company for which such
reports are required by the OCC for the immediately preceding
fiscal year or fiscal quarter, as the case may be, in each
instance together with (i) such notes and information
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<PAGE> 49
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 the financial
condition of CNB or such other banking Subsidiary of the
Company, as the case may be, as of the end of the fiscal
period to which they pertain and the results of CNB's (or
such other banking Subsidiary, as the case may be)
operations, capital position and cash flows for such fiscal
periods, all in conformity with RAP.
(d) Consolidating Reports. As soon 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 on behalf of the Company by a
Responsible Officer as presenting fairly 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), (c) and (d) of this Section 5.01) 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 in form
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 Section 6.01 hereof and providing in reasonable
detail the information and calculations necessary or, in the
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<PAGE> 50
judgment of the Agent, appropriate to establish compliance
with Section 6.01 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 reports required pursuant to Sections
5.01(a) and 5.01(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
material reports, letters, comments or other results of any
examination of, or otherwise pertaining to, CNB prepared or
provided by the OCC 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 CNB shall
file with or otherwise provide to the OCC, the Board of
Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation (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 the
Company's Rating Level is 11 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.
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(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 action, suit,
proceeding or investigation by or before any Official
Body (including, without limitation, the OCC, the Federal
Reserve Board or the Federal Deposit Insurance
Corporation 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, condition
(financial or otherwise) of the Company and its
Subsidiaries taken as a whole.
(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 Reportable Event with respect to a Plan or
that action has been or will be taken by any person to
terminate any Plan in accordance with Section 4041 of
ERISA or otherwise, or the Company, any ERISA group
member or any administrator of a Plan files a notice of
intent to terminate a Plan with the Internal Revenue
Service or the PBGC; or files with the Internal Revenue
Service a request pursuant to Section 412 of the Code for
a variance from the minimum funding standard for a Plan;
or files a return with the Internal Revenue Service with
respect to the tax imposed under Section 4971(a) of the
Code for failure to meet the minimum funding standards
established under Section 412 of the Code for a Plan, the
Company will furnish to the Agent a copy of any notice,
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return or other written materials applicable or required
to be filed by the Company in respect thereof; the most
recent Annual Report (Form 5500 Series) and attachments
thereto for the Plan; the most recent actuarial report
for the Plan; and a written statement of a Responsible
Officer of the Company describing the event or the action
taken and the reasons therefor.
(v) Any 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
Environmental Claim.
(vi) Any change in the Company's senior unsecured
debt rating (or CNB's subordinated debt rating, as the
case may be) by Moodys, S&P, Fitch, Duff & Phelps and/or
Thompsons.
(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
is designated in Schedule 3.20 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
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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.
5.02. 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.
5.03. 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
(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 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.
5.04. 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 6.03 hereof, the Company
shall and shall cause each Material Subsidiary to: (a)
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maintain its corporate existence and 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.
5.05. 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.
5.06. Avoidance of Other Conflicts. The Company shall not,
and shall not permit any of its Subsidiaries to, violate or
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 any of them or any of their respective
Subsidiaries is a party or by which any of them or any of
their respective Assets (now owned or hereafter acquired) may
be subject or bound.
5.07. CNB Capitalization. The Company shall at all times
cause CNB and all other banking Subsidiaries of the Company
which are regulated by the OCC to be at least "adequately
capitalized" as determined and defined pursuant to the
regulations of the OCC.
5.08. Financial Accounting Practices. The Company shall,
and shall cause each of its Material 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
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accounting controls sufficient to provide reasonable
assurances that (a) transactions are executed, (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.
5.09. Use of Proceeds. The Company shall use the proceeds
of all Loans hereunder only for its general corporate
purposes. The Company shall not use the proceeds of any
Loans hereunder for the purpose of buying or carrying any
"margin stock" as such term is defined in Regulation U of the
Board of Governors of the Federal Reserve System and will not
directly or indirectly use the proceeds of any Loans
hereunder for any unlawful purpose or in any manner
inconsistent with any other provision hereof.
5.10. 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 business(es)
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) (in the case of commercial products and services,
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
financial products and services referred to above).
5.11. Consolidated Tax Return. The Company shall not, and
shall not suffer any of its Subsidiaries to, file or consent
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to the filing of any consolidated income tax return with any
Person other than the Company and its Subsidiaries.
5.12. Fiscal Year. The Company shall not, and shall not
suffer any of its Subsidiaries to, change its fiscal year or
fiscal quarter.
5.13. Restrictions on Stock Payments, Etc. On or before
December 31, 1994, the Company shall terminate, remove or
otherwise cause to be terminated or removed all restrictions
referred to in Section 6.06(g) hereof including, without
limitation, the termination of the Capital Support Agreement
referred to in such Section.
ARTICLE VI
NEGATIVE COVENANTS
The Company covenants to the Agent and each Bank as follows:
6.01. Financial Covenants.
(a) Consolidated Tangible Net Worth. Consolidated
Tangible Net Worth shall not at any time be less than the sum
of (i) $270,000,000 plus (ii) an amount equal to 50% of the
aggregate of positive Consolidated Net Income for each fiscal
quarter which begins after September 30, 1993 and ends prior
to the date for which compliance with this Section 6.01(a) is
being determined.
(b) Double Leverage Ratio. 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 loan loss reserves maintained
by the Company and its Consolidated Subsidiaries, on a
managed and/or owned basis, against and in respect of all
accounts receivable either managed or owned by the Company
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and its Consolidated Subsidiaries be less than an amount
equal to 75% of the total of all such accounts receivable
which are either managed or owned by the Company and its
Consolidated Subsidiaries which are 90 or more days
contractually past due.
6.02. 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 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 6.02(a);
(b) Liens arising from taxes, assessments, charges,
levies or claims described in Section 5.03 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 5.03;
(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, 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 of such property by the
Company or such Subsidiary;
(ii) each such Lien is confined solely to the
property so purchased, improvements thereto and proceeds
thereof, and
(iii) the aggregate amount of the obligations
secured by all such Liens on any particular property at
any time purchased by the Company or such Subsidiary,
shall not exceed 90% of the lesser of the fair market
value of such property at such time or the actual
purchase price of such property.
(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
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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 CNB 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 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.
(i) Liens granted by Advanta Mortgage Holding Corp.
("AMHC") and/or Advanta Mortgage Corp. USA ("AMC USA") to
secure Indebtedness or other obligations of AMC USA or AMHC,
as the case may be, incurred in anticipation of and relating
to the securitization of Mortgage Loan Assets of and by AMC
or AMHC, as the case may be, 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 Mortgage Loan Assets upon
which such Liens are granted shall at any time exceed
$100,000,000 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. For
purposes hereof "Mortgage Loan Assets" shall mean mortgage
loans secured by residential real property made or acquired
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by AMHC and/or AMC, each of which is evidenced by a note and
secured by a mortgage (each a "Mortgage Loan"). For purposes
hereof, the value of a Mortgage Loan Asset shall be
determined by reference to, and shall be equal to, the unpaid
principal amount of all accounts and instruments (as those
terms are defined in the Uniform Commercial Code of
Pennsylvania) representing or evidencing a Mortgage Loan made
or acquired by AMHC or AMC, as the case may be.
(j) Liens granted by Advanta Leasing Holding Corp.
("ALHC") and/or Advanta Leasing Corp. ("ALC") to secure
Indebtedness or any other obligations of ALHC and/or ALC
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 the following amounts at any time during
the periods indicated;
(i) $63,500,000 from the Closing Date to March 31,
1994;
(ii) $53,500,000 from April 1, 1994 to April 30, 1994;
(iii) $50,500,000 from May 1, 1994 to May 31, 1994;
(iv) $37,500,000 from June 1, 1994 to June 30, 1994;
(v) $ 5,000,000 from July 1, 1994 to December 31,
1994; and
(vi) $ 100,000 at any time thereafter.
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 ALC or ALHC, as the case may be,
of all Assets consisting of accounts, instruments, notes or
other evidences of Indebtedness; the net lease amount
determined in accordance with GAAP and reflected on the
balance sheet of ALC or ALHC, as the case may be, in the case
of all Assets consisting of leases; and 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 5.03.
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(l) "Permitted Lien" shall in no event include any Lien
imposed by, or required to be granted pursuant to, ERISA or
any Environmental Law.
6.03. 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 all or
any substantial portion of the properties of any going
concern or going line of business, (y) acquire all or any
substantial portion of the properties of any other Person
other than in the ordinary 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 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
5.10 hereof) as the Company and its Subsidiaries except as
otherwise permitted pursuant to Section 5.10 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.
6.04. Dispositions of Properties. (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. (b) The Company
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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 6.04 (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
6.05 hereof; and
(iii) Sales, conveyances, assignments or other transfers
or dispositions in immediate exchange for cash or tangible
Assets, provided that such transaction shall not otherwise be
prohibited by any other provision of this Agreement and no
Event of 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 6.04(b): any disposition of
accounts, chattel paper or general Intangibles, with or
without recourse; and any disposition of any leasehold
interest. Nothing in this Section 6.04(b) shall be construed
to limit the restriction set forth in Section 6.04(a) hereof
or any other restriction on dispositions of property imposed
by this Agreement.
6.05. 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 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) Existence and 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
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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, and the board of
directors of the Company or such Subsidiary (including a
majority of the directors having no direct or indirect
interest in such transaction) approve the same;
(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.
6.06. 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 Subsidiary, (x) pay any
Indebtedness, obligations or liabilities from time to time
owed to the Company or any 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) Legal restrictions of general applicability under
the corporation law under which such Subsidiary is
incorporated, and fraudulent conveyance or similar laws or
general applicability for the benefit of creditors of such
Subsidiary generally;
(c) With respect to clause (z) above: (i) non-assignment
provisions of any executory contract or of any lease by the
Company or such Subsidiary as lessee, and (ii) restrictions
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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 Corp. USA ("AMC USA") 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 AMC USA, in each case,
requiring AMC USA and/or its parent Advanta Mortgage Holding
Corp. ("AMHC"), to maintain minimum equity in or of AMC USA
to the extent that the failure to comply with such
requirements would be likely to have a material adverse
effect on the business, operations, condition, (financial or
otherwise) of AMC USA and/or AMHC and provided further that
in no event shall the Company agree to, or cause or permit
any agreement by AMC USA or AMHC to, maintain or cause to be
maintained equity in AMC USA in excess of $10,000,000.
(g) Until December 31, 1994 (and not thereafter)
restrictions resulting from requirements contained in lending
arrangements existing as of the Closing Date between Advanta
Leasing Holding Corp. ("ALHC") and various financial
institutions restricting the ability of ALHC and Advanta
Leasing Corp. ("ALC") to pay dividends, to make advances to
the Company, to repay certain subordinated debt or to
transfer property as well as requiring them to maintain the
leverage position specified in that certain Capital Support
Agreement dated April 2, 1993 among the Company, ALHC and ALC
and requirements contained in such Capital Support Agreement
requiring the Company to provide certain capital support to
such Subsidiaries, provided, however, that in no event shall
the Company, or shall the Company permit either ALHC or ALC
to, provide or agree to provide capital support or to
maintain a leverage position, as the case may be, in an
amount greater than that which is specified in such Capital
Support Agreement as of the date hereof.
ARTICLE VII
EVENTS OF DEFAULT
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7.01 If one or more of the following described Events of
Default shall occur, that is to say:
(a) The Company shall default in the payment when due of
principal of any Note; or
(b) The Company shall default in the payment when due of
interest on any Note or of any Commitment Fee, Utilization
Fee or other fee payable hereunder, 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 VI hereof, or any of the covenants contained in
Sections 5.01(j), 5.04(a), 5.04(b), 5.07, 5.09 or 5.10
hereof; or
(d) Any representation or warranty made by the Company
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) The Company shall default in the observance,
performance or fulfillment of any other covenant (not
otherwise referred to in (a), (b), (c) or (d) above),
condition or provision hereof 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 interest on any
Indebtedness in principal amount of $10,000,000 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, 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 ERISA Group Member shall fail to pay when due
any amount which it shall have become liable to pay under
Title IV of ERISA; or notice of an intent to terminate any
Plan shall be filed under Title IV of ERISA by any ERISA
Group Member, any Plan Administrator or any combination of
the foregoing unless the assets of the Plan to be terminated
are sufficient to discharge when due all obligations of such
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Plan; or the PBGC shall institute proceedings under Title IV
of ERISA to terminate, to impose liability in respect of, or
to cause a trustee to be appointed to administer any Plan; or
a condition shall exist by reason of which the PBGC would be
entitled to obtain a decree adjudicating that any Plan must
be terminated or there shall occur a complete or partial
withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Plans which
could cause one or more ERISA Group Members to incur a
current payment obligation; 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 $10,000,000
in the aggregate and such judgment or judgments shall have
remained undischarged and unstayed for a period of thirty
days; or
(i) This Agreement 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 action or proceeding is initiated against the
Company or any Material Subsidiary of the Company by any
Official Body 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 Company to repay outstanding loans hereunder; or
(k) A Change of Control shall have occurred.
(l) Any "Event of Default" under and as defined in the
364 Day Revolving Credit Agreement shall have occurred and be
continuing.
(m) An involuntary proceeding shall be commenced 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, 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
such proceeding or petition shall continue undismissed for 60
days or an order or decree approving or ordering any of the
foregoing shall be entered; or
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(n) 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 consent
to the appointment of a receiver or 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 (l) of this Article VII, the Banks
shall be under no further obligation to make Loans hereunder
and the Agent shall, upon the request of the Required Banks,
by notice to the Company, declare the unpaid balance of all
Notes then outstanding and interest accrued thereon and all
other liabilities of the Company hereunder and thereunder to
be forthwith due and payable, and the same shall thereupon
become and be immediately due and payable, without
presentment, demand, protest or notice or any kind, all of
which are hereby expressly waived; and (ii) as to any Event
of Default specified under subsections (m) or (n) of this
Article VII, the Banks shall be under no further obligation
to make Loans hereunder and the unpaid balance of all Notes
outstanding hereunder and interest accrued thereon and all
other liabilities of the Company hereunder and thereunder
shall be immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which are
hereby expressly waived.
ARTICLE VIII
THE AGENT
8.01. Appointment. Each Bank hereby appoints Mellon Bank,
N.A. as Agent for such Bank under this Agreement and
irrevocably authorizes the Agent to take such action on its
behalf under the provisions of this Agreement and to exercise
such powers and perform such duties as are expressly
delegated to the Agent by the terms of this Agreement,
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 VIII. Notwithstanding
any provision to the contrary elsewhere in this Agreement,
the Agent shall have no duties or responsibilities, except
those expressly set forth herein, or any fiduciary
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relationship with any Bank, and no implied covenants,
functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or otherwise
exist against the Agent. The provisions of this Article VIII
are solely for the benefit of the Agent and the Banks, and
neither the Company 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 this
Agreement, the Agent shall act solely as Agent of the Banks
and shall not be deemed to have assumed any obligation or
relationship of agency or trust with or for the Company.
Each Bank agrees that the rights and remedies granted to the
Agent under this Agreement 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.
8.02. Delegation of Duties. The Agent may execute any of
its duties under this Agreement 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 8.03.
8.03. Exculpatory Provisions. None of the Agent or any of
its officers, directors, employees, representatives, agents,
attorneys-in-fact or Affiliates shall be (i) liable to the
Banks for any action lawfully taken or omitted to be taken by
it for such person under or in connection with this Agreement
(except for its or such person's own gross negligence or
willful misconduct), or (ii) responsible in any manner to any
of the Banks for any recitals, statements, representations or
warranties made by the Company or any of its officers
contained in this Agreement 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 for any failure of the Company or any of its
officers to perform its obligations hereunder or thereunder.
The Agent shall be under no obligation to any Bank or
ascertain or to inquire as to the observance or performance
of any of the agreements contained in, or conditions of, this
Agreement, or to inspect the properties, books or records of
the Company. The Agent shall not be responsible to any Bank
for the 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
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other documents in connection herewith or therewith furnished
by the Agent to the Banks or by or on behalf of the Company
to the Agent or any Bank, or be required to ascertain or
inquire as to the performance or observance of any of the
terms, conditions, provisions, covenants or agreements
contained herein or therein or as to the use of the proceeds
of the Loans or of the existence or possible existence of any
Potential Default or Event of Default. 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 if the Agent
believes in good faith that taking such action may conflict
with any Law or provision of this Agreement.
8.04. Reliance by Agent. The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any note,
writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, telegram, facsimile, telex or teletype
message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been
signed, sent or made by the proper person or persons and upon
advice and statements of legal counsel (including without
limitation counsel to the Company), independent accountants
and other experts selected by the Agent. The Agent shall be
fully justified in failing or refusing to take or continue to
take any action under this Agreement 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 or it shall first be
indemnified to its satisfaction by the Banks against any and
all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement in accordance
with a request of the Required Banks (or to the extent
specifically provided, of all the Banks), and such request
and any action taken or failure to act pursuant thereto shall
be binding upon all the Banks.
8.05. 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 the Company 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. The
Agent shall take such action with respect to such Potential
Default or Event of Default as shall be reasonably directed
by the Required Banks, provided that, unless and until the
Agent shall have received such directions, the Agent may (but
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shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Potential Default or
Event of Default as it shall deem advisable in the best
interests of the Banks.
8.06. Non-Reliance on Agent and Other Banks. Each Bank
expressly acknowledges that none 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, shall be deemed to
constitute any representation or warranty by the Agent 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 Company 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, appraisals and decisions in taking or not taking
action under this Agreement, and to 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 Company. Except for
notices, reports and other documents expressly required to be
furnished to the Banks by the Agent, the Agent shall not have
any duty or responsibility 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 Company which may come
into the possession of the Agent or any of its officers,
directors, employees, agents, representatives,
attorneys-in-fact or Affiliates.
8.07. Indemnification. The Banks agree to indemnify the
Agent in its capacity as such ratably according to their
respective Commitments (or if the Total Commitment has been
terminated and 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, actions, judgments,
suits, costs, reasonable expenses or disbursements of any
kind whatsoever which may at any time (including without
limitation at any time following the repayment of the Loan)
be imposed on, incurred by or asserted against the Agent in
its capacity as such in any way relating to or arising out of
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this Agreement or any other Loan Documents or other documents
contemplated by or referred to herein or the transactions
contemplated hereby or any action taken or omitted to be
taken by the Agent 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 for the
payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the gross
negligence or willful misconduct of the Agent. The
agreements in this Section 8.07 shall survive the payment of
all the Loans.
8.08. 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 the Loan made by it, the Agent
shall have the same rights and powers under this Agreement as
any Bank and may exercise the same as though it were not the
Agent and the terms "Bank" and "Banks" shall include the
Agent in its individual capacity.
8.09. Successor Agent. The Agent may resign at any time by
giving 30 days' prior written notice thereof to the Banks and
the Company. Upon any such resignation, the Required Banks
shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed, and shall have
accepted such appointment, within 30 days after such notice
of resignation, then the retiring Agent may, on behalf of the
Banks, appoint a successor Agent. 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 of a
retiring Agent, such Agent shall be discharged from its
duties as Agent under this Agreement 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 Company or Bank for whose account such payment is made.
8.10. Calculations. The Agent shall not be liable for any
calculation, apportionment or distribution of payments made
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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.
8.11. 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 by letter from the Agent to the
Company dated November 24, 1993.
8.12. Funding by Agent. Unless the Agent shall have been
notified in writing by any Bank not later than the close of
business on the day before the day on which Loans are
requested by the Company to be made that such Bank will not
make its ratable share of such Loans, the Agent may assume
that such Bank will make its ratable share of the Loans, and
in reliance upon such assumption the Agent may (but in no
circumstances shall be required to) make available to the
Company 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, the Company shall
pay such amount on demand), 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 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, without set-off, withholding, counterclaim or other
deduction of any nature.
8.13. Co-Agent. None of the Banks identified on the facing
page or signature pages of this Agreement as a "co-agent"
shall have any right, power, obligation, liability,
responsibility or duty under this Agreement other than those
applicable to all Banks as such. Each Bank acknowledges that
it has not relied, and will not rely, on any of the Banks so
identified in deciding to enter into this Agreement or in
taking or not taking action hereunder.
ARTICLE IX
MISCELLANEOUS
9.01. Holidays. Unless specifically otherwise provided
herein, whenever any payment or action to be made or taken
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hereunder 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.
9.02. 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 Commitment
Fees and Utilization Fees shall at all times be ascertained
from the records of the Agent, which shall be conclusive
absent manifest error.
9.03. 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 Company 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 the Company, the Agent
or any Bank. Any such amendment, modification or supplement
made by the Company and the Agent in accordance with the
provisions of this Section shall be binding upon the Company,
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, or extend any Maturity Date 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 Commitment Fee or the
Utilization Fee or reduce or postpone the date for payment of
any other fees, expenses, indemnities or amounts payable
under this Agreement, without the written consent of each
Bank affected thereby;
(c) Change the definition of "Required Banks" or amend
this Section 9.03, without the written consent of all the
Banks;
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(d) Amend or waive any of the provisions of Article VIII
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 any such amendment, modification
or supplement must be in 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.
9.04. 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 Note shall affect any other or future exercise thereof
or 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 the Notes 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.
9.05. 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 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 at the address stated on the signature pages
hereof or in accordance with the last unrevoked written
direction from such party to the other parties hereto, in all
cases with postage or other charges prepaid. Any such
properly given notice to the Agent or any Bank shall be
effective when received. Any such properly given notice to
the Company shall be effective on the earliest to occur of
receipt, telephone confirmation of receipt of telex or
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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 the Company 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 the Company, and neither
the Agent nor any Bank shall have any duty to verify the
identity or authority of any Person giving such notice.
9.06. 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-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) 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, and (ii) the enforcement or
preservation of rights under this Agreement (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 proceeding), dispute, work-out, restructuring
or rescheduling related in any way to this Agreement).
(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
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
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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 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 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) 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 or 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, 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.
9.07. Severability. The provisions of this Agreement are
intended to be severable. If any provision of this Agreement
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 hereof in any jurisdiction.
9.08. 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.
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9.09. Duration; Survival. All representations and
warranties contained herein or made in connection herewith
shall survive the making of, and shall not be waived by the
execution and delivery, of this Agreement, any investigation
by or knowledge of the Agent or any Bank, the making of any
Loan, or any other event or condition whatever. All
covenants and agreements contained herein shall continue in
full force and effect from and after the date hereof so long
as the Company may borrow hereunder and until payment in full
of all obligations. Without limitation, all obligations of
the Company hereunder to make payments to or indemnify the
Agent or any Bank shall survive the payment in full of all
other obligations hereunder, termination of the Company's
right to borrow hereunder, and all other events and
conditions whatever.
9.10. Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto 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.
9.11. 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, the Company 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 the Company, 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.
9.12. Set-Off. The Company 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 the Company hereunder
shall be due and payable (on a Maturity Date, Expiration
Date, by acceleration or otherwise), each Bank shall have the
right, without notice to the Company, to set-off against and
to appropriate and apply to such obligation any Indebtedness,
liability or obligation of any nature owing to the Company 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 the Company 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 the Company or any other Person,
- 69 -
<PAGE> 77
whether such Indebtedness, obligation or liability owed to
the Company 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.
The Company 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 the Company). The rights provided by this
Section are in addition to all other rights and remedies
which any Bank (or any such Participant, branch, Subsidiary
or Affiliate) may otherwise have under this Agreement, at Law
or in equity, or otherwise, and nothing in this Agreement
shall be deemed a waiver or prohibition of or restriction on
the rights of set-off or bankers' lien of any such Person.
9.13. 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, interest thereon,
or any other obligation contemplated by this Agreement to be
made by the Company pro rata to all Banks in greater
proportion than any such amount received by any other Bank,
then the Bank receiving such proportionately greater payment
shall notify each other 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 Banks. The 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 applicable Banks
a participation in the applicable obligations owed to such
other Banks in such amount as shall result in a ratable
sharing by all 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 amounts, if
any, required by Law to be paid by the Bank making such
purchase. The Company hereby consents to and confirms the
foregoing arrangements. Each Participant shall be bound by
this Section as fully as if it were a Bank hereunder.
9.14. Successors and Assigns; Participations; Assignments.
- 70 -
<PAGE> 78
(a) Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Company, the
Banks, all future holders of the Notes, the Agent and their
respective successors and assigns, except that the Company
may not assign or transfer any of its rights hereunder or
interests herein 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 obligations under this Agreement
(including, without limitation, all or a portion of its
Commitments 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
(iv) such Participant shall be bound by the
provisions of Section 9.13 hereof.
The Company agrees that any such Participant shall be
entitled to the benefits of Sections 2.11, 2.12 and 9.06 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 (including, without limitation, all or
any portion of its Commitments and Loans owing to it and any
Note held by it) 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
- 71 -
<PAGE> 79
(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 Section
9.14(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, such transferor Bank shall retain,
after such assignment, a minimum principal amount of
$5,000,000 of its Commitment and Loans then outstanding,
and such assignment shall be in a minimum aggregate
principal amount of $2,500,000 of the Commitments and
Loans then outstanding,
(iii) each such assignment shall be of a constant,
and not a varying, percentage of each Commitment of the
transferor Bank and of all of the transferor Bank's
rights and obligations under this Agreement, and
(iv) each such assignment shall be made pursuant to
assignment documentation reasonably satisfactory to the
Agent and, so long as no Potential Default or Event of
Default exists or is continuing, the Company (the
"Assignment Document").
In order to effect any such assignment, the transferor Bank
and the Purchasing Bank shall execute and deliver to the
Agent a notice of such assignment (which shall be signed on
behalf of the Purchasing Bank and the transferor Bank and
shall include the effective date of such assignment (the
"Assignment Effective Date"), the portion of the Commitment
and Loans being assigned, the name, address and payment and
notice instructions of the Purchasing Bank and the consents
required in Clause (i) above) (the "Assignment Notice"),
together with any Note subject to such assignment (the
"Transferor Bank Notes") and a processing and recording fee
of $2,000; and, upon receipt thereof, the Agent shall accept
such Assignment Notice and the Agent 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 Notice
(x) the Purchasing Bank shall be a party hereto
and, to the extent provided in such Assignment Notice,
shall have the rights and obligations of a Bank
hereunder, and
- 72 -
<PAGE> 80
(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
Notice 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 Notice, the Company, at its expense, shall execute
and deliver to the Agent (for delivery to the Purchasing
Bank) a new Note evidencing such Purchasing Bank's assigned
Commitments or Loans and (for delivery to the transferor
Bank) a replacement Note in the principal amount of the Loans
or Commitments 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 and be substantially in the form of
the precedessor 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.
(d) Register. The Agent shall maintain at its office 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 from time
to time. The entries in the Register shall be conclusive
(absent manifest error) and the Company, 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 Company 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 9.14(e),
the Company authorizes 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 Company in connection with this
Agreement or the Agent's or such Bank's credit evaluation of
the Company and its 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
- 73 -
<PAGE> 81
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 Company 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
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 Company. Each Bank agrees that it
will not use any non-public information supplied to it by the
Company pursuant to this Agreement for any purpose unrelated
to this Agreement and the Loans.
(f) Assignments to Federal Reserve Bank. 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.
9.15. Governing Law; Submission to Jurisdiction; Waiver of
Jury Trial; Limitation of Liability.
(a) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY,
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA, WITHOUT REGARD TO CHOICE OF LAW
PRINCIPLES.
(b) Certain Waivers. THE COMPANY HEREBY IRREVOCABLY AND
UNCONDITIONALLY:
(i) AGREES THAT ANY ACTION, SUIT OR PROCEEDING BY
ANY PERSON ARISING FROM OR RELATING TO THIS AGREEMENT OR
ANY STATEMENT, COURSE OF CONDUCT, ACT, OMISSION, OR EVENT
- 74 -
<PAGE> 82
OCCURRING IN CONNECTION HEREWITH OR THEREWITH
(COLLECTIVELY, "RELATED LITIGATION") MAY BE BROUGHT IN
ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
SITTING IN ALLEGHENY COUNTY, PENNSYLVANIA, 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);
(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 THE COMPANY;
(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 THE COMPANY AT THE ADDRESS FOR NOTICES
DESCRIBED IN SECTION 9.05 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 THE COMPANY 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
- 75 -
<PAGE> 83
OR ANY OTHER THEORY OF LIABILITY). THE COMPANY 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.
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.
By:
---------------------------------
(Signature)
Name: David D. Wesselink
Title: Senior Vice President & Chief Financial Officer
Address for Notices:
300 Welsh Road, Building 4
Horsham, PA 19044
Attention: Mike Nixon
Telephone: (215) 784-5315
Telecopier: (215) 657-0504
With Copy To:
300 Welsh Road, Building 5
Horsham, PA 19044
Attention: Gene S. Schneyer
Telephone: (215) 784-5343
Telecopier: (215) 784-5350
MELLON BANK, N.A., individually and as Agent
By:
---------------------------------
(Signature)
Name:
-------------------------------
Title:
------------------------------
Address for Notices:
One Mellon Bank Center
Pittsburgh, PA 15158
Attention: Henry J. Voorhees
Telephone: (412) 234-2905
Telecopier: (412) 234-8087
- 76 -
<PAGE> 84
THE BANK OF TOKYO TRUST COMPANY
By:
---------------------------------
(Signature)
Name:
-------------------------------
Title:
------------------------------
Address for Notices:
1251 Avenue of the Americas
12th Floor, National Banking Dept.
New York, NY 10116-3138
Attention: John R. Jeffers, Vice President
Telephone: (212) 782-4311
Telecopier: (212) 782-6445
CIBC INC.
By:
---------------------------------
(Signature)
Name:
-------------------------------
Title:
------------------------------
Address for Notices:
425 Lexington Avenue
New York, NY 10017
Attention: LuAnn Bowers, Vice President
Telephone: (212) 856-3638
Telecopier: (212) 856-3613
- 77 -
<PAGE> 85
CHEMICAL BANK
By:
---------------------------------
(Signature)
Name:
-------------------------------
Title:
------------------------------
Address for Notices:
270 Park Avenue, 9th Floor
New York, NY 10172
Attention: Roger A. Parker, Vice President
Telephone: (212) 270-3751
Telecopier: (212) 270-1789
THE DAIWA BANK, LTD.
<TABLE>
<S> <C>
By: By:
------------------------- --------------------------
(Signature) (Signature)
Name: By:
----------------------- --------------------------
Title: By:
---------------------- --------------------------
</TABLE>
Address for Notices:
One Liberty Place
1650 Market Street, Suite 2860
Philadelphia, PA 19103
Attention: Michael Fox, Vice President
Telephone: (215) 636-4446
Telecopier: (215) 636-4446
- 78 -
<PAGE> 86
HARRIS TRUST AND SAVINGS BANK
By:
----------------------------------
(Signature)
Name:
--------------------------------
Title:
-------------------------------
Address for Notices:
111 West Monroe Street
P.O. Box 755
Chicago, IL 60690
Attention: Michael J. Houlihan, Credit Officer
Telephone: (312) 461-4514
Telecopier: (312) 765-8382
MERIDIAN BANK
By:
---------------------------------
(Signature)
Name:
-------------------------------
Title:
------------------------------
Address for Notices:
1650 Market Street
Mailing Address: OL 3620
P.O. Box 7588
Philadelphia, PA 19103
Attention: John M. Fessick, Vice President
Telephone: (215) 854-3136
Telecopier: (215) 854-3774
- 79 -
<PAGE> 87
NATIONSBANK OF TEXAS, N.A.
By:
---------------------------------
(Signature)
Name:
-------------------------------
Title:
------------------------------
Address for Notices:
901 West Main Street, Suite 6600
Dallas, TX 75201
Attention: Patrick K. Doyle, Senior Vice President
Telephone: (214) 508-0569
Telecopier: (214) 508-0604
PNC BANK, N.A.
By:
---------------------------------
(Signature)
Name:
-------------------------------
Title:
------------------------------
Address for Notices:
Land Title Building
Broad and Chestnut Streets
Philadelphia, PA 19101
Attention: Karen L. Voight, Assistant Vice President
Telephone: (215) 585-5224
Telecopier: (215) 585-7615
- 80 -
<PAGE> 88
SHAWMUT BANK CONNECTICUT, N.A.
By:
---------------------------------
(Signature)
Name:
-------------------------------
Title:
------------------------------
Address for Notices:
777 Main Street
Hartford, CT 06115
Attention: Phil S. Walker, Assistant Vice President
Telephone: (203) 686-5366
Telecopier: (203) 986-5367
THE FIRST NATIONAL BANK OF CHICAGO
By:
---------------------------------
(Signature)
Name:
-------------------------------
Title:
------------------------------
Address for Notices:
One First National Plaza, Mail Suite 0084
Chicago, IL 60670-0084
Attention: Mark C. Kramer, Vice President
Telephone: (312) 732-2293
Telecopier: (312) 732-5296
- 81 -
<PAGE> 89
UNION BANK
By:
---------------------------------
(Signature)
Name:
-------------------------------
Title:
------------------------------
Address for Notices:
350 California Street, 11th Floor
San Francisco, CA 94104
Attention: Donald H. Rubin, Vice President, Manager
Telephone: (415) 705-7060
Telecopier: (415) 705-7037
- 82 -
<PAGE> 1
EXHIBIT 21
CURRENT LIST OF SUBSIDIARIES OF REGISTRANT
ADVANTA Corp. (DE)
ADVANTA Residual Holding Corp. (DE)
Colonial National Financial Corp. (UT)
AICM, Inc. (AZ)
ADVANTA Name Corp. (DE)
Colonial National Automotive Financial Corp. (DE)
Colonial National Corp. (DE)
Colonial National Bank USA
Colonial Mortgage Management Corp. (CA)
ADVANTA Leasing Holding Corp. (DE)
ADVANTA Leasing Corp. (DE)
ADVANTA Leasing Receivables Corp. (DE)
ADVANTA Leasing Receivables Corp. II (DE)
Mt. Vernon Leasing, Inc. (NJ)
ADVANTA Advertising, Inc. (DE)
ADVANTENNIS Corp. (DE)
ADVANTA Life Insurance company (AZ)
TSO National Life Insurance Compan6y (AZ)
ADVANTA Insurance Company (AZ)
Direct National Life Insurance Company (AZ)
ADVANTA Mortgage Holding Company (DE)
ADVANTA Mortgage Corp. USA (DE)
ADVANTA Mortgage Corp. Midatlantic (PA)
ADVANTA Mortgage Corp. Midatlantic II (PA)
ADVANTA Mortgage Corp. New Jersey (NJ)
ADVANTA Mortgage Corp. Northeast (NY)
ADVANTA Mortgage Corp. Midwest (PA)
ADVANTA Financial Investments, Inc. (PA)
ADVANTA Nominee Services, Inc. (DE)
ADVANTA Mortgage Conduit Services, Inc. (DE)
<PAGE> 1
EXHIBIT 23
ARTHUR
ANDERSEN
ARTHUR ANDERSEN & CO. S.C.
-----------------------------
Arthur Andersen & Co.
-----------------------------
1601 Market Street
Philadelphia PA 19103-2499
215 241 7300
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included in this Form 10-K, into the
Company's previously filed Form S-8 Registration Statements; File
No. 33-7615, No. 33-12510, No. 33-19290, No. 33-47308, No.
33-47305, No. 33-50256, No. 33-50254, No. 33-50258, No. 33-55492,
No. 33-57516, No. 33-50209 and No. 33-51327 and Form S-3
Registration Statements; File No. 33-27864, No. 33-38923, No.
33-58660 and No. 33-50883.
/S/ Arthur Andersen & Co.
-------------------------
Philadelphia, PA
March 29, 1994
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
director of ADVANTA Corp., a Delaware corporation (the
"Company"), does hereby constitute and appoint Dennis Alter,
Richard A. Greenawalt, John J. Calamari, David D. Wesselink and
Gene S. Schneyer, or any of them (with full power to each of them
to act alone), his true and lawful attorney-in-fact and agent,
with full power of substitution, for him and on his behalf to
sign, execute and file an Annual Report on Form 10-K under the
Securities Exchange Act of 1934, as amended, for the fiscal year
ended December 31, 1993, relating to the Company, and any or all
amendments thereto with all exhibits and any and all documents
required to be filed with respect thereto, with the Securities
and Exchange Commission or any regulatory authority, granting
unto such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the
premises in order to effectuate the same as fully to all intents
and purposes as he might or could do if personally present,
hereby ratifying and confirming all that such attorneys-in-fact
and agents, or any of them, or their substitute or substitutes,
may lawfully do or cause to be done.
IN WITNESS WHEREOF, each of the undersigned has executed
this Power of Attorney this ----- day of March, 1994.
/S/ Arthur P. Bellis
--------------------------
Arthur P. Bellis, Director
Witness:----------------------
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
director of ADVANTA Corp., a Delaware corporation (the
"Company"), does hereby constitute and appoint Dennis Alter,
Richard A. Greenawalt, John J. Calamari, David D. Wesselink and
Gene S. Schneyer, or any of them (with full power to each of them
to act alone), his true and lawful attorney-in-fact and agent,
with full power of substitution, for him and on his behalf to
sign, execute and file an Annual Report on Form 10-K under the
Securities Exchange Act of 1934, as amended, for the fiscal year
ended December 31, 1993, relating to the Company, and any or all
amendments thereto with all exhibits and any and all documents
required to be filed with respect thereto, with the Securities
and Exchange Commission or any regulatory authority, granting
unto such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the
premises in order to effectuate the same as fully to all intents
and purposes as he might or could do if personally present,
hereby ratifying and confirming all that such attorneys-in-fact
and agents, or any of them, or their substitute or substitutes,
may lawfully do or cause to be done.
IN WITNESS WHEREOF, each of the undersigned has executed
this Power of Attorney this ----- day of March, 1994.
/S/ Max Botel
-------------------
Max Botel, Director
Witness:-----------------------------
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
director of ADVANTA Corp., a Delaware corporation (the
"Company"), does hereby constitute and appoint Dennis Alter,
Richard A. Greenawalt, John J. Calamari, David D. Wesselink and
Gene S. Schneyer, or any of them (with full power to each of them
to act alone), his true and lawful attorney-in-fact and agent,
with full power of substitution, for him and on his behalf to
sign, execute and file an Annual Report on Form 10-K under the
Securities Exchange Act of 1934, as amended, for the fiscal year
ended December 31, 1993, relating to the Company, and any or all
amendments thereto with all exhibits and any and all documents
required to be filed with respect thereto, with the Securities
and Exchange Commission or any regulatory authority, granting
unto such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the
premises in order to effectuate the same as fully to all intents
and purposes as he might or could do if personally present,
hereby ratifying and confirming all that such attorneys-in-fact
and agents, or any of them, or their substitute or substitutes,
may lawfully do or cause to be done.
IN WITNESS WHEREOF, each of the undersigned has executed
this Power of Attorney this ----- day of March, 1994.
/S/ Richard J. Braemer
----------------------------
Richard J. Braemer, Director
Witness:-----------------------------
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
director of ADVANTA Corp., a Delaware corporation (the
"Company"), does hereby constitute and appoint Dennis Alter,
Richard A. Greenawalt, John J. Calamari, David D. Wesselink and
Gene S. Schneyer, or any of them (with full power to each of them
to act alone), his true and lawful attorney-in-fact and agent,
with full power of substitution, for him and on his behalf to
sign, execute and file an Annual Report on Form 10-K under the
Securities Exchange Act of 1934, as amended, for the fiscal year
ended December 31, 1993, relating to the Company, and any or all
amendments thereto with all exhibits and any and all documents
required to be filed with respect thereto, with the Securities
and Exchange Commission or any regulatory authority, granting
unto such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the
premises in order to effectuate the same as fully to all intents
and purposes as he might or could do if personally present,
hereby ratifying and confirming all that such attorneys-in-fact
and agents, or any of them, or their substitute or substitutes,
may lawfully do or cause to be done.
IN WITNESS WHEREOF, each of the undersigned has executed
this Power of Attorney this ----- day of March, 1994.
/S/ Anthony P. Brenner
----------------------------
Anthony P. Brenner, Director
Witness:-----------------------------
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
director of ADVANTA Corp., a Delaware corporation (the
"Company"), does hereby constitute and appoint Dennis Alter,
Richard A. Greenawalt, John J. Calamari, David D. Wesselink and
Gene S. Schneyer, or any of them (with full power to each of them
to act alone), his true and lawful attorney-in-fact and agent,
with full power of substitution, for him and on his behalf to
sign, execute and file an Annual Report on Form 10-K under the
Securities Exchange Act of 1934, as amended, for the fiscal year
ended December 31, 1993, relating to the Company, and any or all
amendments thereto with all exhibits and any and all documents
required to be filed with respect thereto, with the Securities
and Exchange Commission or any regulatory authority, granting
unto such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the
premises in order to effectuate the same as fully to all intents
and purposes as he might or could do if personally present,
hereby ratifying and confirming all that such attorneys-in-fact
and agents, or any of them, or their substitute or substitutes,
may lawfully do or cause to be done.
IN WITNESS WHEREOF, each of the undersigned has executed
this Power of Attorney this ----- day of March, 1994.
/S/ William C. Dunkelberg
-------------------------------
William C. Dunkelberg, Director
Witness:---------------------
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned
director of ADVANTA Corp., a Delaware corporation (the
"Company"), does hereby constitute and appoint Dennis Alter,
Richard A. Greenawalt, John J. Calamari, David D. Wesselink and
Gene S. Schneyer, or any of them (with full power to each of them
to act alone), his true and lawful attorney-in-fact and agent,
with full power of substitution, for him and on his behalf to
sign, execute and file an Annual Report on Form 10-K under the
Securities Exchange Act of 1934, as amended, for the fiscal year
ended December 31, 1993, relating to the Company, and any or all
amendments thereto with all exhibits and any and all documents
required to be filed with respect thereto, with the Securities
and Exchange Commission or any regulatory authority, granting
unto such attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the
premises in order to effectuate the same as fully to all intents
and purposes as he might or could do if personally present,
hereby ratifying and confirming all that such attorneys-in-fact
and agents, or any of them, or their substitute or substitutes,
may lawfully do or cause to be done.
IN WITNESS WHEREOF, each of the undersigned has executed
this Power of Attorney this ----- day of March, 1994.
/S/ Ronald J. Naples
--------------------------
Ronald J. Naples, Director
Witness:---------------------
