SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
April 6, 1994
Date of Report (Date of earliest event reported)
Fairfield Communities, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 1-8096 71-0390438
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification Number)
2800 Cantrell Road
Little Rock, Arkansas 72202
(501) 664-6000
(Address including zip code and telephone number including
area code of Registrant's principal executive offices)
Page 1 of 72
Exhibit Index appears on page 6
<PAGE>
INFORMATION INCLUDED IN THE REPORT
Item 5. Other Events
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On April 6, 1994, Fairfield entered into a Stock Purchase Agreement
(the "Agreement") to sell the stock (the "Sale") of its wholly owned
subsidiary, First Federal Savings and Loan Association of Charlotte ("First
Federal"), to Security Capital Bancorp ("SecCap"). A copy of the Agreement
is attached hereto as Exhibit 5.1 and incorporated herein by reference.
The following discussion of the Agreement is (a) a summary only, (b)
necessarily selective and therefore incomplete and (c) qualified in its
entirety by reference to the Agreement.
The purchase price for First Federal is $40.35 million, which will be
increased (subject to the limitation hereafter described) to reflect the
consolidated pretax net earnings of First Federal and its subsidiaries for
the period from October 1, 1993 through the closing of the Sale, or
decreased by the consolidated pretax net losses of First Federal and its
subsidiaries during this time period, whichever is the case (the "Purchase
Price"). The increase to the $40.35 million for pretax earnings of First
Federal and its subsidiaries cannot exceed $1,825,000 plus, if the closing
of the Sale occurs after August 1, 1994, in general, the pretax earnings or
losses of First Federal and its subsidiaries from August 1, 1994 through
the closing, provided that the foregoing amounts may be reduced under
certain circumstances for reserves taken or losses (in excess of gains) on
Excluded Assets (as defined below) after September 30, 1993. Up to
approximately $1.39 million of the Purchase Price is to be retained by
SecCap to secure Fairfield's obligation to indemnify SecCap against three
existing lawsuits/claims which have been asserted against First Federal
(the "Litigation Indemnity"). As part of the proposed transaction,
Fairfield is to purchase for cash (a) at book value, net of reserves, up to
approximately $19.8 million, as of March 28, 1994, of certain real estate,
classified loans, joint venture interests and other assets owned by First
Federal (the "Excluded Association Assets"), subject to the right of SecCap
to elect for First Federal to retain all or part of such assets, and (b)
lot and timeshare contracts receivable and related assets which First
Federal previously acquired from Fairfield (the "Contracts Receivable"),
having a book value, less certain negotiated reserves, at December 31,
1993, of approximately $54.2 million and a weighted average yield, at
December 31, 1993, on approximately $52.5 million of interest earning
receivables, of 11.6%. The Excluded Association Assets and the Contracts
Receivable are collectively referred to as the "Excluded Assets".
Approximately $2.85 million in net book value of the Excluded Association
Assets are to be pledged to SecCap to provide additional security with
respect to both the Litigation Indemnity and the general indemnities under
the Agreement. Fairfield has certain rights to substitute collateral in
connection with such pledge, including the right to substitute $0.60 to
$0.70 of cash for every $1.00 of net book value of Excluded Association
Assets so pledged. Reserves taken by Fairfield after the closing on
Excluded Association Assets securing the Litigation Indemnity may increase
the total Excluded Association Assets required as collateral.
Fairfield expects to utilize (a) a portion of the Purchase Price to
fund the purchase of the Excluded Association Assets and (b) the remaining
Purchase Price, plus proceeds from borrowings under its and its
subsidiaries' revolving credit agreements with The First National Bank of
Boston ("FNBB"), to fund the purchase of the Contracts Receivable. Under
Fairfield's and its subsidiaries' revolving credit agreements, in general,
within applicable loan limits, $0.75 of additional borrowing availability
is created for each $1.00 in outstanding principal balance of qualifying
Contracts Receivable pledged to FNBB.
Fairfield expects to dispose of certain of the Excluded Association
Assets in one or more transactions, and otherwise to monetize the remaining
Excluded Association Assets, following the closing of the Sale of First
Federal. Any gain resulting from the Sale of First Federal may be reduced
by additional write-downs of these assets, which may be material, depending
upon Fairfield's intended method of disposing of, or monetizing, the
Excluded Association Assets.
The Sale is subject to numerous conditions, including the obtaining of
necessary approvals from (i) state and federal regulatory authorities, (ii)
FNBB and (iii) Fairfield's stockholders. There is no assurance that the
conditions to closing will be satisfied or that the various regulatory
approvals will be obtained on terms satisfactory to the parties. The Sale
is expected to close by August 1, 1994.
On April 6, 1994, Fairfield issued a press release, announcing the
signing of the Agreement and generally describing the terms of the Sale. A
copy of such press release is attached hereto as Exhibit 5.2 and
incorporated herein by reference.
<PAGE>
Item 7. Financial Statements and Exhibits
---------------------------------
(c) Exhibits
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5.1 Stock Purchase Agreement dated as of April 5, 1994,
between Fairfield Communities, Inc. and Security
Capital Bancorp, providing for the possible sale of
the stock of First Federal Savings and Loan
Association of Charlotte, a wholly-owned subsidiary
of Fairfield Communities, Inc.
5.2 Press Release dated April 6, 1994, announcing the
signature of the Stock Purchase Agreement dated as of
April 5, 1994, between Fairfield Communities, Inc.
and Security Capital Bancorp, providing for the
possible sale of the stock of First Federal Savings
and Loan Association of Charlotte, a wholly-owned
subsidiary of Fairfield Communities, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
FAIRFIELD COMMUNITIES, INC.
By: /s/ Marcel J. Dumeny
Marcel J. Dumeny
Senior Vice President
Date: April 14, 1994
<PAGE>
FAIRFIELD COMMUNITIES, INC.
EXHIBIT INDEX
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Sequential
Exhibit Number Description Page Number
- -------------- ----------- -----------
5.1 Stock Purchase Agreement dated as of
April 5, 1994, between Fairfield
Communities, Inc. and Security Capital
Bancorp, providing for the possible sale
of the stock of First Federal Savings and
Loan Association of Charlotte, a wholly-
owned subsidiary of Fairfield Communities,
Inc.
5.2 Press Release dated April 6, 1994,
announcing the signature of the Stock
Purchase Agreement dated as of April 5,
1994, between Fairfield Communities, Inc.
and Security Capital Bancorp, providing
for the possible sale of the stock of First
Federal Savings and Loan Association of
Charlotte, a wholly-owned subsidiary of
Fairfield Communities, Inc.
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT ("Agreement"), dated as of April 5, 1994,
between FAIRFIELD COMMUNITIES, INC., a Delaware corporation having its
principal office at 2800 Cantrell Road, Little Rock, Arkansas 72202 (the
"Seller"), and SECURITY CAPITAL BANCORP, a North Carolina corporation
having its principal office at 507 West Innes Street, Salisbury, North
Carolina 28144 ("SCBC").
W I T N E S S E T H:
WHEREAS, the Seller owns Two Hundred Thousand (200,000) shares
("Shares") of the common stock of First Federal Savings and Loan
Association of Charlotte (the "Association"), which Shares constitute all
of the issued and outstanding shares of capital stock of the Association;
WHEREAS, the Seller wishes to sell the Shares to SCBC, and SCBC wishes
to purchase and acquire, or to have the Designated Subsidiary (as
hereinafter defined) purchase and acquire, the Shares from the Seller (the
"Acquisition"), all on the terms set forth hereinafter; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties, covenants and indemnification in
connection with the transactions contemplated hereby;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto do hereby
agree as follows:
ARTICLE I
DEFINITIONS
"Acquisition" shall have the meaning set forth in the preamble of this
Agreement.
"Adverse Consequences" shall mean all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages (including any
trebling thereof), assessments, premiums, penalties, fines, interest,
costs, amounts paid in settlement or in compromise, Liabilities,
obligations, Taxes arising from claims by taxing authorities, liens,
losses, expenses, monetary sanctions awarded during the Litigation, and
fees (including attorneys' fees awarded to third parties), court costs, and
reasonable attorneys', expert witness', investigators', consultants' and
accountants' fees and expenses (of the party incurring or subject to the
foregoing matters) arising from an occurrence of any of the foregoing;
provided, however, (i) with respect solely to Direct Claims, it is the
intention of SCBC and the Seller to include only direct compensatory
damages resulting from any of the above and indirect, consequential,
exemplary and/or punitive damages resulting from any of the above are
specifically excluded from the definition of Adverse Consequences, except
that the Seller shall be entitled, as and when provided under Section
2.4(e), to recover the Penalty as a Direct Claim for SCBC's failure to pay
the Deferred Payments in accordance with provisions of Section 2.4(b) and
(d) of this Agreement, and (ii) with respect to Third Party Claims, it is
the intention of SCBC and the Seller to exclude from the definition of
Adverse Consequences wages, salaries and similar compensation paid by SCBC,
the Association or any of the Retained Association Subsidiaries to their
employees in respect of time spent by such employees in defending such
Third Party Claims, including the Litigation, but to include out-of-pocket
expenses incurred by such employees.
"Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated
under the Securities Exchange Act of 1934, as amended.
"Agreement" shall have the meaning set forth in the preamble of this
Agreement.
"Association" shall have the meaning set forth in the preamble of this
Agreement, as modified by the provisions of Section 2.5.
"Association Common Stock" shall have the meaning set forth in Section
3.3 of this Agreement.
"Association Financial Statements" shall mean (i) the audited
consolidated balance sheets (including related notes and schedules, if any)
of the Association as of December 31, 1993, 1992 and 1991 and the related
audited consolidated statements of operations, stockholder's equity and
cash flows (including related notes and schedules, if any) for each of the
periods ended December 31, 1993 and 1992, June 30, 1992, and December 31,
1991 as have been Previously Disclosed (or, in the case of the period ended
December 31, 1993, as will be disclosed to SCBC prior to the Effective
Time) and (ii) the Association's unaudited consolidated balance sheets
(including related notes and schedules, if any) as of September 30, 1993
and the related unaudited consolidated statements of operations,
stockholder's equity and cash flows for the three-month and nine-month
periods ended September 30, 1993 as have been Previously Disclosed and,
with respect to interim periods ended subsequent to December 31, 1993, as
will be provided to SCBC prior to the Effective Time.
"Association Letter" shall mean the letter dated as of the date
hereof, from the Association to SCBC, containing certain representations
and warranties to SCBC as of the date hereof.
"Association Subsidiaries" shall mean any corporation, commercial
bank, industrial bank, savings association, savings bank, partnership,
Joint Venture, limited liability company, business trust, or other
organization more than 10% of the stock or ownership interest of which is
owned, directly or indirectly, by the Association, as Previously Disclosed.
"Bank Holding Company Act" shall mean the Bank Holding Company Act of
1956, as amended.
"Bankruptcy Litigation" shall mean all threatened and hereafter
asserted claims against SCBC, the Association or a Retained Association
Subsidiary by the trustee in bankruptcy or by any other party in interest
in the bankruptcy cases of Carley Capital Group, James E. Carley or L.
David Carley for alleged fraudulent transfers or preferential transfers to
the Association or any Association Subsidiary by the Carley Capital Group
or entities related to the Carley Capital Group.
"Budgeted Reserves" shall mean New Reserves in respect of Other Assets
in an amount equal to the sum of (i) $1,250,000, plus (ii) an amount
determined by multiplying the number of months during the Interim Period
(or portion of a calendar month if the Closing does not occur on the last
day of calendar month) times $20,000 (or proportionate lesser amount for a
portion of a calendar month in which the Closing occurs).
"Capped Interim Period Earnings Amount" shall mean an amount (which
may be a negative number) equal to the lesser of (i) the amount of the
Interim Period Earnings, and (ii) One Million Eight Hundred Twenty-Five
Thousand Dollars ($1,825,000) plus, in the event the Closing occurs on a
date after the Target Date, an amount (which may be a negative number)
equal to one hundred percent (100%) of the Interim Period Earnings
attributable to the period of time commencing after the Target Date and
ending on and including the Closing Date (the "Post-Target Date Interim
Period Earnings").
"Cash" shall mean currency of the United States of America.
"Cash Equivalents" shall mean stocks, bonds, notes, obligations, other
forms of intangible property or whatever else has been received by the
Association during the Interim Period, except Cash, real property or
tangible personal property, (i) as a payment on, a distribution from, a
restructuring or reorganization of, a sale or other disposition of, or as a
result of a foreclosure or other asset realization procedure on, any
Excluded Loans, Excluded Real Estate and JV Interests or Repurchased
Timeshare and Lot Assets, which (ii) has a quantifiable monetary value
determinable under GAAP at the time of its receipt by the Association, and
which (iii) has been credited against the Gross Book Value of the
particular Excluded Loan, Excluded Real Estate and JV Interest or
Repurchased Timeshare and Lot Asset in respect of which it was received.
"Class Action Litigation" shall mean (i) the civil action styled
Charlotte T. Curry, individually and on behalf of all others similarly
situated v. First Federal Savings & Loan Association of Charlotte, Case No.
93 CVS 7963, filed in the General Court of Justice, Superior Court
Division, Forsyth County, North Carolina and subsequently transferred to
the General Court of Justice, Superior Court Division, Mecklenberg County,
North Carolina, and any and all other claims now or hereafter asserted
against SCBC, the Association or a Retained Association Subsidiary in such
civil action, and (ii) any civil action commenced against SCBC, the
Association, the successor to the Association after the Merger, or any
Retained Association Subsidiary which (X) is filed by or on behalf of one
or more Persons who are described as a member of the purported class, as
defined in the complaint filed in the Curry litigation, and who opts out of
any settlement or award in the Curry litigation, or (Y) is filed subsequent
to dismissal of the Curry litigation without prejudice by or on behalf of
one or more Persons who are described as a member of the purported class,
as defined in the complaint filed in the Curry litigation.
"Closing" shall have the meaning set forth in Section 5.8(a) of this
Agreement.
"Closing Date" shall have the meaning set forth in Section 5.8(a) of
this Agreement.
"Commissioner" shall have the meaning set forth in Section 5.1 of this
Agreement.
"Continuing Employees" shall have the meaning set forth in Section 5.9
of this Agreement.
"Controlled Group of Corporations" shall have the meaning set forth in
Tax Code Section 1563.
"CRA" shall mean the Community Reinvestment Act of 1977, as amended.
"Deferred Payment Amount" shall mean a portion of the Purchase Price
equal to the dollar amount specified on Appendix 1.
"Deferred Payment Security Interests" shall have the meaning set forth
in Section 2.4(c).
"Designated Subsidiary" shall mean the SCBC Subsidiary, if any,
designated by SCBC as set forth in Section 8.7 hereof.
"Direct Claim" shall mean any claim by an Indemnified Party on account
of an Indemnifiable Loss that does not result from a Third Party Claim.
"Effective Time" shall mean the time and date specified pursuant to
Section 5.8 hereof as the effective time of the Acquisition.
"Effects of Extraordinary Items" shall be determined at the Effective
Time and shall mean an amount (which may be a negative number) equal to (i)
the sum of (A) an amount equal to all New Reserves in respect of Excluded
Assets, but only to the extent that such New Reserves are subtracted in
accordance with Sections 2.2(b)(i), (ii) and (iii) hereof from the Net Book
Value of the Excluded Assets to be purchased by the Seller or have been
taken into account in determining the gains and losses on Excluded Assets
sold or otherwise disposed of during the Interim Period for purposes of
clauses (i)(B) and (ii) hereof, and (B) an amount equal to all losses on
the sales or other dispositions of Excluded Assets during the Interim
Period, determined in accordance with GAAP and without regard to the
effects of federal, state and local income Taxes and other Taxes in the
nature of income Taxes, minus (ii) an amount equal to all gains on the
sales or other dispositions of Excluded Assets during the Interim Period,
determined in accordance with GAAP and without regard to the effects of
federal, state and local income Taxes and other Taxes in the nature of
income Taxes.
"Employee Benefit Plan" shall mean any (i) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (ii) qualified defined contribution retirement plan or
arrangement which is an Employee Pension Benefit Plan, (iii) qualified
defined benefit retirement plan or arrangement which is an Employee Pension
Benefit Plan, (iv) Employee Welfare Benefit Plan or material fringe benefit
plan or program, or (v) stock option, stock purchase, stock appreciation,
stock or cash bonus, or similar plan or arrangement.
"Employee Pension Benefit Plan" shall have the meaning set forth in
ERISA Section 3(2).
"Employee Welfare Benefit Plan" shall have the meaning set forth in
ERISA Section 3(1).
"Environmental Agency" shall have the meaning set forth in Section
3.12(f) of this Agreement.
"Environmental Law" shall have the meaning set forth in Section
3.12(d) of this Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Excluded Assets" shall mean (i) the Excluded Loans; (ii) the Excluded
Real Estate and JV Interests; (iii) the Repurchased Timeshare and Lot
Assets; (iv) all Association Subsidiaries that are not Retained Association
Subsidiaries; (v) Proceeds; (vi) all loans wholly charged off as of
September 30, 1993 and in respect of which all original collateral, if any,
had been realized and liquidated by the Association as of September 30,
1993; (vii) all claims, demands, causes of action or other rights and the
like, including, but not limited to, claims against any borrowers,
guarantors, sureties, insurers under policies of insurance existing at or
prior to the Effective Time and claims against Persons asserting claims
against the Association and its successors and assigns, whether in
litigation, arbitration or otherwise, related to, or guaranteeing or
insuring against risks of loss associated with, the assets described in
clauses (i) through (vi) of this definition or arising from or related to,
or guaranteeing or insuring against risks of loss associated with, the
Excluded Liabilities or other matters with respect to which the Seller
shall be obligated after the Effective Time to indemnify SCBC, the
Association and the Retained Association Subsidiaries and all present and
future judgments, fines, settlement proceeds, awards or other recoveries of
any kind (collectively, "Recoveries") from the litigation or settlement of
such claims, demands or causes of actions; and (viii) all records and
original documents which pertain to or are utilized by the Association and
the Association Subsidiaries to administer, reflect, monitor, evidence or
record information with respect to the operation or ownership of any of the
assets described in the other clauses of this definition or with respect to
the Excluded Liabilities.
"Excluded Liabilities" shall mean all liabilities and obligations of
the Association or any of the Association Subsidiaries arising prior to or
after the Effective Time in respect of or in connection with the Excluded
Assets, including, but not limited to, all obligations of the Association
to fund future advances on the Excluded Loans.
"Excluded Loans" shall mean the loans and other items listed on
Exhibit A hereto and all related escrow accounts and servicing rights
associated therewith and all Proceeds therefrom.
"Excluded Real Estate and JV Interests" shall mean the real estate,
Joint Ventures and other assets listed on Exhibit B hereto, all interests
of the Association and the Retained Association Subsidiaries therein and
all Proceeds therefrom.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation, or any
successor thereto.
"Federal Reserve Board" shall mean the Board of Governors of the
Federal Reserve System, or any successor thereto.
"FHLB of Atlanta" shall mean Federal Home Loan Bank of Atlanta.
"Fiduciary" shall have the meaning set forth in ERISA Section 3(21).
"GAAP" shall mean generally accepted accounting principles in effect
in the United States from time to time, as applied by the entity in respect
of which the term is used consistently with its past practices.
"Gross Book Value" shall mean the book value of an asset, plus or
minus, adjustments, if any, for the following: undisbursed loan balances,
accrued interest, deferred fees, deferred interest and reserves for
uncollected interest, but not reducing such book value by the amounts of
specific valuation allowances and charge-offs and, when used in reference
to or in respect of Repurchased Timeshare and Lot Assets, Timeshare and Lot
Reserves as defined in the definition of "Net Book Value," which are
reflected in the books and records of the Association at September 30,
1993.
"Hazardous Materials" shall have the meaning set forth in Section
3.12(e) of this Agreement.
"HMDA" shall mean the Home Mortgage Disclosure Act, as amended.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
"Homeowners Litigation" shall mean the civil action styled Carson Pond
Homeowners' Association v. Carolina Financial Service Corporation, et al,
Case No. 92 CVS 12275, filed in the General Court of Justice, Superior
Court Division, Mecklenberg County, North Carolina, and all other claims
now or hereafter asserted against the Association or any Retained
Association Subsidiary in such civil action or in a civil action filed by
the Carson Pond Homeowners' Association subsequent to the dismissal of the
pending action without prejudice for any acts or omissions by any of them
prior to the Closing which claims are based generally upon the factual
allegations set forth in the complaint in the aforesaid pending litigation.
"Indemnification Security Interests" shall have the meaning set forth
in Section 8.4(a).
"Indemnifiable Losses" shall mean any and all Adverse Consequences
resulting from Litigation or an event, circumstance or occurrence giving
rise to a Direct Claim or a Third Party Claim, except to the extent that
such Adverse Consequences are the result of any action taken or omitted to
be taken by the Indemnified Party in breach of its obligations under this
Agreement or under the Responsibilities Agreement or in violation of law.
"Indemnified Party" shall mean any Person entitled to indemnification
under this Agreement.
"Indemnifying Party" shall mean any Person required to provide
indemnification under this Agreement.
"Indemnity Payment" shall mean any amount of Indemnifiable Losses
required to be paid pursuant to this Agreement.
"Intellectual Property" shall mean (i) all inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent
disclosures, together with all reissuances, continuations, continuations-
in-part, revisions, extensions, and reexaminations thereof, (ii) all
trademarks, service marks, trade dress, logos, trade names, and corporate
names, together with all translations, adaptations, derivations, and
combinations thereof and including all goodwill associated therewith, (iii)
all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (iv) all mask works
and all applications, registrations, and renewals in connection therewith,
(v) all trade secrets and confidential business information (including
ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data,
designs, drawings, specifications, customer and supplier lists, pricing and
cost information and business and marketing plans and proposal(s), (vi) all
computer software (including data related documentation), source codes and
site licenses, (vii) all other proprietary rights, and (viii) all copies
and tangible embodiments thereof (in whatever form or medium).
"Interim Period" shall mean the period commencing on and including
October 1, 1993 and ending as of the Effective Time.
"Interim Period Earnings" shall mean consolidated net earnings of the
Association and the Association Subsidiaries during the Interim Period,
determined (i) in accordance with GAAP, (ii) without regard to the effects
of federal, state and local income Taxes and other Taxes in the nature of
income Taxes, and (iii) without regard to the effects of any of the
components that determine the Effects of Extraordinary Items.
"Joint Venture" shall mean any joint venture, partnership or similar
arrangement in which the Association or any Association Subsidiary is a
member, party or partner (whether general or limited), as Previously
Disclosed."
"Knowledge" shall mean the actual knowledge of the Seller's senior
executive officers and directors (including, without limitation, the
Seller's senior executive officers responsible for Tax matters and the
Seller's representatives on the Association's Board of Directors) after
reasonable inquiry of the executive officers and directors of the
Association and each Retained Association Subsidiary, the Person or Persons
responsible for the day-to-day operations of any Association Subsidiary
that is not a Retained Association Subsidiary but over which the
Association or any Retained Association Subsidiary exercises managerial
control, and the Seller's and the Association's attorneys, accountants and
other professionals involved in matters related to the Seller, the
Association and/or any Association Subsidiary.
"Liability" shall mean any liability (whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and
whether due or to become due), including any liability for Taxes.
"Litigation" shall mean the Bankruptcy Litigation, the Class Action
Litigation and/or the Homeowners' Litigation, as applicable.
"Litigation Security Interests" shall have the meaning set forth in
Section 8.4(a).
"Loan" shall have the meaning set forth in Section 3.23 of this
Agreement.
"Material Adverse Event" shall mean any event, matter, item or
circumstance (other than as a result of changes (a) in banking or thrift
laws or regulations of general applicability or interpretations thereof by
court or governmental entities, (b) in GAAP, (c) in interest rates, or (d)
when used in respect of the Association and the Association Subsidiaries,
in or relating to the Excluded Assets) that in and of itself, or when
combined with all similar events, matters, items or circumstances,
reasonably could be expected to have, now or in the future, a material
adverse effect on the business, financial condition, operations, results of
operations or prospects of the Association and the Retained Association
Subsidiaries, taken as a consolidated whole (unless otherwise indicated
herein), or SCBC and the SCBC Subsidiaries, taken as a consolidated whole
(unless otherwise indicated herein), as the case may be, but when used in
respect of the Association and the Retained Association Subsidiaries, shall
not include those changes which would reasonably be expected to occur as a
reasonable consequence of the Acquisition, including, without limitation,
the consequences of employee resignations and employee relations
difficulties.
"Merger" shall have the meaning set forth in Section 2.5 of this
Agreement.
"Multiemployer Plan" shall have the meaning set forth in ERISA Section
3(37).
"Net Book Value" shall mean (i) when used in reference to or in
respect of an asset other than a Repurchased Timeshare and Lot Asset, the
Gross Book Value of such asset less charge-offs (net of recoveries) and
specific valuation allowances allocated to that asset which are reflected
in the books and records of the Association at September 30, 1993 in
accordance with GAAP and in the Ordinary Course of Business, and (ii) when
used in reference to or in respect of Repurchased Timeshare and Lot Assets,
the Gross Book Value of such assets minus (A) the amount of the Timeshare
and Lot Reserve Account on the Association's books and records at September
30, 1993, minus (B) the amount of the general reserve account attributable
to Repurchased Timeshare and Lot Assets on the Association's books and
records at September 30, 1993, and minus (C) any separate interest reserve
attributable to Repurchased Timeshare and Lot Assets on the Association's
books at September 30, 1993 (the reserve accounts described in clauses (A),
(B) and (C) hereof, without reference to balances at September 30, 1993,
being referred to in this Agreement as the "Timeshare and Lot Reserves"),
plus (D) the aggregate amount of the Timeshare and Lot Reserves at
September 30, 1993 reallocated by the Association during the Interim Period
as contemplated by Section 5.3(k) hereof.
"New Reserves," when used in reference to or in respect of a category
or classification of the Association's assets, shall mean the aggregate of
the charge-offs (net of recoveries) and general and specific valuation
provisions for loss contingencies on assets of the Association within that
category or classification of assets that are entered by the Association on
its books and records during the Interim Period in accordance with GAAP and
in the Ordinary Course of Business; provided, however, except to the extent
that the Association reallocates general or specific reserves during the
Interim Period as contemplated by the provisions of Section 5.3(k) hereof,
such aggregate shall not include (i) any valuation provisions resulting
from allocations made of valuation allowances (general or specific)
existing on the Association's books at September 30, 1993, and (ii) any
charge-offs (net of recoveries) and valuation provisions (general or
specific) in respect of Other Assets entered by the Association on its
books and records during the Interim Period that are not expensed in
calculating Interim Period Earnings.
"OTS" shall mean the Office of Thrift Supervision, its predecessor,
the Federal Home Loan Bank Board, and any successor to the Office of Thrift
Supervision.
"Ordinary Course of Business" shall mean the ordinary course of
business of the entity respecting which this term is used, conducted in the
same manner as theretofore conducted during the 18 months preceding the
date of this Agreement and consistent with the entity's past policies,
practices, and methods (including with respect to quantity and frequency)
in effect during such 18-month period (except as modified at the request of
SCBC as provided in Section 5.3(a)), but shall expressly exclude the
initiation of new, or the modification of the terms of existing,
transactions with Affiliates not required by financial institution
regulatory authorities.
"Other Assets" shall mean all assets of the Association and the
Retained Association Subsidiaries other than the Excluded Assets.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PCBs" shall have the meaning set forth in Section 3.12(b) of this
Agreement.
"Penalty" shall mean the amount payable by SCBC to the Seller as and
when provided in Section 2.4(e).
"Period End" shall have the meaning set forth in Section 8.2(a) of
this Agreement.
"Person" shall mean an individual, a partnership, a corporation, a
commercial bank, an industrial bank, a savings association, a savings bank,
a limited liability company, an association, a joint stock company, a
trust, a business trust, a Joint Venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political
subdivision thereof).
"Previously Disclosed" shall mean information disclosed in a letter
from the Seller making such disclosure specifically referring to this
Agreement and arranged in paragraphs corresponding to the Sections,
subsections and items of this Agreement applicable thereto, and delivered
to SCBC, and shall include statements made in the Association Letter.
"Proceeds" shall mean any real property, personal property, stocks,
bonds, notes (including promissory notes delivered to and accepted by the
Association in connection with the sale of an asset), obligations or other
forms of intangible property or whatever else is received by the
Association or an Association Subsidiary during the Interim Period, except
Cash and Cash Equivalents, as a payment on, a distribution from, the sale
or other disposition of, or a restructuring or reorganization of, or as a
result of a foreclosure, deed in lieu of foreclosure, cancellation of a lot
contract receivable, or other asset realization procedure on an Excluded
Asset.
"Prohibited Transaction" shall have the meaning set forth in ERISA
Section 406 and Tax Code Section 4975.
"RCRA" shall have the meaning set forth in Section 3.12(e) of this
Agreement.
"Reportable Event" shall have the meaning set forth in ERISA Section
4043.
"Repurchased Timeshare and Lot Assets" shall mean all of the timeshare
and lot contract receivables which were originated by the Seller or
Affiliates of the Seller other than the Association and sold to the
Association, all related escrow accounts and servicing rights associated
therewith and all Proceeds therefrom.
"Responsibilities Agreement" shall mean the agreement, the form of
which is attached as Exhibit D, to be executed and delivered by the Seller
and SCBC at the Closing.
"Restrictions on Transfer" shall mean any restriction, limitation, or
prohibition upon an owner's right, power or authority to transfer, sell, or
otherwise convey full title and ownership rights in a security, including,
but not limited to, any restriction, limitation or prohibition arising
under federal or state securities laws or regulations, voting trusts, court
orders, agreements among or between shareholders, and agreements with third
parties.
"Retained Association Subsidiaries" shall mean those Association
Subsidiaries set forth on Exhibit C hereto.
"Rights" shall mean warrants, options, rights (whether stock
appreciation rights, conversion rights, exchange rights, profit
participation rights, or otherwise), convertible securities and other
arrangements or commitments which obligate an entity to issue, otherwise
cause to become outstanding, sell, transfer, pledge, or otherwise dispose
of any of its capital stock or other ownership interests, or any voting
rights thereof or therein.
"SCBC" shall have the meaning set forth in the preamble of this
Agreement.
"SCBC Subsidiaries" shall mean Security Bank and Trust Company;
OMNIBANK, Inc., A State Savings Bank; Citizens Savings, Inc., A State
Savings Bank; Home Savings Bank, Inc., A State Savings Bank; First Cabarrus
Corporation; Estates Development Corporation; and, First Security Credit
Corporation.
"Section 338 Forms" shall have the meaning set forth in Section 5.3(i)
of this Agreement.
"Security Interest" shall mean any mortgage, deed of trust, pledge,
lien, encumbrance, charge, or other security interest, other than (i) liens
for Taxes not yet due and payable or for Taxes that the taxpayer is
contesting in good faith through appropriate proceedings, and (ii) purchase
money liens and liens securing rental payments under capital lease
arrangements.
"Seller" shall have the meaning set forth in the preamble of this
Agreement.
"Seller's Payment" shall have the meaning set forth in Section 2.2(b)
of this Agreement.
"Shares" shall have the meaning set forth in the preamble of this
Agreement.
"Significant Contract" shall mean (a) any note, bond, mortgage or
other instrument which evidences or secures indebtedness of the Association
(other than a deposit) or a Retained Association Subsidiary with a balance
outstanding of $25,000 or more, which cannot be redeemed or prepaid at the
option of the Association or the Retained Association Subsidiary for an
amount which, when added to the outstanding principal balance, would be
less than $25,000, (b) any agreement, arrangement, commitment, contract or
other instrument, except a lease of real or personal property, to which the
Association or any Retained Association Subsidiary is a party or by which
they are bound, if (i) such agreement, arrangement, commitment, contract or
instrument was not made in the Ordinary Course of Business by the
Association or such Retained Association Subsidiary, or (ii) the
performance or nonperformance of such agreement, arrangement, commitment,
contract or instrument could either (X) increase the liabilities or
decrease the assets of the Association or such Retained Association
Subsidiary, or (Y) decrease the income or increase the expenses of the
Association or such Retained Association Subsidiary, in each case by
$25,000 or more over the remaining term of the obligation, exclusive of all
optional renewal periods and extensions of the term; provided, however,
that any such agreement, arrangement, commitment, contract or other
instrument shall not be deemed to a Significant Contract in the event the
Association or such Retained Association Subsidiary has the contractual
right to terminate the agreement, arrangement, commitment, contract or
other instrument in question on 30 days notice or less, without incurring a
penalty or premium in excess of $25,000. It is understood that Significant
Contacts do not include loans or commitments to fund loans or to extend
credit.
"Significant Lease" shall mean (a) any lease of real or personal
property, or any sublease of real property, by the Association or any
Association Subsidiary, as lessee, pursuant to which the Association or the
Association Subsidiary reasonably anticipates the payment of aggregate
rent, taxes, insurance, utilities (if applicable) and other charges in
excess of $25,000 over the remaining term of the lease, exclusive of all
optional renewal periods and optional extensions of the term (provided,
however, that any such lease shall not be deemed a Significant Lease in the
event the Association or the Association Subsidiary has the contractual
right to terminate the lease in question on 30 days' notice or less,
without incurring a penalty or premium in excess of $25,000); or (b) any
lease of real or personal property, or any sublease of real property, by
the Association or any Association Subsidiary, as lessor, pursuant to which
the Association or the Association Subsidiary reasonably anticipates the
collection of aggregate rent in excess of $25,000 over the remaining term
of the lease, exclusive of all optional renewal periods and extensions of
the term (provided, however, that any such lease shall not be deemed a
Significant Lease in the event the Association or the Association
Subsidiary has the contractual right to terminate the lease in question on
30 days' notice or less, without incurring a penalty or premium in excess
of $25,000).
"Target Date" shall mean July 31, 1994 or such later date as shall be
determined by extending the Target Date after July 31, 1994 by one day for
each Late Day (as such term is defined in Section 5.1 hereof). By way of
example, if under Section 5.1 there are an aggregate of six Late Days, then
the Target Date shall mean August 6, 1994.
"Tax" or "Taxes" shall mean any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, withholding, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Tax Code Section 59A), customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax or taxes of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"Tax Code" shall mean the Internal Revenue Code of 1986, as amended.
"Tax Return" shall mean any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Tax Sharing Agreement" shall have the meaning set forth in Section
2.3(b) of this Agreement.
"Termination" when used in reference to or in respect of the
Bankruptcy Litigation, the Class Action Litigation, or the Homeowners
Litigation, shall mean (i) an order, ruling or judgment of a court or a
binding award of an arbitrator that is no longer subject to review,
reversal, modification or amendment by appeal or writ of certiorari, which
ends such Litigation against SCBC, the Association and the Retained
Association Subsidiaries, (ii) any compromise or settlement of such
Litigation that, upon payment of all Liabilities against SCBC, the
Association and/or the Retained Association Subsidiaries created thereby,
will be completely implemented and consummated and that, if necessary, has
been approved by an order, ruling or judgment of the applicable court that
is no longer subject to review, reversal, modification or amendment by
appeal or writ of certiorari, or (iii) insofar as such Litigation is
defined to include claims with respect to which an action has not been
commenced and for which an action is not commenced in the future, either
(A) a written opinion (containing only such limitations as are mutually
acceptable to SCBC and the Seller) from counsel mutually acceptable to SCBC
and the Seller that all such claims are barred by the applicable statute of
limitations, or (B) the date which is the sixth (6th) anniversary of the
Closing Date.
"Third Party Claim" shall mean any claim, action or proceeding made or
brought by any Person that is not a party hereto or an Affiliate of a party
hereto.
"Timeshare and Lot Reserves" shall have the meaning set forth in the
definition of the term "Net Book Value."
Other terms used herein are defined elsewhere in this Agreement.
ARTICLE II
PURCHASE AND SALE OF SHARES; MERGER OF THE ASSOCIATION
Section 2.1. Acquisition of Shares
(a) At the Closing, upon satisfaction of the conditions contained in
Article VI hereof, (i) the Seller shall sell and deliver the Shares to
SCBC, and (ii) in exchange therefor, SCBC shall pay the Purchase Price, as
defined and calculated in accordance with Section 2.1(b) below, to the
Seller as follows: the Deferred Payment Amount shall be paid by SCBC at
the times set forth in, upon satisfaction of the conditions contained in,
and in accordance with the other terms of Section 2.4 hereof, and an amount
(the "Cash Payment Amount") equal to the excess of the Purchase Price over
the Deferred Payment Amount shall be paid to the Seller by SCBC in
immediately available funds; provided that, the Seller may elect pursuant
to Section 2.2(d) hereof to cause SCBC to pay all or a portion of the Cash
Payment Amount to the Association or a Retained Association Subsidiary as
an offset to, and a credit against, the Seller's Payment. The Purchase
Price shall constitute the entire purchase price to be paid by SCBC for the
Shares.
(b) The "Purchase Price" for the Shares means Forty Million Three
Hundred Fifty Thousand Dollars ($40,350,000), plus the excess, if any, of
the Earnings Adjustment, as defined and calculated in accordance with
Section 2.1(c) below over the aggregate of payments for Taxes on taxable
income earned during the Interim Period made by the Association during the
Interim Period in accordance with the Tax Sharing Agreement or by the
Association or SCBC pursuant to the provisions of Section 2.3(a) hereof,
regardless of whether such payments are cash payments made by the
Association to the Seller or credits (by way of provisions, allocations or
otherwise) made by the Association to the Timeshare and Lot Reserves. The
Seller understands that the Earnings Adjustment could be a negative number
which, under the foregoing formula, would have the effect of reducing the
Purchase Price by the absolute value of such negative number.
(c) The "Earnings Adjustment" means and shall be the amount
determined either under clause (i), (ii) or (iii) below, whichever applies:
(i) If the Interim Period Earnings are an amount less than
$2,625,000, then the Earnings Adjustment shall be an amount (which may be a
negative number) equal to (a) the Capped Interim Period Earnings Amount,
minus (B) the amount of the Effects of Extraordinary Items.
(ii) If the Interim Period Earnings minus the amount of the
Effects of Extraordinary Items are an amount equal to or more than
$2,625,000, then the Earnings Adjustment shall be the Capped Interim Period
Earnings Amount.
(iii) If (A) Interim Period Earnings are an amount more than
$2,625,000, and (B) Interim Period Earnings minus the amount of the Effects
of Extraordinary Items are an amount (the "Clause (iii) Amount") that is
less than $2,625,000, then the Earnings Adjustment shall be an amount equal
to the Capped Interim Period Earnings Amount, minus an amount equal to (C)
$2,625,000 minus (D) the Clause (iii) Amount.
(d) The amount of the Interim Period Earnings, the Post-Target Date
Interim Period Earnings, if necessary, the Effects of Extraordinary Items
and the Earnings Adjustment shall be estimated in the Ordinary Course of
Business of the Association as of the Effective Time, and such estimated
amount shall be used in calculating the Purchase Price. As soon as
reasonably practicable following the Effective Time, the actual amount of
the Interim Period Earnings, the Post-Target Date Interim Period Earnings,
if necessary, the Effects of Extraordinary Items and the Earnings
Adjustment shall be determined by the Seller and SCBC, and any difference
between the Purchase Price calculated using the actual amount of the
Interim Period Earnings, the Post-Target Date Interim Period Earnings, if
necessary, the Effects of Extraordinary Items and the Earnings Adjustment
and the Purchase Price calculated at the Closing by using the estimated
amount of the Interim Period Earnings, the Post-Target Date Interim Period
Earnings, if necessary, the Effects of Extraordinary Items and the Earnings
Adjustment shall be paid by the appropriate party hereto within ten (10)
days after such determination.
Section 2.2 Purchase of Excluded Assets.
(a) At the Closing and immediately prior to the Effective Time, upon
satisfaction of the conditions contained in Article VI hereof other than
Section 6.3(m), the Seller shall purchase from the Association or the
applicable Retained Association Subsidiary, and the Association or the
applicable Retained Association Subsidiary shall transfer and assign to the
Seller, all of the Excluded Assets and, in exchange therefor, the Seller
shall pay an amount equal to the Seller's Payment, as defined and
calculated in accordance with Section 2.2(b) below, to the Association or
the applicable Retained Association Subsidiary in immediately available
funds and shall assume the Excluded Liabilities. The Seller's Payment and
the assumption by the Seller of the Excluded Liabilities shall constitute
the entire purchase price to be paid by Seller for the Excluded Assets.
(b) The "Seller's Payment" means the sum of the amounts determined in
clauses (i), (ii) and (iii) below:
(i) the Net Book Value of the Excluded Loans (A) minus all New
Reserves in respect of Excluded Loans and (B) minus all Cash and Cash
Equivalents received by the Association in respect of Excluded Loans, but
only to the extent such Cash and Cash Equivalents received did not increase
Interim Period Earnings;
(ii) the Net Book Value of the Excluded Real Estate and JV
Interests and, to the extent they are not included within the term
"Excluded Real Estate and JV Interests," the Association Subsidiaries other
than the Retained Association Subsidiaries (A) minus all New Reserves in
respect of Excluded Real Estate and JV Interests and (B) minus all Cash and
Cash Equivalents received by the Association in respect of Excluded Real
Estate and JV Interests and, to the extent they are not included within the
term "Excluded Real Estate and JV Interests," the Association Subsidiaries
other than the Retained Association Subsidiaries, but only to the extent
such Cash and Cash Equivalents received did not increase Interim Period
Earnings; and
(iii) the Net Book Value of the Repurchased Timeshare and Lot
Assets, (A) minus all New Reserves in respect of Repurchased Timeshare and
Lot Assets, including all New Reserves attributable to Timeshare and Lot
Reserves, and (B) minus all Cash and Cash Equivalents received by the
Association in respect of Repurchased Timeshare and Lot Assets, but only to
the extent such Cash and Cash Equivalents received did not increase Interim
Period Earnings.
(c) Notwithstanding the definitions of the terms "Excluded Assets"
and "Proceeds" and the provisions of Section 2.2(a) above, SCBC shall have
the right to identify Excluded Loans and Excluded Real Estate and JV
Interests, and Proceeds therefrom (but not Repurchased Timeshare and Lot
Assets and Proceeds therefrom), to be retained by the Association or a
Retained Association Subsidiary, which right shall be subject to the terms
and conditions of this Section 2.2(c). SCBC shall identify to Seller all
Excluded Loans and Excluded Real Estate and JV Interests, and Proceeds
therefrom, to be retained by the Association or a Retained Association
Subsidiary by delivery of written notice on or before the date five (5)
days before the Closing Date. Any Excluded Asset or Proceeds therefrom so
identified by SCBC shall continue to be considered Excluded Assets for all
other purposes of this Agreement other than for Seller's obligation to
acquire such assets as Excluded Assets under Section 2.2(a) hereof.
(d) Notwithstanding the provisions of Sections 2.1(a) and 2.2(a)
hereof, the Seller shall have the right to elect to cause SCBC to pay all
or a portion of the Cash Payment Amount to the Association and/or any
Retained Association Subsidiary from which Excluded Assets are to be
transferred, as an offset to, and a credit against, the Seller's Payment
(the portion of the Cash Payment Amount to be paid to any Retained
Association Subsidiary shall not exceed the portion of the Seller's Payment
otherwise to be paid to such Retained Association Subsidiary), and the
Seller shall have the option to acquire the stock of Carolina Financial
Services Corporation, a Retained Association Subsidiary ("CFSC"), and any
and all loans from the Association or any Retained Association Subsidiary
(other than CFSC) to CFSC at an aggregate purchase price equal to the sum
of the Net Book Value of such shares and the Net Book Value of all such
loans at the Closing Date, in lieu of acquiring from CFSC the Excluded
Assets owned by CFSC. For purposes of the foregoing sentence, the
definition of "Net Book Value" shall be deemed to refer to the Closing Date
rather than to September 30, 1993. The Seller shall exercise the right and
the option described in the foregoing provisions of this Section 2.2(d) by
delivering written notice to SCBC on or before the date five (5) days
before the Closing Date and by causing the Association and CFSC to transfer
all of the assets of CFSC that are not Excluded Assets to the Association
immediately prior to the Closing.
Section 2.3. Tax Sharing Liability.
(a) At the Closing, upon satisfaction of the conditions in Article VI
hereof, other than Section 6.3(m), and immediately prior to the Effective
Time, the Association shall pay to the Seller the Tax Sharing Liability.
In the event that the Association is not permitted to make such payment to
the Seller by the OTS, SCBC shall make such payment on behalf of the
Association. The parties hereto do not intend any such payment of the
amount of the Tax Sharing Liability to constitute a portion of the Purchase
Price.
(b) The "Tax Sharing Liability" shall mean any unpaid amount for
Taxes the Association is obligated to advance to the Seller for taxable
income earned during the Interim Period pursuant to Sections 4 and 6 of the
Tax Sharing Agreement, dated August 17, 1990, among the Seller and certain
of its subsidiaries, including the Association and certain of the
Association Subsidiaries, as amended November 14, 1990 and September 14,
1992 (the "Tax Sharing Agreement"), excluding any Tax Liabilities arising
from or in connection with the Section 338(g) Election or the Section
338(h) Election described in Section 5.3, and less the amount, if any, of
prior overpayments as reflected on the Association's books and records.
(c) The amount of the Tax Sharing Liability shall be estimated in the
Ordinary Course of Business of the Association as of the Closing Date. As
soon as reasonably practicable following the Effective Time, the actual
amount of the Tax Sharing Liability as of the Closing Date shall be
determined by the Seller and SCBC and any difference between the Tax
Sharing Liability as estimated and the actual Tax Sharing Liability shall
be paid by the Seller to the Association or by the Association to the
Seller, as the case may be, within ten (10) days after such determination.
(d) Notwithstanding the provisions of Section 2.2(a) and 2.3(a)
hereof, the Seller shall have the right to cause all or a portion of the
amount of the Tax Sharing Liability, as estimated as of the Closing Date,
to be retained by the Association or paid to any Retained Association
Subsidiary from which Excluded Assets are to be transferred as an offset
to, and a credit against, the Seller's Payment. The Seller shall exercise
this right by delivering written notice to SCBC and the Association on or
before the date five (5) days prior to the Closing Date.
Section 2.4. Deferred Payment Amount - Interest Accrual and Payments.
(a) In order to induce SCBC to agree to consummate the Acquisition
before Termination of the Litigation, Seller and SCBC agree to defer
payment of the Deferred Payment Amount until after Closing and to pay the
Deferred Payment Amount in accordance with, as and when provided in this
Section 2.4. Except as provided in this Section 2.4, SCBC shall have no
right or authority or claim to the Deferred Payment Amount and shall have
no right or authority to set off against payment(s) of the Deferred Payment
Amount any amounts due and owing by Seller to SCBC, the Association or the
Retained Association Subsidiaries in respect of matters other than the
Litigation or to delay the payment(s) of the Deferred Payment Amount
pending the final resolution of any such other matters. The unpaid part of
the Deferred Payment Amount shall accrue interest at an adjusting annual
rate equal to the annual rate of interest paid by Security Bank and Trust
Company, an SCBC Subsidiary, on certificates of deposit having principal of
$100,000 or more and a term of five (5) years (the "CD Rate"), with such
rate being adjusted and re-set at such times, and in tandem with, changes
in the CD Rate (the "Interest Rate"), until the earlier of the time (i) the
Deferred Payment Amount has been paid in full by SCBC in accordance with,
as and when provided in Section 2.4(b) or (ii) cash in an amount equal to
the unpaid balance of the Deferred Payment Amount shall have been delivered
to the Escrow Agent as provided in Section 2.4(d). Accrued interest shall
be added to the balance of the Deferred Payment Amount at the end of each
calendar month and shall thereafter be a part of the Deferred Payment
Amount.
(b) As soon as practicable but in no event later than 15 days after
the Termination of the relevant Litigation (or at Closing in the event
Termination of the relevant litigation has occurred at least 15 days prior
to the Closing Date), SCBC shall make one or more installment payments (the
"Deferred Payments") of the Deferred Payment Amount as follows:
(i) After Termination of the Class Action Litigation, SCBC shall
pay to the Seller or, to the extent the Seller has not made adequate
provision for the full satisfaction of such Liability by means satisfactory
to SCBC, to such Persons other than the Seller as necessary to satisfy and
pay in full any Liability of SCBC, the Association and the Retained
Association Subsidiaries created by such Termination, an amount equal to
Percentage A on Appendix 1 times the initial Deferred Payment Amount, plus
all or the applicable portion of the amounts retained by SCBC pursuant to
the provisions of clauses (ii) and (v) of this Section 2.4(b) plus interest
accrued at the Interest Rate on such amounts from the Closing Date.
(ii) After Termination of the Bankruptcy Litigation, SCBC shall
pay to the Seller or, to the extent the Seller has not made adequate
provision for the full satisfaction of such Liability by means satisfactory
to SCBC, to such Persons other than the Seller as necessary to satisfy and
pay in full any Liability of SCBC, the Association and the Retained
Association Subsidiaries created by such Termination, an amount equal to
(A) if the Class Action Litigation previously has been Terminated,
Percentage B on Appendix 1 times the initial Deferred Payment Amount plus
interest accrued at the Interest Rate on such amount from the Closing Date,
or (B) if the Class Action Litigation has not been Terminated, Percentage C
on Appendix 1 times the initial Deferred Payment Amount plus interest
accrued at the Interest Rate on such amount from the Closing Date.
(iii) After Termination of the Homeowners' Litigation, SCBC
shall pay to the Seller or, to the extent the Seller has not made adequate
provision for the full satisfaction of such Liability by means satisfactory
to SCBC, to such Persons other than Seller as necessary to satisfy and pay
in full any Liability of SCBC, the Association and the Retained Association
Subsidiaries created by such Termination, an amount equal to Percentage D
on Appendix 1 times the initial Deferred Payment Amount plus interest
accrued at the Interest Rate on such amount from the Closing Date.
(iv) After Termination of all Litigation, SCBC shall pay to the
Seller the remaining balance of the Deferred Payment Amount provided that
all Liabilities of SCBC, the Association and the Retained Association
Subsidiaries created by all Terminations of all Litigation have been fully
satisfied and paid.
(v) Notwithstanding the foregoing provisions of this Section
2.4(b), SCBC may withhold any Deferred Payment which it would otherwise be
obligated to pay under the foregoing provisions of this Section 2.4(b) if
and only if SCBC in its good faith and reasonable judgment, based on
information made available to the Seller (by way of example, and not
limitation, assertions of new claims or new theories of liability in the
Class Action Litigation, information indicating inaccuracies in the
estimates of potential Liability from Litigation contained in letters of
the Seller's independent auditors provided to SCBC in advance of the
execution of this Agreement, and assertions of fraudulent conveyance claims
in the Bankruptcy Litigation) and supported by a written opinion of legal
counsel selected by SCBC and reasonably acceptable to the Seller,
determines that for the sole purpose of securing Seller's obligation to
indemnify SCBC, the Association and the Retained Association Subsidiaries
for Indemnifiable Losses suffered by reason of the Litigation, the balance
of the Deferred Payment Amount that would remain after such payment would
not be sufficient to fully pay and satisfy the potential Liabilities of
SCBC, the Association and the Retained Association Subsidiaries from
Litigation for which there has not been a Termination.
(c) The Seller shall grant to SCBC, as collateral agent for its
benefit and the benefit of the Association and each of the Retained
Association Subsidiaries (the "Collateral Agent"), perfected first liens
and security interests on and in the Deferred Payment Amount and interest
accrued thereon ("Deferred Payment Security Interests"), which Deferred
Payment Security Interests shall be released in proportion to and to the
same extent as the Deferred Payment Amount is paid to the Seller, or to
other Persons, as provided in Section 2.4(b).
(d) Notwithstanding the foregoing provisions of this Section 2.4,
upon the first to occur of (A) SCBC's failure to make a Deferred Payment in
accordance with, as and when provided in Section 2.4(b) hereof, which
failure is determined to have been in bad faith as provided in Section
2.4(e) hereof, (B) a "change-in-control" of SCBC (which term shall mean (i)
the adoption of a plan of merger or share exchange by SCBC pursuant to
which the holders of SCBC's voting capital stock as of the Closing Date as
a group would receive less than 50% of the voting capital stock of the
surviving corporation, (ii) the acquisition of more than 25% of SCBC's
outstanding voting capital stock by any Person pursuant to a transaction or
series of transactions not approved by a formal resolution adopted by a
majority of the members of SCBC's Board of Directors in office prior to
such Person's acquisition of more than 10% of such voting capital stock and
continuing in office at the time of such vote, or (iii) the adoption of an
agreement by SCBC pursuant to which it would sell to a Person (other than
an SCBC Subsidiary) the capital stock or assets of one or more SCBC
Subsidiaries which, in the aggregate, constitute more than 40% of SCBC's
then existing consolidated total assets), and (C) a decline in the ratio
(expressed as a percentage) of consolidated tangible capital to
consolidated total assets of SCBC to less than three and one-half percent
(3.5%), SCBC shall deposit with Wachovia Bank of North Carolina, N.A. or
any other bank acceptable to SCBC and the Seller (the "Escrow Agent") cash
in an amount equal to the unpaid balance of the Deferred Payment Amount
plus interest accrued at the Interest Rate on such amount from the end of
the prior calendar month, which cash shall be held, invested and
administered by the Escrow Agent pursuant to an escrow agreement the form
and substance of which shall be mutually acceptable to the Seller, SCBC and
the Escrow Agent.
(e) If SCBC fails to make a Deferred Payment in accordance with, as
and when provided in either Section 2.4(b) or Section 2.4(d) hereof (the
"Defaulted Deferred Payment"), and such failure is determined to have been
in bad faith (as hereafter defined), SCBC shall pay and the Seller shall be
entitled to receive, in addition to the Defaulted Deferred Payment and
interest accrued thereon, an amount (the "Penalty") equal to twenty percent
(20%) of the sum of the amount of the Defaulted Deferred Payment plus
interest accrued thereon at the Interest Rate from the end of the prior
calendar month. The term "bad faith" shall mean the failure to make a
Deferred Payment for any reason other than (i) SCBC's honest, good faith
and reasonable belief that Termination of the relevant Litigation has not
occurred, or (ii) SCBC's honest, good faith and reasonable determination
pursuant to Section 2.4(b)(v) that it may withhold the Deferred Payment.
Section 2.5. Merger of the Association
It is anticipated that SCBC will, as soon as practicable following the
Acquisition and after certain necessary interim steps, cause the
Association to be merged with and into an SCBC Subsidiary (the "Merger").
All references in this Agreement to the Association pertaining to any time
or event occurring at or after the effectiveness of the Merger shall be
deemed to be references to the SCBC Subsidiary which is the successor of
the Association resulting from the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to SCBC as follows:
Section 3.1. Organization, Good Standing and Authority of Seller
The Seller is duly organized, validly existing, and in good standing
as a general business corporation under the laws of the State of Delaware,
and has the powers and privileges of a general business corporation,
including, without limitation, full power to carry on its business. The
Seller is duly qualified to do business in the States of Arkansas and North
Carolina.
Section 3.2. Warranty of Title to the Shares
The Seller holds of record and beneficially owns, and has good and
marketable title to, the Shares and, except as Previously Disclosed, the
Shares are not subject to any Restrictions on Transfer, Taxes, Security
Interest, or Rights. Except as Previously Disclosed, the Seller is not a
party to any voting trust, shareholders' agreement, proxy, voting trust, or
other agreement or understanding with respect to the Shares or the voting
rights associated therewith.
Section 3.3. Capital Structure of the Association
The authorized capital stock of the Association consists of 20,000,000
shares of capital stock, of which 12,500,000 shares are common stock, par
value $.01 per share ("Association Common Stock"), and of which 7,500,000
shares are preferred stock, par value $.01 per share (the "Association
Preferred Stock"). As of the date hereof, there were 200,000 shares of the
Association Common Stock issued and outstanding, and the Shares constitute
all of such outstanding Association Common Stock. All outstanding shares
of the Association Common Stock have been duly issued, are validly
outstanding, fully paid and nonassessable. Except as Previously Disclosed,
there are no Rights authorized, issued or outstanding with respect to the
capital stock of the Association. None of the outstanding shares of the
Association's capital stock has been issued in violation of the preemptive
rights of any person. There are no shares of Association Preferred Stock
outstanding.
Section 3.4. Organization, Standing and Authority
The Association is a federal savings and loan association duly
organized, validly existing and in good standing under the laws of the
United States with full corporate power and authority to carry on its
business as now conducted and is duly qualified to do business in the
states of the United States and foreign jurisdictions where its ownership
or leasing of property or the conduct of its business requires such
qualification. The officers and directors of the Association have been
accurately and completely Previously Disclosed to SCBC.
Section 3.5. Ownership of Association Subsidiaries
The Association does not own, directly or indirectly, any outstanding
capital stock or other voting securities or ownership interests of any
corporation, commercial bank, industrial bank, savings association, savings
bank, partnership, Joint Venture, limited liability company, business
trust, or other organization, except for the Association Subsidiaries and
except as Previously Disclosed. The outstanding shares of capital stock or
other voting securities or ownership interests of the Retained Association
Subsidiaries are validly issued and outstanding, fully paid and
nonassessable, and all such shares are directly or indirectly owned by the
Association free and clear of all Restrictions on Transfer, Taxes, and
Security Interests. No Rights are authorized, issued or outstanding with
respect to the capital stock or other voting securities or ownership
interests of any of the Retained Association Subsidiaries and there are no
voting trusts, shareholders' agreements, proxies or other agreements or
understandings with respect thereto.
Section 3.6. Organization, Standing and Authority of the Association
Subsidiaries
Each of the Retained Association Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
State of North Carolina. Each of the Retained Association Subsidiaries (i)
has full power and authority to carry on its business as now conducted,
(ii) is duly qualified to do business in the states of the United States
and foreign jurisdictions where its ownership or leasing of property or the
conduct of its business requires such qualification where failure to so
qualify would constitute a Material Adverse Event with respect to the
Association and the Retained Association Subsidiaries, and (iii) is not
presently engaged in any activities that have not been Previously
Disclosed. The officers and directors of each Association Subsidiary have
been accurately and completely Previously Disclosed to SCBC.
Section 3.7. Authorized and Effective Agreement
(a) Subject to the approval of the Acquisition by the Seller's
shareholders as set forth in Section 6.1(a), the Seller has all requisite
corporate power and authority to enter into, to deliver, and (subject to
receipt of all required governmental approvals as set forth in Section 5.1)
to perform all of its obligations under this Agreement. The execution and
delivery of this Agreement have been, and upon the approval of the
Acquisition by the Seller's shareholders as set forth in Section 6.1(a),
the consummation of the transactions contemplated hereby, other than the
Merger, will have been, duly and validly authorized by all necessary
corporate action in respect thereof on the part of the Seller. This
Agreement constitutes a legal, valid and binding obligation of the Seller,
which is enforceable against the Seller in accordance with its terms,
subject as to enforceability, to bankruptcy, insolvency and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles.
(b) Neither the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby, nor compliance by the
Seller with any of the provisions hereof shall (i) conflict with or result
in a breach of any provision of the certificate of incorporation (or, as
applicable, the charter) or bylaws of the Seller, the Association or any
Retained Association Subsidiary; (ii) except as Previously Disclosed,
conflict with, or constitute or result in a breach of, any term, condition
or provision of, or constitute a default under, or give rise to any right
of termination, cancellation or acceleration with respect to, or result in
the creation or imposition of any Security Interest upon any material
property or asset of the Seller, the Association or any Retained
Association Subsidiary pursuant to, any note, bond, mortgage, indenture,
lease, license, agreement, instrument, or other arrangement or obligation
to which the Seller, the Association or any Retained Association Subsidiary
is a party or by which it is bound; or (iii) except as Previously Disclosed
and subject to receipt of all required governmental approvals as set forth
in Section 5.1, violate any order, ruling, decree, charge, writ,
injunction, regulatory agreement or memorandum of understanding,
constitution, statute, rule or regulation applicable to the Seller, the
Association or any Association Subsidiary.
Section 3.8. Financial Statements; Organizational Documents; Minute Books
(a) Except as Previously Disclosed, the Association Financial
Statements present fairly or will present fairly, as the case may be, the
consolidated balance sheets of the Association and the Association
Subsidiaries as of the dates indicated and the consolidated statements of
operations, stockholder's equity and cash flows for the periods then ended
in conformity with GAAP, are correct and complete, and are consistent with
the books and records of such entities; provided, however, that the
Association Financial Statements for the three-month period ended September
30, 1993 and for any interim period subsequent to the year-ended December
31, 1993 will be subject to normal year-end adjustments (which adjustments,
based on presently known facts, will not be material individually or in the
aggregate).
(b) The Seller or the Association previously has delivered to SCBC
true, complete and correct copies of the certificates of incorporation (or,
as applicable, the charters) and bylaws, and previously has provided to
SCBC access to all minute books, stock certificate books and stock transfer
records, of the Association and the Retained Association Subsidiaries. The
minute books of each of the Association and the Retained Association
Subsidiaries contain accurate records of all corporate actions of its
shareholder and Board of Directors (including committees of its Board of
Directors). SCBC shall receive true, complete and correct copies of any
additions, deletions, or modifications to any of the items described in
this Section 3.8(b) made after February 25, 1994.
Section 3.9. Operations Since September 30, 1993
(a) Except as Previously Disclosed, from September 30, 1993 to the
date of this Agreement, there has not been any change in the business,
financial condition, operations or results of operations of the Association
and the Association Subsidiaries taken as a consolidated whole that would
constitute a Material Adverse Event with respect to the Association and the
Retained Association Subsidiaries.
(b) To the Knowledge of the Seller, from September 30, 1993 to the
date of this Agreement: (i) neither the Association nor any Association
Subsidiary has sold, leased, transferred, or assigned any of its assets,
tangible or intangible, other than for a fair consideration in the Ordinary
Course of Business; (ii) neither the Association nor, except as Previously
Disclosed, any Association Subsidiary has entered into any agreement,
contract, lease, license, loan, loan commitment, or deposit
collateralization agreement (or a series of related agreements, contracts,
lease, licenses, loans, loan commitments, or deposit collateralization
agreements) outside the Ordinary Course of Business; (iii) no party
(including the Association and the Association Subsidiaries) has
accelerated, terminated, modified or cancelled any agreement, contract,
lease, license, loan, loan commitment, or deposit collateralization
agreement (or series of related agreements, contracts, leases, licenses,
loans, loan commitments, or deposit collateralization agreements) involving
more than Twenty-Five Thousand Dollars ($25,000) to which the Association
or any of the Retained Association Subsidiaries is a party or by which any
of them is bound outside the Ordinary Course of Business; (iv) neither the
Association nor any Retained Association Subsidiary has imposed, or
suffered the imposition of, any Security Interest upon any of its assets,
tangible or intangible, except Security Interests granted in connection
with the purchase of equipment or supplies in the Ordinary Course of
Business; (v) neither the Association nor any Retained Association
Subsidiary has made any capital expenditure (or series of related capital
expenditures) involving more than Fifty Thousand Dollars ($50,000) outside
the Ordinary Course of Business; (vi) except as Previously Disclosed,
neither the Association nor any Retained Association Subsidiary has made
any capital investment in, any loan (other than an owner-occupied
residential mortgage loan and/or construction loan, in each case having an
initial principal balance of less than $300,000, made to the homeowner and
made in the Ordinary Course of Business) to, or any acquisition of the
investments or loans (other than U.S. government securities and investment
grade corporate securities), of any Person, either involving more than
Fifty Thousand Dollars ($50,000) or outside the Ordinary Course of
Business; (vii) neither the Association nor any Retained Association
Subsidiary has issued any note, bond, or other debt security or created,
incurred, assumed, or guaranteed any indebtedness for borrowed money or
capitalized lease obligation except in the Ordinary Course of Business;
(viii) neither the Association nor any Association Subsidiary has delayed
or postponed the payment of accounts payable and other Liabilities outside
the Ordinary Course of Business; (ix) except as Previously Disclosed,
neither the Association nor any Retained Association Subsidiary has
cancelled, compromised, waived, or released any right or claim it may have
against any Person (or series of related rights and claims) either
involving more than Twenty-Five Thousand Dollars ($25,000) or outside the
Ordinary Course of Business; (x) neither the Association nor any Retained
Association Subsidiary has granted any license or sublicense of any rights
under or with respect to any Intellectual Property; (xi) there has been no
change made or authorized in the certificate of incorporation (or, as
applicable, the charter) or bylaws of the Association or any Retained
Association Subsidiary; (xii) neither the Association nor any Retained
Association Subsidiary has issued, sold, or otherwise disposed of any of
its capital stock, or granted any Rights with respect to its capital stock,
or agreed to, or allowed the imposition of, any Restriction or Transfer
with respect to its capital stock; (xiii) neither the Association nor any
Retained Association Subsidiary has declared, set aside, or paid any
dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise acquired
any of its capital stock; (xiv) neither the Association nor any Retained
Association Subsidiary has experienced any damage, destruction, or loss
(whether or not covered by insurance) to its property in excess of Fifty
Thousand Dollars ($50,000) per occurrence; (xv) except as Previously
Disclosed, neither the Association nor any Association Subsidiary has made
any loan to, or entered into any other transaction with, any of its
directors, officers, employees or other Affiliates; (xvi) neither the
Association nor any Association Subsidiary has entered into any collective
bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement; (xvii) neither the Association nor any
Retained Association Subsidiary has granted any increase in the
compensation of any of its directors, officers, employees, or independent
contractors outside the Ordinary Course of Business; (xviii) except as
Previously Disclosed, neither the Association nor any Association
Subsidiary has adopted, amended, modified or terminated any bonus, profit-
sharing, incentive, severance, or other plan, contract, or commitment for
the benefit of any of its directors, officers, and employees (or taken any
such action with respect to any other Employee Benefit Plan); (xix) neither
the Association nor any Retained Association Subsidiary has entered into
any employment contract or consulting agreement, nor has the Association or
any Retained Association Subsidiary made any material change in employment
or engagement terms for any of its directors, officers, employees or
independent contractors outside the Ordinary Course of Business; (xx)
neither the Association nor any Retained Association Subsidiary has made or
pledged to make any charitable or other capital contribution outside the
Ordinary Course of Business; (xxi) there has not been any other material
occurrence, event, incident, action, failure to act, or transaction outside
the Ordinary Course of Business involving the Association or any
Association Subsidiary; and (xxii) neither the Association nor any
Association Subsidiary or any Retained Association Subsidiary, as the case
may be, has committed to do, or to permit the occurrence of, any of the
foregoing.
Section 3.10. Absence of Undisclosed Liabilities
To the Knowledge of the Seller, except as Previously Disclosed,
neither the Association nor any Association Subsidiary has any Liability
the payment, accrual or liquidation of which would constitute a Material
Adverse Event with respect to the Association and the Retained Association
Subsidiaries or that, when combined with all similar Liabilities, would
constitute a Material Adverse Event with respect to the Association and the
Retained Association Subsidiaries.
Section 3.11. Properties
(a) Except as Previously Disclosed, the Association and the
Association Subsidiaries have good and marketable title to, or leasehold
interests in, all of the properties and assets, real and personal,
reflected on the consolidated balance sheet included in the Association
Financial Statements as of September 30, 1993 or acquired after such date,
free and clear of all Security Interests, except (i) pledges to secure
deposits and other liens incurred in the Ordinary Course of Business of the
Association, (ii) such imperfections of title, easements, restrictions,
covenants, and encumbrances, if any, as are not material in character,
amount or extent and do not affect the current use, occupancy, or value, or
the marketability of title thereto, and (iii) dispositions and encumbrances
for adequate consideration in the Ordinary Course of Business of the
Association. Except as Previously Disclosed, each Significant Lease
pursuant to which the Association or any Retained Association Subsidiary,
as lessee, leases real or personal property, are, with respect to the
Association or such Retained Association Subsidiary, valid and enforceable
in accordance with their respective terms.
(b) With respect to each parcel of real estate owned by the
Association or an Association Subsidiary that is not an Excluded Asset:
(i) there are no pending or, to the Knowledge of the Seller, threatened
condemnation proceedings, lawsuits, or administrative actions relating to
such parcel or other matters affecting materially and adversely the current
use, occupancy, or value thereof; (ii) to the Knowledge of the Seller, such
parcel and all improvements thereon have received all approvals of
governmental authorities (including all material licenses and permits)
required in connection with the ownership or operation thereof and has been
operated and maintained in accordance with applicable laws, rules, and
regulations; (iii) except as Previously Disclosed, there are no leases,
subleases, licenses, concessions, or other agreements, written or oral,
granting to any party or parties the right of use or occupancy of any
portion of such parcel; (iv) there are no outstanding options or rights of
first refusal to purchase such parcel, or any portion thereof or interest
therein; (v) to the Knowledge of Seller, no parties (other than the
Association or one of the Association Subsidiaries) are in possession of
such parcel, other than tenants under any Previously Disclosed leases who
are in possession of space to which they are entitled; (vi) such parcel
abuts on and has direct vehicular access to a public road, or has access to
a public road via a permanent, irrevocable, appurtenant easement
benefitting such parcel, of real property, and access to such parcel is
provided by paved public right-of-way with adequate curb cuts available;
and (vii) other than as Previously Disclosed, all real property taxes with
respect to such parcel which are currently due and payable with respect to
such parcel have been paid in full or will be paid prior to delinquency or
are being properly contested and are fully reserved in the Association
Financial Statements.
Section 3.12. Environmental Matters
(a) To the Knowledge of the Seller, except as Previously Disclosed,
neither the Association or any Association Subsidiary nor any property
owned or operated by the Association or any Association Subsidiary has been
or is in violation of, nor does the Association or any Association
Subsidiary have any Liabilities under, any Environmental Law (as defined in
Section 3.12(d) hereof). There are no actions, suits or proceedings,
demands, claims, notices, or investigations (including, without limitation,
notices, demand letters or requests for information from any Environmental
Agency (as defined in Section 3.12 (f) hereof)), instituted, pending, or,
to the Seller's Knowledge, threatened, relating to any Liability under any
Environmental Law of the Association or any Association Subsidiary or
respecting any property owned or operated by Association or any Association
Subsidiary.
(b) To the Knowledge of the Seller, except as Previously Disclosed,
(i) no Hazardous Materials (as defined in Section 3.12(e) hereof) have been
generated, treated, stored or disposed of at, or transported to or from,
any properties owned or operated by the Association or any Association
Subsidiary at any time, except in compliance with applicable Environmental
Laws, (ii) no friable asbestos containing material is in use, or is or has
been stored or disposed of, on or upon any properties owned or operated by
the Association or any Association Subsidiary, (iii) no polychlorinated
biphenyls ("PCBs") are located on or in any properties owned or operated by
the Association or any Association Subsidiary in any form or device,
including, without limitation, in the form of electrical transformers,
fluorescent light fixtures with ballasts, or cooling oils, except in
compliance with applicable Environmental Laws, and (iv) no underground
storage tanks are located on any properties owned or operated by the
Association or any Association Subsidiary or were located on any properties
owned or operated by the Association or any Association Subsidiary and
subsequently removed or filled.
(c) The representations in Section 3.12(a) and (b) above shall also
apply to any property in which the Association or any Association
Subsidiary obtained a Security Interest, other than owner-occupied, single-
family residences. The representations in Section 3.12(a) and (b) above
and in the preceding sentence shall not apply to the extent that, in the
opinion of the Association's management, the results of such actions,
suits, proceedings, demands, claims, notices or investigations, or the
presence of such Hazardous Materials, substances or items on such property,
is not likely to result in a Material Adverse Event with respect to the
Association and the Retained Association Subsidiaries.
(d) "Environmental Law" means any federal, state, local or foreign
law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, order, judgment, decree, injunction or
agreement with any Environmental Agency relating to (i) the protection,
preservation or restoration of the environment (including, without
limitation, air water vapor, surface water, groundwater, drinking water
supply, surface soil, subsurface soil, plant and animal life or any other
natural resource), and/or (ii) the usage, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production,
release, or disposal of any substance presently listed, defined, designated
or classified as hazardous, toxic, radioactive or dangerous, or otherwise
regulated, whether by type or by quantity, including any material
containing any such substance as a component.
(e) "Hazardous Materials" means solid waste (as that term is defined
under the Resource Conservation and Recovery Act, 42 U.S.C.A. Section 6901 et
seq. ("RCRA"), and the regulations adopted pursuant to RCRA), hazardous waste
(as that term is defined under RCRA and the regulations adopted pursuant to
RCRA), hazardous substances (as that term is defined in the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C.A. Section
9601 et seq. ("CERCLA"), and the regulations adopted pursuant to CERCLA), and
other pollutants, including, without limitation, any solid, liquid, gaseous
or thermal irritant or contaminant, such as smoke, vapor, soot, fumes,
acids, alkalis or chemicals.
(f) "Environmental Agency" means the United States Environmental
Protection Agency, the North Carolina Department of Environment, Health and
Natural Resources, any state agency in a state where the Association or any
Association Subsidiary owns or operates properties which is equivalent in
jurisdiction to the North Carolina Department of Environment, Health and
Natural Resources, or any other federal, state or local agency responsible
for regulating or enforcing laws, rules, regulations and ordinances
relating to (i) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, surface soil, subsurface soil,
plant and animal life or any other natural resource), and/or (ii) the use,
storage, recycling, treatment, generation, transportation, processing,
handling, labeling, production, release, or disposal of any substance
presently listed, defined, designated or classified as hazardous, toxic,
radioactive, or dangerous, or otherwise regulated, whether by type or by
quantity, including any material containing any such substance as a
component.
Section 3.13. Allowance for Loan Losses
Except as Previously Disclosed, the allowance for loan losses
respecting Other Assets reflected on the unaudited consolidated balance
sheets at September 30, 1993 and for the interim periods ended subsequent
to December 31, 1993 is or will be adequate in the opinion of the
Association's management in all material respects as of their respective
dates under the requirements of GAAP to provide for losses relating to or
inherent in the Other Assets.
Section 3.14. Tax Matters
(a) Except as Previously Disclosed, the Association and the
Association Subsidiaries, and each of their predecessors, have timely filed
all Tax Returns required by applicable law to be filed by them by the
Effective Time (taking into account all applicable extensions) and have
paid, or where payment is not required to have been made, have set up an
adequate reserve or accrual for the payment of, all Taxes required to be
paid in respect of the periods covered by such Tax Returns and, as of the
Effective Time, will have paid, or where payment is not required to have
been made, will have set up an adequate reserve or accrual for the payment
of, all Taxes for any subsequent periods ending on or prior to the
Effective Time.
(b) Except as Previously Disclosed, (i) all Tax Returns filed by or
on behalf the Association and the Association Subsidiaries are complete and
accurate in all material respects; (ii) the Seller has no Knowledge of any
extension of time within which to file any Tax Return that is required to
be filed by, or on behalf of, the Association or any Association
Subsidiary; (iii) the Seller has no Knowledge of any claim made by an
authority in a jurisdiction where the Association or any Association
Subsidiary does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction; and (iv) there are no Security Interests on
any of the assets of any of the Association or any Association Subsidiary
that arose in connection with any failure or alleged failure to pay any
Tax.
(c) The Association and each Association Subsidiary has withheld and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owning to any employee and, to the Knowledge of the Seller,
any independent contractor, depositor, other creditor, shareholder, or
other third party.
(d) To the Knowledge of Seller, no taxing authority plans to assess
any additional Taxes against the Association or any Association Subsidiary
for any period for which Tax Returns have been filed. There is no dispute
or claim concerning any Tax Liability of the Association or any Association
Subsidiary (i) claimed or raised by any authority in writing or (ii) of
which the Seller has Knowledge. The Seller previously has made available
to SCBC copies of the Seller's federal consolidated income Tax Returns for
the calendar years 1989, 1990, 1991 and 1992 and the Association previously
has delivered to SCBC all state, local and foreign income Tax Returns filed
by or on behalf of the Association or any Association Subsidiary for
taxable periods ended on or after June 1, 1989.
(e) To the Knowledge of Seller, neither the Seller, the Association
nor any Association Subsidiary has waived statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency that is or will be a Liability of the Association
or any Association Subsidiary.
(f) Neither the Association nor any Association Subsidiary has filed
a consent under Tax Code Section 341(f) concerning collapsible
corporations. The Seller has no Knowledge that the Association or any
Association Subsidiary has made any payments, is obligated to make any
payments, or is a party to any agreement that under certain circumstances
could obligate it to make any payments that will not be deductible under
Tax Code Section 280G regarding excess parachute payments. The Association
and each Association Subsidiary has disclosed in the Seller's consolidated
federal income Tax Returns all positions taken therein that could give rise
to a substantial understatement of federal income Tax by the Association or
any Association Subsidiary within the meaning of Tax Code Section 6662
(taking into account the existence of substantial authority for such
position).
(g) The unpaid Taxes of the Association and the Association
Subsidiaries (i) did not, as of September 30, 1993, exceed the reserve for
Tax Liability set forth on the face of the consolidated balance sheet as of
September 30, 1993 included in the Association Financial Statements, and
(ii) will not exceed that reserve as adjusted for operations and
transactions through the Effective Time in accordance with the past custom
and practice of the Association and the Association Subsidiaries in filing
their Tax Returns.
Section 3.15. Employee Benefit Plans
(a) The Seller has Previously Disclosed, and the Association has
provided to SCBC true, correct and complete copies of, all Employee Benefit
Plans maintained for the benefit of employees or former employees of the
Association or any Association Subsidiary, including all Summary Plan
Descriptions, together with (i) all related trust agreements, insurance
contracts and other funding agreements which implement each such Employee
Benefit Plans, (ii) the most recent actuarial and financial reports
prepared with respect to any Employee Pension Benefit Plan, (iii) the most
recent annual reports filed with any government agency with respect to each
Employee Benefit Plan, and (iii) all rulings and determination letters and
any open requests for rulings or letters that pertain to any Employee
Benefit Plan.
(b) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) complies in form and in operation in all
respects with the applicable requirements of ERISA and the Tax Code, except
where the failure to comply would not constitute a Material Adverse Event
with respect to the Association and the Association Subsidiaries.
(c) All required reports and descriptions (including Form 5500 Annual
Reports, Summary Annual Reports, PBGC-1's, and Summary Plan Descriptions)
have been filed or distributed appropriately with respect to each such
Employee Benefit Plan. The requirements of Part 6 of Subtitle B of Title I
of ERISA and of Tax Code Section 4980B have been met with respect to each
such Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(d) All contributions (including all employer contributions and
employee salary reduction contributions) which are due have been paid to
each such Employee Benefit Plan which is an Employee Pension Benefit Plan
and all contributions for any period ending at or before the Effective Time
which are not yet due have been paid to each such Employee Pension Benefit
Plan or accrued by the Association and the Association Subsidiaries in the
Ordinary Course of Business. All premiums or other payments for all
periods ending on or before the Effective Time have been paid with respect
to each such Employee Benefit Plan which is an Employee Welfare Benefit
Plan.
(e) Each such Employee Benefit Plan which is an Employee Pension
Benefit Plan and which is intended to be a "qualified plan" meets the
requirements of a "qualified plan" under Tax Code Section 401(a) and,
except as Previously Disclosed, has received, since December 31, 1989, a
favorable determination letter from the Internal Revenue Service.
(f) With respect to each Employee Benefit Plan that the Association
or any of the Association Subsidiaries maintains or ever has maintained or
to which any of them contributes, ever has contributed, or ever has been
required to contribute:
(i) No such Employee Benefit Plan which is an Employee Pension
Benefit Plan (other than any Multiemployer Plan) has been the subject of a
Reportable Event as to which notices would be required to be filed with the
PBGC. No proceeding by the PBGC to terminate any such Employee Pension
Benefit Plan (other than any Multiemployer Plan) has been instituted or, to
the Knowledge of the Seller, threatened.
(ii) There have been no Prohibited Transactions with respect to
any such Employee Benefit Plan. No Fiduciary has any Liability for breach
of fiduciary duty or any other failure to act or comply in connection with
the administration or investment of the assets of any such Employee Benefit
Plan. No action, suit, proceeding, hearing, or investigation with respect
to the administration or the investment of the assets of any such Employee
Benefit Plan (other than routine claims for benefits) is pending or, to the
Knowledge of the Seller, threatened. The Seller has no Knowledge of any
basis for any such action, suit, proceeding, hearing, or investigation.
(g) Neither the Association, any of the Association Subsidiaries nor
any of the other members of the Controlled Group of Corporations that
include the Association and the Association Subsidiaries contributes to,
ever has contributed to, or ever has been required to contribute to any
Multiemployer Plan or has any Liability (including withdrawal Liability)
under any Multiemployer Plan.
(h) Neither the Association nor any Association Subsidiary maintains
any defined benefit plans. Neither the Association nor any of the
Association Subsidiaries has incurred, and the Seller has no Knowledge of
any reason to expect that any of the Association or the Association
Subsidiaries will incur, any Liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA (including any withdrawal
Liability) or under the Tax Code with respect to any such Employee Benefit
Plan which is an Employee Pension Benefit Plan and that is maintained or
ever has been maintained by the Association, any Association Subsidiary or
a Controlled Group of Corporations which includes the Association.
Section 3.16. Certain Contracts
(a) Except as Previously Disclosed, at the date hereof neither the
Association nor any Association Subsidiary is a party to, is bound or
affected by, or receives benefits under (in each case whether written or
oral) (i) any Significant Contract, (ii) any agreement, indenture or other
instrument relating to the borrowing of money by the Association or any
Retained Association Subsidiary or the guarantee by the Association or any
Retained Association Subsidiary of any obligation of another Person, (iii)
any agreement, arrangement or commitment relating to the employment of an
independent contractor or the employment, election or retention in office
of any present or former officer, director, or employee, or providing for
severance benefits upon the termination of any such relationship, or (iv)
any collective bargaining agreement or other understanding with a labor
union.
(b) Neither the Association nor any Association Subsidiary is in
default, which default would constitute a Material Adverse Event with
respect to the Association and the Retained Association Subsidiaries under
any Significant Contract or any agreement, commitment, arrangement or other
indenture described in Section 3.16(a), whether written or oral, and there
has not occurred any event that, with the lapse of time or giving of notice
or both, would constitute such a default.
Section 3.17. Legal Proceedings; Regulatory Approvals
Except as Previously Disclosed, at the date hereof there are (i) no
outstanding injunctions, judgments, orders, decrees, rulings or regulatory
directives against the Association or any Association Subsidiary or to
which the Association or any Association Subsidiary is a party, and (ii) no
actions, suits, claims, governmental investigations or proceedings have
been instituted, are pending or, to the Knowledge of the Seller, are
threatened (or unasserted but considered by the Association and the Seller
probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome) against the Association
or any Association Subsidiary or against any asset, interest, or right of
the Association or any Association Subsidiary, or against any officer,
director or employee of any of them that in any such case, if decided
adversely, might constitute a Material Adverse Event with respect to the
Association and the Retained Association Subsidiaries. To the Knowledge of
the Seller, there are no actual or threatened actions, suits or proceedings
against the Association, any Association Subsidiary, or the Seller which
present a claim to restrain or which would have the effect of prohibiting
the transactions contemplated herein. Except as Previously Disclosed,
there is no fact or condition (including, but not limited to, compliance
with the CRA and HMDA), relating to the Association or any Association
Subsidiary of which the Seller has Knowledge that would prevent the Seller,
the Association or SCBC from obtaining all of the federal and state
regulatory approvals contemplated herein.
Section 3.18. Compliance with Laws
To the Knowledge of the Seller, except as Previously Disclosed, each
of the Association and the Association Subsidiaries is in compliance in all
material respects with all statutes and regulations applicable and material
to the conduct of its business (except for any violations that do not
constitute a Material Adverse Event with respect to the Association and the
Retained Association Subsidiaries), and neither the Association nor any
Association Subsidiary has received notification from any agency or
department of federal, state or local government (i) asserting a violation
or possible violation of any such statute or regulation and which violation
would constitute a Material Adverse Event with respect to the Association
and the Retained Association Subsidiaries, (ii) threatening to revoke any
license, franchise, permit or government authorization, or (iii)
restricting or in any way limiting its operations. Except as Previously
Disclosed, neither the Association nor any Association Subsidiary is
subject to any regulatory or supervisory cease and desist order, agreement,
directive, memorandum of understanding or commitment, and none of them has
received any communication requesting that they enter into any of the
foregoing. Without limiting the generality of the foregoing, to the
Knowledge of the Seller, the Association and each Association Subsidiary
has timely filed all currency transaction reports required to be filed and
taken all other actions required under the Currency and Foreign
Transactions Reporting Act, 31 U.S.C. Section 5301 et seq., and its
implementing regulations.
Section 3.19. Brokers and Finders
Except as Previously Disclosed, none of the Seller, the Association or
any Association Subsidiary nor any of their respective officers, directors,
employees or Affiliates has employed any broker, finder or financial
advisor or incurred any liability for any fees or commissions or other
payments in connection with the transactions contemplated herein (except
for fees to accountants and lawyers).
Section 3.20. Insurance
The Association and the Retained Association Subsidiaries each
currently maintains insurance in the amounts and for the coverage
Previously Disclosed. A copy of each such insurance policy previously has
been provided to SCBC, and the annual premium for each such policy has been
Previously Disclosed. With respect to each such policy, to the Knowledge
of the Seller the policy is legal, binding, enforceable and in full force
and effect; neither the Association nor any Retained Association Subsidiary
is in breach or default thereof, and to the Knowledge of the Seller, no
event has occurred which, with the lapse of time or the giving of notice,
or both, would constitute such a breach or default, or permit termination,
modification, or acceleration, under that policy. Except as Previously
Disclosed, neither the Association nor any Retained Association Subsidiary
has received any notice of a premium increase or cancellation with respect
to any insurance policy or bond, and within the last three years, neither
the Association nor any Retained Association Subsidiary has been refused or
received any notice of termination with respect to any insurance coverage
sought or applied for.
Section 3.21. Repurchase Agreements
Except as Previously Disclosed, neither the Association nor any of the
Association Subsidiaries is a party to any agreement pursuant to which the
Association or any Association Subsidiary has purchased securities subject
to an agreement to resell, any agreement pursuant to which the Association
or the Association Subsidiary has sold securities subject to an agreement
to repurchase, any interest rate swap agreement, any other interest rate
hedging agreement, or any other similar agreement.
Section 3.22. Deposit Accounts of the Association
(a) The deposit accounts of the Association are insured by Savings
Association Insurance Fund of the FDIC to the maximum extent permitted by
federal law, and the Association has paid all premiums and assessments and
filed all reports required under the FDIA and under the National Housing
Act.
(b) The Association is a member in good standing of the FHLB of
Atlanta and owns the requisite amount of stock in the FHLB of Atlanta.
(c) The Association is a "qualified thrift lender," as such term is
defined in the HOLA and in the OTS' regulations thereunder.
(d) The Association is a qualified seller and servicer for the
Federal National Mortgage Association and the Federal Home Loan Mortgage
Corporation.
Section 3.23. Loans
Except as Previously Disclosed, with respect to each loan on the books
and records of the Association or any Association Subsidiary, including
check overdraft extensions of credit, unfunded portions of outstanding
lines of credit and loan commitments but excluding the Excluded Loans (a
"Loan"): (i) such Loan is a valid loan and is evidenced by a promissory
note or other evidence of indebtedness with respect thereto; (ii) its
principal balance as shown on the books and records of the Association or
any Association Subsidiary is true and correct as of the last date shown
thereon; (iii) to the Knowledge of the Seller, all purported signatures on
and executions of any document in connection with such Loan are genuine;
(iv) all related documentation required or necessary to enforce repayment
of the Loan, to collect upon all guarantees of such Loan and to enforce all
liens or Security Interests in any collateral for such Loan has been signed
or executed by all necessary parties including, with regard to Loans which
are secured, all deeds of trusts, financing statements, security agreements
and similar documents related thereto; (v) the Association or the
Association Subsidiary has custody of all documents or microfilm records
thereof related to such Loan (as such documents relate to the matters
described in clauses (i) - (iv) and (vi) and (vii) hereof); (vi) to the
extent secured, such Loan has been secured by valid liens and Security
Interests which have been perfected; and (vii) to the Knowledge of the
Seller, such Loan is the legal, valid and binding obligation of the obligor
named therein, subject to bankruptcy, insolvency, fraudulent conveyance and
other laws of general applicability relating to or affecting creditors'
rights and to general equity principles. All Loans on the books and
records of the Association or any Association Subsidiary have been
originated and administered in accordance with the terms of the underlying
notes related thereto. To the Knowledge of the Seller, neither the terms
of such Loans, nor any of the loan documentation, nor the manner in which
such Loans have been administered and serviced, violates any federal, state
or local law, rule, regulation or ordinance applicable thereto, including,
without limitation, Regulation O of the Federal Reserve Board, 12 C.F.R.
Section 563.43, the Federal Truth-In-Lending Act, Regulation Z of the Federal
Reserve Board, the Equal Credit Opportunity Act, and state laws, rules and
regulations relating to consumer protection, installment sales and usury.
Section 3.24. Related Party Loans, Investments and Transactions
(a) Except as Previously Disclosed, neither the Association nor any
Association Subsidiary is a party to any loan or investment, including any
loan guaranty, with, or is liable for any Liability of, any director or
executive officer of the Seller, the Association, an Association Subsidiary
or any Affiliate of any of the foregoing.
(b) The Seller has Previously Disclosed all agreements, arrangements
and commitments of any kind, whether oral or written, between the
Association and/or any Association Subsidiary, on the one hand, and the
Seller or any of its Affiliates, on the other hand.
(c) Neither the Seller nor any of its Affiliates (other than the
Association and the Retained Association Subsidiaries) owns, or will own as
of the Effective Time (other than Excluded Assets), any assets, tangible or
intangible, which currently are used in the business of the Association or
any Retained Association Subsidiary.
Section 3.25. Representations and Warranties of the Association
The Seller acknowledges that SCBC has received and relied upon the
Association Letter. The Seller represents and warrants that the
representations and warranties contained in the Association Letter are, to
the best of its Knowledge, correct in all material respects, such
Association Letter being a material inducement to SCBC's execution of this
Agreement and SCBC's willingness to consummate the transactions
contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SCBC
SCBC represents and warrants to the Seller as follows:
Section 4.1. Organization, Standing and Authority of SCBC
SCBC is a general business corporation duly organized, validly
existing and in good standing under the laws of the state of North Carolina
with full corporate power and authority to carry on its business as now
conducted and is duly qualified to do business in the states of the United
States and foreign jurisdictions where its ownership or leasing of property
or the conduct of its business requires such qualification and where
failure to so qualify would constitute a Material Adverse Event with
respect to SCBC and the SCBC Subsidiaries. SCBC is registered as a bank
holding company under the Bank Holding Company Act.
Section 4.2. Authorized and Effective Agreement
(a) SCBC has all requisite corporate power and authority to enter
into and perform all of its obligations under this Agreement. The
execution and delivery of this Agreement and consummation of the
transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action in respect thereof on the part of SCBC.
This Agreement constitutes a legal, valid and binding obligation of SCBC,
enforceable against it in accordance with its terms subject, as to
enforceability, to bankruptcy, insolvency and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
(b) Neither the execution and delivery of this Agreement, nor
consummation of the transactions contemplated hereby, nor compliance by
SCBC with any of the provisions hereof shall (i) conflict with or result in
a breach of any provision of the articles of incorporation (or, as
applicable the charter) or bylaws of SCBC or any SCBC Subsidiary, (ii)
constitute or result in a breach of any term, condition or provision of, or
constitute a default under, or give rise to any right of termination,
cancellation or acceleration with respect to, or result in the creation of
any lien, charge or encumbrance upon any property or asset of SCBC or any
SCBC Subsidiary pursuant to, any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation, or (iii) subject to receipt of
all required governmental approvals set forth in Section 5.1, violate any
order, ruling, decree, charge, writ, injunction, regulatory agreement or
memorandum of understanding, constitution, statute, rule or regulation
applicable to SCBC or any SCBC Subsidiary.
Section 4.3. Legal Proceedings; Regulatory Approvals
There are no actual or, to the best knowledge of SCBC, threatened
actions, suits or proceedings which present a claim or restrain or prohibit
the transactions contemplated herein. No fact or condition (including, but
not limited to, CRA and HMDA compliance) relating to SCBC or any SCBC
Subsidiary known to SCBC exists that would prevent SCBC from obtaining all
of the federal and state regulatory approvals contemplated herein.
Section 4.4. Representations of the Designated Subsidiary
Should SCBC designate a Designated Subsidiary as provided in Section
8.7, by a certificate of the President of the Designated Subsidiary
delivered to the Seller at the Closing, the Designated Subsidiary shall
represent and warrant to the Seller matters of the type set forth in
Sections 4.1, 4.2 and 4.3 to the extent applicable to the Designated
Subsidiary.
ARTICLE V
COVENANTS
Section 5.1. Applications
As promptly as practicable after the date hereof, SCBC and the Seller
(if and to the extent required) shall (and the Seller shall, to the extent
required, cause the Association to) submit applications for prior approval
of the transactions contemplated herein to the Federal Reserve Board, the
OTS, the FDIC and the Commissioner of Banks of North Carolina
("Commissioner") and any other federal, state or local government agency,
department or body the approval of which is required for consummation of
the Seller's purchase of the Repurchased Timeshare and Lot Assets as
provided herein, the Acquisition and the Merger. SCBC, the Association and
the Seller promptly shall furnish one another with copies after filing of
applications made by it with these or any other regulatory agencies. The
Seller and SCBC each represent and warrant to the other that all
information concerning it and its directors, officers and shareholders (and
concerning, in the case of the Seller, the Association and the Association
Subsidiaries, and, in the case of SCBC, the SCBC Subsidiaries), included
(or submitted for inclusion) in any such application shall be true, correct
and complete in all material respects. Notwithstanding anything contained
in this Section 5.1 or in Section 5.2 below, the Seller shall use its best
efforts in good faith (and shall cause the Association and the Association
Subsidiaries to use their best efforts in good faith) to (i) submit, not
later than April 22, 1994, to the appropriate regulatory authorities all
applications, if any, that the Seller, the Association or the Association
Subsidiaries may be required under this Section 5.1 to submit, and (ii)
deliver, not later than April 15, 1994 (or such later date that is 15 days
after the Seller's receipt of SCBC's written request hereunder, if such
request is not received by April 1, 1994), all information concerning it,
the Association and the Association Subsidiaries, and their respective
directors, officers and shareholders, that SCBC may request in writing for
inclusion in any regulatory applications that SCBC or the SCBC Subsidiaries
may be required to submit under this Section 5.1, and (iii) deliver, within
six (6) days after receipt of written request therefor, all additional
information requested either by SCBC or a regulatory authority, as the case
may be, to supplement any applications submitted by the Seller as
contemplated by clause (i) hereof or to supplement any information
delivered to SCBC as contemplated by clause (ii) hereof for inclusion in
responses to requests for additional information to supplement any such
applications. If the Seller, the Association or any of the Association
Subsidiaries is delayed in submitting any applications beyond April 22,
1994 as contemplated by clause (i) of the immediately preceding sentence,
or is delayed in submitting information in response to requests from SCBC
or regulatory authorities beyond the date contemplated by clause (ii) of
the immediately preceding sentence, or is delayed in delivering additional
information in response to requests therefor from SCBC or any regulatory
authorities beyond six (6) days as contemplated by clause (iii) of the
immediately preceding sentence, then each day that such delivery or
submission is delayed shall be considered a "Late Day," notwithstanding the
use by the Seller, the Association and the Association Subsidiaries of best
efforts in good faith to make such delivery or submission within the
required time period. By way of example, if the Seller does not submit a
required application until April 27, 1994 and the Association does not
deliver information requested by SCBC until April 19, 1994, the Seller,
having received the request therefor on April 1, 1994, then the total
number of Late Days is nine (five Late Days for the delay associated with
the Seller's submission of its application and four Late Days for the delay
associated with the Association's delivery of the information requested by
SCBC). For purposes of the foregoing, any submission or delivery or notice
which would otherwise be required to be made on a day which is a Saturday,
Sunday or holiday shall be extended until the next day which is not a
Saturday, Sunday or holiday and such extension shall not be considered a
delay and no Late Days shall accrue solely as a result of such extension.
Section 5.2. Best Efforts
SCBC and the Seller shall each use its best efforts in good faith
(and, in the case of the Seller, the Seller shall cause the Association and
the Association Subsidiaries to use, and, in the case of SCBC, SCBC shall
cause the SCBC Subsidiaries to use, their best efforts in good faith) to
(i) furnish such information as may be required in connection with and
otherwise cooperate in the preparation and filing of the documents referred
to in Section 5.1 above, and (ii) take or cause to be taken all action
necessary or desirable on its or their part so as to permit consummation of
the Acquisition and the Merger at the earliest possible date, including,
but not limited to, the acquisition of all third-party consents; provided,
however, that neither SCBC nor the Seller shall be required to expend other
than nominal amounts of money to acquire third-party consents under
contracts or leases to which the Association or any Retained Association
Subsidiary is a party. Neither SCBC nor the Seller shall take, or cause or
to the best of its ability permit to be taken, any action that would
substantially delay or impair the prospects of completing the Acquisition
or the Merger.
Section 5.3. Certain Accounting and Tax Matters
(a) The Seller and SCBC shall consult and cooperate on a mutually
satisfactory basis with each other concerning such accounting and financial
matters, including, but not limited to, the Section 338(g) Election and the
Section 338(h) Election, each as described below, as may be necessary,
appropriate or required to facilitate the Acquisition and the Merger
(taking into account SCBC's policies, practices and procedures), including,
without limitation, issues arising in connection with the Association's
record keeping, loan classification, valuation adjustments, levels of loan
loss reserves and other accounting practices; provided, however, that the
Association shall not be required to make any material change to its loan,
investment, business or accounting practices unless SCBC shall have
notified the Seller that all conditions to SCBC's obligations to effect the
Acquisition, other than those set forth in Section 6.3(a), (d), (e),
(h)(ii), (k), (l) and (m), have been satisfied; and, provided further, that
should any such requested change have an effect on the amounts of the
Purchase Price, the Seller's Payment and/or the Tax Sharing Liability, SCBC
and the Seller shall increase or decrease, as applicable, the Purchase
Price, the Seller's Payment and the Tax Sharing Liability, as applicable,
to compensate (i.e., factor out) for such effect. Nothing in this Section
5.3 shall require the Association to make any material change in its loan,
investment, business or accounting practices other than in accordance with
HOLA and OTS' regulations.
(b) The Tax Sharing Agreement between the Seller and the Association
will be terminated as of the Effective Time and will have no further effect
for any taxable year (whether the current year, a future year or a past
year); provided that, such termination will not affect any right of the
Seller or SCBC under this Agreement, including, but not limited to, under
Section 2.3.
(c) Except as provided in Sections 5.3(d) and (e), SCBC will prepare
and file or cause to be prepared or filed all Tax Returns relating to the
Association or any of the Retained Association Subsidiaries which are
required to be filed after the Effective Time. Except as otherwise
expressly provided herein, SCBC will pay or cause to be paid all Taxes
required to be paid with respect to such Tax Returns, but payment of such
Taxes will not be treated as a waiver of any rights of SCBC under Section
2.3 or to indemnification under this Agreement.
(d) The Seller will file its consolidated federal income Tax Return
for its taxable year which includes the Closing Date, and will report
thereon the income of the Association and the Association Subsidiaries
through the Effective Time as required by applicable law. The Seller will
pay all Taxes required to be paid with respect to such consolidated federal
income Tax Return, but payment of such Taxes will not be treated as a
waiver of any rights of the Seller under this Agreement, including without
limitation rights pursuant to Section 2.3. In order to assist the Seller
in preparation of such consolidated federal income Tax Returns, SCBC will
prepare and deliver to (or cause to be prepared and delivered to) the
Seller the information which the Association and the Retained Association
Subsidiaries have customarily provided to the Seller and other information
necessary for preparation of such Tax Return within 60 days of the Seller's
request therefor, and shall also provide additional information and access
as provided in Section 5.3(j).
(e) The Seller will prepare or will cause to be prepared any (i) Tax
Returns required by law to be filed by the Association or the Association
Subsidiaries for taxable years ending at or before the Effective Time,
taking into account any extensions which have been customarily taken or
requested in prior years; and (ii) any North Carolina income Tax Returns
required to be filed by the Association or the Association Subsidiaries for
taxable years ending at or before the Effective Time, regardless of when
filing is required. Except for Taxes required to be paid with respect to
all federal income Tax Returns described in the preceding sentence, which
the Seller shall pay, the Seller, the Association or the Retained
Association Subsidiaries will pay all Taxes required to be paid with
respect to the income Tax Returns described in the preceding sentence
consistent with past practices and in the Ordinary Course of Business. To
the extent any Tax Return prepared by the Seller pursuant to this Section
5.3(e) has not been filed as of the Effective Time, SCBC will provide any
additional information or assistance as may be reasonably requested in
connection with the finalization of such Tax Return and will cause the
appropriate persons to sign and file such Tax Return, provided that the
Seller represents and warrants in writing that such Tax Return has been
prepared in good faith with all due care and is correct and complete in all
material respects.
(f) In accordance with Section 8.2 hereof, the Seller agrees to
indemnify SCBC from and against any Adverse Consequences that SCBC may
suffer resulting from, arising out of, relating to, in the nature of, or
caused by any Liability of the Association or any of the Association
Subsidiaries under Section 1.1502-6 of the regulations promulgated by the
U.S. Department of the Treasury under the Tax Code (or any similar
provision of state, local or foreign law or regulations).
(g) Except as otherwise provided in this Section 5.3, SCBC will
control all audits, refund claims and other proceedings involving any Tax
Return filed by the Association or any Retained Association Subsidiary.
SCBC will give prompt notice to the Seller of any audit, refund claim or
other proceeding involving any Tax Return relating (in whole or in part) to
periods or transactions prior to the Effective Time, and will consult with
the Seller and give due regard to the Seller's interests in any
negotiations or discussions unless SCBC reasonably concludes that the
Seller will not be required to make any payment under this Agreement by
reason of the subject of the negotiation or discussion, in which case the
Seller will have no further liability under this Agreement with respect to
such periods or transactions. SCBC and its Affiliates and agents will not
concede, settle or compromise any claim or deficiency related to such Tax
Returns without the prior written consent of the Seller, which consent
shall not be unreasonably withheld; failure to obtain such consent will be
treated as a waiver by SCBC of any right to indemnification with respect to
Adverse Consequences related to the matter conceded, settled or
compromised.
(h) The Seller will control all audits, refund claims and other
proceedings related to (i) the federal consolidated income Tax Return of
the Seller and (ii) any North Carolina income Tax Return filed by the
Association or any Association Subsidiary with respect to periods ended at
or prior to the Effective Time. SCBC and the Seller will give prompt
notice to the other party of any audit, refund claim or other proceeding
involving any such income Tax Return, and will cooperate with each other in
good faith in the conduct of such audit, claim or proceeding.
(i) SCBC is eligible to, and will, make a timely election under the
Tax Code Section 338(g) (the "Section 338(g) Election"), and both the
Seller and SCBC are eligible to make, and will join in making, a timely
election under Tax Code Section 338(h)(10) (the "Section 338(h) Election"),
with respect to the purchase of the Shares under this Agreement. The
parties will make corresponding elections with respect to each Retained
Association Subsidiary unless, after consultation with the Seller, (A) SCBC
determines, in good faith and in its reasonable judgment, that such
elections would increase its overall federal and state income Tax
Liabilities on a consolidated basis and that the present value of such
increase exceeds the present value of any compensating payments to SCBC
offered by the Seller, or (B) the Seller requests in writing that such
elections not be made and SCBC does not determine, in good faith and in its
reasonable judgment, that (x) such elections would decrease its overall
federal and state income Tax Liabilities on a consolidated basis and (y)
the present value of such decrease exceeds the present value of any
compensating payments to SCBC offered by the Seller. SCBC will deliver to
the Seller a duly executed and completed Internal Revenue Service Form 8023
as well as drafts of any required attachments (collectively, the "Section
338 Forms"), no later than 60 calendar days prior to the date the Section
338 Forms are required to be filed. In the event of any dispute with
regard to the content of any Section 338 Form, the parties will diligently
attempt to resolve such dispute. Once finalized, the Seller will promptly
cause the Section 338 Forms to be duly executed by an officer of the
Seller, and will return such Section 338 Forms to SCBC. SCBC will duly and
timely file the Section 338 Forms in accordance with applicable Tax laws,
and will provide written evidence to the Seller that it has done so.
Neither SCBC nor the Seller will, and each will cause their Affiliates not
to, take any action to modify or revoke the Section 338(g) Election or the
Section 338(h) Election contained in, or the content of, any Section 338
Form (or any comparable state or local form) without the express written
consent of the other party. SCBC and the Seller agree to report the
transactions contemplated by this Agreement in a manner consistent with the
Section 338(g) Election and the Section 338(h) Election (and, where
applicable, similar non-federal elections) and not to take any position
contrary thereto. The obligations and procedures set forth in this Section
5.3(i) will apply for purposes of making elections for purposes of the
North Carolina state and local income Tax laws and regulations which are
similar to elections under Tax Code Section 338(g) or Tax Code Section
338(h)(10). The Seller will pay any Tax attributable to the making of a
Section 338(h) Election and, subject to Section 8.2 hereof, will indemnify
SCBC, the Association and the Retained Association Subsidiaries against any
Adverse Consequences arising out of any failure to pay such Tax.
(j) To facilitate the performance of obligations and exercise of
rights pursuant to this Agreement, without limiting the generality of any
obligations hereunder, each party will provide or cause its Affiliates to
provide to the other party and its agents reasonable access during normal
business hours to any records, files or other materials relating to any Tax
Returns of the Association and the Association Subsidiaries, and with
reasonable access to any employees or agents having knowledge relating to
such Tax Returns. Each of the parties hereto shall reimburse the other
party for all out-of-pocket disbursements and expenditures (but not rents,
utilities, internal duplication costs, employee salaries or other overhead)
reasonably incurred by the other party in preparing and delivering
information pursuant to the foregoing items of this Section 5.3.
(k) During the Interim Period, the Seller shall use its best efforts,
consistent with GAAP and accounting standards imposed by the OTS, to cause
the Association to establish Budgeted Reserves by the Closing Date. As a
means of creating Budgeted Reserves for purposes of complying with the
requirements set forth in the immediately preceding sentence, the
Association may reallocate to its general reserves in respect of Other
Assets up to $1.25 million of the valuation allowances (general or
specific) existing on the Association's books at September 30, 1993 in
respect of Excluded Assets and all such reallocated reserves shall be
considered Budgeted Reserves.
Section 5.4. Investigation and Confidentiality
The Seller will keep SCBC advised of all material developments
relevant to the business of the Association and the Association
Subsidiaries and to consummation of the transactions contemplated herein,
and SCBC will advise the Seller of any Material Adverse Event with respect
to SCBC and the SCBC Subsidiaries that is likely adversely to affect
consummation of the transactions contemplated herein. SCBC may make or
cause to be made such continuing investigation of the financial and legal
condition of the Association and the Association Subsidiaries as SCBC
reasonably deems necessary or advisable in connection with the transactions
contemplated herein; provided, however, that such continuing investigation
shall be reasonably related to such transactions and shall not interfere
unnecessarily with normal operations. The Seller agrees to furnish SCBC
and its advisors with such financial data and other information with
respect to its business, financial condition and Tax matters as SCBC shall,
from time to time, reasonably request. No investigation pursuant to this
Section 5.4 shall affect or be deemed to modify any representation or
warranty made by, or the conditions to the obligations hereunder of, either
party hereto. SCBC shall, and shall cause its directors, officers,
employees, attorneys and advisors to, maintain the confidentiality of all
information obtained in such investigation or pursuant to the letter
agreement, dated August 31, 1993, between the Seller and SCBC which is not
otherwise publicly disclosed by the Seller, said undertaking with respect
to confidentiality to survive any termination of this Agreement pursuant to
Section 7.1 hereof.
Section 5.5. Press Releases
SCBC and the Seller shall agree with each other as to the form and
substance of any press release related to this Agreement or the
transactions contemplated hereby, and consult with each other as to the
form and substance of other public disclosures related thereto; provided,
however, that nothing contained herein shall prohibit either party,
following notification to the other party, from making any disclosure which
its counsel deems necessary under applicable securities laws.
Section 5.6. Forbearances of the Association
Except with the prior written consent of SCBC, between the date hereof
and the Effective Time, the two representatives of the Seller serving on
the Association's Board of Directors shall use their best influences, and
shall cast their votes as directors, consistent with their fiduciary duties
as directors and in compliance with all laws, including, but not limited
to, the federal Bank Merger Act and applicable antitrust laws, to cause the
Association not to, and to cause each Retained Association Subsidiary not
to:
(a) carry on its business other than in the Ordinary Course of
Business, or establish or acquire any new subsidiary or Joint Venture or
cause or permit any Retained Association Subsidiary to engage in any new
activity or expand any existing activities (but the foregoing shall not
prevent the Association and the Retained Association Subsidiaries from
pursuing and closing loans and other transactions in respect of the
Excluded Assets or, if not in respect of the Excluded Assets, that
previously were approved by their respective Board of Directors and with
respect to which their managements have made a legally enforceable
commitment to third parties).
(b) declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock;
(c) issue any shares of its capital stock to any Person; or recognize
on its stock transfer records any transfer, sale or conveyance of any of
the Shares to any other Person; or enter into, or permit the imposition of,
a Restriction on Transfer respecting the Shares;
(d) issue, grant or authorize any Rights with respect to any of its
capital stock or effect any recapitalization, reclassification, stock
dividend, stock split or like change in capitalization;
(e) amend its certificate of incorporation (or, as applicable, its
charter) or bylaws; impose, or suffer the imposition, on any share of stock
held by the Association in any Retained Association Subsidiary of any
Security Interest or permit any such Security Interest to exist; or waive
or release any material right or cancel or compromise any material debt or
claim other than the Litigation and other than in the Ordinary Course of
Business;
(f) merge or consolidate with any other Person or permit any other
Person to merge into it, acquire control over any other Person; permit any
Person to acquire control over it; or liquidate, sell or otherwise dispose
of any assets (other than Excluded Assets) or acquire any assets (other
than Proceeds from Excluded Assets), other than in the Ordinary Course of
Business;
(g) fail to comply in any material respect with any laws,
regulations, ordinances, governmental actions, or any memorandum of
understanding or consent agreement with financial institution regulatory
authorities applicable to it and to the conduct of its business except
where the Association or any Association Subsidiary is in good faith
contesting the validity of any of the foregoing or where the failure to so
comply would not constitute a Material Adverse Event with respect to the
Association or the Retained Association Subsidiary;
(h) increase the rate of compensation of any of its directors,
officers, employees, or independent contractors, or pay agree to pay any
bonus, or provide or agree to provide any other new employee benefit or
incentive, to any of its directors, officers, or employees, except in the
Ordinary Course of Business;
(i) enter into or substantially modify (except as may be required by
applicable law) any Employee Benefit Plan, any other plan or arrangement,
or any trust agreement related thereto, in respect of any of its directors,
officers or other employees, except that the Association may amend the
Policy (which term is defined in Section 8.2(a) hereof) to clarify the
exclusion from coverage under the Policy of employees employed under
written employment or severance agreements;
(j) solicit or encourage inquiries or proposals with respect to,
furnish any information relating to, or participate in any negotiations or
discussions concerning, any acquisition or purchase of the Shares, or other
shares of the capital stock or other voting securities of the Association
or any Retained Association Subsidiary, all or a substantial portion of the
assets of, or a substantial equity interest in, the Association or any
Retained Association Subsidiary, or any merger, consolidation or other
business combination involving the Association or any Retained Association
Subsidiary other than as contemplated by this Agreement; or authorize or
permit any officer, director, agent or Affiliate to do any of the above; or
fail to notify SCBC immediately if any such inquiries or proposals are
received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated with, the
Association or any Retained Association Subsidiary;
(k) enter into or modify (i) any agreement, contract, arrangement,
lease, license, loan, loan commitment or deposit collateralization
agreement (or series of agreements, contracts, arrangements, leases,
licensees, loans, loan commitments or deposit collateralization agreements)
involving more than Twenty-Five Thousand Dollars ($25,000) other than in
the Ordinary Course of Business and other than any such contracts,
agreements, etc. in respect of Excluded Assets, (ii) any agreement or
memorandum of understanding with financial institution regulatory
authorities, (iii) any agreement, indenture or other instrument relating to
the borrowing of money by the Association or any Retained Association
Subsidiary or the guarantee by the Association or any Retained Association
Subsidiary of any indebtedness, except for deposits and advances from the
FHLB of Atlanta occurring in the Ordinary Course of Business, (iv) any
agreement, arrangement or commitment relating to the employment of, or
severance of, an independent contractor or the employment, severance,
election or retention in office of any present or former director or
officer or employee, except in the Ordinary Course of Business; or (v) any
collective bargaining agreement or other understanding with a labor union;
(l) change its lending, investment, loan loss provisions, or asset
liability management policies or practices in any material respect except
as may be required by applicable law or as contemplated in Section 5.3(k)
hereof;
(m) change its methods of accounting in effect at September 30, 1993,
except as required by changes in GAAP concurred in by its independent
auditors, or change any of its methods of reporting income and deductions
for federal income Tax purposes from those employed in the preparation of
its federal income Tax Returns for the year ended December 31, 1992, except
as required by changes in law;
(n) delay or postpone the recognition of any Liability or accelerate
the recognition of income in any manner not consistent with GAAP;
(o) fail to keep its business and properties substantially intact,
including its relationships with depositors, borrowers, other customers,
and employees;
(p) sell, lease, transfer, or assign any assets, tangible or
intangible, other than Excluded Assets or for a fair consideration in the
Ordinary Course of Business;
(q) impose, or suffer the imposition of, any Security Interest upon
any of its assets, tangible or intangible, except Security Interests in
Excluded Assets or Security Interests granted in connection with the
purchase of equipment or supplies in the Ordinary Course of Business;
(r) make any capital expenditure (or series of related capital
expenditures) involving more than Fifty Thousand Dollars ($50,000) outside
the Ordinary Course of Business;
(s) make any capital investments in, any loan (other than an owner-
occupied residential mortgage loan and/or construction loan, in each case
having an initial principal balance of less than $300,000 made to the
homeowner and made in the Ordinary Course of Business and other than a loan
made in connection with the sale or disposition of Excluded Assets which
constitutes Proceeds) to, or any acquisition of the investments or loans
of, any Person, either involving more than Fifty Thousand Dollars ($50,000)
or outside the Ordinary Course of Business;
(t) cancel, compromise, waive, or release any right or claim it may
have against any Person (or any series of related rights and claims) unless
such claim or right involves (i) an Excluded Asset or (ii) an amount not to
exceed Twenty-Five Thousand Dollars ($25,000) and such cancellation,
waiver, compromise or release is in the Ordinary Course of Business or
(iii) as related to or associated with the Litigation;
(u) grant any license or sublicense of any rights under or with
respect to any Intellectual Property;
(v) any loan to, or enter into any other transaction with, any of its
directors, officers, or employees (other than in accordance with the
Association's past practices and policies regarding loans to employees
(including with respect to frequency and amount) in existence during the
preceding 18 months) or other Affiliates;
(w) make any pledge to make any charitable or other capital
contribution outside the Ordinary Course of Business; or
(x) agree to do any of the foregoing.
The Association shall cause the Association Subsidiaries that are not
Retained Association Subsidiaries not to do or permit, or agree to do or
permit, those matters set forth in items (g), (i), (j), (k)(ii), (k)(iii),
(k)(v), (l), (m), (n), (p) and (s).
Section 5.7. Forbearances of the Seller
Except with the prior written consent of SCBC between the date hereof
and the Effective Time, the Seller shall not:
(a) transfer, sell or convey any of the Shares, or any Rights to any
of the Shares, to any other Person, or enter into, or permit the imposition
of, a Restriction on Transfer respecting the Shares;
(b) grant any Security Interest in any of the Shares to any other
Person;
(c) vote the Shares to approve any merger of the Association or any
Retained Association Subsidiary with or into any other Person, any
consolidation of the Association or any Retained Association Subsidiary
with any other Person, any sale, exchange or disposition by the Association
or any Retained Association Subsidiary of any assets (other than Excluded
Assets), or any liquidation of the Association, any Retained Association
Subsidiary or their respective assets (other than Excluded Assets).
(d) solicit or encourage inquiries or proposals with respect to,
furnish any information relating to, or participate in any negotiations or
discussions concerning, any acquisition or purchase of the Shares or other
shares of the capital stock or other voting securities of the Association
or any Retained Association Subsidiary, all or a substantial portion of the
assets (other than Excluded Assets) of, or a substantial equity interest
in, the Association or any Retained Association Subsidiary or any merger,
consolidation or other business combination involving the Association or
any Retained Association Subsidiary other than as contemplated by this
Agreement; or authorize or permit any officer, director, agent or Affiliate
to do any of the above; or fail to notify SCBC immediately if any such
inquiries or proposals are received by, any such information is requested
from, or any such negotiations or discussions are sought to be initiated
with, the Seller, the Association or any Retained Association Subsidiary;
(e) enter or permit any of its Affiliates to enter, into agreements,
commitments or understandings with the Association or any Retained
Association Subsidiary providing for the extension of credit to the Seller
or any of its Affiliates; or
(f) agree to do any of the foregoing.
Section 5.8. Closing; Effective Time
(a) The transactions contemplated by this Agreement (other than the
Merger) shall be consummated at a closing (the "Closing") to be held at the
offices of SCBC's counsel, Brooks, Pierce, McLendon, Humphrey & Leonard,
L.L.P., Suite 2000, Renaissance Plaza, 230 North Elm Street, Greensboro,
North Carolina, or such other place as shall be agreed to by SCBC and the
Seller, on the fifth business day following satisfaction of the conditions
to consummation of the Acquisition set forth in Article VI hereof or such
later date as the parties may otherwise agree (the "Closing Date"). The
Acquisition shall be effective as of the Closing on the Closing Date or at
such other time and date specified by the parties at the Closing (the
"Effective Time"); provided, however, that solely for financial accounting
and Tax reporting purposes, the Seller's purchase of the Excluded Assets,
the Association's payment of the Tax Sharing Liability and the Acquisition,
in that order, shall be deemed effective as of 11:59:59 o'clock p.m.,
Greensboro, North Carolina time, on the Closing Date. The Merger shall
occur at such time as may be specified by SCBC, which may be either at the
Effective Time or thereafter.
(b) The Closing shall be conducted pursuant to and in accordance with
a closing escrow agreement to be executed by the Seller, SCBC, the
Association and an escrow agent to be selected by mutual agreement of the
Seller and SCBC (the "Closing Escrow Agent"). The form and substance of
the closing escrow agreement shall be reasonably satisfactory to the Seller
and SCBC and shall obligate the Closing Escrow Agent to hold all documents
and funds deposited with it pursuant to the closing escrow agreement until
it has received all such documents and funds and until it has been
authorized to deliver and, if necessary, record such documents and release
such funds by joint instructions of the Seller, SCBC and the Association.
Notwithstanding anything set forth herein to the contrary, the Seller and
SCBC contemplate that the closing escrow agreement will require the
Association to deliver to the Closing Escrow Agent all executed transfer
documents pertaining to the Excluded Assets and to require the Seller to
deposit with the Closing Escrow Agent the Seller's Payment, subject to such
credits and offsets as are provided in this Agreement.
At the Closing: (i) the Seller shall deliver to SCBC (A) the various
certificates, instruments and documents described in Section 6.3, (B) in
executed forms, the Responsibilities Agreement and Appropriate security
documents and Intercreditor Agreements, all as described in Section 8.4,
(C) in executed form, a security agreement, in form and substance
satisfactory to SCBC and its counsel, granting the Deferred Payment
Security Interests and, if necessary to establish the first priority of
such Deferred Payment Security Interests, Intercreditor Agreement(s), (D)
stock certificates representing ownership of the Shares, endorsed for
transfer, at SCBC's election to SCBC or the Designated Subsidiary, and (E)
evidence of the revocation of all proxies in respect of the Shares granted
to the OTS and of the termination of all agreements between the OTS and the
Seller with regard to the Shares and/or the Association, which revocation
and termination may be conditioned upon the consummation of the
Acquisition; (ii) the Seller shall deliver the Seller's Payment to the
Association and/or to any Retained Association Subsidiary from which
Excluded Assets are to be transferred, except as provided in the following
clauses (iii) and (iv); (iii) SCBC shall deliver to the Seller the Cash
Payment Amount, subject to the Seller's right under Section 2.2(d) to cause
all or a portion of the Cash Payment Amount to be paid to the Association
and/or to any Retained Association Subsidiary as an offset to, and as a
credit against, the Seller's Payment; and (iv) the Association, or SCBC on
behalf of the Association, shall deliver to the Seller the amount of the
estimated Tax Sharing Liability as of the Effective Time, subject to the
Seller's right under Section 2.3(d) to cause all or a portion of such
estimated Tax Sharing Liability to be retained by the Association and/or
paid to any Retained Association Subsidiary as an offset to, and credit
against, the Seller's Payment; and, (v) the Association shall deliver to
the Seller the License and Services Agreement described in Section 5.9.
(c) In the case at any time after the Effective Time any further
action is necessary to carry out the purposes of this Agreement, each of
the Seller and SCBC will take such further action (including the execution
and delivery of such further instruments and documents) as the other may
reasonably request, all at the sole cost and expense of the requesting
party (unless the request is made in connection with a claim for indemnity
pursuant to Article VIII and the requesting party is SCBC and is entitled
to indemnification therefor under Section 8.2). The Seller acknowledges
and agrees that from and after the Effective Time the original records
(including Tax records), agreements, and financial data of any sort of the
Association and the Retained Association Subsidiaries (except to the extent
such records constitute Excluded Assets), wherever now located, shall be
located at the main offices of the Association or at such other location as
SCBC shall determine, and shall be the property of the Association;
provided, however, that SCBC shall provide the Seller access to certain of
such records as provided in Section 5.3(j).
Section 5.9. Employees and Employee Benefit Plans
(a) As of the Effective Time the employees of the Association and the
Retained Association Subsidiaries (other than Robert T. Waugh who shall
remain employed under his Previously Disclosed employment agreement with
the Association) shall remain employees of the Association and the Retained
Association Subsidiaries (the "Continuing Employees") with only such rights
as to continued employment as exist under North Carolina law with respect
to persons not parties to employment agreements with their employer. SCBC,
the Association or the Retained Association Subsidiaries may terminate any
such Continuing Employee in accordance with SCBC's employment policies and
practices at any time thereafter; provided, that M.L. Beall, a current
employee of the Association, will be employed by the Seller as of the
Effective Time on terms acceptable to Mr. Beall and the Seller, and will be
permitted to conduct his activities for the Seller from the premises of the
Association as provided in a License and Services Agreement attached hereto
as Exhibit E. During the period following the Acquisition, if a Continuing
Employee remains in the employ of the Association or a Retained Association
Subsidiary, he or she shall be eligible to receive group hospitalization,
medical, life, disability and other benefits comparable to those provided
to the present employees of the SCBC Subsidiaries. With respect to
Continuing Employees, SCBC shall waive "pre-existing conditions" provisions
under its health care insurance plan in connection with the admission of
such Continuing Employees to such Plan. Following the Merger, the
Association's Money Purchase Pension Plan (the "MPP Plan") shall be
terminated, and the rights and interests of the Continuing Employees of the
Association and the Retained Association Subsidiaries in such plan shall
become fully vested, with each participating employee having the right or
option either to receive the benefits to which they are entitled as a
result of the termination of the MPP Plan or to have such benefits "rolled"
into the 401(k) Plan maintained by SCBC and the SCBC Subsidiaries for the
benefit of their employees, and on the same basis and applying the
eligibility standards as would apply to employees of SCBC and the SCBC
Subsidiaries, recognizing the past service of those Continuing Employees of
the Association and the Retained Association Subsidiaries as if such
service had been performed on behalf of SCBC and the SCBC Subsidiaries for
vesting and qualification, but not for funding, purposes. Following the
Merger, the Continuing Employees of the Association and the Retained
Association Subsidiaries shall be entitled to participate, to the same
extent and on the same terms as the employees of SCBC, in any retirement,
pension, medical insurance or similar plans in effect for the benefit of
the employees of SCBC and the SCBC Subsidiaries (but not in deferred
compensation, split-dollar insurance, incentive bonus, stock option, stock
appreciation rights, stock ownership or long term incentive compensation
plans or arrangements established for the benefit of certain of SCBC's
employees) which when considered as a whole shall be no less favorable than
the benefits currently provided to the employees of the Association. For
purposes of participating in all plans and benefits of SCBC, such
Continuing Employees shall receive credit for their period of service to
the Association and the Retained Association Subsidiaries for participation
and vesting purposes only. The foregoing provisions of this Section 5.9(a)
are not intended to confer, and should not be construed to confer, any
right upon or contract in favor of any employee of the Association or any
Retained Association Subsidiary.
(b) The Association shall make all required contributions to the MPP
Plan in a manner consistent with its past practices and in a percentage
amount no higher than that made over the past two (2) fiscal years.
Contributions made to the MPP Plan in previous periods which were forfeited
by former participants in the MPP Plan, which are currently credited to a
deferred forfeiture account and which are currently being accreted into
income (approximately $199,000) shall not be allocated to the MPP Plan
participants and shall remain credited to the deferred forfeiture account,
except to the extent they are accreted into income prior to the Effective
Time in a manner consistent with past practices.
Section 5.10. Consent of Lender and Other Necessary Consents.
At the earliest practicable time after the date of this Agreement, the
Seller shall advise The First National Bank of Boston (the "Lender") and
each other Person identified on Appendix 2 hereto of the terms and
conditions of this Agreement and the transactions contemplated herein, and
diligently shall seek (a) all approvals of, and consents to, this Agreement
and such transactions from the Lender (the "Lender's Approval") and from
each such other Person (collectively, the "Other Necessary Approvals") as
are required or necessary under all agreements, instruments and other
understandings between or among the Seller, its Affiliates and the Lender
or each such other Person, as the case may be, for the Acquisition to be
effected, upon the terms and conditions described herein, at the Closing,
(b) the Lender's written confirmation of its acceptance of the terms and
conditions of, and of its intent to execute and deliver at the Closing, the
FNBB Intercreditor Agreement, the form and substance of which shall be
satisfactory to SCBC and its legal counsel (the "Lender's Confirmation"),
and (c) the Lender's written commitment to fund the Seller's purchase of
the Excluded Assets to the extent the cash proceeds of the Acquisition to
the Seller are not sufficient to do so (the "Lender's Commitment").
Section 5.11. Designated Loans.
SCBC and the Seller have agreed that the Loans listed on Exhibit H
hereto (the "Designated Loans") will be retained by the Association and
will not be Excluded Loans. Notwithstanding the foregoing, if (i) there
occurs a default under the terms of any document evidencing or securing a
Designated Loan and such default has not been cured within any applicable
cure period set forth in such document(s) after delivery of any required
notice of such default, or (ii) any representation or warranty pertaining
to a Designated Loan set forth in this Agreement is determined to be
inaccurate or untrue, then the Seller shall purchase such Designated Loan
either (A) at the Closing and as an Excluded Loan, if the events described
in clauses (i) or (ii) hereof shall occur prior to the Closing Date, or (B)
within ten (10) days after the Seller's receipt of written demand from SCBC
setting forth the circumstances requiring such purchase, in which case the
Seller shall pay SCBC a cash purchase price equal to the unpaid principal
balance and accrued interest due on such Designated Loan on the date of the
Seller's purchase thereof minus the amount of any specific valuation
allowances in respect of such Designated Loan existing on the books of the
Association as of the Closing Date. The purchase of such Designated Loan
by the Seller shall be SCBC's sole remedy and recourse for the borrower's
default on a Designated Loan or the inaccuracy or untruthfulness of any
representation or warranty of the Seller pertaining to such Designated Loan
set forth in this Agreement.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.1. Conditions Precedent -- SCBC and the Seller
The respective obligations of SCBC and the Seller to effect the
transactions contemplated by this Agreement shall be subject to
satisfaction or waiver of the following conditions at or prior to the
Effective Time:
(a) The approval of the Acquisition by the Seller's shareholders
shall have been duly and validly taken; and
(b) Neither SCBC, any SCBC Subsidiary, the Seller, the Association
nor any Association Subsidiary shall be subject to any order, decree,
judgment, ruling, or injunction of a court or governmental body of
competent jurisdiction which enjoins or prohibits consummation of the
transactions contemplated herein, nor shall any of them be a party or
subject to any pending action, suit or proceeding before any court or
governmental agency of competent jurisdiction wherein an unfavorable order,
decree, judgment, ruling, or injunction would (i) enjoin or prohibit
consummation of the transactions contemplated herein, (ii) cause any of the
transactions contemplated herein to be rescinded following consummation,
(iii) adversely affect the right of SCBC to own and/or to vote the Shares
or to control the Association and the Retained Association Subsidiaries, or
(iv) affect adversely the right of the Association or any Retained
Association Subsidiary to own its assets and to operate its business.
Section 6.2. Conditions Precedent -- the Seller
The obligations of the Seller to effect the transactions contemplated
by this Agreement shall be subject to satisfaction of the following
additional conditions at or prior to the Effective Time unless waived by
the Seller pursuant to Section 7.3 hereof:
(a) The representations and warranties of SCBC set forth in Article
IV hereof (and, if applicable, the representations and warranties of the
Designated Subsidiary made as provided in Section 8.7) shall be true and
correct in all material respects as of the date of this Agreement and as of
the Effective Time as though made on and as of the Effective Time (or on
the date when made in the case of any representation and warranty which
specifically relates to an earlier date), except as otherwise contemplated
by this Agreement or consented to in writing by the Seller (which consent
may not be unreasonably withheld);
(b) SCBC shall have in all material respects performed all material
obligations and complied with all material covenants required by this
Agreement;
(c) SCBC shall have delivered to the Seller a certificate, dated as
of the Closing Date and signed on its behalf by its Chief Executive
Officer, to the effect that the conditions set forth in Sections 6.1(b),
6.2(a), 6.2(b), 6.2(d) and 6.3(b) to the extent applicable to SCBC or any
SCBC Subsidiary, have been satisfied and that there are no actions, suits,
claims, governmental investigations or procedures instituted, pending or,
to the best of his knowledge, threatened that reasonably may be expected to
constitute a Material Adverse Event with respect to SCBC and the SCBC
Subsidiaries or that present a claim or demand to restrain or prohibit the
transactions contemplated herein;
(d) All approvals from the Federal Reserve Board, the OTS, the FDIC,
the Commissioner and any other state or federal government agency,
department or body necessary or required to effect the Seller's purchase of
the Repurchased Timeshare and Lot Assets as provided herein and the
Acquisition and the Merger on the terms and conditions set forth herein
shall have been received, all conditions imposed therein which are to be
satisfied prior to the Effective Time shall have been so satisfied, all
applicable notice and waiting periods shall have passed, and all such
approvals shall be in effect;
(e) SCBC shall have demonstrated its ability to make the deliveries
required of it under Section 5.8(b);
(f) The Seller shall have received such opinions of SCBC's counsel as
it shall reasonably request; and
(g) The Seller shall have received the Lender's Approval, the Other
Necessary Approvals and the Lender's Commitment.
Section 6.3. Conditions Precedent -- SCBC
The obligations of SCBC to effect the transactions contemplated by
this Agreement shall be subject to satisfaction of the following additional
conditions at or prior to the Effective Time unless waived by SCBC pursuant
to Section 7.3 hereof;
(a) The representations and warranties of the Seller set forth in
Article III hereof and of the Association in the Association Letter shall
be true and correct in all material respects as of the date of this
Agreement and as of the Effective Time as though made as of the Effective
Time (or on the date when made in the case of any representation and
warranty which specifically relates to an earlier date), except as
otherwise contemplated by this Agreement or consented to in writing by SCBC
(which consent may not be unreasonably withheld);
(b) All approvals from the Federal Reserve Board, the OTS, the FDIC,
the Commissioner and any other state or federal government agency,
department or body necessary or required to effect the Acquisition on the
terms and conditions set forth herein or necessary or required to effect
the Merger shall have been received, all conditions imposed therein which
are to be satisfied prior to the Effective Time have been so satisfied, all
notice periods and waiting periods required after the granting of any such
approvals shall have passed, and all such approvals shall be in effect;
provided, however, that no such approval shall contain any term or impose
any condition or requirement that is a term, condition or requirement that
has not heretofore been normally imposed in transactions of the nature of
the Acquisition and the Merger and that would constitute a Material Adverse
Event (which term, solely for the purposes of this sentence, shall be
deemed not to include parenthetical item (a) of the definition of "Material
Adverse Event" set forth in Article I) with respect to the Association and
the Retained Association Subsidiaries or the Association's successor
pursuant to the Merger;
(c) The Seller shall have in all respects performed all material
obligations and complied with all covenants, each in all material respects,
required by this Agreement;
(d) The Seller shall have delivered to SCBC a certificate, dated as
of the Closing Date and signed on behalf of the Seller by its Chief
Executive Officer, to the effect that the conditions set forth in Sections
6.1(a), 6.1(b), 6.3(a) (except, with respect to representations and
warranties of the Association in the Association Letter, qualified to the
Seller's Knowledge), 6.3(b) and 6.3(c), to the extent applicable to the
Seller, the Association or any of the Association Subsidiaries, have been
satisfied and that there are no actions, suits, claims, governmental
investigations or procedures instituted, pending or, to the best of the
Seller's Knowledge, threatened that reasonably may be expected to
constitute a Material Adverse Event in respect of the Association and the
Retained Association Subsidiaries or that present a claim or demand to
restrain or prohibit the transactions contemplated herein;
(e) SCBC shall have received such opinions of the Seller's counsel
and the Association's counsel as it shall reasonably request;
(f) The Association and the Association Subsidiaries shall have
conducted their businesses as provided in Section 5.6;
(g) A change in the business, financial condition, operations,
results of operations or prospects of the Association and the Association
Subsidiaries, taken as a consolidated whole, that constitutes a Material
Adverse Event with respect to the Association and the Retained Association
Subsidiaries shall not have occurred since September 30, 1993.
(h) SCBC shall have received: (i) prior to the execution of this
Agreement a signed copy of the Association Letter; and (ii) prior to the
Closing, a letter dated as of the Closing Date, and in form and substance
satisfactory to SCBC, signed on behalf of the Association by the Chief
Executive Officer and the Chief Financial Officer of the Association and
confirming that the matters referred to in Section 6.3(a) hereof insofar as
they relate to the representations and warranties of the Association;
(i) SCBC shall have received, effective as of the Effective Time, the
resignations of the directors of the Association and each Retained
Association Subsidiary (if and to the extent requested by SCBC at least ten
(10) days prior to the Effective Time);
(j) The Seller shall have demonstrated its ability to make the
deliveries required of it under Section 5.8(b);
(k) The Lender shall have given the Lender's Approval and shall have
executed and delivered the FNBB Intercreditor Agreement, and the Other
Necessary Approvals shall have been given;
(l) All UCC-1 financing statements and other Appropriate security
documents necessary to perfect the Deferred Payment Security Interests, the
Indemnification Security Interests and the Litigation Security Interests
shall have been filed with, and accepted for filing and filed of record by,
all registrars of deeds, UCC filing authorities and similar governmental
offices where such filings are required to perfect and establish of record
such first liens and security interests; and
(m) The Seller (or its designated Affiliate) (i) shall have purchased
the Excluded Assets and assumed the Excluded Liabilities pursuant to one or
more purchase and assumption agreements with the Association and the
Retained Association Subsidiaries, and shall have executed and delivered,
or executed and received, all necessary related documents and instruments,
all of which agreements, documents and instruments shall be in form,
substance, and effect reasonably satisfactory to SCBC and its counsel, and
(ii) shall have advised SCBC of whether (A) it has paid the Seller's
Payment to the Association and/or any Retained Association Subsidiary in
immediately available funds, or (B) it desires to cause SCBC to deliver all
or a portion of the Cash Payment Amount to the Association and/or to any
Retained Association Subsidiaries as an offset to, and as a credit against,
the Seller's Payment, and/or (C) it desires to cause the Association to
retain, and/or to pay to any Retained Association Subsidiary, all or a
portion of the amount of the estimated Tax Sharing Liability as an offset
to, and as a credit against, the Seller's Payment.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
Section 7.1. Termination
This Agreement may be terminated:
(a) at any time on or prior to the Effective Time, by the mutual
consent in writing of the parties hereto;
(b) at any time on or prior to the Effective Time, by SCBC in writing
if the Seller has, or by the Seller in writing if SCBC has, in any material
respect, breached (i) any covenant or undertaking contained herein or (ii)
any representation or warranty contained herein, which breach has been
materially adverse, and in the case of (i) or (ii) if such breach has not
been cured by the earlier of 20 days after the date on which written notice
of such breach is given to the party committing such breach or the
Effective Time;
(c) on the Closing Date and prior to the Effective Time, by either
party hereto in writing, if any of the conditions precedent to the
obligations of such party to consummate the transactions contemplated
hereby have not been satisfied or fulfilled, other than by reason of the
failure of such party to fulfill its obligations under Section 5.2;
(d) at any time, by either party hereto in writing, if any of the
applications for prior approval referred to in Section 5.1 hereof are
denied, and the time periods for appeals and requests for reconsideration
have run;
(e) by either party hereto in writing, if the Effective Time has not
occurred by 5:00 o'clock, p.m., Greensboro, North Carolina time, on
September 30, 1994 (or such later date as the parties shall mutually
agree);
(f) at any time after the 45th day after the date of this Agreement,
by SCBC in writing, if prior to the time SCBC exercises its right of
termination under this Section 7.1(f), the Seller shall have not delivered
to SCBC written evidence of the Lender's Approval and the Other Necessary
Approvals or if the Lender shall have not provided to the Seller the
Lender's Confirmation, together with the definitive form of the FNBB
Intercreditor Agreement, and the Lender's Commitment, in each case
satisfactory in form and substance to SCBC and its counsel;
(g) at any time after the 75th day after the date of this Agreement,
by the Seller in writing, (i) if the Seller shall not have received the
Lender's Approval and the Other Necessary Approvals, the Lender's
Confirmation (together with the definitive form of the FNBB Intercreditor
Agreement) or the Lender's Commitment on or prior to the time the Seller
exercises its right of termination under this Section 7.1(g), (ii) if the
Lender shall have given the Lender's Commitment and the Lender's
Confirmation but thereafter refuses to honor the Lender's Commitment or to
execute and deliver at the Closing the FNBB Intercreditor Agreement, or
(iii) if, after diligently exercising its best efforts in good faith, the
Seller is unable to satisfy any of the conditions to funding of the
Lender's Commitment and the purchase of the Excluded Assets, and the Seller
provides satisfactory evidence to SCBC that, after diligently exercising
its best efforts in good faith, the Seller will be unable to fund its
purchase of the Excluded Assets through its own resources and/or through
borrowings from Persons other than the Lender; or
(h) at any time, by either party hereto in writing, if such party
determines in good faith that any condition precedent to such party's
obligations to consummate the Acquisition is or would be impossible to
satisfy.
Section 7.2. Effect of Termination
(a) In the event this Agreement is terminated pursuant to Section 7.1
hereof, this Agreement shall become void and have no further effect, except
that (i) the provisions relating to confidentiality and expenses set forth
in Sections 5.4 and 8.1, respectively, and (ii) the provisions relating to
the consequences of termination set forth in Section 7.2(b), shall survive
any such termination, and (ii) a termination pursuant to Section 7.1(b)
shall not, except as otherwise may be provided pursuant to Section 7.2(b),
relieve the breaching party from liability for an uncured breach of the
covenant, undertaking, representation, or warranty giving rise to such
termination. Without affecting any right, claim, or cause of action
against the Seller, SCBC agrees not to assert any right, claim or cause of
action against the Association in the event of the termination of this
Agreement for any reason.
(b) In the event of termination of this Agreement by SCBC pursuant to
Section 7.1(b) as a result of a deliberate or wilful action or inaction by
the Seller, or in the event of termination by the Seller other than
pursuant to Section 7.1, the Seller shall pay to SCBC Nine Hundred Twenty-
Five Thousand Dollars ($925,000) within 30 days of written notice to the
Seller by SCBC following such termination. In the event of termination by
the Seller pursuant to Section 7.1(b) as a result of a deliberate or wilful
action or inaction by SCBC, or in the event of termination of this
Agreement by SCBC other than pursuant to Section 7.1, SCBC shall pay to the
Seller Nine Hundred Twenty-Five Thousand Dollars ($925,000) within 30 days
of written notice to SCBC by the Seller following such termination. Any
amount paid pursuant to this Section 7.2(b) shall represent the liquidated
damages of the party receiving such amount and shall constitute such
party's sole and exclusive remedy for such termination.
Section 7.3. Waiver
Except with respect to any required regulatory approval, each party
hereto by written instrument signed by the chief executive officer of such
party, may at any time extend the time for the performance of any of the
obligations or other acts of the other party hereto and may waive (i) any
inaccuracies of the other party in the representations and warranties
contained in this Agreement or any document delivered pursuant hereto, (ii)
compliance with any of the covenants, undertakings or agreements of the
other party, or satisfaction of any of the conditions precedent to its
obligations, contained herein or (iii) the performance by the other party
of any of its obligations set out herein. No waiver by either such party
of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Expenses
Each party hereto shall bear and pay all costs and expenses incurred
by it in connection with the transactions contemplated by this Agreement,
including fees and expenses of its own financial consultants, accountants
and counsel, except (a) as otherwise provided for pursuant to Section
7.2(b), and (b) as otherwise provided in Sections 8.2, 8.3, 8.4 and 8.5;
provided, however, if the Seller shall terminate this Agreement in
compliance with Section 7.1(g)(ii) or (iii), then within ten (10) days of
the date of such termination, the Seller shall reimburse SCBC, in
immediately available funds, an amount equal to the sum of (i) all fees
paid or payable, and all expenses reimbursed or reimbursable, by SCBC to
its outside attorneys, independent accountants, investment advisors, loan
review consultants, computer consultants and other outside advisors and
consultants in connection with services, analyses, considerations or
activities undertaken in connection with the Acquisition, the Merger and/or
this Agreement, (ii) all application and similar fees paid by SCBC or any
SCBC Subsidiary to governmental agencies or departments in connection with
the Acquisition or the Merger, and (iii) the sum of $20,000 as full
reimbursement to SCBC and the SCBC Subsidiaries for out-of-pocket expenses
incurred by them for travel, copying, telephone tolls and similar matters.
Section 8.2. Indemnification
SCBC and the Seller agree that upon consummation of the Acquisition at
the Closing, the provisions of this Section 8.2 shall become and be in full
force and effect.
(a) Subject to the limitations set forth in this Section 8.2(a) and
in Section 8.2(c) hereof, and in accordance with the procedures set forth
in Section 8.3 hereof and, if applicable, the Responsibilities Agreement,
the Seller shall indemnify and hold harmless SCBC, the Association and/or
each of the Retained Association Subsidiaries from and against all
Indemnifiable Losses suffered by it or them by reasons of:
(i) the untruthfulness or the inaccuracy of any representation
or warranty of the Seller or the breach of any covenant or agreement of the
Seller contained in this Agreement, other than the representations,
warranties, covenants and agreements set forth in Sections 3.2, 3.3,
5.3(f), 5.3(i) and 5.11 hereof;
(ii) the untruthfulness or the inaccuracy of any representations
or warranties of the Seller set forth in Sections 3.2 and 3.3 of this
Agreement;
(iii) the breach of any agreement or covenant of the Seller set
forth in Sections 5.3(f) and 5.3(i) of this Agreement;
(iv) the Class Action Litigation;
(v) the Homeowners Litigation;
(vi) the Bankruptcy Litigation;
(vii) any "Excess Severance Benefit" claimed against the
Association or its successor after the Merger by any hereafter named
employee of the Association if he or she is involuntarily terminated by the
Association or by its successor after the Merger within twelve (12) months
after the Effective Time: Betty Allison; Rick Downey; Sandy Harlan; John
Johns; Barry Lesley; Sandra Lully; and Anelson Watkins (the "Named
Employees"). The term "Excess Severance Benefit" means an amount equal to
the excess, if any, of the lump sum benefit a Named Employee claims he or
she is entitled to receive from the Association or its successor after the
Merger over the amount of the lump sum severance benefit that would have
been paid to that Named Employee pursuant to the severance policy of the
Association entitled "First Federal Severance and Separation Plan," as in
effect on March 1, 1994 (the "Policy"), if he or she had been eligible for
a lump sum severance benefit under the Policy and if he or she had been
involuntarily terminated on such date of termination; and
(viii) the breach of any agreement or covenant of the Seller set
forth in Section 5.11 of this Agreement.
A claim for indemnification pursuant to clause (i) of this Section
8.2(a) may be made at any time on or before 11:59:59 o'clock, p.m.,
Greensboro, North Carolina time on the nine hundred thirteenth (913th) day
after the Closing Date (the "Period End"). A claim for indemnification
pursuant to clause (iii) of this Section 8.2(a) may be made at any time on
or before the date which is the sixth (6th) anniversary of the Closing
Date. A claim for indemnification under clauses (ii) and (vii) of this
Section 8.2(a) may be made at any time prior to 30 days following the
expiration of the applicable statute of limitations governing actions which
could be brought arising out of the matters for which indemnification is
provided in such clauses. Any claim for indemnification under clauses
(iv), (v) and (vi) may be made at any time prior to 15 days after the
Termination of the Litigation giving rise to such claim. Any claim for
indemnification under clause (viii) of this Section 8.2(a) shall be made
within 15 days after the Seller's failure to purchase a Designated Loan in
respect of which SCBC has made demand in accordance with the provisions of
Section 5.11 hereof. Any claim for indemnification under clause (i) or
(iii) of this Section 8.2(a) that is not made within the time period
provided herein shall be forever barred, notwithstanding any longer period
provided in any otherwise applicable statute of limitations or any other
rule or law to the contrary.
With respect to claims for indemnification under clauses (i) of this
Section 8.2(a) (but no other claims for indemnification under this Section
8.2(a) which shall be payable without limitation), the Seller shall not be
required to make an Indemnity Payment for a single claim unless and until
the amount of Indemnifiable Losses arising from that claim exceed $50,000
(the "single-loss deductible"), after which amount the Seller shall pay all
Indemnifiable Losses arising from that claim to the extent such
Indemnifiable Losses exceed the single-loss deductible. Notwithstanding
the foregoing, the Seller shall make an Indemnity Payment of all
Indemnifiable Losses arising from a claim under clause (i) of this Section
8.2(a), without regard to the single-loss deductible of $50,000, if and
when the aggregate amount of Indemnifiable Losses for which the Seller has
not made Indemnity Payments as a result of the single-loss deductible
equals $225,000 (the "aggregate-loss deductible") to the extent such
Indemnifiable Losses exceed the aggregate-loss deductible. For purposes of
determining whether or not the $50,000 single-loss deductible and/or any
part of the $225,000 aggregate-loss deductible is available with respect to
a claim for indemnification under clause (i) of this Section 8.2(a), the
Indemnifiable Losses of SCBC, the Association and the Retained Association
Subsidiaries arising from a single claim shall be aggregated, and each
dollar of Indemnifiable Loss of SCBC, the Association and/or a Retained
Association Subsidiary from a claim (taking into consideration requirements
imposed in the specific representation, warranty, covenant or agreement
alleged to have been violated, such as a "materiality" or "Material Adverse
Event" threshold, which must be satisfied before such representation,
warranty, covenant or agreement can be violated and a corresponding claim
for indemnification may be made) shall be charged against the single-loss
and aggregate-loss deductibles; provided, however, each dollar of
Indemnifiable Losses recovered by SCBC, the Association and/or any of the
Retained Association Subsidiaries from any Person that is not an Affiliate
of any of them prior to the making of such a claim for indemnification
shall not be charged against the single-loss deductible or the aggregate-
loss deductible. By way of example only, if the first six claims for
indemnification under clause (i) of this Section 8.2(a) are separate and
are made by SCBC in the following order and for Indemnifiable Losses in the
amounts of $49,900, $49,900, $49,900, $49,900 $25,000 and $500 (determined
in each instance after taking into consideration any "materiality,"
Material Adverse Event" or similar threshold applicable to the specific
representation, warranty, agreement or covenant that SCBC asserts the
Seller has breached), the Seller would not be obligated to make Indemnity
Payments to SCBC for the first four claims for $49,900 each nor the fifth
claim for $25,000, because each of these claims is for Indemnifiable Losses
in an amount less than the $50,000 single-loss deductible and the aggregate
of these five claims (i.e., $224,600) is less than the $225,000 aggregate-
loss deductible; the Seller would be obligated to make an Indemnity Payment
for Indemnifiable Losses of $100 to SCBC in respect of the sixth claim for
$500, even though it is for an amount less than the $50,000 single-loss
deductible, because the sum of the six claims (i.e., $225,100) exceeds the
$225,000 aggregate-loss deductible by this amount; and, thereafter, the
Seller would be obligated to make Indemnity Payments for all claims under
clause (i) of this Section 8.2(a) without regard to the $50,000 single-loss
deductible.
(b) Subject to the limitations set forth in this Section 8.2(b) and
in Section 8.2(c) hereof, and in accordance with the procedures set forth
in Section 8.3 hereof, SCBC shall indemnify and hold harmless the Seller
from and against all Indemnifiable Losses suffered by the Seller by reason
of the inaccuracy or untruthfulness of a representation or warranty of SCBC
or the breach of any covenant or agreement of SCBC contained in this
Agreement. A claim for indemnification pursuant to this Section 8.2(b)
that is not made on or before the Period End shall be forever barred,
notwithstanding any longer period provided in any otherwise applicable
statute of limitations or any other rule of law to the contrary.
(c) Notwithstanding anything in Section 8.2(a) hereof to the
contrary, the Seller shall not be obligated to indemnify SCBC, the
Association and/or any of the Retained Association Subsidiaries for
Indemnifiable Losses suffered by it or them by reason of the inaccuracy or
untruthfulness of any representation or warranty of the Seller or the
breach of any covenant or agreement of the Seller of which SCBC has actual,
conscious awareness prior to the Effective Time; provided, however, that
the preceding provision of this sentence does not apply to the
Indemnifiable Losses arising from or incurred in connection with
Indemnifiable Losses under Sections 8.2(a)(iv), (v), (vi), and (vii).
Notwithstanding anything in Section 8.2(b) hereof to the contrary, SCBC
shall not be obligated to indemnify the Seller for Indemnifiable Losses
suffered by the Seller by reason of the inaccuracy of a representation or
warranty or the breach of a covenant or an agreement of which the Seller
has actual, conscious awareness prior to the Effective Time. The sole
remedy and recourse for the inaccuracy or untruthfulness of a
representation or warranty or the breach of a covenant or an agreement of
which SCBC or the Seller, as the case may be, has actual, conscious
awareness prior to the Effective Time (except, as provided above, this
provision shall not apply to SCBC's awareness of the Litigation) shall be,
in the case of the Seller, to refuse to waive the condition to Closing set
forth in Section 6.2(a) hereof and to terminate this Agreement under
Section 7.1(b) hereof, and, in the case of SCBC, to refuse to waive the
condition to Closing set forth in Section 6.3(a) hereof and to terminate
this Agreement under Section 7.1(b) hereof.
Section 8.3. Indemnification Procedures.
(a) With respect to indemnification under clauses (iv), (v) and (vi)
of Section 8.2(a) for the Class Action Litigation, the Homeowners
Litigation and the Bankruptcy Litigation, respectively, the Seller and SCBC
shall execute and deliver at the Closing the Responsibilities Agreement,
pursuant to which the Seller shall assume the defense of each such
Litigation matter that has not been Terminated as of the Closing and SCBC
shall undertake to cooperate in good faith in the defense of each such
Litigation matter, all upon the terms and conditions set forth in the
Responsibilities Agreement;
(b) With respect to claims for indemnification under Section 8.2(a)
hereof (other than clauses (iv), (v) and (vi) thereof) and under Section
8.2(b) hereof:
(i) If any Indemnified Party receives notice of the assertion or
commencement of any Third Party Claim against such Indemnified Party with
respect to which any Indemnifying Party is obligated to provide
indemnification under Section 8.2 (including any claim concerning a Named
Employee with respect to the matters described in Section 8.2(a)(vii)), the
Indemnified Party will deliver to such Indemnifying Party reasonably prompt
written notice thereof, which in no event will be later than 15 calendar
days after receipt of such notice of the assertion or commencement of such
Third Party Claim. Such notice will describe the Third Party Claim in
reasonable detail, will include copies of all materials written in evidence
thereof and will indicate the estimated amount, if reasonably practicable,
of the Indemnifiable Losses that has been or may be sustained by the
Indemnified Party. The Indemnifying Party will have the right to
participate in, or, by giving written notice to the Indemnified Party, to
assume, the defense of any Third Party Claim at such Indemnifying Party's
own expense and by such Indemnifying Party's own counsel (reasonably
satisfactory to the Indemnified Party), and the Indemnified Party will
cooperate in good faith in such defense.
(ii) If, within ten (10) calendar days after the date of deliver
of notice of a Third Party Claim to an Indemnifying Party pursuant to
Section 8.3(b)(i), an Indemnified Party receives written notice from the
Indemnifying Party that the Indemnifying Party has elected to assume the
defense of such Third Party Claim as provided in the last sentence of
Section 8.3(b)(i), the Indemnifying Party will not be liable to indemnify
the Indemnified Party for any legal expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof, notwithstanding
the definition of the term "Adverse Consequences;" provided, however, that
if the Indemnifying Party fails to take reasonable steps necessary to
defend diligently such Third Party Claim within 15 calendar days after the
delivery by the Indemnified Party of written notice that the Indemnified
Party believes the Indemnifying Party has failed to take such steps or if
the Indemnifying Party has not undertaken fully to indemnify the
Indemnified Party in respect of all Indemnifiable Losses relating to the
matter, the Indemnified Party may assume its own defense, and the
Indemnifying Party will be liable for all reasonable costs or expenses paid
or incurred by the Indemnified Party in connection therewith; and, provided
further, that if the Indemnifying Party is also a party or party-in-
interest to such Third Party Claim and the Indemnified Party receives a
written opinion of counsel that, as a result of such status of the
Indemnifying Party, counsel for the Indemnifying Party (the "Indemnifying
Party's Counsel") has, or reasonably will have, a conflict of interest in
representing both the Indemnified Party and the Indemnifying Party with
respect to such Third Party Claim, the Indemnified Party, upon notice to
the Indemnifying Party, may employ separate counsel to represent the
Indemnified Party in such Third Party Claim (the "Indemnified Party's
Counsel"), with the expense of Indemnified Party's Counsel to be
Indemnifiable Losses. In such events, the participation of the Indemnified
Party's Counsel in any Third Party Claim shall not preclude (a) continuing
representation of the Indemnifying Party in such Third Party Claim by the
Indemnifying Party's Counsel, or (b) continuing representation of the
Indemnified Party by the Indemnified Party's Counsel in connection with
matters related to or arising under the Agreement or the other agreements
referenced herein. Without the prior written consent of the Indemnified
Party, the Indemnifying Party will not enter into any settlement of any
Third Party Claim that would lead to Liability or create any financial or
other obligation on the part of the Indemnified Party. If a firm offer is
made to settle a Third Party Claim without leading to Liability or the
creation of a financial or other obligation on the part of the Indemnified
Party and the Indemnifying Party desires to accept and agree to such offer,
the Indemnifying Party will deliver written notice to the Indemnified Party
to such effect. If the Indemnified Party fails to consent to such firm
offer with ten (10) calendar days after the delivery of such notice, the
Indemnified Party may continue to contest or defend such Third Party Claim;
provided, however, the maximum amount of Indemnifiable Losses for such
Third Party Claim may not exceed the amount of Indemnifiable Losses
incurred through the end of such ten (10) calendar day period, plus the
amount of such settlement offer. In the event that (a) the Indemnifying
Party ceases to take reasonable steps to defend any Third Party Claim after
expiration of the fifteen (15) day notice period prescribed in the first
sentence of this clause (ii) of Section 8.3(b), or (b) the Indemnified
Party elects to continue to contest or defend a Third Party Claim as
described in the immediately preceding sentence, the Indemnified Party may
elect to retain the Indemnifying Party's Counsel to continue to contest or
defend such Third Party Claim. The Indemnifying Party, after consulting
with and receiving the advise of its own counsel about this provision,
agrees and consents, and waives all objections and assertions of conflicts
of interest, to the continuing representation of the Indemnified Party by
the Indemnifying Party's Counsel and/or the Indemnified Party's Counsel in
the circumstances and as described in the immediately preceding sentence.
(iii) Any Direct Claim will be asserted by delivery to the
Indemnifying Party of reasonably prompt written notice thereof, which,
except as otherwise specifically provided in Section 8.2(a), in no event
will be later than 30 calendar days after the Indemnified Party becomes
aware of such Direct Claim, and the Indemnifying Party will have a period
of 15 calendar days within which to respond in writing to such Direct
Claim. If the Indemnifying Party does not so respond within such 15
calendar day period, the Indemnifying Party will be deemed to have rejected
such claim, in which event the Indemnified Party will be free to pursue
such remedies as may be available to the Indemnified Party on the terms and
subject to the provisions of this Agreement.
(iv) A failure to give timely notice or to include any specified
information in any notices as provided in Sections 8.3(c)(i), 8.3(c)(ii) or
8.3(c)(iii) will not affect the rights or obligations of any party hereto
except and only to the extent that, as a result of such failure, any party
hereto that was entitled to receive such notice was deprived of its right
to recover any payment under its applicable insurance coverage or was
otherwise damaged as a result of such failure. The Indemnified Party shall
use its best reasonable efforts to cooperate and assist the Indemnifying
Party in defending any Third Party Claim, which shall include, but not be
limited to, the pursuit of all cross-claims and counterclaims associated
therewith (other than any such claim by the Indemnified Party against an
Affiliate thereof) and reasonable access to all records and employees of
the Indemnified Party; provided, however, that all reasonable out-of-pocket
costs and expenses of the Indemnified Party thereby incurred shall be
reimbursed by the Indemnifying Party within ten (10) days of written demand
therefor.
(v) If the amount of any Indemnifiable Losses, at any time
subsequent to the making of an Indemnity Payment or charge against the
single-loss deductible and the aggregate-loss deductible, is reduced by
recovery, settlement or otherwise under or pursuant to any insurance
coverage, other than a recovery, settlement or other reduction from any
Person that is an Affiliate of the Indemnified Party, or pursuant to any
claim, recovery, settlement or payment by or against any Person that is not
an Affiliate of the Indemnified Party, then the amount of such reduction,
less any costs, expenses, premiums or taxes incurred in connection
therewith, will promptly be repaid by the Indemnified Party to the
Indemnifying Party up to the amount of any Indemnity Payment made in
respect of such Indemnifiable Losses, and any amount in excess of such
Indemnity Payment shall be retained by the Indemnified Party, and the
amount of any charge against the single-loss deductible and the aggregate
loss deductible in respect of such Indemnifiable Losses shall be reversed
and the deductibles restored up to the amount of such excess. Upon making
any Indemnity Payment the Indemnifying Party will, to the extent of such
Indemnity Payment and/or the amount of the single-loss deductible and the
aggregate-loss deductible charged against the claim associated with such
Indemnity Payment, be subrogated to all rights of the Indemnified Party
against any third party that is not an Affiliate of the Indemnified Party
in respect of the Indemnifiable Losses to which the Indemnity Payment
relates; provided, however, that (i) the Indemnifying Party shall then be
in compliance with its obligations under this Agreement in respect of such
Indemnifiable Losses, and (ii) until the Indemnified Party recovers full
payment of its Indemnifiable Losses (other than the amount of the single-
loss deductible and the amount of the aggregate-loss deductible charged
against a Direct Claim or Third Party Claim or associated with the
Indemnity Payment), any and all claims of the Indemnifying Party against
such third party on account of said Indemnity Payment will be subrogated
and subordinated in right of payment to the Indemnified Party's rights
against such third party. Without limiting the generality or effect of any
other provision of this Agreement, each such Indemnified Party and
Indemnifying Party will duly execute upon request all instruments
reasonably necessary to evidence and perfect the above-described
subrogation and subordination rights.
(c) If a dispute arises with respect to Section 8.2 of this
Agreement, the parties agree to resolve any such dispute by seeking a fair
and prompt negotiated resolution, but if this is not successful, all
disputes shall be resolved by arbitration pursuant to Section 8.5 of this
Agreement.
Section 8.4. Indemnification Collateral.
(a) In order to secure the Seller's indemnification obligations under
Section 8.2(a) hereof (the "General Indemnity"), the Seller shall, at the
Closing, grant, transfer and deliver to SCBC, as Collateral Agent,
perfected first liens and security interests ("Indemnification Security
Interests") on and in Eligible Collateral having a General Indemnity Value
in an amount (the "Required General Indemnity Amount") of at least
$1,500,000 (the "General Indemnity Collateral Pool"). In order to further
secure the Seller's indemnification obligations under clause (iv) of
Section 8.2(a) for the Class Action Litigation, but for no other purposes
(the "Litigation Indemnity"), the Seller shall, at the Closing, grant,
transfer and deliver to SCBC, as Collateral Agent, perfected first liens
and security interests ("Litigation Security Interests") on and in Eligible
Collateral having a Litigation Indemnity Value in an amount (the "Required
Litigation Indemnity Amount") of at least $244,000 (the "Litigation
Indemnity Collateral Pool").
(b) The term "General Indemnity Value" means: (i) in the case of
Eligible Excluded Assets, 60% of the Net Book Value on the books of the
Association or the applicable Retained Association Subsidiary as of the
Closing Date minus the aggregate amount of principal repayments received by
the Seller during the period of time from the Closing Date through the last
day of the calendar month immediately preceding the date upon which the
Indemnification Security Interests are granted in or on the Eligible
Excluded Asset (the "General Indemnity Security Interest Date"); and (ii)
in the case of Other Eligible Collateral, face value. The term "Litigation
Indemnity Value" means (i) in the case of Eligible Excluded Assets, 70% of
the Net Book Value on the books of the Association or the applicable
Retained Association Subsidiary as of the Closing Date, minus, in the case
of Eligible Excluded Assets, until the twelfth (12th) Monthly Adjustment
(as defined below) 50% of the provisions for losses taken by the Seller and
other write-downs in value on the Seller's books at or after the Effective
Time in respect of such Eligible Excluded Assets (and thereafter such
reserves and write-downs shall be disregarded), and minus the aggregate
amount of principal repayments received by the Seller during the period of
time from the Closing Date through the last day of the calendar month
immediately preceding the date upon which the Litigation Security Interests
are granted in or on the Eligible Excluded Asset (the "Litigation Indemnity
Security Interest Date"), and (ii) in the case of Other Eligible
Collateral, face value. After the Closing, the General Indemnity Value and
the Litigation Indemnity Value of the actual collateral from time to time
(the "Collateral") will be reviewed at the end of each calendar month, and
Indemnification Security Interests and/or Litigation Security Interests in
any additional Eligible Collateral necessary to meet each of the Required
General Indemnity Amount and the Required Litigation Indemnity Amount will
be granted, transferred and delivered by the Seller to SCBC, as Collateral
Agent (the "Monthly Adjustment"), within ten (10) business days thereafter.
For purposes of the Monthly Adjustment, the General Indemnity Value and
the Litigation Indemnity Value each will be calculated as of the last day
of that month (rather than the General Indemnity Security Interest Date or
the Litigation Indemnity Security Interest Date, as applicable) and will
also reflect any adjustments required by reason of any principal repayments
received by the Seller in respect of Collateral during such month,
unrepaired damage, destruction or condemnation. The Required General
Indemnity Value of the General Indemnity Collateral Pool will be reduced
from time to time by the amount of any Indemnifiable Losses paid by the
Seller on indemnification claims under clause (i) of Section 8.2(a),
whether on Direct Claims or Third Party Claims, and a corresponding amount
of the Collateral in the General Indemnity Collateral Pool shall be
immediately released by SCBC, as Collateral Agent, from the Indemnification
Security Interests.
(c) The term "Eligible Collateral" means (i) Excluded Loans and
Excluded Real Estate and JV Interests (collectively, the "Eligible Excluded
Assets"), and (ii) Cash, U.S. government obligations and other security of
similar credit standing and liquidity mutually agreed upon by the Seller
and SCBC (collectively, the "Other Eligible Collateral").
(d) The Seller may from time to time and at any time remove
Collateral from the General Indemnity Collateral Pool or the Litigation
Indemnity Collateral Pool and SCBC, as Collateral Agent, shall release the
Indemnification Security Interests or Litigation Security Interests, as
applicable, on such Collateral, provided that (i) Eligible Collateral
having a General Indemnity Value or a Litigation Indemnity Value, as
applicable, equal to the Collateral to be removed and released shall be
substituted immediately prior to the time of such removal and release, and
(ii) the Seller shall give SCBC at least five (5) business days' prior
notice of its intention to make a removal, release and substitution.
(e) At the Closing (and at the time of the granting of any
Indemnification Security Interests or Litigation Security Interests after
the Closing) the Seller and SCBC will enter into security documents which
shall: (i) be Appropriate for the type of Eligible Collateral involved;
(ii) be in form and substance identical (except for necessary changes) to
those which will be agreed upon prior to the Closing; (iii) provide that
the only obligations secured thereby are the Seller's obligations under the
General Indemnity, in the case of security documents relating to any of the
General Indemnity Collateral Pool, or the Seller's obligations under the
Litigation Indemnity, in the case of security documents relating to any of
the Litigation Indemnity Collateral Pool; (iv) permit all receipts from the
Collateral, including, without limitation, principal, interest, dividends,
rents, royalties, insurance proceeds, condemnation awards, sale proceeds
and the like to continue to be paid to the Seller, unless an event of
default has occurred under the security documents which relate to such
Collateral, except that receipts of principal other than regular
installment payments of principal, insurance proceeds, condemnation awards
and sales proceeds shall be payable to the Seller only if the Required
General Indemnity Amount or Required Litigation Indemnity Amount, as
applicable, of Collateral will remain in the General Indemnity Collateral
Pool or the Litigation Indemnity Collateral Pool, as applicable, after the
payment thereof and after the addition thereto of any new Collateral by the
Seller; (v) provide that any Collateral then remaining in the General
Indemnity Collateral Pool shall be released on the first business day which
follows the Period End; provided, however, if there then exists any
unresolved Direct Claims or Third Party Claims made in accordance with the
requirements of this Agreement, Collateral having a General Indemnity Value
not less than the aggregate amount of such claim(s) shall be retained and
released upon the final resolution of such claim(s) or partially released
as multiple claims are finally resolved; (vi) provide that any Collateral
remaining in the Litigation Indemnity Collateral Pool upon Termination of
the Class Action Litigation shall be released on the 16th day following
such Termination, and (vii) provide, with respect to Collateral in the
General Indemnity Collateral Pool, that the Seller shall not be deemed to
be in default of its obligations while the Seller is disputing its
obligations to indemnify SCBC, the Association and/or the Retained
Association Subsidiaries for any claims under clauses (i), (ii), and (iii)
of Section 8.2(a) of this Agreement in accordance with the dispute
resolution procedures set forth in this Agreement. The term "Appropriate"
shall mean a document satisfactory in form and substance to SCBC and when
used in respect of any Eligible Collateral which is: (A) an Excluded Loan,
shall mean a security agreement, UCC-1 financing statements, a collateral
assignment of the promissory note representing such Excluded Loan, and a
collateral assignment of the related mortgage or deed of trust; (B)
Excluded Real Estate, shall mean a mortgage (or deed of trust), an
assignment of rents and security agreement, and UCC-1 financing statements;
(C) an Excluded JV Interest, shall mean a security agreement, a collateral
assignment of the JV Interest of the Seller, and UCC-1 financing
statements; (D) Cash or U.S. government obligations, shall mean a security
agreement; and (E) subject to one or more prior third party liens or
Security Interests, shall mean Intercreditor Agreements which shall provide
for the subordination of all such prior liens or Security Interests to the
Indemnification Security Interests and/or the Litigation Security Interest
being granted by the Seller to SCBC, as Collateral Agent.
(f) any Collateral which is Cash, a U.S. government obligation, a
note (including a note evidencing an Excluded Loan) or other asset the
possession of which must be delivered to the creditor or an agent in order
to perfect Indemnification Security Interests or Litigation Indemnification
Security Interests therein shall be held by SCBC as Collateral Agent or, at
the Seller's election and at the Seller's expense, by another collateral
escrow agent, who shall act as the agent and for the benefit of SCBC, the
Association, the Successor and the Retained Association Subsidiaries and
who shall be acceptable to SCBC, pursuant to an escrow agent agreement in
form and substance satisfactory to SCBC.
Section 8.5. Arbitration
Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof, shall be resolved by arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration Association at
a site located in the State of North Carolina, and, absent fraud, collusion
or willful misconduct by the arbitrator(s) shown by clear and convincing
evidence (rather than by a preponderance of the evidence), judgment upon
the award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. The arbitrator(s) may award injunctive relief or any
other remedy available from a judge, including liquidated damages as set
forth in Section 7.2(b), the Penalty as provided in Section 2.4(d), and
reimbursement of expenses as provided in Section 8.1, and shall award
costs, expenses and reasonable attorneys' fees to the prevailing party, but
shall not have the power to award punitive or exemplary damages other than
the Penalty. The fees and expenses of the arbitrator(s) shall be paid by
the non-prevailing party (in the event one party prevails on all matters
arbitrated) or by the parties in proportion to the monetary damages awarded
to the other party as compared to the sum of all monetary damages awarded
(in the event neither party prevails on all matters arbitrated). For
example, a party awarded 60% of the sum of damages awarded to the parties
would pay 40% of the fees and expenses of the arbitrator(s). The parties
confirm that by agreeing to this alternate dispute resolution process, they
intend to give up their right to have any dispute decided in a civil court
by a judge or jury.
Section 8.6. Entire Agreement
This Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral,
including the Letter of Intent, dated December 15, 1993, as amended, other
than documents referred to herein that are to be executed at or in
connection with the Closing. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the parties hereto, and
their respective successors and permissible assignees. Nothing in this
Agreement, expressed or implied, is intended to confer upon any party,
other than the parties hereto, and their successors, any rights, remedies,
obligations or Liabilities.
Section 8.7. Assignment
Neither of the parties hereto may assign any of its rights or
obligations under this Agreement to any other Person; provided, however,
that SCBC may assign its rights and obligations to any SCBC Subsidiary
designated by it (herein, the "Designated Subsidiary") upon notice to the
Seller, accompanied by a written assumption agreement executed by the
Designated Subsidiary; provided, further, that notwithstanding such
assignment to a Designated Subsidiary, SCBC shall remain, and jointly and
severally with the Designated Subsidiary be, obligated with regard to all
such obligations assigned. In the event that SCBC shall make such an
assignment, each reference to SCBC herein shall be deemed to be a reference
to both SCBC and the Designated Subsidiary, unless the context of such
reference clearly requires otherwise. Notwithstanding any such assignment,
SCBC shall be entitled to enforce, in its own name and on behalf of the
Designated Subsidiary, its and the Designated Subsidiary's rights
hereunder.
Section 8.8. Notices
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or
sent by overnight express or by registered or certified mail, postage
prepaid, addressed as follows:
If to the Seller:
Fairfield Communities, Inc.
Post Office Box 3375
Little Rock, Arkansas 72203
Attn: Marcel J. Dumeny
(For Overnight Delivery):
Fairfield Communities, Inc.
2800 Cantrell Road
Little Rock, Arkansas 72202
Attn: Marcel J. Dumeny
With a required copy to:
Jones, Day, Reavis & Pogue
Post Office Box 660623
Dallas, Texas 75226
Attn: Stephen L. Fluckiger
(For Overnight Delivery):
Jones, Day, Reavis & Pogue
2300 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201
Attn: Stephen L. Fluckiger
If to SCBC:
Security Capital Bancorp
Post Office Box 1387
Salisbury, North Carolina 28145-1387
Attn: David B. Jordan, Vice Chairman and
Chief Executive Officer
(For Overnight Delivery):
Security Capital Bancorp
507 West Innes Street
Salisbury, North Carolina 28144
Attn: David B. Jordan, Vice Chairman and
Chief Executive Officer
With a required copy to:
Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P.
Post Office Box 26000
Greensboro, North Carolina 27420-6000
Attn: Robert A. Singer
(For Overnight Delivery):
Brooks, Pierce, McLendon, Humphrey & Leonard, L.L.P.
2000 Renaissance Plaza, 230 North Elm Street
Greensboro, North Carolina 27401
Attn: Robert A. Singer
Section 8.9. Captions; Headings
The captions and section headings contained in this Agreement are for
reference purposes only and are not part of this Agreement.
Section 8.10. Amendments
No amendment of any provision of this Agreement shall be valid unless
the same shall be in writing and signed by duly authorized executive
officers of SCBC and the Seller.
Section 8.11. Severability
Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any
other situation or in any other jurisdiction.
Section 8.12. Construction
The Seller and SCBC have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or a question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the parties hereto and no presumption or burden of proof
shall arise favoring or disfavoring either party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to
any federal, state, local, or foreign statute or law shall be deemed also
to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The word "including" shall mean including
without limitation. The Seller and SCBC intend that each representation,
warranty, covenant and agreement contained herein shall have independent
significance.
Section 8.13. Incorporation of Exhibits and Appendices
The Exhibits and Appendices identified in this Agreement are
incorporated herein by reference and made a part hereof.
Section 8.14. Specific Performance
Each of the Seller and SCBC acknowledges and agrees that the other
party would be damaged irreparably in the event any of the provisions of
this Agreement are not performed in accordance with their specific terms or
otherwise are breached prior to the Effective Time. Accordingly, each of
the parties hereto agrees that the other party shall be entitled to an
injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the parties and the
matter, in addition to any other remedy to which it may be entitled, at law
or in equity. This Section 8.14 deals only with the right to pursue the
equitable remedy of specific performance. The right to seek such remedy of
specific performance shall not be deemed to enlarge or decrease the
provisions of Section 7.2(b) hereof, and may be sought to be enforced in
conjunction with, but in the alternative to, a claim under Section 7.2(b)
or may be sought to be enforced independently of a claim under Section
7.2(b), but in no event shall a party hereto recover liquidated damages
under Section 7.2(b) hereof and seek to enforce specific performance of
this Agreement.
Section 8.15. Counterparts
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
Section 8.16. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the State of North Carolina applicable to agreements made and
entirely to be performed within such jurisdiction except to the extent
federal law may be applicable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in counterparts by their duly authorized officers and their
corporate seals to be hereunto affixed and attested by their officers
thereunto duly authorized, all as of the day and year first above written.
ATTEST: SECURITY CAPITAL BANCORP
/s/ Bettina S. Jamison By: /s/ David B. Jordan
Asst. Secretary David B. Jordan
Vice Chairman and
Chief Executive Officer
(SEAL)
ATTEST: FAIRFIELD COMMUNITIES, INC.
/s/ Marcel J. Dumeny By: /s/ J. W. McConnell
Secretary John W. McConnell
President and
Chief Executive Officer
(SEAL)
<PAGE>
List of Exhibits
----------------
Exhibit Topic First Reference
- ------- ----- ---------------
Exhibit A Excluded Loans Article I
Exhibit B Excluded Real Estate and Article I
JV Interests
Exhibit C List of Retained Article I
Association Subsidiaries
Exhibit D Responsibilities Article I
Agreement
Exhibit E License and Services Section 5.9
Agreement
Exhibit F (Not used by agreement
of the parties)
Exhibit G (Not used by agreement
of the parties)
Exhibit H Designated Loans Section 5.11
<PAGE>
List of Appendices
------------------
Appendix Topic First Reference
- -------- ----- ---------------
Appendix 1 Deferred Payment Section 2.4(b)
Percentages
Appendix 2 Other Necessary Section 5.10
Approvals
<PAGE>
Registrant agrees to furnish supplementally a copy of the above Exhibits and
Appendices to the Securities and Exchange Commission upon request.
FAIRFIELD COMMUNITIES, INC. EXECUTES DEFINITIVE AGREEMENT TO SELL
FIRST FEDERAL SAVINGS AND LOAN OF CHARLOTTE
LITTLE ROCK, ARKANSAS, April 6, 1994 -- Fairfield Communities, Inc.
(NASDAQ: FFCI) announced today that it has executed a definitive agreement
to sell its wholly owned subsidiary, First Federal Savings and Loan
Association of Charlotte, to Security Capital Bancorp (NASDAQ: SCBC). The
purchase price for First Federal is $40.4 million plus, subject to certain
limitations, First Federal's pre-tax earnings from October 1, 1993 through
the closing date. At September 30, 1993, First Federal's consolidated book
value was $27.4 million.
First Federal, with total assets of approximately $327 million as of
March 1, 1994, operates seven banking offices in Charlotte, North Carolina
and three offices in the communities of Biscoe, Rockingham and Troy. The
sale is subject to customary conditions, including the approval of
regulatory authorities. Closing is expected by August 1, 1994.
As part of the proposed transaction, Fairfield is expected to
repurchase from First Federal lot and timeshare contracts receivable and
related assets which First Federal previously acquired from Fairfield. At
December 31, 1993, the contracts receivable had a net book value of
approximately $53.3 million and a weighted average yield of 11.6%.
Fairfield will also purchase certain real estate, classified loans, joint
venture interests and other assets with a book value at March 28, 1994 net
of reserves, of up to $19.8 million. Fairfield intends to either dispose
of, or monetize, these assets following the closing. Any gain from the
sale of First Federal may be reduced by additional write-downs of these
assets.
"Fairfield continues to focus its activities on Leisure Products",
said John W. McConnell, President and Chief Executive Officer. "While
First Federal is profitable, we can more effectively employ our capital in
our higher-return vacation ownership business, which includes the financing
of lot and timeshare contracts. The sale of First Federal will contribute
to the growth of our Leisure Products business."
Fairfield will fund the purchase of selected assets and contracts
receivable in part from the sale proceeds and in part from borrowings under
a revolving credit agreement with The First National Bank of Boston.
Fairfield Communities, Inc., incorporated in 1969, is one of the
nation's largest vacation ownership companies. Fairfield operates 15
resort and home developments in ten states throughout the Sun Belt,
providing vacation products, recreational facilities, homesites, primary
and secondary residences to over 121,500 property owners.
