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
Date of Report: April 13, 1994
Security Capital Bancorp
(Exact name of registrant as specified in its charter)
North Carolina 0-12359 56-1354694
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
507 West Innes Street
Post Office Box 1387
Salisbury, North Carolina 28145-1387
(Address of principal executive offices)
Registrant's telephone number, including area code: (704) 636-3775
N/A
(Former name or former address, if changed since last report)
EXHIBIT INDEX ON PAGE 7
PAGE 1 OF __
Item 1. Changes in Control of Registrant
Not Applicable.
Item 2. Acquisition or Disposition of Assets
Not Applicable.
Item 3. Bankruptcy or Receivership
Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant
Not Applicable.
Item 5. Other Events
Security Capital Bancorp (the "Company") and Fairfield
Communities, Inc. ("FCI") entered a
Stock Purchase Agreement, dated as of April 5, 1994, concerning the
Company's acquisition of First
Federal Savings and Loan Association of Charlotte, North Carolina, a
wholly-owned subsidiary of FCI.
Copies of the Stock Purchase Agreement and a press release of the Company,
dated April, 1994, are
attached as Exhibits and incorporated herein by reference.
Item 6. Resignations of Registrant's Directors
Not Applicable.
Item 7. Financial Statements and Exhibits
(2) Stock Purchase Agreement, dated as of April 5, 1994
(99.1) Press Release of Security Capital Bancorp, distributed
April 6, 1994
Item 8. Change in Fiscal Year
Not Applicable.
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 hereunto duly
authorized.
SECURITY CAPITAL BANCORP
Date: April 13, 1994
By:
David B. Jordan
Vice-Chairman and Chief Executive Officer
EXHIBIT INDEX
Exhibit No. Description
Sequential Page No.
2 Stock Purchase Agreement
dated as of April 5, 1994
99.1 Press Release of
Security Capital Bancorp
Distributed on
April 6, 1994
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 mark)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 mark)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 mark)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 mark)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/ John W. McConnell
Secretary John W. McConnell
President and Chief Executive Officer
(SEAL)
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
Exhibit A
Excluded Loans
9/30/93 9/30/93
Loan Principal Specific
Number Borrower Balance Reserve
12508 Ostby/Commercial Federal $28,488 $4,000
12509 Ostby/Commercial Federal 28,488 4,000
12526 Ridley/Commercial Federal 24,038 4,000
250558 Waddell Rubin Associates 317,386 10,000
271635 Snyder Farm Ltd. Ptnshp 473,417 (1) 150,000
277518 Waddell Rubin Associates 37,800 0
277916 WRS Partnership 667,928 0
6716931 BMI/Home Federal 235,685 (2) 0
6722145 BMI/Home Federal 1,568,000 (2) 100,000
261070 John & Jeff Schwarz 1,075,315 300,000
8261074 John/Jeff Schwarz 372,699 0
275312 Landgraff - Swift 100,000 100,000
1054 Anderson/Am Fam/Stone 26,070 0
179930 William Proctor 9,539 0
231449 Alton Widenhouse 61,418 0
238784 Jack N. Wallace 25,488 0
238899 Charles E. Mitchell 3,288 0
247987 Folger Hodges 8,904 0
248187 Kenneth Hewett 69,424 0
252877 Gus Thrift 7,554 0
258205 WE Varley/TA Durino 78,336 0
259154 Lark Newsom, Jr. 11,169 0
259366 Laura Hatacher 21,624 0
259926 Johnie C. Cowick 3,926 1,500
260082 Vander Thomas 29,977 0
262911 Rodney Scherick (5% owned) 2,387 0
265626 Ricky Lambeth 113,291 0
265634 Ricky Lambeth 47,957 0
266868 Robert D. Blake, Jr. 36,269 0
267369 Philip Hogan 24,712 0
267822 Gregory Kenzie 22,717 0
273530 Travis Blake 8,802 0
273857 Frank Steele 22,496 0
273996 Robert Waters 17,764 0
278938 McLain Hall 123,918 0
279617 Randolph Brock 7,570 0
282822 Gordon L. Vaughn 15,579 0
282830 Gordon L. Vaughn 16,256 0
Exhibit A
(continued)
9/30/93 9/30/93
Loan Principal Specific
Number Borrower Balance Reserve
282848 Gordon L. Vaughn 17,611 0
282856 Gordon L. Vaughn 19,305 (3) 0
3721761 Bdton/Am Mtg Ser/Banks 6,760 0
6723614 BMI/Home Federal 68,454 (2) 0
6723622 BMI/Home Federal 68,454 (2) 0
6741442 BMI/Home Federal 248,813 (3) 0
7012704 Dwight Phillips 9,420 0
7015548 Eddie Wall 208 0
7045673 Fay Morrison 7,880 0
7049507 Victor Ward 7,844 0
7503028 Harry F. Hawkins 29,057 0
7060205 Joe Newsom 1,580 0
7506047 Raymond G. Wiggins 18,502 0
7507193 Wm. Singletary 13,168 0
7507520 Gregory Warnock (FHLMC 5%) 2,038 0
9002693 Edwin R. Ham 144,358 0
9008704 Frank Spencer 118,821 0
9017347 Danny Chapman (VA) 100,736 0
172580 Jay Kumar 109,716 0
271423 City Wide Investments 86,410 0
272259 Raleigh Bynum 285,173 0
Hospitality Investors One 1,653,915 0
Minnesota Participation Loans 996,725 0
American Savings & Loan - Sunrise 982,774 0
Plaza participation loan
Lambeth/Magnum Loans 290,831 7,347
Total $11,034,232 $680,847
(1) See "B. Joint Venture Interests" in Exhibit B for related joint venture
interest.
(2) The Association is in the process of selling loan nos. 6716931, 6722145,
6723614, 6723622 and 6741442 to Home Federal Savings and Loan Association
("Home Federal") and repurchasing the Rubin Business Center Carowinds
loan from Home Federal with a principal balance at March 31, 1994 of
$1,243,782 pursuant to a letter dated March 23, 1994 between the
Association and Home Federal. Total Excluded Loans does not reflect the
closing of these proposed transactions. If such proposed transactions
are consummated, the Rubin Business Center Carowinds loan will be an
"Excluded Loan."
(3) Sold at REO sale on March 7, 1994.
Exhibit B
Excluded Real Estate, JV Interests and Other Assets
9/30/93 9/30/93
Loan Principal Specific
Number Borrower Balance Reserve
Am Savings/Queene Anne $1,821,029 $560,000
CFS Linden Oaks Lots 206,309 37,000
261973 Land's End Dev M/Bch 1,060,052 660,052
Crossland/Ashkenazy 2,720,104 440,600
264230 Mimnaugh Partnership 888,514 200,000
254256 Mimnaugh Partnership 377,240 0
8264250 Mimnaugh Partnership 69,357 0
N. S. Harrison 616,000 0
277275 Magnum Properties 309,404 0
278069 The Calabash Cove 250,067 (1) 0
281004 TL Properties 496,289 25,721
271643 Shops on the Green 2,571,976 55,247
Providence Landing (UFSC) 160,092 500,000
Linden Oaks Lots (UFSC) 82,864 0
Kimmerly Glenn Lane (CF) 150,000 4,133
Total $11,779,297 $2,036,753
B. Joint Venture Interests
9/30/93 9/30/93
Principal Specific
Borrower Balance Reserve
Rhien-Carolina Associates, a joint venture $100,170 $30,730
Carolina Financial Services Corporation/
Partial Settlement/JV Partner 0 (2) 0
Snyder Farms Limited Parntership 544,001 (3) 0
Waddell Rubin Carolina Associates
Limited Partnership 214,274 87,000
Waddell Rubin Associates/LVG 51 914,574 (4) 465,000
Waddell Rubin Associates/LVG 51 $1,773,019 $582,730
(1) Sold and paid off on October 29, 1993.
(2) This settlement relates to the Kimmerly Glenn Lane REO listed above.
(3) Excludes Loan No. 271635 with a 9/30/93 principal balance of $473,417.
(4) Includes loans at 9/30/93 of $369,109 and JV Interests at 9/30/93 of
$545,438.
Exhibit B
(continued)
Approximate Balance
c. Other Assets at 2/28/94
Accounts receivable claims $14,280
Accounts receivable forgery 5,923
Premium Graham Savings and Loan (loans sold) 28,142
Stock Financial Inst. Ins. Group 50,200
Notes receivable UPS Carrington 0 (5)
Accounts receivable Alta Enterprises (UFS) 100,833 (6)
Accounts receivable Shops on Green UFS 13,946
Total $213,324
Total Excluded Real Estate, $13,765,640
JV Interests and Other Assets
Less Specific Reserves 2,619,483
Net Excluded Real $11,146,157
Estate, JV Interests
and Other Assets
(5) Included in Waddell Rubin Associates/LVG 51 under "Joint Venture
Interests" above. See note 4 above.
(6) May be transferred to Designated Loans if appraisal is satisfactory
to SCBC.
Exhibit C
Retained Association Subsidiaries
1. Carolina Financial Services Corporation
2. Northbound, Limited
3. University Financial Services Corporation, Inc.
4. First Residential Mortgage Group, Inc.
5. North Carolina Financial Services Corporation
Exhibit D
RESPONSIBILITIES AGREEMENT
RESPONSIBILITIES AGREEMENT ("Agreement"), dated ___________ __,
1994, among
Fairfield Communities, Inc., a Delaware corporation ("FCI"), Security
Capital Bancorp, a North Carolina
corporation ("SCBC"), and First Federal Savings and Loan Association
of Charlotte, a federal savings
and loan association ("Association").
WITNESSETH:
WHEREAS, FCI and SCBC have entered into a Stock Purchase
Agreement, dated April 5, 1994
(the "Purchase Agreement"), providing, among other things, for FCI's
sale of all of the outstanding
capital stock of the Association to SCBC;
WHEREAS, as provided in Section 8.2(iv), (v) and (vi) of the
Purchase Agreement, FCI has
agreed to indemnify SCBC, the Association and the Retained Association
Subsidiaries from and against
Indemnifiable Losses suffered by them or any of them by reason of the
Litigation, and has agreed to
assume at its own expense the defense of the Litigation;
WHEREAS, it is contemplated that the Association will be merged
with and into Security Bank
and Trust Company, a North Carolina commercial bank (the "Successor"),
immediately after the Closing
and the Successor shall succeed to all rights to indemnification of
the Association upon the consummation
of the Merger; and
WHEREAS, a condition to SCBC's obligation to consummate the
Acquisition is the execution
and delivery by FCI and SCBC of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and
agreement herein contained, the parties hereto do hereby agree as
follows:
Section 1. Defined Terms.
Capitalized terms appearing in this Agreement shall have the
meanings ascribed to them herein;
provided, however, that capitalized terms appearing herein and in the
Purchase Agreement shall be
deemed to have the meanings ascribed to them in the Purchase
Agreement.
Section 2. Assumption of Defense.
(a) As contemplated in Section 8.3(a) of the Purchase Agreement,
FCI hereby assumes the
defense of, and agrees to defend diligently, the Association, the
Successor and the Retained Association
Subsidiaries in the Litigation on the terms and conditions set forth
herein.
(b) In the event FCI assumes the defense of any Third Party
Claim other than the Litigation in
accordance with and as provided in Section 8.3(b) of the Purchase
Agreement or in the event of the
addition of SCBC, the Association, the Successor or any Retained
Association Subsidiary as a defendant,
cross-defendant, counter-defendant or third-party defendant to any
Litigation pending or threatened at the
Effective Time, FCI shall diligently defend SCBC, the Association, the
Successor and the Retained
Association Subsidiary, as applicable, in such Third Party Claim or
Litigation.
Section 3. Expenses of Defense; FCI Counsel.
(a) FCI shall conduct the defense of all Litigation and of all
Third Party Claims for which it
assumes the obligation to defend as described in Section 2(a) and
Section 2(b) (collectively, the "Assumed
Litigation") at its own expense, including, but not limited to, the
payment of all legal, investigatory,
expert and similar fees and expenses, witness fees, transcript costs,
court costs, appeal bonds, appeal
bond premiums and printing costs.
(b) FCI shall retain legal counsel to assist it in the defense
of the Assumed Litigation ("FCI's
Counsel") who shall be reasonably satisfactory to SCBC and who shall
be deemed to have an attorney-
client relationship with SCBC, the Association, the Successor or the
Retained Association Subsidiaries
with respect to the relevant Assumed Litigation matter for all
purposes other than the payment of the
foregoing legal and other fees, expenses and costs.
Notwithstanding the attorney-client relationship that shall be
deemed to exist between FCI's
Counsel and SCBC, the Association, the Successor or the Retained
Association Subsidiaries in respect
of an Assumed Litigation matter, so long as FCI diligently defends the
Assumed Litigation matter, FCI
shall have sole authority to instruct FCI's Counsel with respect to
the Assumed Litigation matter and
FCI's Counsel shall be entitled to rely upon such instructions without
verification or confirmation from
SCBC, the Association, the Successor or the Retained Association
Subsidiaries or SCBC's Counsel (as
defined in Section 5(a) below). SCBC acknowledges that FCI has
retained the law firm of Bell, Davis
& Pitt, P.A. of Winston-Salem, North Carolina as FCI's Counsel to
defend the Class Action Litigation
and that SCBC is reasonably satisfied with FCI's Counsel in this
matter. SCBC further acknowledges
that FCI has retained the law firm of Perry, Patrick, Farmer & Michaux
of Charlotte, North Carolina
as FCI's Counsel to defend the Homeowners' Litigation and the
Bankruptcy Litigation and that SCBC
is reasonably satisfied with FCI's Counsel in these matters.
Section 4. Cooperation of Defendants.
(a) SCBC, the Association, the Successor and the Retained
Association Subsidiaries shall
cooperate with and assist FCI and FCI's Counsel in FCI's defense of
the Assumed Litigation. In
connection therewith, SCBC, the Association, the Successor and the
Retained Association Subsidiaries
(i) shall provide to FCI and FCI's Counsel at mutually agreeable times
access to their employees having
knowledge of the facts and circumstances pertaining to the Assumed
Litigation and to their records and
other documents that are relevant to the Assumed Litigation (the
"Records"), (ii) shall assist FCI and
FCI's Counsel in locating and maintaining those of the Records that
would be necessary or useful in
preparing to defend and/or in defending the Assumed Litigation, (iii)
shall provide work space on the
premises of the Association or the Successor when necessary to
interview the aforesaid employees or to
review the Records, and (iv) shall designate officers of SCBC, the
Association, the Successor and the
Retained Association Subsidiaries to execute on behalf thereof such
pleadings, discovery responses and
similar documents ("Litigation Papers") as are necessary in the
conduct of the defense of the Assumed
Litigation, in each case, however, after review and approval (which
approval shall not be unreasonably
withheld or delayed) of such Litigation Papers by SCBC's Counsel.
(b) To the extent employees of SCBC, the Association, the
Successor or any Retained
Association Subsidiary incur out-of-pocket expenses in connection with
the matters set forth in Section
4(a) that are reimbursed by his or her employer, SCBC shall provide
written evidence of such
reimbursement to FCI and FCI shall pay the amount thereof to the
applicable employer within ten (10)
days of FCI's receipt of such written evidence.
Section 5. SCBC Counsel.
(a) Separate counsel retained by SCBC ("SCBC's Counsel") shall
be entered in each Assumed
Litigation matter as co-counsel with FCI's Counsel appearing therein.
Except as otherwise specifically
provided in Sections 8.2 and 8.3(b)(ii) of the Purchase Agreement, all
fees and expenses of SCBC's
Counsel shall be borne by SCBC, the Association, the Successor and/or
one or more of the Retained
Association Subsidiaries as determined by SCBC.
(b) SCBC's Counsel and FCI's Counsel shall enter into a joint
defense agreement in each
Assumed Litigation matter (i) recognizing their joint representation
of SCBC, the Association, the
Successor and/or the Retained Association Subsidiaries, as applicable,
in the Assumed Litigation matter,
(ii) providing that FCI's Counsel shall have primary responsibility
for the conduct of all such Assumed
Litigation matter, (iii) providing that FCI's Counsel shall advise
SCBC's Counsel of all material factual
and legal aspects of such Assumed Litigation matter and all
discussions between FCI (and its officers,
agents and Affiliates) and FCI's Counsel, and all discussions between
FCI's Counsel and investigators,
expert witnesses and consultants employed by FCI or FCI's Counsel,
concerning any material aspect of
the conduct of such Assumed Litigation matter, and (iv) containing
such other provisions concerning
privileged communications and work product as are addressed
customarily in such agreements.
(c) FCI and FCI's Counsel in an Assumed Litigation matter will
keep SCBC's Counsel fully
advised in a timely manner of all settlement proposals, discussions
and negotiations concerning that
Assumed Litigation matter.
(d) The provisions of Section 8.3(b)(ii) of the Purchase
Agreement are incorporated herein by
this reference as if fully set forth, with each of the following terms
used Section 8.3(b)(ii) of the Purchase
Agreement to have the following ascribed meanings: "Third Party
Claim" shall mean the Assumed
Litigation; "Indemnifying Party" shall mean FCI; and "Indemnified
Party" shall mean SCBC, the
Association, the Successor and the Retained Association Subsidiaries.
Section 6. Cross-Claims, Counterclaims and Third-Party Claims.
(a) Consistent with the provisions of Section 8.3(b)(iv) of the
Purchase Agreement, upon the
request of FCI, each of SCBC, the Association, the Successor and the
Retained Association Subsidiaries
shall commence and diligently pursue in an Assumed Litigation matter
all cross-claims, counterclaims and
third-party claims available to it against a Person other than SCBC,
an SCBC Subsidiary, the Association,
the Successor or a Retained Association Subsidiary ("Claims");
provided, however, that all reasonable
out-of-pocket costs and expenses incurred by them in doing so shall be
paid by FCI (or, upon FCI's
failure to make payment, shall be Indemnifiable Losses) as provided in
Section 8.2(a) of the Purchase
Agreement.
(b) Any monetary damages awarded to, and received by, SCBC, the
Successor, the Association
or a Retained Association Subsidiary upon Termination of an Assumed
Litigation matter, in respect of
that Assumed Litigation matter, shall be applied after Termination of
such Assumed Litigation matter as
a reduction of the Indemnifiable Losses arising from such Assumed
Litigation matter and all such amounts
exceeding the Indemnifiable Losses arising from such Assumed
Litigation matter shall be remitted
promptly to FCI.
Section 7. Notices.
All notices and other communications which are required or
permitted hereunder shall be made
in the manner and to the Persons set forth in Section 8.8 of the
Purchase Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in counterparts
by their duly authorized officers, all as of the day and year first
written above.
SECURITY CAPITAL BANCORP
By:
David B. Jordan
Vice Chairman and
Chief Executive Officer
FAIRFIELD COMMUNITIES, INC.
By:
FIRST FEDERAL SAVINGS AND
LOAN ASSOCIATION OF CHARLOTTE
By:
Robert T. Waugh
President
Exhibit E
LICENSE AND SERVICES AGREEMENT
THIS LICENSE AND SERVICES AGREEMENT (the "Agreement") to be
effective the _____
day of __________, 1994 (the "Effective Date"), by and between First
Federal Savings and Loan
Association of Charlotte ("Licensor") and ___________________________
("Tenant").
WHEREAS, Tenant desires to obtain the right to utilize
office and file space at a business location
maintained by Licensor in the City of Charlotte, North Carolina;
WHEREAS, Tenant desires to obtain certain services from
Licensor as described hereinafter; and
WHEREAS, Licensor desires to license office space and to
provide certain services to Tenant.
NOW, THEREFORE, the parties hereto agree as follows:
1. License of Office Space. For the term hereof,
Licensor hereby grants to Tenant a license
to use office and file space of no less than one hundred (100) square feet
in Licensor's headquarters
building at 801 East Morehead Street, Charlotte, North Carolina or, at such
time as Licensor shall no
longer maintain its headquarters at such location, at such other business
location maintained by Licensor
in Charlotte, North Carolina as Licensor shall designate (the "Premises").
2. Services. During the term hereof, Licensor shall
provide to Tenant at the Premises the
following services (the "Services"):
(a) The use of a telephone;
(b) Secretarial assistance on an
requested basis;
(c) Access to a photocopying machine
and facsimile machine;
(d) Use of a desk, desk chair, two
other chairs, credenza and filing cabinets, as
required;
(e) Lights and electrical power;
(f) Reception services for call-
forwarding and message-taking purpose;
(g) Use of a personal computer;
(h) A parking space; and
(i) Janitorial services.
3. Term. The term hereof shall be two (2) years from
the Effective Date; provided,
however, that Tenant may terminate this Agreement upon five (5) days notice
to Licensor.
4. License and Services Fees. During the
term hereof, Tenant shall pay to Licensor each
month a license fee of $20.00 and a fee for the Services calculated as
follows: (a) $75.00 per calendar
month, plus (b) an amount equal to all long distance telephone charges
attributable to activities of
Tenant's employees on or from the Premises during such month, plus (c) an
amount equal to $10.00
multiplied by the number of hours of secretarial assistance utilized by
Tenant, plus (d) $.07 per
photocopy made. Licensor shall calculate and invoice Tenant for the sum of
the license fee and the
amount of the fee for Services on a monthly basis and Tenant shall pay such
amount within ten (10) days
of receipt of an invoice. All payments of license fees and fees for
Services for a calendar month shall
be made to Licensor at Security Capital Bank, Post Office Box 1387,
Salisbury, North Carolina 28145-
1387, Attn: Pressley A. Ridgill.
5. Use of Premises. The Premises will be used by
Tenant and its employees and invitees
only for the purposes of administering, collecting, servicing and selling
or otherwise disposing of the
Excluded Assets, as defined in the Stock Purchase Agreement, dated April 5,
1994, between Security
Capital Bancorp and Fairfield Communities, Inc. (the "Stock Purchase
Agreement"), and any other
purpose specifically contemplated in the Stock Purchase Agreement. No
other business activities may
be carried on by Tenant at, on or through the Premises. No business
activities shall be carried on by
Tenant or its employees before or after Licensor's normal hours of
operation, as established by Licensor
from time to time, without Licensor's prior consent. Tenant's employees
shall not state, indicate or infer
that they are employees of Licensor.
6. Repairs. Licensor shall make and pay for repairs to
the Premises which are necessary
to keep the same in a good state of repair, except that Tenant shall be
responsible for all damages to the
Premises and repairs thereof resulting from the wilful or negligent acts or
omissions of Tenant or its
employees. Tenant shall maintain the Premises free of debris, nuisances or
obstructions. No
improvements or changes may be made to the Premises by Tenant without
Licensor's prior written
approval. Approved changes shall be solely at Tenant's expense. Tenant
will return the Premises to
Licensor in the same condition as of the Effective Date, reasonable wear
and tear excepted.
7. Compliance; Surrender of Premises. During the term
of this Agreement, Tenant shall
obey all applicable laws, statutes and government regulations relating to
the business activities conducted
at, on or through the business location of Licensor on which the Premises
are located. Tenant shall
peacefully surrender possession of the Premises to Licensor upon the
termination of this Agreement.
8. Insurance. Licensor shall maintain at its own
expense public liability insurance in
reasonable and customary amounts covering its business location on which
the Premises are located.
Tenant may, at its option, maintain at its expense insurance coverage of
its personal property on the
Premises. In no event shall Licensor be liable for damages to or loss of
the personal property of Tenant
or any of its employees.
9. Signage. Tenant shall place a sign or other easily
readable notice on the Premises
identifying such Premises as a business location of the Tenant.
10. Default. Notwithstanding any other provision
herein, default in the payment of any fee
due Licensor under this Agreement or in the performance of any other
covenant, agreement, obligation
or condition herein shall entitle Licensor, at its option, to terminate
this Agreement if, after giving notice
of such intention to terminate setting forth the ground therefor, Tenant
does not within three (3) days
remedy such ground or grounds for termination. Upon any such termination
for any default of Tenant,
Licensor, its agents or attorneys shall have the right without further
notice or demand to reenter the
Premises and remove all Tenant's and its employees' property therefrom
without prejudice to any
remedies for arrears of payments due or breach of covenant. In addition to
the foregoing rights, Licensor
shall have such other and further rights as are allowed by law or in
equity. Failure to exercise any right
hereunder on any one or more occasion shall not be deemed a waiver of any
right to exercise such right
on other occasions. Licensor shall be entitled to recover the costs,
including court costs and reasonable
attorneys' fees, it incurs as a result of enforcing the provisions of this
Agreement.
11. Assignment; Successors. This Agreement and the
parties' rights and obligations
hereunder shall enure to the benefit of their respective successors. The
Premises shall not be sub-licensed
nor this Agreement assigned by Tenant in whole or in part, except to
Fairfield Communities, Inc. This
Agreement may be assigned by Licensor to Security Capital Bancorp or any
subsidiary thereof.
12. Entire Agreement. This Agreement contains all of
the agreements between the parties
hereto with respect to the subject matter hereof and may not be modified in
any other manner than by
agreement in writing by all the parties hereto or their successors in
interest.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement to be effective the
date first above written.
LICENSOR TENANT
FIRST FEDERAL SAVINGS AND LOAN
ASSOCIATION OF CHARLOTTE
By: By:
Title: Title:
List of Appendices
Appendix Topic First Reference
Appendix 1 Deferred Payment Section 2.4(b)
Percentages
Appendix 2 Other Necessary Section 5.10
Approvals
Appendix 1
Deferred Payment Amount $1,387,000
Percentage A 70%
Percentage B 23%
Percentage C 15%
Percentage D 7%
Appendix 2
Other Necessary Approvals
1. First National Bank of Crossville ("FNBC") consent to sale of
a substantial part of Seller's assets
pursuant to Section 5.5 of a loan agreement between FNBC and
Fairfield Communities Land
Company, Inc. (Predecessor to Seller) dated February 7, 1977.
2. United States Farmers Home Administration, as guarantor of a
note issued pursuant to the above-
described loan agreement with FNBC.
Exhibit H
Designated Loans
2/28/94
Borrower Loan Amount
1. McNally-Baulieu Homes $ 64,000
2. McNally-Baulieu Homes 56,000
3. Potter Builders 64,000
4. Schafer Builders (Lot 9, Block 1, 11/12/93;
(Lot 29, Block 1, 3/4/94) 112,000
5. Partidge Chowning 62,000
6. Alta Enterprises* 100,833
* The Association is obtaining an appraisal to determine whether the fair
market value of the collateral underlying these loans is sufficient under
normal underwriting and lending guidelines to cover the outstanding first
and second liens on this property. If the fair market value of the
collateral is sufficient as stated in the foregoing sentence, the loans
will remain Designated Loans. If the fair market value of the collateral
is not sufficient as stated, these loans will be reclassified as
Excluded Loans.
SECURITY CAPITAL BANCORP
NASDAQ SYMBOL: SCBC Contact: David B. Jordan
Vice-Chairman/CEO
(704) 637-6180
SECURITY CAPITAL BANCORP ANNOUNCES
AGREEMENT TO ACQUIRE
FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF CHARLOTTE
Salisbury, North Carolina (April 6, 1994) - Security Capital Bancorp
(NASDAQ/NMS-SCBC), today announced that it and Fairfield Communities, Inc.,
an Arkansas developer of resort communities, vacation ownership interests,
lots, homes and condominiums ("FCI"), have executed a Stock Purchase Agreement
concerning Security Capital's acquisition of First Federal Savings and Loan
Association of Charlotte, North Carolina, a subsidiary of FCI ("First Federal").
First Federal operates seven banking offices in Charlotte, a total of three
banking offices in Rockingham, Troy and Biscoe, North Carolina, and a loan
production office in Greensboro, North Carolina. At March 1, 1994, First
Federal's total assets were approximately $327 million. The proposed
transactions are subject to the satisfaction of certain conditions and the
approval of applicable regulatory authorities.
Under the terms of the Agreement, Security Capital will acquire all of
the capital stock of First Federal for a cash payment of approximately $40
million plus an interim earnings adjustment, with an offsetting payment by
FCI from the conveyance by First Federal to FCI of certain real estate owned,
classified loans and other assets, which, at March 28, 1994, aggregated
approximately $19.8 million, net of certain reserves. FCI will also purchase
First Federal's lot and timeshare contract receivables, including the
underlying real estate assets (in the case of cancellations or foreclosures
under such contracts), which, at December 31, 1993, totalled approximately
$53.5 million. Approximately $1.4 million of Security Capital's cash payment
will be deferred pending the resolution of certain litigation involving
FCI and First Federal. The purchase price will be increased by the adjusted
earnings of First Federal from October 1, 1993 through August 1, 1994 or
the date of closing, whichever is earlier, subject to a cap of $1.825 million.
Assuming all conditions are satisfied, the parties currently expect the
acquisition to occur by August 1, 1994. If the acquisition is not closed
by August 1, 1994, the purchase price may be further increased to account
for First Federal's adjusted earnings after that date.
In announcing the Agreement, David B. Jordan, Vice-Chairman and Chief
Executive Officer of Security Capital, commented: "We are very pleased with
this acquisition. Security Capital is one of the best capitalized and
strongest companies in the Southeast, and the acquisition of First Federal
offers us another opportunity to effectively utilize our capital. The
acquisition also allows us to expand our operations and customer base in
the Charlotte area as well as establish a presence in Rockingham, Troy and
Biscoe."
Security Capital, a bank holding company, operates 40 offices in 28
communities located in 11 counties in the south central and western
Piedmont regions of North Carolina through its four banking subsidiaires:
Security Bank and Trust Company and OMNIBANK, SSB/Salisbury, North
Carolina; Citizens Savings, SSB/Concord, North Carolina; and Home Savings
Bank, SSB/Kings Mountain, North Carolina. At March 1, 1994, Security
Capital's total assets were approximately $929 million.
507 WEST INNES STREET
POST OFFICE BOX 1387
SALISBURY, NC 28145-1387
TEL: (704) 636-3775
FAX: (704) 637-1427
