<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1996
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
------------ ------------
Commission file number 0-21814
REGIONAL ACCEPTANCE CORPORATION
-------------------------------
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-1240678
-------------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3004 S. Memorial Drive, Greenville, North Carolina 27834
--------------------------------------------------------
(Address of principal executive offices)
919-756-2148
------------
(Issuer's telephone number)
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
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
<TABLE>
<CAPTION>
OUTSTANDING AT
CLASS JUNE 30, 1996
------------ --------------
<S> <C>
Common Stock 15,008,038
</TABLE>
<PAGE> 2
ITEM 1: FINANCIAL STATEMENTS
Regional Acceptance Corporation and Subsidiaries
Consolidated Balance Sheets
June 30, 1996 and December 31, 1995
<TABLE>
<CAPTION>
June 30,
1996 December 31,
(Unaudited) 1995
----------- -------------
<S> <C> <C>
ASSETS
Cash $ 1,984,120 $ 2,915,191
Loans receivable 162,039,599 139,506,447
Less:
Allowance for loan losses (4,074,310) (3,429,923)
Non-refundable dealer holdbacks (322,760) (571,196)
------------ ------------
Loans receivable, net 157,642,529 135,505,328
Property and equipment, net 2,043,543 1,855,949
Deferred tax asset 823,700 1,639,700
Other assets 498,446 1,013,594
------------ ------------
Total assets $162,992,338 $142,929,762
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Commercial paper $ 48,252,925 $50,000,000
Senior debt 65,744,500 45,391,500
Subordinated debt 4,514,176 6,739,503
Other debt 2,000,000 2,000,000
Accrued expenses 451,649 610,940
Other liabilities 249,735 908,562
------------ ------------
Total liabilities 121,212,985 105,650,505
------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock. 10,000,000 shares authorized;
none issued - -
Common stock, no par value. 100,000,000 shares
authorized; 15,008,038 issued and outstanding 19,180,182 19,171,261
Retained earnings 22,599,171 18,107,996
------------ ------------
Total stockholders' equity 41,779,353 37,279,257
------------ ------------
Total liabilities and stocholders' equity $162,992,338 $142,929,762
============ ============
</TABLE>
2
See accompanying notes to consolidated financial statements
<PAGE> 3
Regional Acceptance Corporation and Subsidiaries
Consolidated Statements of Income
Three and six months ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three months ended June Six months ended
June 30, June 30,
------------------------- --------------------------
1996 1995 1996 1995
------------------------- --------------------------
<S> <C> <C> <C> <C>
Interest income $ 8,410,710 $ 6,739,698 $16,212,420 $13,046,065
Interest expense (2,062,549) (1,953,788) (4,021,532) (3,806,679)
Net interest income before provision
for loan losses 6,348,161 4,785,910 12,190,888 9,239,386
----------- ----------- ----------- -----------
Provision for loan losses (1,261,000) (742,000) (2,161,000) (1,382,000)
----------- ----------- ----------- -----------
Net interest income 5,087,161 4,043,910 10,029,888 7,857,386
Other income:
Insurance commissions 1,158,280 1,004,973 2,342,517 1,986,221
Late charges 136,984 134,197 285,969 273,485
Other service charges and fees 119,509 117,028 256,969 238,510
Other income 3,542 5,499 4,320 7,112
----------- ----------- ----------- -----------
1,418,315 1,261,697 2,889,775 2,505,328
----------- ----------- ----------- -----------
Operating expenses:
Salaries 1,245,111 893,115 2,489,837 1,817,100
Rent 221,254 167,744 382,698 337,678
Taxes, other than income taxes 261,441 266,101 378,380 427,094
Other 1,279,220 721,696 2,454,573 1,347,578
----------- ----------- ----------- -----------
3,007,026 2,048,656 5,705,488 3,929,450
----------- ----------- ----------- -----------
Income before provision for income taxes 3,498,450 3,256,951 7,214,175 6,433,264
Provision for income taxes (1,248,000) (1,256,000) (2,723,000) (2,522,000)
----------- ----------- ----------- -----------
Net income $ 2,250,450 $ 2,000,951 $ 4,491,175 $ 3,911,264
=========== =========== =========== ===========
Net income per share $ 0.15 $ 0.13 $ 0.30 $ 0.26
=========== =========== =========== ===========
Weighted average shares outstanding 15,007,363 15,007,031 15,007,197 15,007,031
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE> 4
Regional Acceptance Corporation and Subsidiaries
Consolidated Statements of Stockholders' Equity
Six months ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Retained Earning Total
------------ ---------------- ------------
<S> <C> <C> <C>
Balance January 1, 1996 $19,171,261 $18,107,996 $37,279,257
Exercise of option for 1,007 shares 8,921 - $ 8,921
Net income for period ended
June 30, 1996 - 4,491,175 4,491,175
------------ --------------- -----------
Balance June 30, 1996 $19,180,182 $22,599,171 $41,779,353
============ =============== ===========
Common Stock Retained Earning Total
------------ ---------------- -----------
Balance January 1, 1995 $19,171,261 $ 9,899,753 $29,071,014
Net income for period ended
June 30, 1995 - 3,911,264 3,911,264
Balance June 30, 1995 $19,171,261 $13,811,017 $32,982,278
------------ --------------- -----------
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 5
Regional Acceptance Corporation and Subsidiaries
Consolidated Statements of Cash Flows
Six months ended June 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
Cash flows from operating activities ------------- -------------
<S> <C> <C>
Net income $ 4,491,175 $ 3,911,264
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses 2,161,000 1,382,000
Deferred tax benefit 816,000 (203,700)
Depreciation and amortization 225,059 120,000
Interest credited to debentures 36,459 73,617
Change in assets and liabilities:
Other assets 515,148 (275,999)
Accounts payable and accrued liabilities (818,117) 400,748
------------- -------------
Net cash provided by operating activities 7,426,724 5,407,930
------------- -------------
Cash flows from investing activities
Loans originated (149,000,753) (78,123,918)
Loans repaid 124,702,551 63,445,158
Purchase of property and equipment, net (412,653) (771,788)
------------- -------------
Net cash used by investing activities (24,710,855) (15,450,548)
------------- -------------
Cash flows from financing activities
Proceeds from issuance of senior debt 31,500,000 19,050,000
Principal payments on senior debt (11,147,000) (56,338,577)
Proceeds from issuance of commercial paper 145,686,737 90,000,000)
Principal payments on commercial paper (147,433,812) (40,000,000)
Proceeds from issuance of subordinated debt 1,416,685 848,283
Principal payments on subordinated debt (3,678,471) (2,148,860)
Change in other debt, net - (70,000)
Exercise of stock option 8,921 -
Change in cash overdraft, net - (679,744)
------------- -------------
Net cash provided by financing activities 16,353,060 10,661,102
Net change in cash (931,071) 618,484
Cash at beginning of period 2,915,191 -
------------- -------------
Cash at end of period $ 1,984,120 $ 618,484
============= =============
Supplemental information, cash paid for:
Interest $ 4,614,471 $ 3,642,443
Income taxes $ 2,822,762 $ 2,916,455
============= =============
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE> 6
REGIONAL ACCEPTANCE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
(UNAUDITED)
Note 1-Organization and summary of accounting policies
General
The Company is primarily engaged in the business of financing consumer
purchases of used motor vehicles ("sales finance loans"). Sales finance
loans are originated by the selling dealer who sells the note to the
Company. Such loans are secured by the purchased vehicle. The Company
also makes direct loans to consumers ("consumer loans").
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Principles of consolidation
The consolidated financial statements of the Company include the accounts
of its wholly-owned subsidiaries, Regional Acceptance Investment
Corporation of Nevada, Greenville Funding Corporation 1994-1 (see note
8), Greenville Car Mart, Inc., and REGA Insurance Services. All
significant intercompany transactions have been eliminated in
consolidation.
Per share data
Income per share is computed by dividing net income by weighted average
shares outstanding.
The impact on income per share from the exercise of all outstanding stock
options would not be material.
Financial statement presentation
The interim financial statements include all adjustments which, in the
opinion of management, are of a normal recurring nature and necessary for
a fair presentation of the financial position at June 30, 1996 and the
results of operations and cash flows for the periods ended June 30, 1996
and 1995.
6
<PAGE> 7
Regional Acceptance Corporation and Subsidiaries
Notes to Consolidated Financial Statements, Continued
Note 2-Loans
Following is a summary of loans outstanding at June 30, 1996 and December 31,
1995:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Sales finance loans $186,070,926 $153,898,972
Direct consumer loans 21,562,202 22,249,208
------------ ------------
Total gross loans 207,633,128 176,148,180
Unearned finance charges and insurance
commissions (45,593,529) (36,641,733)
------------ ------------
Total loans $162,039,599 $139,506,447
============ ============
</TABLE>
Direct consumer loans includes accrued interest receivable of $308,000 and
$356,000 at June 30, 1996 and December 31, 1995, respectively.
At June 30, 1996, approximately $71.2 million of sales finance loans were
pledged to secure outstanding commercial paper. Such loans are not available
to secure any other obligations until all outstanding commercial paper is
retired. (See note 8).
Note 3-Allowance for loan losses
The following table summarizes activity in the Allowance for Loan Losses for
the six month periods ended June 30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Balance at beginning of year $3,429,923 $2,367,648
Provision charged to operations 2,161,000 1,382,000
Loans charged-off (1,582,429) (1,044,436)
Recoveries 65,816 48,834
---------- ----------
Balance at end of period $4,074,310 $2,754,046
========== ==========
</TABLE>
Loans charged-off during the period ended June 30, 1996 are net of $1,800,000
charged to the non-refundable dealer holdback account.
Note 4-Stock options
On January 1, 1996, the Company adopted Statement of Financial Accounting
Standards ("SFAS") no. 123, Accounting for Stock Based Compensation. As
permitted by SFAS
7
<PAGE> 8
Regional Acceptance Corporation and Subsidiaries
Notes to Consolidated Financial Statements, Continued
123, the Company has chosen to apply Accounting Principles Board Opinion No. 25
in accounting for stock-based compensation plans. Accordingly, no compensation
cost has been recognized for its stock option plans. Had compensation cost for
the Company's stock-based compensation plans been determined based on the fair
value at the grant dates for awards under those plans consistent with the method
of SFAS 123, there would have been no material effect on the Company's net
income or net income per share for the six month periods ended June 30, 1996 or
1995.
Note 5-Contingent liability
The Company has a contractual arrangement with an unrelated insurance company
for the sale of credit related insurance products. The insurer retains a fee,
pays claims, and maintains reserves for claims and unearned insurance premiums.
If the fees, claims, and reserves exceed earned premiums, the Company must
reimburse the insurer for the excess. Thus, the Company is contingently liable
to the insurance company for any claims paid in excess of the reserve retained
by the insurance company. Management periodically reviews loss experience in
relation to premiums collected. Based on historical loss experience, no
liability accrual is considered necessary at the present time. In the event
that claims experience increased significantly, a liability could exist.
Beginning April 1996 the Company began underwriting its own insurance policies.
Such policies are reinsured through the same unrelated insurance company.
Additionally, in April 1996 the Company began administering its insurance
policies through REGA Insurance Services.
Note 6-Proposed issuance of stock
On February 2, 1996, the Board of Directors approved the acquisition of three
off-shore insurance companies owned by two directors and a former director.
The insurance companies have no liabilities and their only assets are
debentures issued by the Company. The purchase price is 95% of the net assets
of the insurance companies, payable in stock of Regional Acceptance
Corporation. Assuming that the current owners of these companies accept the
Company's offer, approximately 130,000 shares of common stock will be issued to
acquire these entities. It is anticipated this transaction will close in the
third quarter of 1996.
Note 7-Acquisition of company
On March 29, 1996, the Company signed a definitive merger agreement with
Southern National Corporation ("SNC") pursuant to which Regional would become a
wholly-owned subsidiary of SNC. The agreement is subject to approval by
Regional's stockholders, among other matters. Upon consummation, each share of
Regional will be exchanged for .3929 shares of SNC if the price of SNC stock is
between $26 and $30 per
8
<PAGE> 9
Regional Acceptance Corporation and Subsidiaries
Notes to Consolidated Financial Statements, Continued
share. The exchange ratio changes to equal a price of $10.21 or $11.79 if the
price of SNC stock ranges between $24 to $26 or $30 to $32, respectively. The
exchange ratio is subject to renegotiation if SNC stock is less than $24 or more
than $32. The price of SNC stock for exchange purposes is based on the 10
trading days which are five days before the Regional Acceptance Corporation
stockholders meeting to vote on the proposed transaction (August 5 to August
16).
In connection with entering into the definitive agreement, and as a condition
to SNC's execution thereof, the Company granted to SNC an option to purchase
19.9 percent of the shares of Regional Acceptance Corporation outstanding as of
March 29, 1996 (2,986,399 shares) at a price of $10.21 per share. The option
could have the effect of deterring other proposals for a business combination
with the Company.
Note 8-Subsequent events
As of June 30, 1996, the Company determined that it had violated a covenant of
its commercial paper program. In anticipation of the pending merger with
Southern National Corporation and to avoid payment of a waiver fee, the Company
elected to terminate the commercial paper program. The termination was
accomplished in two stages. The first stage was payment of a $13 million
maturing tranche with proceeds of a $20 million unsecured line of credit
previously committed by a subsidiary bank of Southern National Corporation. To
repay the remainder, the boards of the Company and of Greenville Funding
Corporation 1994-1 agreed to merge the companies. The effect of this
transaction was to make the Company's loans available as collateral under the
senior debt agreement, providing the Company with funds to repay the commercial
paper and the unsecured line of credit from Southern National Corporation. At
current interest rates, the termination of the commercial paper program and use
of the revolving line of credit would increase interest expense approximately
$700,000 per year.
On July 1, the Company entered into a facilities management agreement with
Alltel Information Services ("Alltel"). Under the agreement, Alltel will
assume complete management of the Company's data processing functions including
hiring five of the Company's employees assigned to the data processing
operation. The term of the contract is 60 months with a base fee of
$2,064,000. The Company can terminate the contract without penalty at the end
180 days if certain goals agreed to by the Company and Alltel during the first
30 days of the contract are not achieved by Alltel. Additionally, the Company
can terminate the contract for any reason after 24 months by payment of 125
percent of the then remaining fees under the contract.
9
<PAGE> 10
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
The Company is primarily engaged in the business of financing consumer
purchases of used motor vehicles ("sales finance loans"). Sales finance loans
are originated by the selling dealer who sells the customer's note to the
Company. Such loans are secured by the purchased vehicle. The Company also
makes direct loans to consumers ("consumer loans").
Net income for the three and six month periods ended June 30, 1996 was
$2,250,450 and $4,491,175 respectively. These results compare to $2,000,951
and $3,911,264 for the same periods in 1995. Net income for 1996 represents
increases of 12.5 percent and 14.8 percent for the three and six month periods
compared to 1995. Per share income for 1996 was $.15 and $.30 compared to $.13
and $.26 for the 1995 periods.
Outstanding loans increased $22.5 million from December 31, 1995 to $162.0
million. Loans increased $31.9 million from June 30, 1995. These increases
represent growth rates of 32.2 percent (annualized) and 24.5 percent,
respectively. Management believes that the increase in growth is attributable
to an improvement in the competitive environment.
10
<PAGE> 11
Management's discussion and analysis of financial
condition and results of operations, continued
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTH PERIODS ENDED
JUNE 30, 1996 AND 1995
The following table sets forth a summary of the results of operations for the
three and six months ended June 30, 1996 and 1995:
<TABLE>
<CAPTION>
Three months ended Six months ended
June June 30,
--------------------- ---------------------
1996 1995 1996 1995
-------- --------- --------- ---------
(Amounts in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Interest income $ 8,411 $ 6,740 $16,212 $13,046
Interest expense (2,063) (1,954) (4,021) (3,807)
------- ------- ------- -------
Net interest income before provision
for loan losses 6,348 4,786 12,191 9,239
Provision for loan losses (1,261) (742) (2,161) (1,382)
------- ------- ------- -------
Net interest income 5,087 4,044 10,030 7,857
Other income 1,418 1,262 2,890 2,505
Operating expenses 3,007 2,049 5,706 3,929
------- ------- ------- -------
Income before provision for income taxes 3,498 3,257 7,214 6,433
Provision for income taxes (1,248) (1,256) (2,723) (2,522)
------- ------- ------- -------
Net income $ 2,250 $ 2,001 $ 4,491 $ 3,911
======= ======= ======= =======
Net income per share $ 0.15 $ 0.13 $ 0.30 $ 0.26
======= ======= ======= =======
</TABLE>
11
<PAGE> 12
Management's discussion and analysis of financial
condition and results of operations, continued
Net interest income
The principal component of the Company's profitability is its net spread, the
difference between interest received on loans receivable and interest expense
for loans payable. The following table sets forth data on loan yields and cost
of funds for the 1996 and 1995 three and six month periods:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 (1) June 30 (1)
--------------------------------------------
(Dollars in thousands)
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Average loans receivable (2) $156,097 $125,908 $149,680 $122,374
Average loans payable 116,303 91,440 111,434 88,436
======== ======== ======== ========
Interest income $ 8,411 $ 6,740 $ 16,212 $ 13,046
Interest expense (2,063) (1,954) (4,021) (3,807)
-------- -------- -------- --------
Net interest income $ 6,348 $ 4,786 $ 12,191 $ 9,239
======== ======== ======== ========
Yield on loans 21.6% 21.4% 21.7% 21.3%
Cost of funds -7.1% -8.5% -7.2% -8.6%
Net interest spread 14.5% 12.9% 14.5% 12.7%
======== ======== ======== ========
Net interest margin (3) 16.3% 15.2% 16.3% 15.1%
======== ======== ======== ========
</TABLE>
(1) Percentages are annualized
(2) Non-accruing loans, net of unearned finance charges, are included in
outstanding loans
(3) Net interest margin is net interest income divided by average loans
receivable
____________________________________________________
The increase in interest income in the quarter and six month periods is
primarily the result of increases in outstanding loans; combined with a modest
increase in loan yield. Interest expense for the quarter and six month periods
increased solely because of increased levels of borrowings as the cost of funds
declined significantly over the 1995 periods. The decrease in cost of funds is
attributable to declines in market interest rates, the Company's commercial
paper program implemented in May 1995, and to declines in the interest rates on
the revolving line of credit negotiated in September 1995. (See "Financial
condition, liquidity, and capital resources").
12
<PAGE> 13
Management's discussion and analysis of financial
condition and results of operations, continued
Provision for loan losses
Provisions for loan losses are charged to income in amounts sufficient to
maintain the allowance for loan losses at a level considered adequate to cover
expected future losses of principal in the existing loan portfolio. Loan loss
experience, contractual delinquency of loans receivable, the value of
underlying collateral, and management's judgment are factors used in assessing
the overall adequacy of the allowance and the resulting provision for loan
losses.
The Company's charge-off policy is based on a loan-by-loan review of delinquent
loans. Losses on loans secured by motor vehicles are recognized at the time
the collateral is repossessed. Other loans are charged-off when they become
contractually past due 180 days, unless extenuating circumstances exist where
management believes the loans will be collected. Loans may be charged-off
prior to the normal charge-off period if management deems them uncollectible.
In 1995, the Company amended its dealer agreements to increase the
non-refundable discount on loans purchased by the Company to $200 from $100.
The discount on loans was increased to $300 effective August 1, 1996. (In one
office the Company charges a discount equal to a percentage of the purchased
loan). The Company allocates a portion of the discounts collected to a reserve
account. The amount allocated to the reserve account is available for
absorbing losses on loans purchased from dealers.
13
<PAGE> 14
Management's discussion and analysis of financial
condition and results of operations, continued
The following table sets forth information regarding the Company's allowance
for loan losses at June 30, 1996 and 1995:
<TABLE>
<CAPTION>
At or For the Six months
ended June 30,
------------------------
1996 1995
---------- ----------
(Dollars in thousands)
<S> <C> <C>
Allowance for loan losses $4,074 $2,754
Non-refundable dealer holdbacks 323 69
------ ------
Total $4,397 $2,823
====== ======
As a percentage of period-end loans:
Allowance for loan losses 2.5% 2.1%
Non-refundable dealer holdbacks 0.2% 0.1%
------ ------
Total 2.7% 2.2%
====== ======
Provision for loan losses $2,161 $1,382
Charge-offs, net of recoveries $1,517 $996
Charge-offs as a percentage of average
loans receivable 2.0% 1.6%
</TABLE>
Loans charged-off in 1996 are net of $1,800,000 charged to the non-refundable
dealer holdback account.
14
<PAGE> 15
Management's discussion and analysis of financial
condition and results of operations, continued
The following table sets forth an analysis of the Company's delinquent
accounts, including repossessions and bankruptcies, at June 30, 1996 and 1995:
<TABLE>
<CAPTION>
June 30,
---------------------------------------------
(Dollars in thousands)
1996 (1) 1995 (1)
-------------------- ----------------------
Days Delinquent Amount % Amount %
-------- ------- -------- -------
<S> <C> <C> <C> <C>
30 to 59 days $ 6,145 3.0% $1,973 1.2%
60 to 89 days 2,595 1.2% 617 0.4%
90 days and more 5,344 2.6% 1,767 1.0%
------- ---- ------ ----
Total delinquent loan $14,084 6.8% $4,357 2.6%
======= ==== ====== ====
</TABLE>
(1) Delinquent accounts and related percentage delinquencies are based on gross
loans receivable
Management attributes the increase in delinquent accounts in the 1996 period
compared to 1995 to the difficulties arising from a computer conversion and to
increased repossessed assets on hand. The Company includes repossessed assets
in its delinquency data. At June 30, 1996 repossessed assets were $4,299,000,
2.1 percent of loans, compared to $1,397,000, 0.8 percent of loans, at June 30,
1995.
Management reviewed its past due loans and repossessed collateral and, in
management's opinion, the allowance for loan losses is adequate to absorb
losses in the loan portfolio.
Other operating income
The Company earns commissions on the sale of various insurance products and
from late
15
<PAGE> 16
Management's discussion and analysis of financial
condition and results of operations, continued
charges and other miscellaneous fees. The following table sets forth
such other income, as a percentage of average loans receivable for the three
and six months ended June 30, 1996 and 1995:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 (1) June 30 (1)
------------------ ----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Insurance commissions 2.9% 3.2% 3.1% 3.2%
Other 0.7% 0.8% 0.8% 0.9%
--- --- --- ---
Total other income 3.6% 4.0% 3.9% 4.1%
</TABLE> === === === ===
1) Percentages are annualized
____________________________________________________
The change in other income is primarily attributable to a percentage decline in
insurance commissions. As the Company expands its dealer base, there is a
delay between the Company's purchase of loans from new dealers and the dealers'
successful offering of the Company's insurance products. Management expects
insurance penetration to increase as dealers begin selling products; however,
the increase is not likely to equal the percentage growth in loans outstanding.
Further, as the size of the average new loan increases, the Company does not
want to sell insurance products that might increase the customer's payment to
an imprudent level.
Operating expenses
The following table sets forth operating expenses, as a percentage of average
loans receivable, for the three and six month periods ended June 30, 1996 and
1995:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 (1) June 30 (1)
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Salaries 3.2% 2.8% 3.3% 3.0%
Other 4.5% 3.7% 4.3% 3.4%
--- --- --- ---
Total other expenses 7.7% 6.5% 7.6% 6.4%
=== === === ===
</TABLE>
1) Percentages are annualized
16
<PAGE> 17
Management's discussion and analysis of financial
condition and results of operations, continued
The chart illustrates that operating expenses are increasing at a rate faster
than the growth in loans. The increases in both salaries and other operating
expenses are primarily attributable to payroll and other costs associated with
opening new offices and with increase in home office support staff.
FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES
The Company's loans increased by $22.5 million from December 31, 1995, to June
30, 1996. This increase equals an annualized growth rate of 32.2 percent. In
the comparable 1995 period, loans increased at an annualized rate of 23.5
percent. Sales finance loans accounted for substantially all the growth.
Additionally, the Company opened three offices in the first half of 1996.
Management attributes the lower growth rate in 1995 to increased competition.
In the Company's opinion, much of its competitors' loan volume was being
underwritten in a manner that was likely to result in higher loan losses than
the Company was willing to undertake. Management believes that the increase in
growth in 1996 is at least partially attributable to a change in the
competitive environment. The Company intends to maintain a reasonable rate of
loan growth. If the unfavorable competitive environment returns, management
will maintain loan growth by opening additional offices.
The Company finances its loan growth with cash flow from operations, principal
repayments on loans, sales of commercial paper, subordinated debt, and bank
borrowings.
In May 1995, the Company closed a $50 million commercial paper facility through
BA Securities, Inc., a subsidiary of BankAmerica Corporation. The Company
converted $52 million of its $130 million senior revolving line of credit to a
liquidity backup line to assure repayment of outstanding commercial paper;
reducing the amount available under the revolving line to $78 million. At June
30, 1996, $48.3 million was outstanding on the commercial paper facility and
$65.7 million was outstanding on the revolving line of credit.
As of June 30, 1996, the Company determined that it had violated a covenant of
its commercial paper program. In anticipation of the pending merger with
Southern National Corporation and to avoid payment of a waiver fee, the Company
elected to terminate the commercial paper program. The termination was
accomplished in two stages. The first stage was payment of a $13 million
maturing tranche with proceeds of a $20 million unsecured line of credit
previously committed by a subsidiary bank of Southern National Corporation. To
repay the remainder, the boards of the Company and of Greenville Funding
Corporation 1994-1 agreed to merge the companies. The effect of this
transaction was to make the Company's loans available as collateral under the
senior debt agreement, providing the company with funds to repay the commercial
paper and the unsecured line of credit from Southern National Corporation. At
current interest rates,
17
<PAGE> 18
Management's discussion and analysis of financial
condition and results of operations, continued
the termination of the commercial paper program and use of the revolving line of
credit will increase interest expense approximately $700,000 per year.
The Company believes that the $20 million unsecured line of credit from a
subsidiary bank of Southern National Corporation is sufficient to fund loan
growth to the date of the proposed merger with Southern National Corporation,
September 1, 1996. In the event the merger is not consummated on that date,
the Company will need to increase its revolving line of credit or otherwise
obtain additional funds to finance the growth in loans. The Company believes
its two primarily alternatives for increasing funding sources are an increase
in the revolving line of credit from the lead bank, Bank of America, or
additional funding from Southern National Corporation in advance of the
proposed acquisition.
PROPOSED ISSUANCE OF STOCK
On February 2, 1996, the Board of Directors approved the acquisition of three
off-shore insurance companies owned by two directors and a former director.
The insurance companies have no liabilities and their only assets are
debentures issued by the Company. The purchase price is 95% of the net assets
of the insurance companies, payable in stock of Regional Acceptance
Corporation. Assuming that the current owners of these companies accept the
Company's offer, approximately 130,000 shares of common stock will be issued to
acquire these entities. It is anticipated this transaction will close in the
third quarter of 1996.
ACQUISITION OF COMPANY
On March 29, 1996, the Company signed a definitive merger agreement with
Southern National Corporation ("SNC") pursuant to which Regional would become a
wholly-owned subsidiary of SNC. The agreement is subject to approval by
Regional's stockholders, among other matters. Upon consummation, each share of
Regional will be exchanged for .3929 shares of SNC if the price of SNC stock is
between $26 and $30 per share. The exchange ratio changes to equal a price of
$10.21 or $11.79 if the price of SNC stock ranges between $24 to $26 or $30 to
$32, respectively. The exchange ratio is subject to renegotiation if SNC stock
is less than $24 or more than $32. The price of SNC stock for exchange
purposes is based on the 10 trading days which are five days before the
Regional Acceptance Corporation stockholders meeting to vote on the proposed
transaction (August 5 to August 16).
In connection with entering into the definitive agreement, and as a condition
to SNC's execution thereof, the Company granted to SNC an option to purchase
19.9 percent of the shares of Regional Acceptance Corporation outstanding as of
March 29, 1996 (2,986,399 shares) at a price of $10.21 per share. The option
could have the effect of deterring other proposals for a business combination
with the Company.
18
<PAGE> 19
Management's discussion and analysis of financial
condition and results of operations, continued
SUBSEQUENT EVENT
On July 1, the Company entered into with a facilities management agreement with
Alltel Information Services ("Alltel"). Under the agreement, Alltel will
assume complete management of the Company's data processing functions including
hiring five of the Company's employees assigned to the data processing
operation. The term of the contract is 60 months with a base fee of
$2,064,000. The Company can terminate the contract without penalty at the end
180 days if certain goals agreed to by the Company and Alltel during the first
30 days of the contract are not achieved by Alltel. Additionally, the Company
can terminate the contract for any reason after 24 months by payment of 125
percent of the then remaining fees under the contract.
19
<PAGE> 20
PART II
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.30 Data Processing Agreement by and between the
Company and Alltel Financial Information Services,
Inc. dated June 21, 1996, effective July 1, 1996.
Exhibit 10.31 Loan Agreement between the Company and Branch
Banking and Trust Company dated as of July 16,
1996.
Exhibit 27.2 Financial Data Schedule for the quarter ended
June 30,1996 (filed in electronic format only)
20
<PAGE> 21
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report be signed on its behalf by the undersigned, thereunto duly
authorized.
Regional Acceptance Corporation
(Registrant)
Date: August 12, 1996 By: /S/ W. R. Stallings, Sr.
----------------------------
W. R. Stallings, Sr.
President and Chief Executive Officer
Date: August 12, 1996 By: /S/ Robert D. Barry
-----------------------
Robert D. Barry
Vice President, Secretary, and
Chief Financial Officer
21
<PAGE> 22
REGIONAL ACCEPTANCE CORPORATION
REPORT ON FORM 10-Q
JUNE 30, 1996
COMMISSION FILE NO. 0-21814
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No Description
- ---------- -----------
<S> <C>
10.30 Data Processing Agreement by and between the Company and Alltel
Financial Information Services, Inc. dated June 21, 1996,
effective July 1, 1996.
10.31 Loan Agreement between the Company and Branch Banking and Trust
Company dated as of July 16, 1996.
27.2 Financial Data Schedule for the quarter ended June 30, 1996
(filed in electronic format only)
</TABLE>
22
<PAGE> 1
EXHIBIT 10.30
DATA PROCESSING AGREEMENT
by and between
ALLTEL FINANCIAL INFORMATION SERVICES, INC.
and
REGIONAL ACCEPTANCE CORPORATION
3004 SOUTH MEMORIAL DRIVE
GREENVILLE, NORTH CAROLINA 27834
JULY ___, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Responsibilities of the Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3.1 Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2 Computer Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.3 Terminals/Communications Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.4 Processing Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.5 Client Approval of Program Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.6 Confidentiality of Client Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.7 Delivery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.8 Supplies and Forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.9 Client's Input Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. Data Processing Premises and Security. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.1 Data Processing Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Security Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5. Software. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.1 Software License. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.2 Additional Licensed Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.3 Software Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.4 User Manuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5.5 Third Party Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
5.6 Installation of New Systems and Subsystems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.7 Modifications Requested by Client . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.8 Regulatory Reporting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6. Education. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7. Staffing; Computer Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.1 Resident Technical Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
8. Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.1 Timely Input and Output. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8.2 Responsibility for Processing Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9. Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.1 Right to Terminate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.2 Method of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.3 Termination for Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.4 Termination for Other Reasons. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9.5 Termination for Convenience. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10. Transitional Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.1 Offer of Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.2 Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10.3 Additional Support . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
11. Backup, Storage, Files and Programs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
11.1 Storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11.2 Disaster Recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
12. Effective Planning and Communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
12.1 Steering Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
12.2 Audit Conference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
13. Payment and Billing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
14. No Interference with Contractual Relationship. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
15. No Waiver of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
16. Mergers and Acquisitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
17. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
18. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
19. Confidential Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
20. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
21. Independent Contractor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
21.1 Client Supervisory Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
21.2 ALLTEL Financial's Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
21.3 ALLTEL Financial as an Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
22. Client and ALLTEL Financial Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
23. Previous Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
24. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
25. Covenant of Good Faith. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
26. Limitation of Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
27. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
28. Section Titles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
29. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
30. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
31. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
32. Future Business Arrangements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
33. Dispute Resolution and Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
33.1 Informal Dispute Resolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
33.2 Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
33.3 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
33.4 Costs and Attorney's Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
iv
<PAGE> 6
DATA PROCESSING AGREEMENT
This is an Agreement, dated as of the 1st day of July, 1996
(hereinafter the "Effective Date"), by and between ALLTEL FINANCIAL INFORMATION
SERVICES, INC., an Arkansas corporation, 4001 Rodney Parham Road, Little Rock,
Arkansas 72212-2496 (hereinafter "ALLTEL Financial") and
REGIONAL ACCEPTANCE CORPORATION
3004 SOUTH MEMORIAL DRIVE
GREENVILLE, NORTH CAROLINA 27834
_
hereinafter "Client").
In consideration of the payments to be made and services to be performed
hereunder, the parties agree as follows:
1. SERVICES.
ALLTEL Financial will provide to Client the data processing services
and products described in this Agreement and its Exhibits. Such
services and products include, but are not limited to, the general
management of Client's data processing, installation and enhancement
of ALLTEL Financial-developed software systems, operation of software
systems developed by ALLTEL Financial and third parties, furnishing
and operating computer equipment, providing information in various
media forms, and a license to use ALLTEL Financial software systems.
The specific services provided and the applicable fees therefor are
described in more detail in this Agreement and its Exhibits.
2. TERM.
The term of this Agreement is five (5) years, beginning on the
Effective Date reflected above unless earlier terminated in accordance
with the provisions of this Agreement. The end of such term shall be
the "Expiration Date". At least nine (9) months prior to the
Expiration Date, ALLTEL Financial will submit to Client a written
proposal for renewal of this Agreement. Client will respond to such
proposal within ninety (90) days following receipt thereof.
3. RESPONSIBILITIES OF THE PARTIES.
ALLTEL Financial and Client agree to be responsible for the following
matters:
1
<PAGE> 7
3.1 PERSONNEL. Upon execution hereof, ALLTEL Financial will offer
employment, at comparable compensation, when the compensation for each
employee is considered as a whole, to the current data processing
employees of Client, who have been designated by Client, in writing,
prior to the execution of this Agreement. In the event that
employment benefits provided to ALLTEL Financial are less favorable
than those provided by Client as of the Effective Date, ALLTEL
Financial will gross up such employees base salary so that total
compensation to such employee when employed by ALLTEL Financial is no
less favorable than that provided to such employees by Client. ALLTEL
Financial shall give such employees credit for prior service with
Client for purposes of determining eligibility for benefits with
ALLTEL Financial and shall provide medical insurance which shall waive
the exclusion for pre-existing conditions. The terms of such
employment shall be in the sole discretion of ALLTEL Financial. After
such employment by ALLTEL Financial, it shall be ALLTEL Financial's
responsibility for compliance with employment and labor laws
applicable to the employees hired by ALLTEL Financial pursuant to this
Section and ALLTEL Financial shall indemnify and hold harmless Client
from and against any and all liability, fees (including reasonable
attorneys' fees) or costs of any nature arising from ALLTEL
Financial's failure to comply with such laws. Client will indemnify,
defend and hold ALLTEL Financial harmless from and against any and all
liability, fees (including reasonable attorneys' fees) or costs of any
nature arising directly or indirectly from claims asserted by such
employees under any "Change of Control" contract with Client.
3.2 COMPUTER EQUIPMENT. Except as otherwise provided in this
Agreement Client will supply and pay for all CPUs, communications
controllers, DASD equipment, tape/cartridge equipment, printers and
related peripheral equipment which may be required for its operation
of the Data Center as defined in Section 4.1. ALLTEL Financial shall
be responsible for management of such equipment and recommendations
for equipment purchases.
3.3 TERMINALS/COMMUNICATIONS COST. Client will pay all costs of
installing and utilizing communication or telephone lines, data sets,
modems, terminals, and terminal control units, as required for
Client's on-line operations, testing and training. ALLTEL Financial
shall be responsible for management of such network and
recommendations for equipment purchases, upgrades and
reconfigurations.
3.4 PROCESSING SCHEDULE. ALLTEL Financial will process and update
Client's data in accordance with a schedule mutually agreed to by the
parties within 30 days after the Account Manager is present on
Client's site. Such schedule shall be appended to this Agreement as
Exhibit C. In addition, ALLTEL Financial shall submit to Client,
within 180 days after the Effective Date, a proposed set of
performance standards. The parties will endeavor to agree upon such
performance standards, however, if the parties are unable to agree,
the dispute regarding such performance standards shall be resolved in
accordance with the provisions of Section 33.
2
<PAGE> 8
3.5 CLIENT APPROVAL OF PROGRAM CHANGES. All changes to programs
used to process Client's data affecting input, output, control, audit,
or accounting procedures of Client shall be made only with the prior,
written approval of Client.
3.6 CONFIDENTIALITY OF CLIENT DATA. All information concerning
Client, its business or customers submitted to ALLTEL Financial
pursuant to this Agreement shall be held in confidence by ALLTEL
Financial and shall not be disclosed. Client's data and files shall
be and remain the sole property of Client and shall be returned to
Client upon the expiration or termination of this Agreement. All
ALLTEL Financial employees with access to Client's data shall execute
ALLTEL Financial's standard non-disclosure agreement. No person or
entity shall be permitted to have access to Client's data in the
possession of ALLTEL Financial without the written authorization of
Client. All of Client's data in the possession of ALLTEL Financial
shall be available for examination by Client, at any time during
regular business hours, without notice. If ALLTEL Financial receives
any legal process requiring it to produce Client's data or that of any
of its customers, ALLTEL Financial shall notify Client promptly, and
deliver copies of such orders to Client, immediately and prior to
compliance with such process.
3.7 DELIVERY. Client, or its designee, is responsible for
delivery of all input to the Data Center. Client's branches are
responsible for the accurate and complete input of all of Client's
data. ALLTEL Financial is responsible for safekeeping Client's
documents while in ALLTEL Financial's possession in the Data Center
and for delivering printed output within the building in which the
Data Center is located as of the Effective Date. ALLTEL Financial
will also provide for output to the branches to be available on line
for access by such branches. Any charges incurred for the use of
couriers to distribute Client's output will be the responsibility of
Client.
3.8 SUPPLIES AND FORMS. Client will furnish to ALLTEL Financial
its current inventory of magnetic tapes, tape cartridges and impact
printer ribbons for use in processing Client's data. ALLTEL Financial
will provide all other magnetic tapes, tape cartridges and impact
printer ribbons required to perform ALLTEL Financial's processing
responsibilities during the term of this Agreement. Client will
provide all input and output forms, stock paper, and any forms
necessary for ALLTEL Financial to meet the processing requirements of
Client, as well as adequate storage therefor.
3.9 CLIENT'S INPUT DATA. All magnetic tapes furnished by Client
to ALLTEL Financial shall be in machine readable condition,
accompanied by control totals and, if applicable, encoded batch tickets
and proof tapes with totals. Client assumes all risk of loss and
expenses of reconstruction of input data, except for loss caused by the
negligence of ALLTEL Financial..
4. DATA PROCESSING PREMISES AND SECURITY.
3
<PAGE> 9
4.1 DATA PROCESSING PREMISES. Client agrees to provide ALLTEL
Financial with adequate premises, in good repair, to perform its
responsibilities under this Agreement (hereinafter the "Data Center").
Without limiting the generality of the foregoing, Client agrees to
supply water, sewer, heat, lights, telephone lines, equipment and
service, air conditioning, electricity (including, if desired by
Client, an uninterruptable power system, battery backup and backup
generator capacity), daily janitorial services, office equipment and
furniture, and parking spaces for ALLTEL Financial employees under the
same conditions currently provided to employees of Client. ALLTEL
Financial is not responsible for any injury or damage to property or
persons which occurs in or around the Data Center unless it is caused
by the negligent or willful misconduct of ALLTEL Financial. Client
will provide telephone instruments and telephone service for ALLTEL
Financial to communicate with the employees of Client, Client's
service bureau customers, if any, and as reasonably required by ALLTEL
Financial to operate the Data Center. ALLTEL Financial agrees that it
has inspected the Data Center as of the Effective Date and that such
space allocated to ALLTEL Financial is adequate for ALLTEL Financial
to perform the services hereunder. At the expiration or termination
of this Agreement, ALLTEL Financial shall return the portion of the
Data Center allocated to ALLTEL Financial hereunder in "broom clean"
condition.
4.2 SECURITY STANDARDS. ALLTEL Financial will adhere to such
security standards with respect to Client's data as may reasonably be
imposed by Client, including prehiring personnel investigative
procedures and discharge of personnel. Client will pay the costs for
any modifications or additions to the Data Center which are required
by such security standards. Client will reimburse ALLTEL Financial
for actual costs incurred if adherence to security standards requested
or required by Client increases ALLTEL Financial's costs of operation.
5. SOFTWARE.
5.1 SOFTWARE LICENSE. Effective on the Expiration Date (or the
earlier Termination Date if this Agreement is terminated by Client
pursuant to the provisions of Section 9), ALLTEL Financial will grant
and convey to Client and Client will accept a license to use ALLTEL
Financial's proprietary application systems ("Software"), under the
terms and conditions set forth in Exhibit D. However, such software
license shall be effective for only that Software installed for
Client's benefit prior to and during the term of this Agreement.
5.2 ADDITIONAL LICENSED PROGRAMS. The license contemplated by
this Section 5 shall also apply to all ALLTEL Financial-developed
program modifications, enhancements, new systems or major subsystems
installed for Client's benefit pursuant to this Agreement. During the
term of this Agreement, when provided to ALLTEL Financial's other
commercial clients, ALLTEL Financial shall provide Client, at no
additional fees hereunder, all such modifications, enhancements, new
systems or major subsystems relating to the Software installed as of
the Effective Date or subsequently installed
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pursuant to mutual agreement of the parties. ALLTEL Financial shall
provide Client information regarding such modifications, enhancements,
new systems or major subsystems to enable Client to make a decision as
to whether to install such release. In the event that Client elects
to have such release installed for Client's benefit, ALLTEL Financial
shall install such release as part of the services hereunder. ALLTEL
Financial will furnish Client, upon request, a current list of all
Software systems and subsystems developed and made available by ALLTEL
Financial. ALLTEL Financial will give Client ninety (90) days notice
prior to eliminating updates for a particular system version of any
ALLTEL Financial-developed program. In the event that ALLTEL
Financial eliminates updates for any system, Client shall have the
right to continue to use such system and obtain maintenance for such
system from ALLTEL Financial at additional fees pursuant to Section
5.7.
5.3 SOFTWARE WARRANTY. Each of the warranties set forth in
Exhibit D, as well as the patent and trademark indemnity provisions of
Exhibit D, shall apply to the Software, and all enhancements,
modifications or changes thereto, furnished or used pursuant to this
Agreement. In addition, ALLTEL Financial warrants that: (i) ALLTEL
Financial owns the Software and/or has the right to provide such
Software to Client as described herein; (ii) to the best of ALLTEL
Financial's knowledge after reasonable investigation, the Software,
when provided to Client by ALLTEL Financial, did not contain code
which would allow the remote disabling or inhibiting of the operation
of the Software or any code which had been introduced by a third party
and which would be classified as a computer "virus"; and (iii) the
Software, when provided to Client by ALLTEL Financial, shall be and
remain compatible with the then current IBM operating system in use at
Client's data center.
5.4 USER MANUALS. Prior to the installation of each Software
system, ALLTEL Financial will deliver to Client two copies of the
applicable User Manuals, and thereafter, two copies of standard
updates thereto. Client is responsible for the initial
personalization and for the maintenance, reproduction and distribution
of User Manuals. ALLTEL Financial hereby consents to the reproduction
of User Manuals by Client solely for the internal use of Client in
accordance with this Agreement.
5.5 THIRD PARTY SOFTWARE. ALLTEL Financial will use all computer
programs acquired by Client from third parties or developed by Client
without the assistance of ALLTEL Financial exclusively to process
Client's data. Additional use of such programs by ALLTEL Financial
shall require the written approval of Client. ALLTEL Financial
reserves the right to review and/or test such programs, in advance of
processing, to assure compatibility with ALLTEL Financial equipment
and consistency with ALLTEL Financial's processing techniques. Client
shall pay all license fees, purchase maintenance contracts for such
programs and pay for any required training. ALLTEL Financial shall be
responsible for managing the relationship with such third party
vendor, including entities with whom ALLTEL Financial has business
alliances. Client will indemnify ALLTEL Financial and hold ALLTEL
Financial harmless from any loss, claim, damage
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or expense, including reasonable attorneys' fees, resulting from any
action brought or claim made by any third party claiming superior
title or right to protection of proprietary information in respect of
any such programs. ALLTEL Financial shall indemnify and hold Client
harmless from and against any loss, claim, damage or expense,
including reasonable attorneys' fees, arising from ALLTEL Financial's
unauthorized disclosure or misuse of such third party software in
violation of the provisions of any agreement governing the use of such
software to the extent that ALLTEL Financial has been made aware of
such provisions by Client.
5.6 INSTALLATION OF NEW SYSTEMS AND SUBSYSTEMS. ALLTEL Financial
will, at no additional fee hereunder, install regulatory changes,
updates, new systems and subsystems using the Resident Staff. ALLTEL
Financial will present to Client the features of and estimated hours
required to install such systems or subsystems. Client, at its
option, may elect to install the new system or subsystem or to
continue use of the then installed ALLTEL Financial-developed system.
5.7 MODIFICATIONS REQUESTED BY CLIENT. If requested by Client,
ALLTEL Financial agrees to provide Client with a quotation for
fees for the modification of the ALLTEL Financial-developed programs
installed for Client by ALLTEL Financial. Following Client's approval,
if such modifications require programming, such programming will be
provided by non-resident ALLTEL Financial staff in accordance with the
schedule of fees set out in Exhibit B. Implementation of such
Client-authorized modifications will be performed by the Resident
Staff. Client understands that modifications may require an increase
in the time of performance and/or the Resident Staff to subsequently
install ALLTEL Financial-developed updates, new systems or subsystems.
5.8 REGULATORY REPORTING REQUIREMENTS. Client agrees to make
ALLTEL Financial aware of any local, state or federal governmental
requirements not included in the requirements established by federal
banking regulatory authorities (which shall be provided by ALLTEL
Financial). Any changes needed (other than those to be provided by
ALLTEL Financial) will be handled in accordance with Section 5.7.
6. EDUCATION.
ALLTEL Financial will make available to Client personnel, its standard
application software training courses, which are generally held in
Little Rock, Arkansas or Orlando, Florida, in accordance with ALLTEL
Financial's Education and Training Department schedule, a current copy
of which will be provided to Client upon request. Client personnel
may attend such courses, and any other standard courses generally
offered by ALLTEL Financial to its other customers, upon payment of
ALLTEL Financial's then current published course fee, subject to
normal space availability requirements and compliance with ALLTEL
Financial's standard registration and enrollment deadlines and
procedures. Client will pay all of its travel and lodging expenses
while attending ALLTEL Financial courses.
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7. STAFFING; COMPUTER USE.
7.1 RESIDENT TECHNICAL STAFF. ALLTEL Financial will provide,
included in the fees specified, five (5) members of the Resident Staff
and one (1) Account Manager ("Account Manager") to perform the
services described in this Agreement for Client at the Data Center.
Prior to the provision of such Account Manager or any replacement
thereof, ALLTEL Financial shall provide Client with the resume of such
potential Account Manager, shall provide Client the opportunity to
interview such potential Account Manager and provide comments and
ALLTEL Financial shall give due consideration to any concerns
expressed by Client. Prior to the transfer of any existing Account
Manager, ALLTEL Financial shall notify Client of such impending
transfer and shall give due considerations to any comments by Client
regarding such transfer. Subject to a reasonable time for
replacements in the event of resignations or terminations, ALLTEL
Financial will maintain such staffing levels throughout the term of
this Agreement. The members of the Resident Staff will be adequately
trained and qualified with sufficient work experience to perform the
services described herein. Duties of the Resident Staff shall
include, but are not limited to, installing the Software, installing
program updates, installing new systems and subsystems, writing and
maintaining Queries, daily run balancing and identifying
out-of-balance conditions to Client's designated accounting department
for reconciliation and resolution, help desk support, communication
and customer service, attending education classes, Client meetings and
research meetings, and coordinating and planning equipment and data
processing support for new branch installation, branch closings or
relocation. Client-requested program modifications and general
programming duties will be provided by non- resident Alltel personnel.
(a) Project Control - The Resident Staff will use a
project management system for Client projects, and ALLTEL
Financial will provide Client with output from such system as
frequently as weekly.
(b) Priorities - Client shall have the right to establish
all programming and project priorities. Changes in
priorities, however, which require reassignment of ALLTEL
Financial Resident Staff to other responsibilities may result
in an enlargement of ALLTEL Financial's time to complete
certain tasks hereunder.
(c) Resource Change Procedure - At Client's written
request, ALLTEL Financial will increase or decrease the
Resident Staff, as long as the staffing level is not less than
the minimum number set forth in Section 7.1, unless mutually
agreed upon or as described in Exhibit B. ALLTEL Financial
will promptly respond to Client's request with a proposed fee
schedule adjustment which shall be reasonable in light of the
related costs of salaries, recruiting, relocation, severance,
and employee benefits which are affected thereby. Quotations
for increases or decreases in the Resident Staff will be in
minimum increments of one
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person for a minimum term of one year. ALLTEL Financial will
have up to 90 days to implement agreed changes in the Resident
Staff.
(d) Temporary Non-Resident Personnel - If Client does not
wish to re-order priorities to permit the Resident Staff to
perform additional services, or to direct ALLTEL Financial to
increase the Resident Staff, Client may request ALLTEL
Financial to provide additional non-resident personnel on
temporary basis and ALLTEL Financial will provide such
non-resident personnel on an "as-available" basis. ALLTEL
Financial will promptly respond with a quotation for such
non-resident personnel in accordance with Section 3 of Exhibit
B. If Client wishes to utilize the ALLTEL Financial personnel
services quoted, Client will notify ALLTEL Financial in
writing, authorizing ALLTEL Financial to provide such
services.
8. PERFORMANCE.
8.1 TIMELY INPUT AND OUTPUT. The parties agree that timely and
accurate submission of input and output is essential to satisfactory
performance under this Agreement. ALLTEL Financial's time of
performance shall be enlarged, if and to the extent reasonably
necessary, in the event that: (a) Client fails to submit input data
in the prescribed form or in accordance with the schedules set forth
in Exhibit D, (b) an act of God, malfunction of any equipment (unless
caused by the negligence or willful misconduct of ALLTEL Financial) or
other cause beyond the control of ALLTEL Financial prevents timely
data processing hereunder, (c) special requests by Client or any
governmental agency authorized to regulate or supervise Client impact
ALLTEL Financial's normal processing schedule; or (d) if Client fails
to provide any equipment, software, premises or performance called for
by this Agreement, and the same is necessary for ALLTEL Financial's
performance hereunder. ALLTEL Financial will notify Client of the
estimated impact on its processing schedule, if any.
8.2 RESPONSIBILITY FOR PROCESSING DATA. Client shall be solely
responsible for the input, transmission or delivery of all data to be
processed by ALLTEL Financial except when Client has expressly
retained ALLTEL Financial to perform such responsibility on Client's
behalf. Such information and data shall be submitted to ALLTEL
Financial in accordance with the forms and procedures agreed to
between the parties. With respect to data transmitted by Client which
is accurate and complete, ALLTEL Financial shall be responsible for
processing such data in accordance with the provisions of this
Agreement. With respect to data transmitted by Client which is
inaccurate or incomplete, but which a prudent business entity in the
same or similar business as ALLTEL Financial would determine to be
inaccurate or incomplete, ALLTEL Financial shall be responsible for
detecting such inaccuracy or lack of completeness and informing Client
prior to providing Client with the output of the processing of such
data. With respect to data transmitted by Client which is inaccurate
or incomplete, but which a prudent business entity in the same or
similar business as ALLTEL Financial would not determine to be
inaccurate or
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incomplete, ALLTEL Financial shall not be liable for damages caused by
processing such information in an inaccurate or incomplete condition
except for other processing errors of ALLTEL Financial. In the event
of an error in processing Client's data resulting from a situation for
which ALLTEL Financial is responsible hereunder, ALLTEL Financial will
correct such error without charge to Client. Client shall use its
best commercially reasonable efforts to inform ALLTEL Financial in
writing promptly after receipt of records and other information from
ALLTEL Financial which Client does not have otherwise available, but
no later than the time for which ALLTEL Financial is required pursuant
to agreement between the parties to retain the history necessary to
correct such erroneous processing. In each case of erroneous
processing, where applicable, Client shall provide ALLTEL Financial
with such support as is reasonably required to perform the
corrections.
9. TERMINATION.
This Agreement may be terminated prior to the Expiration Date, as
follows:
9.1 RIGHT TO TERMINATE. In addition to any other rights which
either party may have in law or equity, either ALLTEL Financial or
Client may terminate this Agreement if the defaulting party fails to
cure any material default hereunder within sixty (60) days of written
notice from the other party (the "Cure Period"), specifying the nature
and extent of any such default.
9.2 METHOD OF TERMINATION. Exercise of the right to terminate
under Section 9.1 must be accomplished by specifying in such written
notice to the defaulting party, the nature and extent of such default
and fixing a date, on the last day of a month, not less than 90 days
following the conclusion of the Cure Period, unless the default has
been cured, for cessation of services hereunder (the "Termination
Date").
9.3 TERMINATION FOR ACQUISITION. In the event that Client is
acquired or has a change of ownership after the initial eighteen (18)
months of this Agreement, Client may terminate this Agreement with
ninety (90) days prior written notice to ALLTEL Financial which shall
terminate no earlier than the conclusion of the eighteen (18) month
period. In the event that Client so terminates this Agreement, fifty
percent (50%) of the remaining fees payable under this Agreement will
be due and payable as an early termination fee.
9.4 TERMINATION FOR OTHER REASONS. ALLTEL Financial agrees that
on or before 180 days after the Effective Date of this Agreement and
assuming that Client follows all recommendations of ALLTEL Financial,
ALLTEL Financial agrees that the Software will be performing
substantially in accordance with the applicable documentation and that
on line response time will generally be three (3) seconds or less. In
the event that ALLTEL Financial is not able to perform as described in
this Section, Client may terminate this Agreement with ten (10) days
prior written notice given within thirty (30) days after the
conclusion of such 180 day period. In the event of such termination,
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neither party shall have any liability or obligation to the other,
except that ALLTEL Financial shall refund to Client a portion of the
original license fee paid by Client for the Software on a pro rata
basis using a 6 year straight line amortization schedule with the date
of the original license agreement as the beginning date.
9.5 TERMINATION FOR CONVENIENCE. Effective on or after the end of
the twenty-fourth month after the Effective Date , Client may
terminate this Agreement for convenience and without cause by giving
ALLTEL Financial six (6) months prior written notice (the "Early
Termination Notice") specifying the date of early termination ("Early
Termination Date") which shall be effective no earlier than the end of
the twenty-fourth month after the Effective Date. If Client elects to
terminate this Agreement pursuant to this Section, Client shall pay to
ALLTEL Financial a termination fee equal to the total of twenty-five
percent (25%) of the remaining stream of payments under this
Agreement. In addition, Client will reimburse ALLTEL Financial for
reasonable expenses actually incurred by ALLTEL Financial for
severance, bonuses for continued employment ("stay-pay") and
relocation. For purposes of this Section, the remaining stream of
payments will be the amount equal to the average of the three (3)
monthly invoices from ALLTEL Financial to Client for the three (3)
complete months prior to the receipt by ALLTEL Financial of the Early
Termination Notice times the number of months remaining from the Early
Termination Date provided for in the notice through and including the
Expiration Date.
10. TRANSITIONAL COOPERATION.
After notice of termination and prior to the Termination Date, or for
six months prior to the Expiration Date, ALLTEL Financial agrees that:
10.1 OFFER OF EMPLOYMENT. Client may offer employment to ALLTEL
Financial's Data Center employees.
10.2 TRANSITION. ALLTEL Financial will give full cooperation and
support to Client to assure an orderly and efficient transition to
whatever method of computer processing it may select.
10.3 ADDITIONAL SUPPORT. Client shall have the option, exercisable
prior to the Termination Date, to request up to 180 days of additional
technical support from ALLTEL Financial subsequent to the Termination
Date. Client will pay for such services at ALLTEL Financial's then
current Hourly Rates.
11. BACKUP, STORAGE, FILES AND PROGRAMS.
Files and Programs. ALLTEL Financial agrees to provide and maintain
adequate backup files on magnetic media of Client data and all
programs utilized to process Client's data.
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11.1 STORAGE. Client agrees to provide off-site storage for backup
data files and programs. Client agrees to pick up the backup data
files and programs from the Data Center, deliver them to its off-site
storage location, store them, and return them to the Data Center
pursuant to mutually agreed upon procedures and schedules. If
requested by Client, ALLTEL Financial shall provide Client with a
quarterly listing of the names of data files and programs for
verification of the items in storage. Client is solely responsible
for the physical security of such files and programs while not in
ALLTEL Financial's possession.
11.2 DISASTER RECOVERY. Disaster recovery arrangements are
provided under separate agreement attached as Exhibit E. Such
arrangements are designed to deal with circumstances which are
expected to cause any substantial portion of the capabilities of the
Data Center to be unavailable for a consecutive period exceeding 72
hours. The fees for such disaster recovery services are included in
the monthly fees set out in Section 1 of Exhibit B. Any change in the
equipment configuration of Client's data center which is covered by
such disaster recovery services shall necessitate a change in the fees
hereunder.
12. EFFECTIVE PLANNING AND COMMUNICATION.
12.1 STEERING COMMITTEE. ALLTEL Financial and Client agree that
effective planning and communication are necessary to provide overall
direction for Client's data processing, and that each will work to
promote a free and open exchange of information between ALLTEL
Financial personnel, Client senior management and Client user
departments. Members of ALLTEL Financial's Data Center management and
the Resident Staff may participate actively with Client's management
and users in making and implementing day-to-day plans for Client's
data processing. In addition, a joint data processing steering
committee will be established to facilitate such planning and to
encourage a periodic review of priorities and long-term objectives.
ALLTEL Financial's account manager shall be a voting member of such
committee. In addition, if requested by Client, ALLTEL Financial's
account manager will serve as chairman of the data processing steering
committee, and will solicit input from the other members for
appropriate agenda items. ALLTEL Financial will maintain and
distribute copies of minutes of meetings of the data processing
steering committee. Client personnel who shall be members of such
committee shall include such senior management personnel as Client
deems appropriate from time to time. The data processing steering
committee shall meet regularly (initially, once per week).
12.2 AUDIT CONFERENCE. ALLTEL Financial will cooperate fully with
Client or its designee in connection with Client's audit functions or
with regard to examinations by internal and external auditors and
state and federal regulatory authorities. Client
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acknowledges that ALLTEL Financial is not responsible for providing
audit services or for auditing Client's records or data. Following
any audit or examination, Client will conduct (in the case of an
internal audit), or instruct its external auditors or examiners to
conduct an exit conference with ALLTEL Financial and, at such time,
and as soon as available thereafter, to provide ALLTEL Financial with
a copy of the applicable portions of each report regarding ALLTEL
Financial or ALLTEL Financial's services (whether draft or final)
prepared as a result of such audit or examination. Client also agrees
to provide and to instruct its external auditors to provide ALLTEL
Financial, a copy of the portions of each written report containing
comments concerning ALLTEL Financial or the services performed by
ALLTEL Financial pursuant to this Agreement. In the event that ALLTEL
Financial performs an audit of Client's operation (and nothing herein
shall obligate ALLTEL Financial to do so), ALLTEL Financial shall
provide a copy of such audit report to Client.
13. PAYMENT AND BILLING.
Client agrees to pay ALLTEL Financial for the services performed
hereunder in accordance with the fees set forth in this Agreement,
Exhibit B and any modification or amendment made hereto, pursuant to
invoices prepared and delivered to Client. All processing fees shall
be payable on the first day of each month, for services to be rendered
during that month. All other fees shall be billed on the first day of
each month for services provided during the previous month. In the
event that Client, in good faith, disputes a billing under this
Agreement, Client will pay the undisputed portion of the billing,
notify ALLTEL Financial of such dispute prior to the time that the
payment for the disputed fee is overdue, shall specify in such notice
the reason for such dispute and such notice shall be signed by an
executive officer of Client. The parties shall cooperate to resolve
such dispute promptly and this Agreement shall not be terminated for
non-payment of the disputed amount during the resolution of the
dispute. Any interest on the disputed amount will be suspended during
the resolution of the dispute. In the event that the dispute is
ultimately resolved in favor of ALLTEL Financial, interest on the
amount which should have been paid will be added to such amount in
accordance with the terms of this Section.
14. NO INTERFERENCE WITH CONTRACTUAL RELATIONSHIP.
Client warrants that, as of the date hereof, it is not subject to any
contractual obligation that would prevent Client from entering into
this Agreement, and that ALLTEL Financial's offer to provide such
services in no way caused or induced Client to breach any contractual
obligation.
15. NO WAIVER OF DEFAULT.
The failure of either party to exercise any right of termination
hereunder shall not constitute a waiver of the rights granted herein
with respect to any subsequent default.
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16. MERGERS AND ACQUISITIONS.
Upon written request by Client, ALLTEL Financial will process
additional data resulting from any merger or acquisition involving
either Client or any of its service bureau customers; subject to
Client's payment of additional mutually agreeable fees, if any,
applicable to related conversion, testing and processing services.
Client will notify ALLTEL Financial of any such proposed merger or
acquisition as soon as reasonably practicable.
17. ENTIRE AGREEMENT.
This Agreement and the exhibits hereto contain the entire agreement of
the parties and supersedes all prior agreements whether written or
oral with respect to the subject matter hereof. Expiration or
termination of any part of this Agreement shall terminate the entire
Agreement except for any portion hereof which expressly remains in
force and in effect notwithstanding such termination or expiration.
Modification or amendment of this Agreement or any part thereof may be
made only by written instrument executed by both parties.
18. ASSIGNMENT.
Neither party hereto shall assign, subcontract, or otherwise convey or
delegate its rights or duties hereunder to any other party without the
prior written consent of the other party to this Agreement, which
consent shall provide that it is subject to all the terms and
conditions of this Agreement. Subject to the provisions of Exhibit D,
no such consent shall be required in the event of a merger,
consolidation, sale of substantially all of the assets, or any other
change of control of either party hereto, in which event, this
Agreement shall apply to, inure to the benefit of, and be binding upon
the parties hereto and upon their respective successors in interest.
19. CONFIDENTIAL AGREEMENT.
This Agreement is a confidential agreement between ALLTEL Financial
and Client. In no event may this Agreement be reproduced or copies
shown to any third parties by either Client or ALLTEL Financial
without the prior written consent of the other party, except as may be
necessary by reason of legal, accounting or regulatory (including
Securities and Exchange Commission filings) requirements beyond the
reasonable control of ALLTEL Financial or Client, as the case may be,
in which event ALLTEL Financial and Client agree to exercise diligence
in limiting such disclosure to the minimum necessary under the
particular circumstances.
20. TAXES.
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Unless Client shall submit a certificate of resale or exemption
evidencing Client's exemption from payment of all or part of such
taxes, Client will pay directly or reimburse ALLTEL Financial for all
sales, use or excise taxes, however designated, levied or based, on
amounts payable pursuant to this Agreement, including state and local
privilege or excise taxes based on gross revenues under this Agreement
or taxes on services rendered or personal property taxes on the
systems licensed hereunder. Client shall not be responsible for any
taxes levied on the personal property or net income of ALLTEL
Financial or for ALLTEL Financial's corporate franchise taxes. ALLTEL
Financial will cooperate with Client to structure transactions,
invoices or otherwise in a manner which seeks to minimize the impact
on Client of the taxes described in this Section. Client will
indemnify ALLTEL Financial against any liability or expense of any
nature resulting from the cooperation described above. In the event
that ALLTEL Financial receives any tax statement, invoice, assessment
or other evidence of taxes owed by Client hereunder from any
appropriate taxing authority, ALLTEL Financial shall promptly provide
such correspondence to Client.
21. INDEPENDENT CONTRACTOR.
It is agreed that ALLTEL Financial is an independent contractor and
that:
21.1 CLIENT SUPERVISORY POWERS. Client has no power to supervise,
give directions or otherwise regulate ALLTEL Financial's operations or
its employees, except as herein provided for security of Client's data
and detection of errors in processing.
21.2 ALLTEL FINANCIAL'S EMPLOYEES. Persons who process Client's
data are employees of ALLTEL Financial and ALLTEL Financial shall be
solely responsible for payment of compensation to such personnel and
for any injury to them in the course of their employment. ALLTEL
Financial shall assume full responsibility for payment of all federal,
state and local taxes or contributions imposed or required under
unemployment insurance, social security and income tax laws with
respect to such persons.
21.3 ALLTEL FINANCIAL AS AN AGENT. ALLTEL Financial is not an
agent of Client and has no authority to represent Client as to any
matters, except as authorized herein.
22. CLIENT AND ALLTEL FINANCIAL EMPLOYEES.
Except as specifically set forth in Section 10, above, both Client and
ALLTEL Financial agree not to offer employment to any employee of the
other without the prior written consent of the other.
23. PREVIOUS LIABILITIES.
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The parties hereto agree to indemnify the other and hold the other
harmless against any loss (including attorney's fees and expenses)
arising out of any claims or lawsuits filed or subsequently filed as a
result of the acts of the other party which occurred prior to the
Effective Date of this Agreement.
24. NOTICES.
All notices, requests and demands, other than routine operational
communications under this Agreement, shall be in writing and shall be
deemed to have been duly given when deposited in the United States
mail, registered or certified postage prepaid, and addressed to the
other party at the address first shown above and to the attention of
the president of said party. Notice of changes of address, if any,
shall be given in like manner.
25. COVENANT OF GOOD FAITH.
ALLTEL Financial and Client agree that, in their respective dealings
arising out of or related to this Agreement, they shall act fairly and
in good faith.
26. LIMITATION OF LIABILITY.
If either party shall breach any covenant, agreement or undertaking
required of it by this Agreement, the liability of such party shall be
limited to direct damages, actually incurred. Except for liability
resulting from an indemnity given pursuant to this Agreement neither
party shall be liable to the other for any special or consequential
damage or for any claim or demand made by any third party.
27. INSURANCE.
A schedule of ALLTEL Financial's current insurance coverage has been
furnished to Client prior to the Effective Date of this Agreement.
28. SECTION TITLES.
Section titles as to the subject matter of particular sections herein
are for convenience only and are in no way to be construed as part of
this Agreement or as a limitation of the scope of the particular
sections to which they refer.
29. COUNTERPARTS.
This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original, but all of which shall constitute
one and the same instrument.
30. FINANCIAL STATEMENTS.
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Annually, ALLTEL Financial will provide to Client a copy of ALLTEL
Financial's annual financial statements, which may be on a
consolidated basis.
31. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of North Carolina.
32. FUTURE BUSINESS ARRANGEMENTS.
In the event that the parties agree to provide service bureau
processing to other finance companies using the practices and
procedures of Client, the Data Center and ALLTEL Financial's Software
provide hereunder, the parties will cooperate in good faith to reach a
mutually agreeable relationship.
33. DISPUTE RESOLUTION AND ARBITRATION.
Disputes under this Agreement shall be resolved in the following
manner:
33.1 INFORMAL DISPUTE RESOLUTION. If any dispute should arise
concerning performance under or interpretation of this
Agreement, then, prior to, and as a condition to a party's
right to initiate any action pursuant to paragraph 33.2 below,
the parties shall take the following steps in an attempt to
informally resolve any such dispute:
(a) At the written request of either party, the senior
managers of the parties assigned to the data
processing matters contemplated by this Agreement
shall meet in person and shall present to each other
a written summary, reflecting in reasonable detail,
the nature and extent of the dispute in question (the
"Dispute Notice"). Such an in-person meeting shall
take place with five (5) days of receipt of the
request.
(b) If within three (3) days following the meeting held
pursuant to paragraph (a) above, said dispute is not
resolved, or if for any reason the meeting
contemplated by paragraph (a) has not been held as
contemplated thereby, then the matter in dispute
shall be presented to the president of ALLTEL
Financial and to the president of Client for
resolution. Said presidents shall hold an in-person
meeting within three (3) business days following a
written request by either party which meeting shall
include a presentation of the written descriptions of
the dispute contemplated by paragraph (a).
(c) If any dispute remains unresolved after ten days
following the initial request for informal dispute
resolution, then either party may, as contemplated by
Section 33.2, initiate a binding arbitration
proceeding.
16
<PAGE> 22
33.2 ARBITRATION. ALLTEL Financial and Client stipulate and agree
that if they are unable to resolve any controversy arising
under this Agreement as contemplated by Section 33.1(a) and if
such controversy is not subject to Section 33.3 of this
Agreement, then such controversy and any ancillary claims not
so resolved and not so subject shall be submitted to mandatory
and binding arbitration at the election of either party (the
"Disputing Party") pursuant to the following terms and
conditions.
(a) Selection of Arbitrator - The Disputing Party shall
notify the American Arbitration Association (the
"AAA") in writing and shall request that the AAA
furnish to the parties a list of five possible
arbitrators who must have experience in data
processing matters and none of whom may have had any
association with either party as an employee, agent or
contractor within the prior five year period. Each
party shall have fifteen (15) days to reject two of
the proposed arbitrators. If one individual has not
been so rejected, he or she shall serve as arbitrator;
if two or more individuals have not been so rejected,
the AAA shall select the arbitrator from those
individuals.
(b) Conduct of Arbitration - Arbitration will be
conducted in Greenville, North Carolina by the
arbitrator selected pursuant to subparagraph 33.2(a)
over the dispute described in the Dispute Notice and
any other disputes related to this Agreement between
the parties to this Agreement (1) pending at the
inception of such arbitration and not otherwise being
arbitrated under this paragraph 33.2; or (2) arising
during the pendency of such arbitration, in
accordance with the rules of the AAA, except as
specifically provided otherwise in this paragraph
33.2. In particular and without limitation, the
parties hereto hereby affirm and agree to comply with
those rules of the AAA which limit pre-hearing
discovery. The arbitrator will have no power or
authority, under the rules of the AAA or otherwise,
to amend or disregard any provision of this paragraph
33.2.
(c) Replacement of Arbitrator - Should the arbitrator
refuse or be unable to proceed with arbitration
proceedings as called for by this paragraph 33.2,
such arbitrator shall be replaced by an arbitrator
selected from the other four arbitrators originally
proposed by the AAA and not rejected by the parties,
if any, or if there are no remaining proposed
arbitrators who have not been rejected, by repeating
the process of selection. If an arbitrator is
replaced pursuant to this subparagraph 33.2(c), then
a rehearing shall take place in accordance with the
rules of the AAA.
17
<PAGE> 23
(d) Findings and Conclusions - The arbitrator rendering
judgment upon disputes between parties to this
Agreement as provided in this paragraph 33.2 shall,
after reaching judgment and award, if any, prepare
and distribute to the parties to such disputes a
writing describing the findings of fact and
conclusions of law relevant to such judgment and
award and containing an opinion setting forth the
reasons for the giving or denial of any award.
(e) The arbitrator is hereby instructed that time is of
the essence in the arbitration proceeding, and that
the arbitrator shall have the right and authority to
issue monetary sanctions against either of the
parties if, upon a showing of good cause therefor,
said party is unreasonably delaying the proceeding.
(f) The arbitrator shall render his or her judgment or
award within twenty (20) days following the
conclusion of the arbitration proceeding.
(g) Recognizing the express desire of the parties for an
expeditious means of dispute resolution, the
arbitrator shall limit or allow the parties to expand
the scope of discovery as may be reasonable under the
circumstances.
33.3 LITIGATION.
(a) Immediate Injunctive Relief - The parties to
this Agreement hereby agree that the only
circumstance in which disputes between them will not
be subject to the provisions of this paragraph 33 is
where a party makes a good faith determination that a
breach of the terms of this Agreement by another party
is such that the damages to such party resulting
therefrom will be so immediate, so large or severe and
so incapable of adequate redress after the fact that a
temporary restraining order and/or other immediate
injunctive relief is the only adequate remedy for such
breach.
(b) Jurisdiction - The parties hereto hereby
consent to the jurisdiction of the federal district
court residing in either Little Rock, Arkansas or
Greenville, North Carolina for all litigation which
may be brought with respect to the terms of and the
transactions and relationships contemplated by this
Agreement. The parties hereto further consent to the
jurisdiction of any state court the district of which
encompasses assets of a party against which a
judgment has been rendered, either through
arbitration or through litigation, for the
enforcement of such judgment against such assets of
such party.
18
<PAGE> 24
33.4 COSTS AND ATTORNEY'S FEES. Notwithstanding any rule of the
AAA to the contrary, the arbitrator rendering judgment upon
disputes between parties to this Agreement as provided in
paragraph 33.2 shall have the power to award all costs and
attorneys' fees between the parties subject to such disputes.
IN WITNESS WHEREOF, this Agreement has been executed by the
undersigned officers, thereunto duly authorized, on the ______________ day of
June, 1996.
<TABLE>
<CAPTION>
ALLTEL FINANCIAL INFORMATION SERVICES, INC. REGIONAL ACCEPTANCE CORPORATION
<S> <C>
BY: BY:
------------------------------------- --------------------------------------
NAME: NAME:
------------------------------------- --------------------------------------
TITLE: TITLE:
------------------------------------- --------------------------------------
DATE: DATE:
------------------------------------- --------------------------------------
</TABLE>
19
<PAGE> 25
Client: Regional Acceptance Corp.
Effective Date: July 1, 1996
EXHIBIT "A"
REPORTS
1. CURRENT REPORTS.
The reports or output from Client's present systems will be produced
by ALLTEL Financial during the term of this Agreement, unless such
system(s) are replaced in accordance with the terms of this Agreement
or by mutual agreement between the parties.
2. ALLTEL FINANCIAL REPORTS.
Client may select from among the reports available for each of the
application systems listed in Exhibit A, as set forth in the standard
ALLTEL Financial user documentation thereof.
3. ADDITIONAL REPORTS.
ALLTEL Financial will add or delete from either the ALLTEL Financial
or current reports at Client's request, or to change the frequency of
their preparation. If the cumulative effect of changes in requested
reports requires personnel and/or computer equipment in excess of that
required without such changes, ALLTEL Financial agrees to notify
Client and prepare a price quotation, based upon the costs of such
additional computer equipment. Upon receipt of authorization from
Client in writing, ALLTEL Financial will immediately proceed to
acquire such additional personnel and/or equipment and prepare and
deliver all such reports.
A-1
<PAGE> 26
Client: Regional Acceptance Corp.
Effective Date: July 1, 1996
EXHIBIT "B"
CHARGES
1. FEE SCHEDULE.
Client will pay ALLTEL Financial, a minimum fee of $2,064,060 payable
in monthly installments as set forth in the following table:
Applicable Period Amount of Monthly Payment
----------------- -------------------------
Month 1-60 $34,401
In addition to the fees described above, Client agrees to promptly
reimburse ALLTEL Financial for actual costs incurred by ALLTEL Financial for
normal data center startup expenses in the preparation and performance of this
Agreement. Such costs will include but not be limited to relocation,
recruiting, training, temporary living expenses and other costs normally
associated with a data center startup whether similar or dissimilar to the
expenses listed above. ALLTEL Financial shall provide Client with invoices or
other sufficient evidence of such expenses. ALLTEL Financial shall provide
Client with an estimate of the expenses to be reimbursed in accordance with
this paragraph and shall notify Client when such expenses actually incurred
exceed 75% of such estimate and will cooperate with Client to minimize the
impact of such expenses.
In the event that the number of loans being processed for Client
hereunder decreases to less than fifty percent (50%) of the number being
processed as of the Effective Date and such decrease is directly attributable
to a decline in Client's business and is not attributable to Client's ceasing
business, selling or transferring assets or portfolios of loans or other
voluntary acts and application of the foregoing charges is deemed inequitable
by either party, ALLTEL Financial and Client will promptly negotiate in good
faith to resolve such inequity.
2. ADDITIONAL RESPONSIBILITIES OF THE PARTIES.
Except as otherwise provided, Client is responsible for the operation of any
of its data processing facilities other than the Data Center. Such facilities
are hereinafter termed "remote". Client and ALLTEL Financial agree to provide
or perform their respective responsibilities as indicated below.
B-1
<PAGE> 27
RESPONSIBILITY MATRIX
<TABLE>
<CAPTION>
ALLTEL CLIENT
FINANCIAL
<S> <C> <C>
Provide Facilities, Furniture, Fixtures & Equipment X
Provide Data Center Environmentals (Utilities, Security,
Janitorial) X
Provide Computer Equipment and Maintenance
X
Provide Data Communications Equipment and Data Lines
X
Provide Voice Communications Equipment and Lines
X
Provide Tapes, Ribbons, Disk Media, Operations Supplies
X
Provide Microfiche Processing or Optical Data
Storage/Retrieval X
Provide Network Control Equipment X
Provide PC/LAN Systems Equipment & Maintenance X
Provide Personal Computers & Terminals X
Provide Account Manager X
Provide Computer Operations X
Provide Help Desk Personnel X
Provide Host Computer Operations Staff X
Provide Data Center Network Control Staff X
Provide Project Management Services X
Provide Host Application/ALLTEL Staff Training X
Provide Client Staff Training X
Provide Secretarial Support X
Recruiting, Relocation Expenses - ALLTEL Staff X
Staff Replacement Expenses - ALLTEL Staff- for Data Center X
Start Up and Close Down
Provide Host Computer Operating System Software X
Provide Environmental Software/Third Party System Software
X
Provide Data & Voice Communications Software & Maintenance
X
Provide ALLTEL Application Software Maintenance
X
Provide PC/LAN Software & Maintenance X
Provide Personal Computer Software X
Provide Data Security X
Provide Stock Computer Paper and Supplies X
Provide Special Forms, Statements, Etc. X
Provide Personal Property Taxes & Insurance On Equipment
X
Provide Office Supplies, Equipment, Postage & Express Mail
</TABLE>
B-2
<PAGE> 28
<TABLE>
<S> <C> <C>
Provide Off-Site Storage Services X
Provide Disaster Recovery/Business Resumption Services
X
Provide ALLTEL Application Technical Documentation
X
Mainframe System Application Development Support -ALLTEL
Applications X
End-User Computing X
Help Desk X
Personal Computer & Local Area Network Support X
Client/Server Support X
Methods and Procedures End-User X X
Business Recovery/Risk Management X
Text Processing X
Telecommunications Support X
Systems Programming Support X
Computer Operations X
Provide Application Development Standards and Processes
X
Provide Source Library Management X
Provide Software Development Methodology X
Provide Mainframe System Personnel Resources for
Development & Testing X
Provide User Resources for Project Participation X
Provide Project Business Requirements & Definition X
Provide Project Management Methodology X
Provide Testing Methodology, Standards & Procedures
X
Provide Project Prioritization and direction X
Assist Client in Capacity Planning X
Assist Client in Application Performance Tuning X
Install Application Updates X
Install New Application Subsystems X
Provide Application Maintenance Support (Bugs, Corrections)
X
Provide Off-Hours Application Support for Production
X
</TABLE>
B-3
<PAGE> 29
3. ALLTEL FINANCIAL HOURLY RATES.
The following hourly rates are currently in effect. The ALLTEL
Financial hourly rates may be changed by ALLTEL Financial upon written
notice to Client not more often than once during each twelve month
period following the Effective Date. ALLTEL Financial's Hourly Rates
for programming include all related computer time required for program
testing. Overtime rates are only applicable, if and to the extent,
ALLTEL Financial will incur overtime expense. ALLTEL Financial fees
are computed by multiplying the actual personnel hours expended on
Client's project(s) including any travel time (not to exceed 4 hours
each way) to and from Client location(s). In addition, Client agrees
to reimburse ALLTEL Financial for the actual expense of reasonable
travel and lodging expense, if any, related to hourly rate based
services requested by Client. ALLTEL Financial will inform Client, in
advance, if overtime or travel and lodging expense is anticipated to
be incurred. ALLTEL Financial shall not provide services which would
result in fees charged pursuant to this Section without Client's prior
approval.
<TABLE>
<CAPTION>
Regular Hourly Overtime Hourly Minimum Billable
Rate Per Person Rate Per Person Increment Per
Person
<S> <C> <C> <C>
Programmer $105.00 $158.00 $105.00
Computer Operators $ 60.00 $ 90.00 $ 60.00
</TABLE>
In addition, Client will pay all reasonable travel and subsistence
costs incurred by ALLTEL Financial's employees in performance of any
such additional services.
4. PRICE ADJUSTMENT.
The parties acknowledge that ALLTEL Financial's costs of providing
services pursuant to this Agreement are likely to increase,
particularly in the areas of data processing salaries and operating
system maintenance. The fees and charges reflected in this Agreement
will be increased, but not decreased, to compensate ALLTEL Financial
for such inflation based upon changes in the Consumer Price Index for
All Urban Consumers - Other Goods and Services (the "CPI-U") as
published by the U. S. Department of Labor, Bureau of Labor
Statistics. Effective June, 1997 (the thirteenth contract month),
such fees and charges shall be increased by the percentage increase in
the CPI-U over the one-year period ended January 31, 1997 (the eighth
contract month). Semi-annually
B-4
<PAGE> 30
thereafter, such fees and charges shall be further increased by the
percentage increase in the CPI-U for the corresponding six-month
periods ended July and January, respectively. In no event, however,
shall the price increase effective for the thirteenth contract month
be more than 10% or less than 5.0% nor shall any subsequent
semi-annual increase be more than 5% or less than 2.50%.
B-5
<PAGE> 31
Client: Regional Acceptance Corp.
Effective Date: July 1, 1996
EXHIBIT "C"
REPORTING SCHEDULE
To be determined and attached in accordance with Section 3.4 of the Agreement.
C-1
<PAGE> 32
Client: Regional Acceptance Corp.
Effective Date: July 1, 1996
EXHIBIT "D "
SOFTWARE LICENSE AGREEMENT
1. PROVISION OF SOFTWARE.
1.1 ALLTEL Financial agrees to license and furnish to Client the
ALLTEL Financial application systems as described in the
Agreement if such systems are installed prior to the
expiration or termination of the Agreement. Such application
systems are hereinafter referred to as the "Software".
2. DOCUMENTATION.
2.1 For each item of Software, ALLTEL Financial shall also deliver
to Client a complete set of standard operational instructions
and documentation, including, but not limited to, the Software
source code in machine readable form; a copy of ALLTEL
Financial's standard associated control statements used for
operation, development, maintenance and use of the source
code, and any other documentation which is provided by ALLTEL
Financial to its other similar customers. Such documentation
and other materials are hereinafter referred to as
"Documentation."
2.2 Subject to the provision of Section 4, below, ALLTEL Financial
agrees to deliver to Client copies of any revisions,
improvements, enhancements, modifications and updates to the
Documentation which are produced by ALLTEL Financial.
2.3 Client may copy the Documentation provided hereunder in order
to satisfy its own internal requirements. If Client requests,
ALLTEL Financial agrees to furnish additional copies to Client
at ALLTEL Financial's then standard fee for such copies.
3. TERM AND USE RESTRICTIONS.
3.1 This is a perpetual license. Client acknowledges that the
licensed Software and all related Documentation constitute
valuable assets and trade secrets of ALLTEL Financial and that
all information with respect thereto is confidential. The
D-1
<PAGE> 33
Software is licensed to Client only for use by Client for
itself, its subsidiaries and affiliates.
3.2 Client agrees to safeguard the licensed Software with at least
the same degree of care that it exercises with respect
to its own confidential and proprietary information, and shall
take all reasonable precautions to assure that its employees
and representatives do not sell, lease, assign, or otherwise
transfer, disclose or make available, in whole or in part, the
licensed Software or Documentation thereof to any third party
for any reason (except for employees of Client, for auditing
purposes by independent certified public accountants, for
complying with applicable governmental laws, regulations or
court orders or for the limited disclosure to customers of
Client of user manuals and similar information which must be
disclosed in connection with providing data processing services
by Client). In no event, however, shall any competitor of
ALLTEL Financial be furnished with any information,directly or
indirectly, concerning the Software or the Documentation.
3.3 The licensed Software and all related Documentation and
materials may be used by Client and maintained at one
location, only as set forth below (the "Installation Site")
and may not be used by Client or any other person at any other
location or facility; provided, however, that Client may
change the location where it uses the licensed Software upon
prior written notice to ALLTEL Financial and delivery of a
written certificate that all use of the licensed Software
shall be limited to such new location. The Installation Site
shall be as follows:
3.4 All modifications to the licensed Software developed as a
result of joint efforts by ALLTEL Financial and Client shall
become the exclusive property of ALLTEL Financial, subject to
all of the terms and conditions of this License Agreement,
including the right of Client to use such modifications in
accordance herewith and including the foregoing agreements of
Client with respect to disclosure of and/or access to such
modifications. Modifications to the licensed Software
developed solely by Client without the participation of ALLTEL
Financial shall be considered to be part of the Software for
purposes of determining Client's obligations under this
Section 3; provided, however, that Client shall have the
exclusive right to use any such modifications it may develop,
and ALLTEL Financial shall have no right to market such
modifications without Client's express written consent.
3.5 Client further acknowledges and agrees that, in the event of a
breach or threatened breach by Client of any provision of this
Section 3, ALLTEL Financial will have no adequate remedy in
money or damages and, accordingly, shall be entitled to
appropriate injunctive relief. However, no specification in
this License Agreement of a specific legal or equitable remedy
shall be construed as a waiver
D-2
<PAGE> 34
or prohibition against any other legal or equitable remedies
in the event of a breach of any provision of this Agreement.
3.6 ALLTEL Financial retains title to the Software provided
hereunder and does not convey any rights or proprietary
interest therein to Client, other than the license as
specified herein.
3.7 Upon the termination by ALLTEL Financial of this License
Agreement or any licenses granted to Client hereunder, Client
agrees to promptly cease using and return to ALLTEL Financial
all software involved and Documentation related thereto and
all copies thereof. Such return shall also be accompanied by
a written certificate, signed by an appropriate executive
officer of Client, to the effect that all such Software,
related Documentation and copies thereof have been so returned
to ALLTEL Financial.
3.8 ALLTEL Financial hereby acknowledges and agrees that Client
shall have the right to modify any of the Software provided to
Client hereunder and may use and combine such with other
programs and/or material to form an updated work. Such
modifications to the licensed Software, either alone or in
combination, shall become part of the licensed Software and
shall be subject to all of the terms and conditions of this
License Agreement, including the right of Client to use such
modifications in accordance herewith and including the
agreement of Client to limit the use of, the disclosure of
and/or access to, such modifications.
3.9 Client acknowledges that all PC-based Software ("Micro
Software") is released in object code only. The following
additional provisions shall be applicable to Micro Software:
(a) Client may copy the Micro Software and use it on
multiple microprocessors solely for the
benefit of Client and Client's affiliates including,
but not limited to, Client's parent holding company,
its subsidiaries and affiliates. The documentation
for the Micro Software may be similarly copied and
utilized. At Client's option, additional copies may
be made either by Client or by ordering the same from
ALLTEL Financial at ALLTEL Financial's standard rates.
(b) All other restrictions on use, copying or disclosure
of the Software licensed hereunder shall also apply
to the Micro Software and its documentation. In
addition, Client may not provide data processing
services using the Micro Software to any person,
firm, or corporation (other than Client's affiliates
and subsidiaries) without the prior written consent
of ALLTEL Financial and the payment to ALLTEL
Financial of additional license fees.
D-3
<PAGE> 35
(c) In consideration of the right to make and use the
additional copies granted in Section (a) above,
Client agrees and acknowledges that all support for
end-users of the Micro Software will be supplied by
Client's personnel, and that ALLTEL Financial is not
responsible for providing any Micro Software support
services to end-users.
4. ENHANCEMENTS.
Within ninety (90) days of its delivery of a termination notice, as
provided in the Agreement, or within ninety (90) days preceding the
Expiration Date, as set forth in the Agreement, Client may elect to
purchase program maintenance from ALLTEL Financial for the licensed
Software. All updates, modifications and enhancements (the "Updates")
to the Software, if any, (once incorporated into any Software
hereunder) shall be deemed to be part of the license Software for all
purposes hereunder. In the absence of Client's purchase of program
maintenance thereafter, ALLTEL Financial shall not be obligated to
deliver Updates or related Documentation to Client. If Client
exercises this option, Client agrees to pay ALLTEL Financial its
current software maintenance rate(s) then in effect for such
system(s).
5. WARRANTIES.
5.1 ALLTEL Financial warrants to Client that: (i) ALLTEL Financial
has the right to furnish the Software, Documentation and other
materials provided to Client hereunder free of all liens,
claims, encumbrances and other restrictions; (ii) Client shall
quietly and peacefully possess the Software, Documentation and
other materials provided to Client hereunder, subject to and
in accordance with the provisions of this License Agreement;
and (iii) Client's use and possession of the Software,
Documentation and other materials provided to Client hereunder
will not be interrupted or otherwise disturbed by any entity
asserting a claim under or through ALLTEL Financial.
5.2 ALLTEL Financial warrants and represents that the licensed
Software will perform, on an appropriately configured IBM
computer system, in the manner described in the Documentation
thereof.
5.3 EXCEPT AS PROVIDED HEREIN, ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE, ARE HEREBY EXPRESSLY DISCLAIMED AND
EXCLUDED.
6. GENERAL.
6.1 Taxes. Client agrees to pay all taxes levied by a duly
constituted taxing authority against or upon Client's use of
the Software or arising out of this License
D-4
<PAGE> 36
Agreement; exclusive, however, of taxes based on ALLTEL
Financial's income, which taxes shall be paid by ALLTEL
Financial. Client agrees to pay any tax for which it is
responsible hereunder, which may be levied on or assessed
against Client directly, and, if any such tax is paid by
ALLTEL Financial, to reimburse ALLTEL Financial therefore,
upon receipt by Client of proof of payment reasonably
acceptable to Client.
6.2 Patent and Copyright Infringement. ALLTEL Financial agrees to
defend and/or handle, at its own expense, any claim or action
brought by any third party against Client for actual or
alleged infringement of any patent, copyright or similar
property right (including, but not limited to,
misappropriation of trade secrets) based upon the Software or
Documentation furnished hereunder by ALLTEL Financial. ALLTEL
Financial further agrees to indemnify and hold Client harmless
from and against any and all liabilities, losses, costs,
damages, and expenses (including reasonable attorneys' fees)
associated with any such claim or action incurred by Client.
(a) ALLTEL Financial shall have the sole right to conduct
the defense of any such claim or action and all
negotiations for its settlement or compromise, unless
otherwise mutually agreed to in writing between the
parties hereto.
(b) ALLTEL Financial agrees to give Client prompt written
notice of any written threat, warning or notice of
any such claim or action against ALLTEL Financial or
any other use or any supplier or components of the
Software covered hereunder, which could have an
adverse impact on Client's use of same, provided
ALLTEL Financial knows of such claim or action.
6.3 Limitation of Liability. Except for the violation of the
provisions of Section 3.2, 3.3, 3.4 or 6.2, if either party
shall breach any covenant, agreement or undertaking required
of it by this License Agreement, the liability of such party
to the other shall be limited to direct damages, actually
incurred. In addition, neither party shall be liable for any
special or consequential damage suffered by the other party
nor liable for any claim or demand made by any third party.
6.4 Material Breach. In the event of any material breach of the
Agreement or of this License Agreement by Client, ALLTEL
Financial may (reserving cumulatively all other remedies and
rights under this License Agreement in law or in equity)
terminate this License Agreement, in whole or in part, by
giving ninety (90) days' prior written notice thereof;
provided, however, that this License Agreement shall not
terminate at the end of said ninety day notice period if
Client has substantially cured the breach of which it has been
notified prior to the expiration of said ninety (90) days. In
the event of such a termination by ALLTEL Financial pursuant
to this Section 6.4, Client will promptly discontinue its use
of the
D-5
<PAGE> 37
licensed Software and related Documentation and shall return
to ALLTEL Financial all copies thereof in its possession or
control. Such return shall also be accompanied by a written
certificate, signed by an appropriate executive officer of
Client, to the effect that all such Software, related
Documentation and copies thereof has been so returned to
ALLTEL Financial. In addition, Client agrees that monetary
damages will not be sufficient to compensate ALLTEL Financial
in the event of any actual or threatened breach by Client of
any restriction on Client's use of the licensed Software or
Documentation provided in this License Agreement and that, in
such event, ALLTEL Financial shall be entitled to injunctive
and other equitable relief which may be deemed necessary or
appropriate by any court of competent jurisdiction.
6.5 Bankruptcy. Notwithstanding anything in this License
Agreement to the contrary, either party hereto shall
have the right to immediately terminate this License Agreement
upon notice to the other in the event of the other's
insolvency; receivership; or voluntary or involuntary
bankruptcy; in the event of the institution of proceedings
therefor, or in the event of assignment for the benefit of
creditors; or in the event any substantial part of the other's
property is or becomes subject to any levy, seizure, assignment
or sale for or by any creditor or governmental agency without
being released or satisfied within thirty (30) days
thereafter. In the event of such a termination by ALLTEL
Financial pursuant to this Section 6.5, Client will promptly
discontinue its use of the licensed Software and related
Documentation and shall return to ALLTEL Financial all copies
thereof in its possession or control. Such return shall also
be accompanied by a written certificate, signed by an
appropriate executive officer of Client, to the effect that all
such Software, related Documentation and copies thereof have
been so returned to ALLTEL Financial. Notwithstanding the
foregoing, no such termination shall have any effect upon
Client's obligation to pay ALLTEL Financial any amount due
hereunder.
6.6 Notices. Any notices or other communications required or
permitted to be given or delivered under this License
Agreement shall be in writing (unless otherwise specifically
provided herein) and shall be sufficiently given if delivered
personally or mailed by first-class mail, postage prepaid,
<TABLE>
<S> <C>
If to Client: Regional Acceptance Corporation
3004 South Memorial Drive
Greenville, North Carolina 27834
Attention: Robert D. Barry
If to ALLTEL Financial: ALLTEL Financial Information Services, Inc.
4001 Rodney Parham Road
</TABLE>
D-6
<PAGE> 38
Little Rock, Arkansas 72212-2496
Attention: President
or to such other address as either party may from time to time
designate to the other by written notice. Any such notice or
other communication shall be deemed to be given as of the date
it is personally delivered or when placed in the mails in the
manner specified.
6.7 Advertising or Publicity. Neither party shall use the name of
the other in advertising or publicity releases without
securing the prior written consent of the other.
6.8 Assignment. This License Agreement shall be binding upon the
parties and their respective permitted successors and assigns.
Client may not sell, assign, convey or transfer, by operation
of law or otherwise, any of its rights or obligations
hereunder without the prior written consent of ALLTEL
Financial and any such attempted transfer shall be void.
6.9 Governing Law; Jurisdiction and Venue. The validity of this
License Agreement, the construction and enforcement of its
terms, and the interpretation of the rights and duties of the
parties shall be governed by the laws of the State of
Arkansas. Client and ALLTEL Financial hereby consent and
agree that jurisdiction and venue for any claim or cause of
action arising under this Agreement with respect to the
validity, construction or enforcement hereof shall be properly
and exclusively in the state or federal courts located in
Pulaski County, Arkansas, and expressly waive any and all
rights they may have or which may hereafter arise to contest
the propriety of such choice of jurisdiction and venue.
6.10 Modification, Amendment, Supplement and Waiver. No
modification, amendment, supplement to or waiver of this
License Agreement or any of its provisions shall be binding
upon the parties hereto unless made in writing and duly signed
by both parties or the party to be charged, as appropriate
under the circumstances. A failure or delay of either party to
this License Agreement to enforce at any time any of the
provisions hereof, or to exercise any option which is herein
provided, or to require at any time performance of any of
theprovisions hereof, shall in no way be construed to be a
waiver of such provision of this License Agreement.
6.11 Severability. In the event any one or more of the provisions
of this License Agreement shall for any reason be held to be
invalid, illegal or unenforceable, the remaining provisions of
this License Agreement shall be unimpaired, and the invalid,
illegal or unenforceable provision shall be replaced by a
mutually acceptable provision, which being valid, legal and
enforceable, comes closest to
D-7
<PAGE> 39
the intention of the parties underlying the invalid, illegal
or unenforceable provision.
6.12 Headings. The headings in this License Agreement are for
purposes of reference only and shall not in any way limit or
affect the meaning or interpretation of any of the terms
hereof.
D-8
<PAGE> 40
IN WITNESS WHEREOF, the parties hereto have executed this License
Agreement as of the day, month and year first above written, by the undersigned
officers thereunto duly authorized.
<TABLE>
<CAPTION>
ALLTEL FINANCIAL INFORMATION REGIONAL ACCEPTANCE
SERVICES, INC. CORPORATION
<S> <C>
By: By:
-------------------------------- --------------------------------
Name: Name:
-------------------------------- --------------------------------
Title: Title:
-------------------------------- --------------------------------
Date: Date:
-------------------------------- --------------------------------
</TABLE>
D-9
<PAGE> 41
Client: Regional Acceptance Corporation
Effective Date: July 1, 1996
EXHIBIT E
DISASTER RECOVERY AGREEMENT
This is a Disaster Recovery Agreement (the "Agreement") made and
entered into contemporaneously with the Data Processing Agreement (the "FM
Agreement"), dated as of the first day of July, 1996, between ALLTEL
Information Services, Inc., an Arkansas corporation, 4001 Rodney Parham Road,
Little Rock, Arkansas, 72212-2496 (hereinafter "ALLTEL") and
Regional Acceptance Corporation
3004 S. Memorial Drive
Greenville, NC 27834
(hereinafter "CLIENT").
WHEREAS, ALLTEL maintains a computer disaster recovery facility for
use by Subscribing Clients in the event of a Disaster (see definitions, below);
and
WHEREAS, CLIENT wishes to have access to such computer disaster
recovery facility in the event of a Disaster;
NOW THEREFORE, in consideration of the payments to be made and
services to be performed hereunder, the parties agree as follows:
1. DEFINITIONS. The terms and phrases listed below shall have the indicated
special meanings when used in this Agreement:
"DISASTER RECOVERY FACILITY" -- The Computer Equipment described in
Attachment 2 and located at ALLTEL's corporate headquarters.
"DATA CENTER" -- CLIENT's IBM-based computer facility located at:
3004 S. Memorial Drive
Greenville, NC 27834
"DISASTER" -- Any interruption in the availability or accessibility
of the Data Center, resulting from causes beyond CLIENT's control and
reasonably expected to last more than seventy-two (72) continuous hours.
E-1
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"MULTIPLE DISASTER" -- Disasters experienced by two or more
Subscribing Clients at times when such Subscribing Clients would be
entitled to use the Disaster Recovery facility at the same time.
"SHELL FACILITY" -- Preconditioned space suitable for the
installation of CLIENT's computer equipment, located at 409 Shall
Street, Little Rock, Arkansas.
"SUBSCRIBING CLIENT" -- Any person, firm or corporation which has
entered into a Disaster Recovery Agreement with ALLTEL for use of the
Disaster Recovery Facility.
2. TERM.
The term of this Agreement shall begin on July 1, 1996 (the "Effective
Date") and shall be coterminous with the FM Agreement.
3. DISASTER RECOVERY FACILITY.
3.10 ACCESS. Upon declaration of a Disaster, CLIENT may use the
Disaster Recovery Facility under the appropriate class of
service, upon at least six hours' notice to ALLTEL, for a
period of up to six (6) consecutive weeks (the "Recovery
Period"). Thereafter, continued use of the Disaster
Recovery Facility, may be permitted except that another
Subscribing Client who experiences a Disaster after CLIENT's
Recovery Period shall be granted priority access to and use
of the facility.
3.20 ALLTEL COMPUTER EQUIPMENT. ALLTEL will purchase and
maintain in force maintenance agreements for the equipment
described in Attachment 2.
3.30 ALLTEL COMPUTER EQUIPMENT CHANGE. ALLTEL may change or
relocate its IBM compatible computer equipment configuration
at any time upon sixty (60) days prior written notice to
CLIENT; provided, however, that no such notice shall be
required if any such change does not adversely affect the
usefulness to CLIENT of the changed configuration as a
Disaster Recovery Facility. If such a change results in the
Disaster Recovery Facility becoming materially unusable to
CLIENT for disaster recovery, CLIENT may terminate this
Agreement in accordance with Paragraph 10 herein.
3.40 MULTIPLE DISASTERS. In order to reduce the possibility of a
Multiple Disaster, ALLTEL will exercise due care and
discretion in contracting with new clients to avoid
geographic concentrations that would unduly increase
exposure. When a new contract is contemplated that would
result in a perceived exposure due to a geographic
concentration and/or client size, ALLTEL will perform an
analysis of said exposure for review by ALLTEL management
prior to execution of the proposed contract. In addition,
no agreement will be signed with a prospective client who is
currently experiencing a Disaster.
If a Multiple Disaster occurs, more than one Subscribing
Client may be granted access to the Disaster Recovery
Facility. ALLTEL will exercise its best efforts to
coordinate the activities of these Subscribing Clients.
E-1
<PAGE> 43
3.50 COMPUTER EQUIPMENT COMPATIBILITY ASSURANCE. CLIENT will
appoint a Disaster Recovery Coordinator who will maintain
records of CLIENT computer equipment sufficient to identify
any differences which could affect successful processing,
and will promptly notify ALLTEL of any change which may do
so. The Disaster Recovery Coordinator will maintain
documentation for resolution of such differences in the
event of a Disaster. ALLTEL will provide CLIENT with one
(1) copy of the ALLTEL Disaster Recovery Services Users
Guide to assist CLIENT in the understanding and use of the
services provided herein.
CLIENT agrees to conduct a test annually in the Disaster
Recovery Facility. Each test should be an analysis of
compatibility consisting of CLIENT's operating system,
applications, and communications software sufficient to
achieve the pre-established mutually agreeable objectives.
The test should be planned for completion within the test
time allocation specified in Attachment 2, although extra
chargeable time may be authorized by ALLTEL if unforeseen
problems occur and there is a reasonable expectation of
solution within the time extension. CLIENT will submit the
request for an annual test to ALLTEL using forms and
procedures established. ALLTEL will schedule the test on a
mutually agreeable date. Data Center personnel will conduct
the test with the assistance of ALLTEL staff, as necessary.
3.60 NON-DISASTER USE. The Disaster Recovery Facility will be
used by ALLTEL for development and internal accounting, and
for testing of other Subscribing Clients. During any
Recovery Period, a Subscribing Client who has declared a
Disaster shall take priority over all such use and may
preempt Client's' test and use of associated services.
4. DISASTER RECOVERY PLAN.
CLIENT agrees to develop or acquire, and to maintain, a specific,
written plan for dealing with its data processing needs during a
Disaster (the "Disaster Recovery Plan"). A current copy of the
Disaster Recovery Plan shall be maintained by CLIENT at its operating
facility, at an offsite backup location, at the Data Center, and at
ALLTEL's Disaster Recovery Facility.
5. ALLTEL AND CLIENT RELATIONSHIP.
5.10 CLIENT PERSONNEL. CLIENT agrees that trained personnel with
appropriate levels of authority shall be temporarily located
at the Disaster Recovery Facility during all Recovery Period
processing to perform all CLIENT operations functions. In
addition, to the extent that CLIENT has responsibility under
the FM Agreement, CLIENT agrees to provide the necessary
supplies and personnel (at the Disaster Recovery Facility or
at CLIENT's facility, as required) to perform said
functions.
5.20 TRAVEL AND LIVING EXPENSES. CLIENT will pay all travel and
living expenses incurred by either CLIENT or ALLTEL for
temporary relocation of personnel as a result of a Disaster
and/or testing.
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<PAGE> 44
5.30 ADDITIONAL SERVICES. CLIENT agrees to pay the amounts
normally charged to other similarly-situated clients of
ALLTEL for all services performed by ALLTEL that are not
otherwise provided for in the FM Agreement or in this
Agreement.
5.40 PROCESSING FREQUENCY. This Agreement does not guarantee
that all applications will be processed as frequently during
the Recovery Period as they are processed under the FM
Agreement. The applications processed will be consistent
with the priorities set forth in the Disaster Recovery Plan.
5.50 TIME OF PERFORMANCE. ALLTEL will use diligence to provide
the data processing services set forth in the FM
Agreement at the times required therein. CLIENT acknowledges,
however, that the circumstances of a Disaster are likely to
adversely impact ALLTEL's time of performance and that the
provisions of the Time of Performance section of the FM
Agreement shall continue to be applicable during the Recovery
Period.
5.60 ALLTEL CORPORATE RESOURCES. ALLTEL will use good faith
efforts to make available those corporate resources
reasonably necessary and not otherwise included in this
Agreement, to support CLIENT's disaster recovery efforts.
Any resource used that is a chargeable item will be charged
at the then prevailing rate for similarly situated clients.
The following is a non-exclusive list of items for which
ALLTEL shall charge CLIENT. Any additional chargeable item
shall be mutually agreed to by the parties. The prices
for the items listed are set forth below and may be
changed not more than once in any calendar year upon written
notice to CLIENT.
<TABLE>
<S> <C>
Systems Programmer $110.00/hour
Applications Programmer $110.00/hour
TDS Proprietary Network Support $ 90.00/hour
Non Proprietary Network Support $110.00/hour
Tape Hanger $ 35.00/hour
Corporate Aircraft $800.00/hour
</TABLE>
6. SERVICE LEVELS.
6.10 BASIC COVERAGE. The basic coverage under this Agreement
provides for access to the Disaster Recovery Facility under
the Class of Service indicated in Attachment 1.
6.15 SHELL FACILITY. Access to and use of the Shell Facility are
provided under the terms and conditions of Attachment 3.
6.20 ONLINE. Availability of local terminals at the Disaster
Recovery Facility is provided as shown in Attachment 2.
Backup of CLIENT's online circuits, if any, is provided
under the terms and conditions of the Addendum for Dial
Backup Service, the Addendum for Multiplexer Service, the
Addendum for Channel Bank Service, the Addendum for Switched
56Kb Service, or the Addendum for Switched T1 Service.
E-1
<PAGE> 45
6.25 REMOTE TESTING. Availability of remote testing
capabilities, if any, are provided under the terms and
conditions of the Addendum for Remote Testing.
6.30 REMOTE TERMINAL CLUSTER. Availability of a remote terminal
cluster, if any, is provided under the terms and conditions
of the Addendum for Remote Terminal Cluster.
7. FEES.
7.10 PARTICIPATION FEE. There are three general Classes of
Service offered: 1) Asset Based 2) Equipment Based, and 3)
CPU Utilization Based. Asset Based Class of Service applies
to institutions whose assets are less than $300 million.
Equipment Based Class of Service applies to institutions
whose assets are greater than or equal to $300 million. CPU
Utilization Based Class of Service Class of Service applies
to institutions who, due to economic reasons, are processing
on a significantly larger CPU than they require. CLIENT
will pay the applicable monthly participation fees for the
Class of Service indicated in Attachment 1.
7.20 CLIENT COMPUTER EQUIPMENT CHANGE. Upon the installation or
deinstallation of any computer equipment at CLIENT's
data center which changes CLIENT's Equipment Based Class of
Service, CLIENT agrees to pay the participation fees (whether
higher or lower) at the new Class of Service rate. If
CLIENT's requirements exceed the capacity of or are
incompatible with the subscribed Class of Service, CLIENT
will notify ALLTEL. ALLTEL and CLIENT will then have ninety
(90) days in which to resolve the capacity or incompatibility
situation, which solution may include an agreement with a
third party. If, after ninety (90) days from CLIENT's notice
to ALLTEL, ALLTEL and CLIENT have not agreed upon a mutually
satisfactory solution, either party may terminate this
Agreement.
7.30 FACILITY ACCESS FEE. CLIENT agrees to notify ALLTEL
verbally and in writing of its declaration of a Disaster,
and such notice shall require payment of the Facility Access
Fee set forth in Attachment 1.
7.40 FACILITY USAGE FEE. During the Recovery Period, CLIENT will
also pay the hourly Facility Usage Fee described in
Attachment 1.
7.50 MISCELLANEOUS FEES. CLIENT will pay for miscellaneous third
party services that CLIENT authorizes to be performed
that are not otherwise provided for in this Agreement at the
rates then charged to other similarly-situated ALLTEL
clients.
7.60 ESCALATION OF FEES. ALLTEL may periodically adjust its fees
for Disaster Recovery to reflect the various fluctuations in
the cost of supplying services. Such adjustments will occur
under the same terms and conditions as those described in
Exhibit C of the FM Agreement.
E-1
<PAGE> 46
8. PAYMENT AND BILLING.
CLIENT agrees to pay the Participation Fee monthly in advance. Other
applicable fees will be invoiced at least monthly. CLIENT agrees to
pay all such fees within thirty days of the respective dates of such
invoices.
9. LOCATION CHANGE.
CLIENT may change the location of the Data Center upon prior written
notice to ALLTEL.
10. CLIENT TERMINATION.
CLIENT may terminate this Agreement without penalty or fee if any
change in the ALLTEL Computer Equipment under the provisions of
paragraph 3.30 results in the Disaster Recovery Facility becoming
materially unusable to CLIENT for disaster recovery purposes. CLIENT
must notify ALLTEL in writing within thirty (30) days of ALLTEL's
announcement of the equipment change. Termination is subject to the
actual installation of such equipment and effective as of such
equipment change installation date.
11. SECURITY AND CONFIDENTIALITY.
CLIENT agrees to observe ALLTEL's security procedures while using the
Disaster Recovery Facility. ALLTEL and CLIENT each agree to take such
steps and exercise such precautions to protect the proprietary or
confidential information of the other as each exercises in protecting
its own most valuable proprietary or confidential information. ALLTEL
and CLIENT each agree to indemnify the other and hold the other
harmless from and against any loss, claim, damage or expense
(including attorneys' fees) resulting from or arising out of any
unauthorized use or disclosure of the confidential or proprietary
information of the other.
12. SHARED USE.
CLIENT acknowledges that ALLTEL is not liable for any loss, claim,
damage or expense directly or indirectly resulting from the shared use
of the Disaster Recovery Facility and related services in the event of
a Multiple Disaster, except to the extent that such loss, claim,
damage or expense was caused by ALLTEL's negligence or willful
misconduct.
13. DISCLAIMER OF MERCHANTABILITY.
ALL REPRESENTATIONS AND WARRANTIES OF ALLTEL ARE EXPRESSLY SET FORTH
HEREIN. ALL OTHER REPRESENTATIONS AND WARRANTIES, WHETHER EXPRESS OR
IMPLIED, INCLUDING THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, WITH RESPECT TO THE DISASTER RECOVERY FACILITY AND
RELATED SERVICES OR THEIR USE, ARE HEREBY DISCLAIMED.
14. FORCES BEYOND ALLTEL CONTROL.
E-1
<PAGE> 47
ALLTEL shall use reasonable and diligent efforts to make the Disaster
Recovery Facility and related services available and operational at
all times, and in so doing shall take reasonable steps to safeguard
against events which could adversely impact the use thereof.
ALLTEL is not liable to CLIENT or any other person for claims or
damages which result from any failure beyond ALLTEL's control
including but not limited to, acts of God, the public enemy, acts of
any federal, state or local government, fires, floods, tornadoes,
earthquakes or other weather related disasters, war, strikes,
unavailability of computer equipment replacement parts, disruption of
communication service and utility outages.
15. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Arkansas.
E-1
<PAGE> 48
IN WITNESS WHEREOF, this Agreement has been executed by the undersigned,
hereunto duly authorized, on the date(s) set forth below.
<TABLE>
<CAPTION>
ALLTEL FINANCIAL INFORMATION REGIONAL ACCEPTANCE
SERVICES, INC. CORPORATION
<S> <S>
By: By:
-------------------------------------------- -------------------------------------------
Name: David L. Eanes Name:
------------------------------------------ -----------------------------------------
(Type or Print) (Type or Print)
Title: Manager, Disaster Recovery Services Title:
----------------------------------------- ----------------------------------------
Date: Date:
------------------------------------------ -----------------------------------------
</TABLE>
E-1
<PAGE> 49
ATTACHMENT 1
FEE SCHEDULE
CLIENT's CLASS OF SERVICE is determined by the CPU size (in RPR) in the Data
Center. The services provided hereunder are indicated below under CLASS OF
SERVICE. Total Monthly Participation Fees are computed below and are included
in the monthly fees shown in Exhibit C.
<TABLE>
<CAPTION>
CLASS OF SERVICE
----------------
Equipment Based
<S> <C>
I. PARTICIPATION FEES:
Basic Coverage includes: incl.
Computer Equipment List (Attachment 2) incl.
Shell Facility (Attachment 3) incl.
Online Processing:
Dial Backup Service incl.
Remote Testing incl.
Remote Terminal Cluster incl.
TOTAL MONTHLY PARTICIPATION FEE incl.
II. FACILITY ACCESS FEE:
Disaster Recovery Facility $ 5,000
III. FACILITY USAGE FEE:
Disaster Recovery Facility (Clock Hour) $ 100
Shell Facility (Sq. Ft./Day) $ .15
</TABLE>
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<PAGE> 50
ATTACHMENT 2
COMPUTER EQUIPMENT LIST
CLASS OF SERVICE "EQUIPMENT BASED"
<TABLE>
<CAPTION>
Equipment
Quantity Type-Model Description
-------- ---------- -----------
<S> <C> <C>
1 AS400-300-2042 Processor (or Equivalent) and the
following equivalent capacities:
4 IBM 3196 Terminals (Local)
25 Gb EMC HX 3SR-4F Disk Storage
1 IBM 2440 Tape Drive (1600/6250 BPI)
1 EMC 7208 8 MM Tape Cartridge (7 Gb)
1 BM 5262 Printer (800 LPM)
8 Hours Test Time Eight Wall-Clock Hours
(Non-cumulative)
</TABLE>
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<PAGE> 51
ATTACHMENT 3
SHELL FACILITY
1. ALLTEL DISASTER RECOVERY SHELL FACILITY.
1.10 ACCESS AND UTILIZATION. Upon declaration of a Disaster,
CLIENT will have access to the Shell Facility for a
period of up to nine (9) months (the "Extended Recovery
Period"). In the event of a Multiple Disaster, more than one
Subscribing Client may be granted access to the Shell
Facility pursuant to Section 3.40 of the Agreement. ALLTEL
may utilize the facility if a Disaster occurs in any of its
own data centers.
1.20 COMPUTER EQUIPMENT. No computer equipment will be installed
prior to the Recovery Period. The party who owned the
equipment in the Data Center will be responsible for
procurement, shipment and installation of all required
equipment following the declaration of a Disaster.
1.30 SPECIFICATIONS. The Shell Facility consists of 17,500 sq.
ft. of space, including 4,500 sq. ft. of raised floor area.
Air conditioning capacity is 600,000 BTU/HR, electrical
capacity is 160KVA. There are 200 telephone pairs into the
building, with 20 pairs active. The remaining non-raised
floor area consists of office and storage space for CLIENT
use. CLIENT will pay the fee prescribed in Attachment 1,
for the amount of space actually used by CLIENT during the
Extended Recovery Period.
2. CLIENT PERSONNEL.
CLIENT agrees that trained personnel of CLIENT, with appropriate
levels of authority shall be temporarily located at the Shell Facility
during the Extended Recovery Period to perform all CLIENT operations
functions. An ALLTEL representative will be present while CLIENT
personnel are occupying the Shell Facility. To the extent that they
are available, qualified ALLTEL personnel may be assigned to augment
CLIENT's staff at the rates referenced in Section 5.30 of the
Agreement.
3. TERMINATION.
ALLTEL may terminate this Attachment, without the termination of
the Agreement and other attachments, addenda or schedules, upon thirty
(30) days prior written notice to CLIENT. Should this service be
supplanted by another form of service which is useful to CLIENT, CLIENT
will be afforded priority to subscribe to the new service.
<PAGE> 52
ADDENDUM
FOR
DIAL BACKUP SERVICE
1. ALLTEL RESPONSIBILITIES.
ALLTEL agrees to provide dial backup modems and a sufficient number of
dial telephone lines and matrix switch port connections at the
Disaster Recovery Facility ("DRF") to permit connectivity to the
Disaster Recovery Front End Processor ("FEP") during the recovery
period. ALLTEL will ship the modems to CLIENT's designated locations
as soon as possible after CLIENT declares a Disaster.
2. CLIENT RESPONSIBILITIES.
CLIENT will provide a location for the installation of dial
backup equipment for each designated circuit. At each location, an
Alternate Control Point ("ACP") will be installed, along with a
corresponding dial telephone circuit, for each CLIENT multi-point
circuit to be backed up. CLIENT will notify ALLTEL in writing of ACP
locations and of any changes as they occur. CLIENT agrees to provide
all other hardware, including compatible modems, communications links
and any necessary software to utilize this service. CLIENT also agrees
to pay the then current prices to lease or purchase all such equipment
and to bear all shipping, installation, and telephone usage charges.
CLIENT acknowledges that response times may be greater than those
experienced during normal operations.
3. CONFIGURATION.
The following configuration will be available for the prescribed
monthly fee for Dial Backup Service:
<TABLE>
Quantity Manufacturer/Type Description
-------- ----------------- -----------
<S> <C> <C>
1 Southwestern Bell Dial telephone circuits
1 AT&T 3811 2.4 - 14.4 Bps Dial Backup Modems
1 AT&T 3810 2.4 - 14.4 Bps Dial Backup Modems
</TABLE>
4. TESTING.
ALLTEL hereby grants CLIENT usage of up to three of the modems for up
to one week annually for the purpose of online testing in conjunction
and concurrently with other tests of CLIENT's disaster recovery
requirements. ALLTEL will air-ship the dial backup modem(s) to CLIENT
during the week prior to the test. CLIENT will install the modem(s)
per ALLTEL instructions and pay all shipping, installation, and
telephone usage charges. CLIENT will return air-ship the modem(s) to
ALLTEL Disaster Recovery on the first work day following the test.
5. FEES.
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<PAGE> 53
Fees for the services provided by ALLTEL under this Addendum are
included in the Monthly Participation Fees set out in Attachment 1.
E-1
<PAGE> 54
ADDENDUM
FOR
REMOTE TESTING
1. ALLTEL RESPONSIBILITIES.
ALLTEL agrees to provide at the Disaster Recovery Facility ("DRF") the
hardware, software and communications devices for testing remotely on
CLIENT-owned equipment at CLIENT's designated location.
2. CLIENT RESPONSIBILITIES.
CLIENT must ship all necessary tapes and documentation to ALLTEL prior
to the test and follow normally prescribed procedures. CLIENT's
disaster recovery plan should document the intent to use similar
remote capabilities during a disaster. CLIENT agrees to provide all
other hardware, including a compatible modem at CLIENT's location,
along with a compatible terminal, controller, and communications link.
CLIENT agrees to pay all telephone usage charges required to utilize
this service from CLIENT's location to the DRF. CLIENT must provide
at least one operator at the DRF to perform all CLIENT operations
functions, unless ALLTEL, at its sole discretion, elects to waive this
requirement.
3. CONFIGURATION.
The following configuration will be available for the prescribed
monthly fee for Remote Testing:
<TABLE>
<CAPTION>
Quantity Manufacturer/Type Description
-------- ----------------- -----------
<S> <C> <C>
1 Southwestern Bell Dial telephone circuit
1 AT&T 3811 2.4 - 14.4 Bps Dial Backup Modems
1 AT&T 3810 2.4 - 14.4 Bps Dial Backup Modems
</TABLE>
4. TESTING.
ALLTEL hereby grants CLIENT access to the Remote Testing configuration
for the purpose of file transfer testing in conjunction with other
tests of CLIENT's disaster recovery requirements.
5. FEES.
Fees for the services provided by ALLTEL under this Addendum are
included in the Monthly Participation Fees set out in Attachment 1 to
the Disaster Recovery Agreement.
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<PAGE> 55
ADDENDUM
FOR
REMOTE TERMINAL CLUSTER
1. ALLTEL RESPONSIBILITIES.
ALLTEL agrees to provide for use at CLIENT's facility the hardware and
communications devices, along with the required dial telephone access,
to permit remote terminal connectivity to the Disaster Recovery
Central Processing Unit (CPU) within approximately one to three days
after CLIENT's declaration of a disaster.
2. CLIENT RESPONSIBILITIES.
CLIENT will make arrangements in advance, for the potential location
of this equipment, and will document such arrangements in CLIENT's
Disaster Recovery Plan and will, furthermore, advise ALLTEL of these
arrangements and of any changes that may occur. CLIENT agrees to pay
the then current prices to purchase or lease all shippable equipment
and to bear all shipping, installation, and telephone usage charges
associated with said usage or testing. CLIENT also agrees to provide
all other hardware, cables and communications interfaces and any
software required to utilize this service. CLIENT acknowledges that
response times may be greater than those experienced during normal
operations.
3. CONFIGURATION.
The following configuration will be available for the prescribed
monthly fee for the Remote Terminal Cluster:
<TABLE>
<CAPTION>
Quantity Manufacturer/Type Description
---------- ----------------- -----------
<S> <C> <C>
1 Southwestern Bell Dial telephone circuit
1 IBM 5294 Remote Controller (1)
4 IBM 5291 Terminals and cables
2 AT & T 2000 Series Modems with dial backup
</TABLE>
4. TESTING.
ALLTEL hereby grants CLIENT usage of the remote terminal configuration at
the DRF for the purpose of testing the Remote Terminal Cluster option in
conjunction and concurrently with other tests of CLIENT's disaster
recovery requirements.
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<PAGE> 56
5. FEES.
Fees for the services provided by ALLTEL under this Addendum are included
in the Monthly Participation Fees set out in Attachment 1.
<PAGE> 1
EXHIBIT 10.31
===============================================================================
LOAN AGREEMENT
Dated as of July 16, 1996
between
REGIONAL ACCEPTANCE CORPORATION
and
BRANCH BANKING AND TRUST COMPANY
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 1.03. Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE II
THE REVOLVING CREDIT LOAN . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.01. The Revolving Line of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.02. Requests for Advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.03. Interest and Principal Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 2.04. Adjustment of Interest Rate on Unpaid
Amounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.05. Manner of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.06. Payments on Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.07. Additional Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.08. Suspension of Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.09. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.10. Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.11. Additional Rights of Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE III
CONDITIONS OF CLOSING . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.01. Condition Precedent to Making the Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . 12
SECTION 4.01. Representations and Warranties of the
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE V
COVENANTS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . 16
SECTION 5.01. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 5.02. Incorporation of Terms of the Credit
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VI
EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6.02. Rights Upon an Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 6.03. No Remedy Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VII
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 7.01. Amendments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 7.02. Notices, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 7.03. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 7.04. Right of set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 7.05. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 7.06. [Section Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 7.07. Costs, Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 7.08. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 7.09. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 7.10. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 7.11. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 7.12. Prior Agreements Superseded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 7.13. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
EXHIBIT A FORM OF OFFICER'S CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
ii
<PAGE> 4
LOAN AGREEMENT, dated as of July 16, 1996, between REGIONAL ACCEPTANCE
CORPORATION, a North Carolina corporation (the "Company"), and BRANCH BANKING
AND TRUST COMPANY, a North Carolina banking corporation (the "Bank").
PRELIMINARY STATEMENTS:
WHEREAS, the Company has requested that the Bank provide to it a
$20,000,000 short-term line of credit, and the Bank has agreed to provide such
line of credit on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, including the covenants, terms and conditions
hereinafter appearing, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Affiliate" means a Person (i) which directly or indirectly
through one or more intermediaries controls, or is controlled by, or
is under common control with the Company or a Subsidiary of the
Company; (ii) which beneficially owns or holds 10% or more of any
class of the outstanding voting stock (or in the case of a Person
which is not a corporation, 10% or more of the equity interest) of the
Company, or a Subsidiary of the Company; or (iii) 10% or more of any
class of the outstanding voting stock (or in the case of a Person
which is not a corporation, lot or more of the equity interest) of
which is beneficially owned or held by the Company, or a Subsidiary of
the Company. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of
voting stock, by contract or otherwise.
"Advance" means an amount paid by the Bank to the Company and
debited to an Advance Account pursuant to the terms of Section 2.1
hereof.
"Advance Account" means; an account on the books of the Bank
in which
(i) each Advance by the Bank shall be debited
thereto by electronically recording therein on the date of
such Advance a debit entry in the amount of such Advance; and
<PAGE> 5
(ii) each payment made to the Bank for credit to
the Advance Account shall be credited thereto by electronically
recording therein on the date paid to the Bank a credit entry
in the amount of such payment.
"Agreement" means this Loan Agreement and any amendments or
supplements thereto.
"Base Rate" means a fluctuating rate of interest per annum
equal to the Prime Rate, each change in the Base Rate shall take
effect simultaneously with the corresponding change or changes in the
Prime Rate.
"Business Day" means a day of the year on which state-chartered
banks are not required or authorized to close in Wilson, North
Carolina.
"Committed Amount" means the principal amount of $20,000,000,
which the Bank has agreed to lend the Company and is evidenced by the
Note.
"Consistent Basis" means in reference to the application of
GAAP, that the accounting principles observed in the current period are
comparable in all material respects to those applied in the preceding
period, except as otherwise permitted by this Agreement or as may be
different as a result of a change in GAAP (except there shall be no
instance allowing upward revaluation of assets unless such revaluation
is required by GAAP).
"Credit Agreement" means that certain Amended and Restated Loan
and Security Agreement dated as of November 1, 1993, among Regional
Acceptance Corporation and BankAmerica Business Credit, Inc. and all
amendments and supplements thereto.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, including any rules and regulations
promulgated thereunder.
"Event of Default" has the meaning assigned to that term in
Section 6.01 of this Agreement.
"GAAP" means those generally accepted accounting principles
set forth in statements of the Financial Accounting Standards Board or
which have other substantial authoritative support and are applicable
in the circumstances as of the date of a report, as such principles
are from time to time supplemented and amended.
"Interest Period" means a period of one calendar month
commencing on the first day of a calendar month and ending on the last
day of such calendar month; provided, however, that
2
<PAGE> 6
an Interest Period may be less than one calendar month in and only in
the calendar month in which the Note originates or matures.
"LIBOR Base Rate" means the average rate (rounded upward, if
necessary, to the next higher 1/100th of one percent) quoted an
Bloomberg Screen MMR2 or, if no such quotes are available in the Wall
Street Journal (Credit Markets Section), on the determination date for
deposits in U.S. Dollars offered in the London interbank market to
five major European Banks, or if the above method for determining
LIBOR shall not be available, a rate determined by a substitute method
of determination agreed on by the Company and Bank; provided, if such
agreement is not reached within a reasonable period of time (in Bank's
judgment), a rate reasonably determined by Bank in its sole discretion
as a rate being paid, as of the determination date, by first class
banking organizations (as determined by Bank) in the London interbank
market for U. S. Dollar deposits.
"LIBOR Rate" means, for the Interest Period for any loan, a
rate of interest per annum equal to the sum obtained (rounded upwards,
if necessary, to the next higher 1/100ths of 1.0%) by adding (i)
30-day LIBOR Base Rate plus (ii) one and eighty hundredths percent
(1.80%) per annum, which shall be adjusted monthly on the first day of
each month for each Interest Period for a loan. Any minimum or
maximum rate stated in the applicable promissory note shall apply
during any Interest Period. The LIBOR Rate shall be adjusted for any
change in the Reserve Requirement so that Bank shall receive the same
yield. If the first day of any month falls on a date when the Bank is
closed, the LIBOR Rate shall be determined as of the last preceding
business day.
"Loan Documents" means this Agreement and the Note.
"Note" means that certain Promissory Note of the Company in
favor of the Bank dated as of July 10, 1996 in the original principal
amount of $20,000,000 and any amendments or supplements thereto.
"PBGC" means the Pension Benefit Guaranty Corporation or any
successor thereto.
"Person" means any individual, joint venture, corporation,
company, voluntary association, partnership, trust, joint stock
company, unincorporated organization, association, government, or any
agency, instrumentality, or political subdivision thereof, or any
other form of entity.
"Plan" means any pension or other employee benefit plan which
is subject to Title IV of ERISA, and which is: (a) a plan maintained
by Company; (b) a plan to which Company
3
<PAGE> 7
contributes or is required to contribute; (c) a plan to which Company
was required to make contributions at any time during the five
calendar years preceding the date of this Agreement; or (d) any other
plan with respect to which Company has incurred or may incur
liability, including contingent liability, under Title IV of ERISA,
either to such plan or to the PBGC.
"Prime Rate" means the interest rate announced by the Bank
from time to time as its prime rate, which is one of several interest
rate indexes offered by the Bank.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System (or any successor thereto) as the same may
be amended or supplemented from time to time.
"Regulatory Change" means any change effective after the date
hereof in United states federal or state laws or regulations
(including Regulation D and capital adequacy regulations) or foreign
laws or regulations or the adoption or making after such date of any
interpretations, directives or requests applying to a class of banks,
which includes the Bank, under any United States federal or state or
foreign laws or regulations (whether or not having the force of law)
by any court or governmental or monetary authority charged with the
interpretation or administration thereof or compliance by the Bank
with any request or directive regarding capital adequacy, including
with respect to "highly leveraged transactions," whether or not
having the force of law, whether or not failure to comply therewith
would be unlawful and whether or not published or proposed prior to
the date hereof.
"Reserve Requirement" means the maximum aggregate rate at
which reserves (including, without limitation, any marginal,
supplemental or emergency reserves) are required to be maintained
under Regulation D by member banks of the Federal Reserve System with
respect to dollar funding in the London interbank market. Without
limiting the effect of the foregoing, the Reserve Requirement shall
reflect any other reserves required to be maintained by such member
banks by reason of any applicable regulatory change against (i) any
category of liability which includes deposits by reference to which
the LIBOR Base Rate is to be determined or (ii) any category of
extensions of credit or other assets related to LIBOR Rate.
"Subsidiary" of any Person means a corporation in which more
than 50% of the stock having ordinary voting power to elect a majority
of the board of directors or other managers of such corporation is
owned by such Person, by such Person and any one or more Subsidiaries
of such Person, or by any one or more Subsidiaries of such Person.
4
<PAGE> 8
"Termination Date" means September 30, 1996 or such later date
as may be consented to by the Bank in writing and in its sole and
absolute discretion, in which event such later date shall be the
Termination Date.
SECTION 1.02. Computation of Time Periods. In this Agreement, in the
computation of a period of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with Generally Accepted
Accounting Principles consistently applied, except as otherwise stated herein.
5
<PAGE> 9
ARTICLE II
THE REVOLVING CREDIT LOAN
SECTION 2.01. The Revolving Line of Credit. The Bank agrees, upon the
terms and conditions set forth herein, to make Advances to the Company under
the Note during the period from the date of this Agreement until the
Termination Date up to an aggregate amount not exceeding $20,000,000; provided
(i) that immediately after giving effect to each Advance, the Debit Balance
shall not exceed the Committed Amount and (ii) that the Bank shall not be
required to make Advances while any default or Event of Default exists
hereunder. Each Advance shall be in the amount of $25,000 or any integral
multiple thereof, or if applicable the balance of the Committed Amount, and
shall be debited by the Bank to the Advance Account. During the period from
the date hereof to the Termination Date, the Company may use the Committed
Amount by borrowing, paying or repaying and reborrowing such principal amount,
all in accordance with the terms of this Agreement. The Company agrees that if
at any time the outstanding balance under the Note shall exceed the Committed
Amount, the Company shall immediately reduce such outstanding balance to the
extent of such excess. Borrowings and payments of principal hereunder are to
be made no later than 2:00 P.M. Greenville, North Carolina time on the date of
such borrowing or payment. The proceeds of the loan evidenced by the Note
shall be used to repay in full maturing commercial paper through its
receivables funding program sponsored by Bank of America National Trust and
Savings Association, to repay in full existing Subordinated Debt described on
Schedule 2.01 (the "Subordinated Debt") provided such payment will not violate
the terms of the Credit Agreement and to fund temporary increases in loans
originated by the Company.
SECTION 2.02. Requests for Advances. Not later than 2:00 P.M.
Greenville, North Carolina time on the day the Company wishes an Advance under
Section 2.01, it shall give the Bank prior written notice (effective upon
receipt) of its intention to borrow all or portions of the principal amount
available pursuant to Section 2.01 hereof on the date and in the amounts
requested. All Advances will be made by deposit of funds representing such
borrowing to the Company's operating account maintained with the Bank in
Greenville, North Carolina.
SECTION 2.03. Interest and Principal Repayment. The outstanding
principal balance of the Note shall bear interest at the LIBOR Rate. Interest
shall be payable monthly in arrears on the outstanding principal balance on the
fifteenth day of each month, commencing August 15, 1996, and be paid for the
actual number of days elapsed on the basis of a year consisting of 360 days.
All unpaid principal and interest on the Note shall be due and payable in full
on the Termination Date.
6
<PAGE> 10
The indebtedness evidenced by the Note may be prepaid in whole or in
part at any time and all such prepayments shall be without penalty or premiums.
SECTION 2.04. Adjustment of Interest Rate on Unpaid Amounts. If any
amount shall not be paid when due (at maturity, by acceleration or otherwise)
in respect of the Note, all amounts outstanding thereunder shall bear interest
thereafter at a rate of interest per annum which shall be two percent (2%)
above the Base Rate, or (in each case) the maximum rate permitted by applicable
law, whichever is lower from the date such amount was due and payable until the
date such amount is paid in full.
SECTION 2.05. Manner of Payment. All payments of principal (including
any prepayment), interest and any other amount required to be paid to the Bank
with respect to the Note shall be made to the Bank at its principal office in
Greenville, North Carolina in U.S. Dollars and in immediately available funds
on or before 2:00 p.m., Greenville, North Carolina time on the date such
payment is due. The Bank may, but shall not be obligated to debit the amount
of such payment from any one or more ordinary deposit accounts of the Company
with the Bank.
SECTION 2.06. Payments on Business Days. In the event that any
payment hereunder or under the Note becomes due and payable on a day other than
a Business Day, then such due date shall be extended to the next succeeding
Business Day; provided that interest shall continue to accrue during the period
of any such extension.
SECTION 2.07. Additional Costs. (a) The Company shall promptly pay to
the Bank for the account of the Bank from time to time, such amounts resulting
from any Regulatory Change as the Bank may determine to be necessary to
compensate it for any costs incurred by the Bank which it determines are
attributable to its making or maintaining any loan or its obligation to make
any loans hereunder, or any reduction in any amount receivable by the Bank
under this Agreement or the Note, including reductions in the rate of return on
the Bank's capital (such increases in costs and reductions in amounts
receivable and returns being herein called "Additional Costs"). Such
Additional Costs may result from any Regulatory Change which: (i) changes the
basis of taxation of any amounts payable to Bank under this Agreement or the
Note (other than taxes imposed on the income of Bank by the federal government
or any jurisdiction in which the principal office or the applicable lending
office of Bank is located); or (ii) imposes or modifies any reserve, special
deposit, or similar requirements relating to any extensions of credit or other
assets of, or any deposits with or other liabilities of Bank (other than any
such reserve, deposit or requirement reflected in the LIBOR Rate); or (iii)
has or would have the effect of reducing the rate of return on capital of the
Bank to a level below that which the Bank could have achieved but for such
Regulatory Change (taking into consideration the Bank's
7
<PAGE> 11
policies with respect to capital adequacy) or (iv) imposes any other condition
affecting this Agreement or the Note (or any of such extensions of credit or
liabilities). The Bank will notify the Company of any event occurring after
the date hereof which would entitle it to compensation pursuant to this Section
as promptly as practicable after it obtains knowledge thereof and determines to
request such compensation.
(b) Without limiting the effect of the foregoing provisions of
this Section 2.07, in the event that, by reason of any Regulatory Change, the
Bank either (i) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits or other
liabilities of the Bank which includes deposits by reference to which the
interest rate on loans bearing interest at the LIBOR Rate is determined as
provided in this Agreement or a category of extensions of credit or other
assets of Bank which includes such loans or (ii) becomes subject to
restrictions on the amount of such a category of liabilities or assets which it
may hold, then, if the Bank so elects by notice to the Company, the obligation
hereunder of the Bank to make and continue such loans bearing interest at the
LIBOR Rate that are the subject of such restrictions shall be suspended until
the date such Regulatory Change ceases to be in effect and the interest rate on
the applicable loans shall, on the last day(s) of the then current Interest
Period, convert to the Base Rate.
(c) Determinations by the Bank for purposes of this Section of the
effect of any Regulatory Change on its costs of making or maintaining, or being
committed to make the loans or on amounts receivable by it in respect of such
loans and of the additional amounts required to compensate the Bank in respect
of any Additional Costs, shall be conclusive absent demonstrable error,
provided that such determinations are made on a reasonable basis.
SECTION 2.08. Suspension of Loans. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any interest rate for
the loans bearing interest at the LIBOR Rate for any Interest Period, the Bank
determines (which determination made on a reasonable basis shall be conclusive
absent demonstrable error) that
(a) quotations of interest rates for the relevant
deposits referred to in the definition of LIBOR Rate in Article I
hereof are not being provided in the relevant amounts or for the
relevant maturities for purposes of determining the rate of interest
for such loan as provided in this Agreement; or
(b) the relevant rates of interest referred to in the
definition of "LIBOR Base Rate" in Article I hereof upon the basis of
which the LIBOR Rate for such Interest Period is to be determined do
not adequately reflect the cost to the Bank
8
<PAGE> 12
of making or maintaining such loan for such Interest Period (which
determination shall be made on a reasonable basis by, the Bank, and
the Person making such determination shall furnish the Company
evidence of the facts leading to such determination);
then the Bank shall give the Company prompt notice thereof, and so long as such
condition remains in effect, the Bank shall be under no obligation to make or
maintain loans that are subject to such condition and the interest rate on such
loans shall, on the last day of the then current Interest Period, convert to
the Base Rate. The Bank shall give the Company notice describing in reasonable
detail any event or condition described in this Section 2.08 promptly following
the determination by the Bank that the availability of the LIBOR Rate is, or is
to be, suspended as a result thereof.
SECTION 2.09. Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for the Bank to honor its
obligation to make or maintain the LIBOR Rate hereunder, then the Bank shall
promptly notify the Company thereof and the Bank's obligation to make or
continue the LIBOR Rate shall be suspended until such time as the Bank may
again make and maintain the LIBOR Rate and the Bank's outstanding loans shall,
on the last day of the then current Interest Period, convert to the Base Rate.
SECTION 2.10. Obligations Absolute. The payment obligations of the
Company under this Agreement, the Note or the Loan Documents shall be
unconditional and irrevocable, and shall be paid strictly in accordance with
the terms of this Agreement under all circumstances, including, without
limitation, the following circumstances:
(i) any lack of validity or enforceability of this
Agreement, the Note, the Loan Documents or any other agreement or
instrument relating thereto (collectively, the "Related Documents");
(ii) any amendment or waiver of or any consent to
departure from all or any of the Related Documents;
(iii) the existence of any claim, set-off, defense or other
right which the Company may have at any time against the Bank, or any
other person or entity, whether in connection with this Agreement, the
transactions contemplated herein or in the Related Documents, or any
unrelated transaction;
(iv) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing.
SECTION 2.11. Additional Rights of Bank. In the event that the
proposed acquisition of the Company by Southern National
9
<PAGE> 13
Corporation is terminated, the Bank shall, at its option, have the right to
terminate its obligation to make additional advances under the Note and may
declare the entire principal and all interest accrued on the Note then
outstanding to be due and payable in full. Upon such declaration, such Note
shall thereupon become forthwith due and payable, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived,
anything contained herein or in the Note or the other Loan Documents to the
Contrary notwithstanding and the Company shall forthwith pay to the holder of
the Note the entire principal of and interest accrued on such Note.
Alternatively, the Bank shall have the right to require the Company to provide
collateral for the Note acceptable to the Bank and the Company shall execute
and deliver to the Bank such collateral documents as shall be deemed necessary
by the Bank to provide, encumber and perfect the lien on such collateral.
10
<PAGE> 14
ARTICLE III
CONDITIONS OF CLOSING
SECTION 3.01. Condition Precedent to Making the Note. The obligation
of the Bank to make the loans evidenced by the Note is subject to the condition
precedent that, unless otherwise agreed to by Bank, the Bank shall have
received on or before the date hereof the following in form arid substance
satisfactory to the Bank, or made the following determinations:
(a) Corporate Documents: (i) A copy of the Certificate of
incorporation of the Company, certified as of a date no earlier than
30 days prior to the date hereof and a good standing (or comparable
due existence) certificate respecting the Company issued by the
Secretary of State of North Carolina no earlier than 30 days prior to
the date hereof; and (ii) a Certificate of the Secretary of the
Company stating that attached thereto are (x) a true and correct copy
of the bylaws of the Company, currently in full force and effect; and
(y) copies of the resolutions of the Board of Directors of the Company
and each evidencing authorization and approval of this Agreement, and
any other Loan Document to which the Company or is a party and the
transactions contemplated thereby.
(b) Incumbency Certificate: Certificate of the Secretary
or an Assistant Secretary of the Company certifying the names and true
signatures of the officers of the Company authorized to sign this
Agreement, the Loan Documents and the other documents contemplated
hereby and thereby.
(c) Operative Documents: An executed copy of the Loan
Documents.
(d) Officer's Certificate. The Bank shall have received a
certificate from the chief financial officer of the Company in the
form of Exhibit A attached hereto.
(e) Credit Agreement. A copy of the Credit Agreement,
certified by an officer of the Company to be true and complete.
(f) Other Documents: Such other documents, instruments,
approvals (and, if requested by the Bank, certified duplicates of
executed copies thereof) or opinions as the Bank may reasonably
request.
11
<PAGE> 15
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Company. The
Company represents and warrants as follows (which representations and
warranties shall survive the issuance of the Note):
(a) Incorporation, etc. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
North Carolina, has the corporate power to own its properties and to carry on
its business as now being conducted, and is duly qualified as a foreign
corporation to do business in every jurisdiction in which the nature of its
business makes such qualification necessary and is in good standing in such
jurisdictions, except where the failure to qualify or be in good standing would
not have a materially adverse effect on its business.
(b) Power and Authority. The Company is duly authorized under all
applicable provisions of law to execute and deliver this Agreement and to
execute, deliver and perform the Loan Documents to which it is a party, and all
corporate action on the part of the Company required for the lawful execution,
delivery and performance thereof has been duly taken; and each of the Loan
Documents to which it is a party, upon the due execution and delivery thereof,
will be the valid and enforceable instrument, obligation or agreement of the
Company, in accordance with its respective terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting generally the enforcement of creditor's rights and by
such principles of equity as may generally affect the availability of equitable
remedies. Neither the execution of the Loan Documents to which it is a party,
nor the fulfillment of or compliance with their provisions and terms, will
constitute a violation of or default under, or conflict with or result in a
breach of, the terms, conditions or provisions of any agreement or instrument
to which the Company is now a party, including without limitation the Credit
Agreement, or the Articles of Incorporation or the Bylaws of the Company or any
law, regulation, writ or decree applicable to the Company and the violation of
which would have a material adverse effect upon the business or financial
condition of the Company, or create any lien, charge or encumbrance upon any of
the property or assets of the Company pursuant to the terms of any agreement or
instrument to which the Company is a party or by which it is bound.
(c) Financial Condition. The consolidated balance sheet for the
Company as at December 31, 1995, certified by independent certified public
accountants, and the related statements of earnings and shareholders' equity
and cash flows for the fiscal year then ended, copies of all of which have been
furnished to Bank, present fairly the financial condition of the Company and
its subsidiaries as at the date of said balance sheet and the results
12
<PAGE> 16
of its operations for said period. The consolidated balance sheet of the
Company as at March 31, 1996, and the related statement of income for the
three-month period ended on such date, as delivered to the Bank, present fairly
and accurately, subject to normal recurring year-end adjustments, the financial
condition of the Company as at such date and the results of their operation for
such period. The Company has no direct or contingent liabilities as of the
date of this Agreement of a nature required by GAAP to be reflected or provided
for in financial statements which are not provided for or reflected in such
balance sheet or referred to in notes thereto, except for liabilities incurred
since the date of such financial statements in the ordinary course of business.
All such financial statements have been prepared in accordance with GAAP
applied on a Consistent Basis maintained throughout the period involved,
subject, in the case of interim financial statements, to year end adjustments
and footnote disclosures. Since December 31, 1995, there has been no material
adverse change in the business, properties or condition, financial or
otherwise, of the Company and its Subsidiaries, taken as a whole, and since
said date the Company has not been adversely affected in any substantial way as
the result of any fire, explosion, earthquake, accident, strike, lockout,
combination of workmen, flood, embargo, riot, activities of armed forces, war
or acts of God or the enemy, or by cancellation or loss of any major contract.
(d) Title to Properties. Company has good and marketable title to
the property it purports to own, free from liens except as set forth in
Company's financial statements delivered to the Bank.
(e) Litigation. There are no pending or, to the knowledge of the
Company, threatened actions or proceedings before any court, arbitrator or
governmental or administrative body or agency which may reasonably be expected
to materially adversely affect the properties, business or condition, financial
or otherwise, of the Company, or in any way adversely affect or call into
question the power or authority of the Company to enter into or perform any of
the Loan Documents to which it is a party.
(f) Company's Office. Company's chief executive office is located
at the address stated in Section 7.02 hereof, and Company covenants and agrees
that it will not, without prior written notification to Bank, relocate said
chief executive office.
(g) Taxes. All tax returns required to be filed by Company in any
jurisdiction have been filed, and all taxes, assessments, and other
governmental charges upon Company, or upon any of its properties, income or
franchises, which are due and payable, have been paid. The provisions for
reserves for taxes on the books of Company are adequate for all unaudited
fiscal years, and for its current fiscal period.
(h) Contract or Restriction Affecting the Company. The Company is
not a party to or bound by any contract or agreement or
13
<PAGE> 17
subject to any provisions of its Articles of Incorporation, Bylaws or other
corporate restrictions which materially adversely affect the business,
properties or condition, financial or otherwise, of the Company.
(i) Trademarks, Franchises and Licenses. The Company or an
Affiliate of the Company owns, possesses, or has the right to use all necessary
patents, licenses, franchises, trademarks, trademark rights, trade names, trade
name rights and copyrights to conduct the Company's business as now conducted,
without known conflict with any patent, license, franchise, trademark, trade
name, or copyright of any other Person, which could have a material adverse
effect on the business or financial condition of the Company.
(j) No Default. The Company is not in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument to which it is a party, the effect of
which default may impair the ability of the Company to repay its obligations
under this Agreement.
(k) Governmental Authority. No written approval of any foreign,
federal, state or local governmental authorities is necessary to enter into and
to carry out the terms of any of the Loan Documents, and, to the best of the
Company's knowledge, no consents or approvals are required in connection with
the making or performance of the Loan Documents which have not been obtained.
The Company has received the written approval or permits from all federal,
state and local governmental authorities materially necessary to conduct its
operations as presently conducted.
(l) ERISA Requirements. (a) Company has no Plan other than those
listed in Exhibit 7.17 of the Credit Agreement; (b) No Plan has been terminated
or partially terminated or is insolvent or in reorganization, nor has any
proceedings been instituted to terminate or reorganize any Plan; (c) Company
has not withdrawn from any Plan in a complete or partial withdrawal, nor has a
condition occurred which if continued would result in a complete or partial
withdrawal; (d) Company has no withdrawal liability, including contingent
withdrawal liability, to any Plan pursuant to Title IV of ERISA; (e) Company
has no liability to the PBGC other than for required insurance premiums which
have been paid when due; (f) No Reportable Event has occurred with respect to a
Plan; (g) No Plan has an "accumulated funding deficiency" (whether or not
waived) as defined in Section 302 of ERISA or in Section 412 of the Internal
Revenue Code; (h) Each Plan is in substantial compliance with ERISA, and
Company has not received any notice asserting that a Plan is not in compliance
with ERISA. Neither the Company nor any other "party-in-interest" or
"disqualified person" has engaged in a "prohibited transaction" as such terms
are defined in Section 4975 of the internal Revenue Code and Title I of ERISA,
in connection with any Plan which would subject a party-in-interest or
disqualified person (after giving effect to any exemption) to the
14
<PAGE> 18
tax on prohibited transactions imposed by Section 4975 of the Code or any other
liability.
(m) No Untrue Statements. Neither this Agreement nor any other
agreements, reports, schedules, certificates or instruments heretofore or
simultaneously with the execution of this Agreement delivered to the Bank by or
on behalf of the Company or any Affiliate contains any misrepresentation or
untrue statement of a material fact or, to the best knowledge of the Company,
omits to state any material fact necessary to make any of such agreements,
reports, schedules, certificates or instruments, in the light of the
circumstances under which they were made or delivered, not misleading.
(n) Regulation U. No part of the proceeds of the credit extended
by the Bank to the Company will be or has been used to purchase or carry, or
to reduce or retire any loan incurred to purchase or carry, any margin stocks
(within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System) or to extend credit to others for the purpose of purchasing or
carrying any such margin stocks. The Company is not engaged as one of its
important activities in extending credit for the purpose of purchasing or
carrying such margin stocks. In addition, no part of the proceeds of such
credit will be used for the purchase of commodity future contracts (or margins
therefor for short sales), or for any commodity.
15
<PAGE> 19
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.01. Affirmative Covenants. In addition to the affirmative
covenants incorporated by reference pursuant to the terms of Section 5.02
hereof, so long as any amounts are owing under the Note or an advance is
available under the Note, or the Company shall have any obligation to pay any
amount to the Bank hereunder, the Company will, unless the Bank shall otherwise
consent in writing:
(a) Further Assurance. Upon request of the Bank, duly execute and
deliver or cause to be duly executed and delivered to the Bank such further
instruments and do and cause to be done such further acts that may be
reasonably necessary or proper in the opinion of the Bank to carry out more
effectively the provisions and purposes of this Agreement and the Related
Documents.
(b) The Company's Knowledge of Certain Events. Upon the
occurrence of any Event of Default hereunder and the Company's obtaining
knowledge thereof, cause to be delivered to the Bank, within fifteen (15)
business days, an Officer's Certificate specifying the nature thereof, the
period of existence thereof and what action the Company proposes to take with
respect thereto.
SECTION 5.02. Incorporation of Terms of the Credit Agreement.
(a) So long as any amounts are owing under the Note, or
an advance is available under the Committed Amount, or any amounts are
owing by the Company to the Bank hereunder, the Company covenants and
agrees that it will be bound by and duly and fully perform for the
benefit of the Bank all of the covenants contained in Sections 8 and 9
of the Credit Agreement entitled "Financial and Other Covenants" and
"Information As To Borrower" which are applicable to the Company.
Sections 8 and 9 of the Credit Agreement and the defined terms used
therein (including the definitions thereof which appear in other
sections of the Credit Agreement and the Exhibits to such Credit
Agreement) as such exists on the date of delivery of this Agreement
are hereby incorporated by reference as if set forth herein at length,
provided that such incorporated sections shall be subject to the terms
and modifications contained in subsection (c) hereof.
(b) The company has delivered to the Bank a complete copy
of the Credit Agreement. Each reference in this Agreement to the
Credit Agreement shall be deemed to refer to the provisions of the
Credit Agreement as and in the form delivered to the Bank. The
provisions of the Credit Agreement which are incorporated herein shall
for the purposes of this Agreement be deemed to continue in effect so
long as this
16
<PAGE> 20
Agreement is in effect and so long as any amounts are owing under the
Note, or any amounts are owing under this Agreement or Loan Documents,
irrespective of any termination, modification or amendment of, or any
consent or waiver relating to, any of the provisions of the Credit
Agreement. No terminations, modifications, waivers or amendments to
any of the provisions of the Credit Agreement incorporated herein
shall be effective to terminate, modify, waive or amend such
provisions as so incorporated herein unless expressly consented to in
writing by the Bank accompanied by an acknowledgement that such
termination, modification, waiver or amendment shall be applicable to
this Agreement.
(c) All references in incorporated provisions of the
Credit Agreement to other provisions thereof shall be deemed to refer
to such other provisions as incorporated herein for the purpose of
interpreting such incorporated provisions with such modifications, if
any, as are herein provided. The words "herein", "hereof", "hereby",
"hereto", "this agreement" and words of like import, when used in such
incorporated or other provisions of the Credit Agreement, shall be
deemed to refer to this Agreement unless otherwise expressly provided
herein or unless the context otherwise requires. Except as modified
by the provisions hereof and unless otherwise expressly defined
herein, terms which are defined in the Credit Agreement shall have the
same meanings when incorporated herein unless the context otherwise
requires, with the following modifications: (i) whenever the terms
"Lender", "any of the Lenders", "each Lender", or "any Lender" are
used in the Credit Agreement it shall mean the Bank; (ii) whenever the
term "Borrower" is used in the Credit Agreement, it shall mean the
Company; (iii) whenever the terms "Notes" or "Loan Documents" are
used, such terms shall be deemed to refer to this Agreement and Loan
Documents as used herein and whenever the term "Loan" shall be used in
the Credit Agreement it shall mean the loan evidenced by the Note.
17
<PAGE> 21
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. The occurrence of any of the
following events shall be an "Event of Default" hereunder:
(a) If the Company fails to pay any principal or interest payable
under the Note when due or fails to pay any other amount due hereunder or under
the Note or under any of the Related Documents when due; or
(b) If the Company or any Subsidiary defaults in the payment of
principal of, by acceleration or otherwise, or interest on any indebtedness for
money borrowed (including guaranties or contingent obligations relating to
indebtedness for money borrowed and including all indebtedness for money
borrowed owing to the Bank) beyond any period of grace provided with respect
thereto, or in the performance of any other agreement, term or condition
contained in any agreement under which any such obligation is created, and if
the effect of such default is to cause, or permit the holder or holders of such
obligation (or a trustee on behalf of such holder or holders) to cause, such
obligation to become due prior to its stated maturity; or
(c) If an "Event of Default" shall occur under the Credit
Agreement.
(d) If any representation or warranty made by the Company herein,
or in any writing furnished in connection with or pursuant to this agreement or
any of the Loan Documents, or if any report, certificate, financial statement
or other instrument or document deliver to the Bank by or on behalf of the
Company, shall be false or is leading in any material respect on the date as of
which made and in the opinion of the Bank may impair the ability of the Company
to repay or perform its obligations hereunder; or
(e) If the Company or any Subsidiary defaults in the performance
or observance of any agreement or covenant contained in Section 5.01(b) of this
Agreement; or
(f) If the Company shall fail to perform or observe any of the
provisions of the terms of the Credit Agreement as incorporated pursuant to
Section 5.02 of this Agreement and such failure shall continue unremedied for
10 Business Days after written notice thereof shall have been delivered to the
Company by the Bank, or
(g) If the Company or any Subsidiary defaults in the performance
or observance of any other agreement, covenant, term or condition binding on it
contained herein (other than those referred to in subsections (a) through (f)
above) and such default shall not have been remedied within thirty (30) days
after written notice thereof shall have been received by the Company from the
Bank; or
18
<PAGE> 22
(h) If there shall occur any "Event of Default" (beyond any
applicable grace periods) as specified in this Agreement or any of the other
Loan Documents; or
(i) Liquidation or dissolution of the Company, or suspension of
the business of the Company or filing by the Company of a voluntary petition in
bankruptcy or a voluntary petition or an answer seeking reorganization
arrangement, readjustment of its debts or for any other relief under the United
States Bankruptcy Code, as amended, or under any other insolvency act or law,
state or federal, now or hereafter existing, or any other action of the Company
indicating its consent to, approval of, or acquiescence in any petition or
proceedings; the application by the Company for, or the appointment by consent
or acquiescence of, a receiver, a trustee or a custodian of the company, or an
assignment for the benefit of creditors, the inability of the Company or any
Subsidiary or the admission by the Company in writing of its inability to pay
its debts as they mature; or
(j) Filing of an involuntary petition against the Company in
bankruptcy or seeking reorganization arrangement, readjustment of its debts or
for any other relief under the United States Bankruptcy Code, as amended, or
under any other insolvency act or law, state or federal, now or hereafter
existing; or the involuntary appointment of a receiver, a trustee or a
custodian of the Company or for all or a substantial part of its property; the
issuance of a warrant of attachment, execution or similar process against any
substantial part of the property of the Company and the continuance of any of
the events referred to in this subsection (j) for sixty (60) days undismissed
or undischarged.
SECTION 6.02. Rights upon an Event of Default. If any Event of
Default shall have occurred and not been waived, the Bank may (i) declare all
amounts owing under the Note and all other amounts payable hereunder or in
respect thereof immediately due and payable by the Company, and (ii) declare
any obligation to make advances under the Note terminated, in each case without
presentment, demand, protest, or further notice of any kind, all of which are
hereby expressly waived by the Company. Notwithstanding the foregoing, upon
the occurrence of an Event of Default described in Section: 6.01(i) and 6.01(j)
the entire amount owing under the Note shall become immediately due and payable
without declaration or demand.
SECTION 6.03. No Remedy Exclusive. No remedy herein conferred upon or
reserved to the Bank is intended to be exclusive of any other available remedy
or remedies, but each and every such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute.
19
<PAGE> 23
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendments, Etc. No amendment or waiver of any provision
of this Agreement, nor consent to any departure by the Company therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Bank and then such amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 7.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including required copies) and sent
by receipted hand delivery (including Federal Express or other receipted
courier service), telex or regular mail, if to the Company, at its address at
3004 S. Memorial Drive, Greenville, North Carolina 27834, Attention: President;
if to the Bank, at its address at P.O. Box 1009, Greenville, North Carolina
27835-1009, Attention: City Executive; or, as to each party, at such other
address as shall be designated by such party in a written notice to the other
party. All such notices and communications shall, when delivered or telexed,
be effective when deposited with the courier or telexed, respectively,
addressed as aforesaid, except that notices to the Bank pursuant to the
provisions of Article II shall not be effective until received by the Bank.
SECTION 7.03. No Waiver. No failure on the part of the Bank to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right.
SECTION 7.04. Right of Set-off. (a) Upon the occurrence of any Event
of Default, the Bank is hereby authorized at any time and from time to time, to
the fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by the Bank to or for the credit or the
account of the Company against any and all of the obligations of the Company
now and hereafter existing under this Agreement, irrespective of whether or not
the Bank shall have made any demand hereunder and although such obligations may
be contingent or unmatured.
(b) The Bank agrees promptly to notify the Company after any such
set-off and application referred to in subsection (a) above, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Bank under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) which the Bank may have.
20
<PAGE> 24
SECTION 7.05. Indemnification. The Company hereby indemnifies and
holds the Bank harmless from and against any and all claims, damages, losses,
liabilities, costs or expenses which the Bank may incur or which may be claimed
against the Bank by any person or entity by reason of or in connection with the
execution, delivery or performance of this Agreement, or any Loan Document, or
any transaction contemplated thereby; provided, however, that the Company shall
not be required to indemnify the Bank pursuant to this Section 7.05 for any
claims, damages, losses, liabilities, costs or expenses to the extent caused by
the Bank's gross negligence or willful misconduct. The foregoing limitations
relate only to indemnification under this Section 7.05 and do not diminish or
limit any other liability or obligation of the Company to the Bank under this
Agreement.
Nothing in this Section 7.05 is intended to limit the Company's
obligations contained in Article II or the Note. Without prejudice to the
survival of any other obligation of the Company hereunder, the indemnities and
obligations of the Company contained in this Section 7.05 shall survive the
payment in full of amounts payable pursuant to Article II, the Note for the
period ending on the last day of the applicable statute of limitations period.
SECTION 7.06. [Section Intentionally omitted].
SECTION 7.07. Costs, Expenses and Taxes. The Company agrees to pay on
demand of Bank all costs and expenses in connection with the preparation,
execution, delivery, filing, recording, and administration and enforcement of
this Agreement and the Loan Documents and any other documents which may be
delivered in connection with this Agreement or the transactions contemplated
hereby, including, without limitation, the reasonable fees and out-of-pocket
expenses of the Bank and of counsel and any agents or consultants for the Bank,
with respect thereto and with respect to advising the Bank as to its rights and
responsibilities under this Agreement, and all reasonable costs and expenses
(including counsel fees and expenses) in connection with the preparation and
enforcement of this Agreement, the Loan Documents and such other documents
which may be delivered in connection herewith or therewith. In addition, the
Company shall pay any and all stamps and other taxes and fees payable or
determined to be payable in connection with the execution, delivery, filing and
recording of this Agreement, the Loan Documents and such other documents, and
agrees to save the Bank harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such taxes
and fees.
SECTION 7.08. Binding Effect. This Agreement shall become effective
when it shall have been executed by the Company and the Bank and thereafter
shall be binding upon and inure to the benefit of the Company and the Bank and
their respective successors and assigns, except that the Company shall not have
the right to assign its rights hereunder or any interest herein without the
prior
21
<PAGE> 25
written consent of the Bank. The Bank may, without cost or expense to the
Company, assign or sell a participation in all or any part of, or any interest
(undivided or divided) in, the Bank's rights and benefits under this Agreement.
SECTION 7.09. Severability. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
SECTION 7.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of North Carolina.
SECTION 7.11. Headings. Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
SECTION 7.12. Prior Agreements Superseded. This Agreement shall
completely and fully supersede all prior undertakings or agreements, both
written and oral, between the Company and the Bank relating to the matters
contained herein, including those contained in any commitment letter between
the Bank and the Company executed in anticipation of this Agreement.
SECTION 7.13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
[This space intentionally left blank. Signatures on
following page.]
22
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
ATTEST REGIONAL ACCEPTANCE CORPORATION
By: /s/ Robert D. Barry BY: /s/ W.R. Stallings
------------------------------ ---------------------------------
Title: Secretary Title: President
-------------------------- -----------------------------
BRANCH BANKING AND TRUST COMPANY
By: /s/ S. Hearst Vann
--------------------------------
Title: Vice President
-----------------------------
23
<PAGE> 27
EXHIBIT A
FORM OF OFFICER'S CERTIFICATE
The undersigned, ___________________________________, the Chief
Financial officer of Regional Acceptance Corporation (the "Company"), does
hereby certify to Branch Banking and Trust Company (the "Bank") pursuant to the
provisions of that certain Loan Agreement dated July ____, 1996 between the
Company and the Bank (the "Loan Agreement") as follows:
1. No default or event of default exists under the Credit
Agreement (as defined in the Loan Agreement) and the execution, delivery and
performance by the Company of the terms and conditions of the Loan Agreement,
and the use of the proceeds of the loan made pursuant to the Loan Agreement,
will not cause a default or event of default to occur under the Credit
Agreement.
2. The Company is a valid legal entity and has the power and
authority to enter into the Loan Agreement, and the transactions contemplated
by the Loan Agreement are not prohibited by any other agreement to which the
Company is a party.
3. The Loan Documents (as defined in the Loan Agreement) are duly
and validly executed and each constitutes a valid and legally binding and
enforceable obligation of the Borrower.
4. The loan evidenced by the Note (as defined in the Loan
Agreement) and its terms do not violate any laws including, but not limited to,
any usury laws or similar laws.
5. There are no pending or threatened actions or suits against
the Company that will have a material adverse effect on its financial
condition, or impair the ability of the Company to carry on its business
substantially as now conducted.
6. Attached as Exhibit A-1 hereto is a copy of resolutions
adopted by the Board of Directors of the Company approving the execution,
delivery and performance of the Loan Agreement and the Note, which resolutions
are in full force and effect.
7. Attached as Exhibit A-2 hereto are the Articles of
Incorporation and Bylaws of the Company, and all amendments thereto, which are
currently in effect.
This the ______ day of July, 1996.
------------------------------------
Name:
-------------------------------
Title: Chief Financial Officer
24
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF REGIONAL ACCEPTANCE CORPORATION FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,984,120
<SECURITIES> 0
<RECEIVABLES> 162,039,599
<ALLOWANCES> 4,397,070
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 3,460,521
<DEPRECIATION> 1,416,978
<TOTAL-ASSETS> 162,992,338
<CURRENT-LIABILITIES> 120,511,601
<BONDS> 0
0
0
<COMMON> 19,180,182
<OTHER-SE> 22,599,171
<TOTAL-LIABILITY-AND-EQUITY> 162,992,338
<SALES> 0
<TOTAL-REVENUES> 19,102,195
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,705,488
<LOSS-PROVISION> 2,161,000
<INTEREST-EXPENSE> 4,021,532
<INCOME-PRETAX> 7,214,175
<INCOME-TAX> 2,723,000
<INCOME-CONTINUING> 4,491,175
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,491,175
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
