The Advanta Corp.
Supplemental Executive Insurance Program
ARTICLE I — Establishment and
Purpose
Advanta Corp.
(the “Company”) hereby establishes a nonqualified
deferred compensation plan for certain designated senior executives
(the “Participants,” as hereinafter defined), effective
as of April 2, 2007 (the “Effective Date”), and
known as the Advanta Corp. Supplemental Executive Insurance Program
(the “SEIP”), for the purpose of reimbursing the
Participants for certain unanticipated costs to them associated
with the Company’s existing program of life insurance for
their benefit and/or the benefit of their family members by
providing certain supplemental payments on a regular, periodic
basis commencing immediately and continuing beyond their retirement
from active employment with the Company, subject to certain vesting
requirements, all as set forth herein. The principal purpose of the
SEIP is to provide the Participants with these benefits in order to
encourage their continued employment with the Company and to reward
them for their long and valuable service with and efforts for the
Company, and to provide the Participants, as closely as possible,
with certain benefits that were originally intended to be provided
for them through the Company’s program of life insurance
benefits.
2.1
“Board” means the Board of Directors of the
Company.
2.2
“Cause” means conduct by the Participant consisting of
any of the following:
(a) The
willful and continued failure by the Participant to substantially
perform his or her duties which the Participant fails to cure
(other than any such failure resulting from incapacity due to
physical or mental illness or an Extended Leave of Absence) after
ten (10) days from a written demand for substantial
performance is delivered to the Participant by the Company, which
demand specifically identifies the manner in which the Company
believes that the Participant has not substantially performed his
or her duties; or
(b) The
willful engaging by the Participant in conduct which is clearly and
materially injurious to the Company, monetarily or otherwise. For
purposes of this subsection, no act, or failure to act, on the
Employee’s part shall be deemed “willful” unless
done, or omitted to be done, by the Participant in bad faith and
without reasonable belief that his or her action or omission was in
or not opposed to the best interest of the Company.
Notwithstanding
the foregoing, a Participant shall not be deemed to have been
terminated for Cause unless and until there shall have been
delivered to the Participant a
copy of a
written determination of the Committee issued pursuant to a meeting
of the Committee (after reasonable notice to the Participant and an
opportunity for the Participant, together with his or her counsel,
to be heard before the Committee) finding that in the good faith
opinion of the Committee the Participant was guilty of conduct set
forth above in this Section 2.2 and specifying the particulars
thereof in detail.
2.3
“Change of Control” shall have the same meaning as that
set forth in the Company’s 2000 Omnibus Stock Incentive Plan
or as set forth in such other stock incentive plan as may be
established by the Company that amends or replaces the
Company’s 2000 Omnibus Stock Incentive Plan.
2.4
“Committee” shall mean the Compensation Committee of
the Board or such other subcommittee of the Board as may be
established by the Board to administer the SEIP.
2.5
“Disability” means any medical or physical condition
that constitutes a long-term disability for purposes of the
Company’s long-term disability plan or such Company provided
long-term disability insurance coverage as may be in effect from
time to time. In the event there is no such plan or Company
provided disability coverage in effect, then Disability shall mean
a condition that the Committee determines to constitute a medically
determinable physical or mental condition that is reasonably
expected to prevent the Participant form being able to engage in
substantial gainful activity and that can reasonably be expected to
be of long-continued or indefinite duration or to result in the
Participant’s death.
2.6
“ERISA” means the Employee Retirement Income Security
Act of 1974, as amended, and any successor act thereto.
2.7
“Participant” shall have the meaning set forth in
Section 3.1.
2.8
“Participant Anticipated Insurance Premium Amount”
means certain payments to be made to each Participant each Plan
Year, based on the determination made under this Section 2.8
of the amount that should be paid as an additional insurance
premium or premiums, if any, which a Participant would need to pay
in order to keep the applicable Participant Insurance Policy or
Policies in force with an aggregate death benefit equal to the
Participant Insurance Coverage for the Participant’s life
(the “Individual Policies”) or, with respect to
policies providing for payments on the last to die of the
Participant and his spouse, until the death of the last to die of
the Participant and his spouse (the “Second-to-Die Policies).
For purposes of determining whether any additional premium or
premiums are needed pursuant to this Section 2.8, the
aggregate death benefit with respect to a Participant’s
Individual Policies and the aggregate death benefit with respect to
a Participant’s Second-to-Die Policies, if applicable, shall
not be aggregated together. The Participant Anticipated Insurance
Premium Amount determined under this Section 2.8 shall be
determined as of the last day of each Plan Year, and with respect
to each Participant, by a Chartered Life Underwriter or other
similarly qualified insurance
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professional
(the “Insurance Analyst”) acceptable to both the
Participant and to the Company, and who will determine the amount
of the Participant Anticipated Insurance Premium Amount to be paid
to the Participant for a Plan Year using in-force policy analyses
based on reasonable actuarial assumptions and on the basis of the
following:
(a) the
Insurance Analyst shall make a determination of the period of time
the policy needs to remain in force, using reasonable assumptions
regarding each Participant for the Participant’s lifetime (or
the joint lives of the Participant and his spouse, as the case may
be);
(b) the
Insurance Analyst shall produce or coordinate with the insurance
carrier to produce an in-force policy analysis for each Participant
Insurance Policy for the period determined under
Section 2.8(a) above, taking into account reasonable
assumptions concerning the rate of return on investments within the
Participant Insurance Policy and projected costs of mortality and
expense; and
(c) the
Insurance Analyst shall, in making the determination under
Section 2.8(b), assume that the aggregate death benefit under
the Participant’s Individual Policies and/or Second-to-Die
Policies is not decreased at any time below the amount originally
specified in the Schedule of Participant Insurance
Coverage.
The amount
determined as the Participant Anticipated Insurance Premium Amount
under this Section 2.8 shall be the amount, if any, that
represents the single payment that would be required as of the
computation date for the in-force policy analysis; provided,
however, that the amount that will actually be paid shall be
amortized over a five year period, so that five annual payments
shall be made to the Participant, such payments having a present
value equal to the single payment amount as calculated hereunder.
The Participant Anticipated Insurance Premium Amount with respect
to a Participant Insurance Policy will be $0 if it is determined
that no further premium payments are needed to keep such
Participant Insurance Policy in force as required hereunder, taking
into account for these purposes the projected rate of return on the
underlying Participant Insurance Policy used in the calculation set
forth in Section 2.8(b), above and any residual amounts
required to be paid by reason of a prior determination of the
Participant Anticipated Insurance Premium Amount.
The periodic
calculation of the amount of the Participant Anticipated Insurance
Premium Amount for each Participant, as described above, shall take
into account the actual Participant Insurance Policy value only if
amounts corresponding to the amounts previously calculated as
annual payments were actually used to pay premiums on the
Participant Insurance Policy. In the event these amounts were not
so used to pay premiums on the Participant Insurance Policy, the
subsequent calculation of the Participant Anticipated Insurance
Premium Amount shall be determined by reference to a hypothetical
value of the Participant Insurance Policy, determined as though
such
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amounts were
paid as premiums on such Participant Insurance Policy. An
additional determination of a Participant Anticipated Insurance
Premium Amount shall be made in the event the Participant receives
notice from any insurance carrier that a Participant Insurance
Policy is projected to lapse within one year.
2.9
“Participant Insurance Coverage” means the amount of
life insurance coverage set forth in the Schedule of Participant
Insurance Coverage attached hereto as Exhibit A.
2.10
“Participant Insurance Policies” shall mean with
respect to each Participant, those Individual Policies and
Second-to-Die Policies identified on the Schedule of Participant
Insurance Policies attached hereto as Exhibit A or such other
insurance policies as may be established in the future as a means
for maintaining the required level of Participant Insurance
Coverage.
2.11
“Participant Tax Liability” means the tax liability
determined with respect to each Participant that arises annually
from the imputed income attributable to the Participant Insurance
Coverage under applicable IRS rules and regulations, and the gift
tax liabilities, if any, attributable to the present ownership of
the Participant Insurance Policy (all such calculations of
Participant Tax Liability being based on the application of the
highest marginal tax rates then applicable (including federal
income and gift taxes, and any applicable state and local
taxes).
2.12
“Plan Year” shall mean the calendar year; provided,
however, that the first Plan Year shall be the period from the
Effective Date through December 31, 2007. With respect to
payments to be made during the first Plan Year, all determinations
of amounts payable that are to be made as of the end of a prior
Plan Year shall be calculated as of December 31,
2006.
2.13 “Tax
Gross-Up Amount” means an amount that is determined as
sufficient to reimburse the Participant, on a net, after tax basis,
for the taxes the Participant is required to pay on the amounts
paid under Sections 4.1(a) and (b) of the
SEIP.
2.14 “Top
Hat Plan” means a nonqualified, unfunded plan maintained
primarily to provide deferred compensation benefits to a
Participant who falls within a select group of “management or
highly compensated employees” within the meaning of
Section 201, 301 and 401 of ERISA.
ARTICLE III —
Participation, Vesting and Retirement Benefits
3.1
Eligibility to Participate in the SEIP . Participation in
the SEIP is limited to William Rosoff and Dennis Alter, who are the
members of the Office of the Chair as of the date the SEIP is
adopted (referred to herein as the “Participants”).
This limited participation is intended to be consistent with the
status of the SEIP as a Top Hat Plan.
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(a) Normal
Vesting. Each Participant in the SEIP shall become fully vested
upon attainment of age 70 or at the time there is a Change of
Control of the Company; provided the Participant has remained
continuously employed by the Company through that date. In the
event a Part
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