LOAN AND STOCK PLEDGE AGREEMENT
THIS LOAN AND STOCK PLEDGE AGREEMENT (the "Agreement") is entered into, as
of April 3, 2002, by and between APPALACHIAN BANCSHARES, INC., a Georgia
corporation (the "Borrower"), and Crescent Bank and Trust Company, a Georgia
banking corporation (the "Lender").
On the date hereof the Borrower is borrowing the principal amount of
$4,600,000 from the Lender (the "Loan"), which will be evidenced by the Note.
The Lender is willing to make the Loan to the Borrower on the terms and
conditions described below. The Borrower and Lender agree that the payment and
performance of all obligations relating to the Loan will be secured through the
pledge to the Lender of all the issued and outstanding shares of capital stock
owned or hereafter acquired by the Borrower in APPALACHIAN COMMUNITY BANK (the
"Stock"), such bank (formerly known as ▇▇▇▇▇▇ County Bank, Ellijay, Georgia and
Appalachian Community Bank, Blairsville, Georgia, and currently doing business
as ▇▇▇▇▇▇ County bank in Ellijay, Georgia) having its main office at ▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Bank"). Certain capitalized
terms used in this Agreement are defined in Section 22 of this Agreement.
In consideration of the premises and the mutual agreements and
representations in this Agreement, the Lender and the Borrower agree as follows:
1. Security Interest.
(a) The Borrower hereby unconditionally grants and assigns to the Lender
and its successors and assigns a continuing security interest in and
security title to the Stock. The Borrower hereby delivers to the
Lender all of its right, title and interest in and to the Stock,
together with certificates representing the Stock and stock powers
endorsed in blank, as security for (i) all obligations of the Borrower
to the Lender hereunder, and (ii) payment and performance of all
obligations of the Borrower to the Lender under the Note, whether
direct or indirect, absolute or contingent, now or hereafter existing,
or due or to become due. If the Borrower receives, for any reason
whatsoever, any additional shares of the capital stock of the Bank,
such shares shall thereupon constitute Stock to be held by the Lender
under the terms of this Agreement and the Borrower shall immediately
deliver such shares to the Lender, together with stock powers endorsed
in blank by the Borrower. Beneficial ownership of the Stock, including
all voting, consentual and dividend rights, shall remain in the
Borrower until the occurrence of a Default.
(b) If, prior to repayment in full of the Loan, the aggregate book value
of the Stock becomes less than 200% of the outstanding Loan balance,
the Borrower shall promptly deliver to the Lender on demand additional
collateral of a type and value acceptable to the Lender (and the
Lender's judgment in valuing same shall be conclusive) so that the sum
of the value of such additional collateral plus the aggregate book
value of the Stock is equal to or in excess of 200% of the outstanding
Loan balance. The Borrower shall also execute any security documents
the Lender may request to evidence and perfect the Lender's rights in
such additional collateral. If at any time such additional collateral
is no longer required pursuant to this Section 1(b), the Lender shall
release its security interest in such additional collateral upon the
request of the Borrower.
2. Representations and Warranties. The Borrower represents and warrants to the
Lender as follows:
(a) The Borrower is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Georgia and is qualified
to do business in all jurisdictions where such qualification is
necessary. The Borrower is registered as a bank holding company with
the Board of Governors of the Federal Reserve System and the Georgia
Department of Banking and Finance. The
chief executive office and the principal place of business of the
Borrower, as well as the location of the records of the Borrower, is
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ (▇▇▇▇▇▇ County), and
the Borrower's U.S. employer identification number is ▇▇-▇▇▇▇▇▇▇.
(b) The Bank is a banking corporation duly organized, validly existing,
and in good standing under the laws of the State of Georgia. The
Borrower owns all of the Stock (consisting of 568,000 shares of
capital stock of the Bank, $5.00 par value per share), and there are
no other outstanding shares of capital stock and no outstanding
options, warrants or other rights which can be converted into shares
of capital stock of the Bank. The Bank has all requisite corporate
power and authority and possesses all licenses, permits and
authorizations necessary for it to own its properties and to conduct
its business as presently conducted.
(c) Each financial statement of the Borrower or any Subsidiary which has
been delivered to the Lender presents fairly the financial condition
of the Borrower or such Subsidiary, as of the date indicated therein,
and presents fairly the results of Borrower's or such Subsidiary's
operations for the periods shown therein. There has been no material
adverse change, either existing or threatened, in the financial
condition or operations of the Borrower or any Subsidiary since the
dates of such financial statements.
(d) The Borrower has full power and authority to execute and perform the
Financing Documents. The execution, delivery, and performance by the
Borrower of the Financing Documents (i) have been duly authorized by
all requisite action by the Borrower, (ii) do not violate any
provision of law, and (iii) do not result in a breach of or constitute
a default under any agreement or other instrument to which the
Borrower or any Subsidiary is a party or by which the Borrower or any
Subsidiary is bound. Each of the Financing Documents constitutes the
legal, valid, and binding obligation of the Borrower enforceable in
accordance with its terms.
(e) Except for the security interest created by this Agreement, the
Borrower owns the Stock free and clear of all liens, charges, and
encumbrances, except as may be retired through the proceeds of this
transaction. The Stock is duly issued, fully paid and non-assessable,
and the Borrower has the unencumbered right to pledge the Stock.
(f) There is no action, arbitration, or other proceeding at law or in
equity, or by or before any court agency, or arbitrator, nor is there
any judgment, order, or other decree pending, anticipated or
threatened against the Borrower or any Subsidiary or against any of
their properties or assets which might have a material adverse effect
on the Borrower, any Subsidiary, or their respective properties or
assets, or which might call into question the validity or
enforceability of the Financing Documents, or which might involve the
alleged violation by the Borrower or any Subsidiary of any law, rule
or regulation.
(g) No consent or other authorization of, or filing with, any governmental
authority or other public body, on the part of the Borrower or any
Subsidiary, is required in connection with the Borrower's execution,
delivery, or performance of the Financing Documents; or if so
required, all such prerequisites have been fully satisfied.
(h) None of the transactions contemplated in this Agreement (including,
without limitation, the use of the proceeds of the Loan) will violate
or result in a violation of Section 7 of the Securities Exchange Act
of 1934, or any regulations issued pursuant thereto.
(i) The following documents have been presented under separate cover as
exhibits hereto: true, correct and complete copies of (i) the
Borrower's and the Bank's articles of incorporation as
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in effect as of the date hereof; (ii) the bylaws of the Borrower in
effect immediately prior to the adoption of the resolutions referred
to below; (iii) the bylaws of the Bank as of the date hereof; (iv)
resolutions of the Board of Directors of the Borrower (A) duly adopted
at a meeting duly called at which a quorum was present or (B) by
unanimous written consent (the "Resolutions"), which have been, since
adoption, and are now in full force and effect and which have not been
modified in any respect. There have been no further amendments or
other documents affecting or altering the Borrower's or the Bank's
articles of incorporation since the date of the certifications
referred to above through the date hereof, and the Borrower and the
Bank have remained in valid existence under the laws of the State of
Georgia since such dates.
3. Affirmative Covenants. The Borrower agrees that so long as the Note is
outstanding or this Agreement is in effect:
(a) The Borrower shall promptly furnish to the Lender: (i) not later than
120 days after the end of each fiscal year, audited consolidated
financial statements of the Borrower prepared in accordance with
generally accepted accounting principles ("GAAP") and certified by an
independent accounting firm acceptable to the Lender, (ii) not later
than 45 days after each of the first three quarters of each fiscal
year, unaudited consolidated financial statements of the Borrower,
prepared in accordance with GAAP (subject to changes resulting from
normal year-end adjustments and without notes thereto) and certified
by the chief financial officer of the Borrower; (iii) not later than
30 days after the end of each of the first three quarters of each
year, copies of the Report of Condition and the Report of Income and
Dividends of each of the Bank Subsidiaries; (iv) immediately after the
occurrence of a material adverse change in the business, properties,
condition or prospects (financial or otherwise) of the Borrower or its
Subsidiaries, taken as a whole, including, without limitation, any
material adverse change arising out of imposition of any letter
agreement, memorandum of understanding, cease and desist order, or
other similar regulatory action involving the Borrower or any
Subsidiary, a statement of the Borrower's chief executive officer or
chief financial officer setting forth in reasonable detail such change
and the action which the Borrower or any Subsidiary proposes to take
with respect thereto; and (v) from time to time upon request of the
Lender, such other information relating to the operations, business,
condition, management properties, or prospects of the Borrower or any
Subsidiary as the Lender may reasonably request (including meetings
with the Borrower's or Subsidiary's officers and employees).
(b) The Borrower and each Subsidiary shall punctually pay and discharge
all taxes, assessments and other governmental charges or levies
imposed upon it or upon its income or upon any of its property unless
contested in good faith and for which reserves have been established
in accordance with GAAP.
(c) The Borrower and each Subsidiary shall comply in all material respects
with all requirements of constitutions, statutes, rules, regulations,
and orders and all orders and decrees of courts and arbitrators
applicable to it or its properties except where the failure to comply
could not reasonably be expected to have a material adverse effect.
(d) The Borrower shall promptly notify the Lender of any material change
in management.
4. Negative Covenants. The Borrower agrees that so long as the Note is
outstanding or Agreement is in effect:
(a) The Borrower shall not permit its Capital, as of the end of any fiscal
quarter during the term of this Agreement, to be less than
$10,000,000.
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(b) The Borrower shall not permit the ratio of Tier 1 Capital to average
total assets (the Tier 1 Leverage Ratio) of any of the Bank
Subsidiaries as of the end of any fiscal year to be less than 5.0%.
(c) The Borrower shall not fail to comply with, and shall not permit any
of the Bank Subsidiaries to fail to comply with, any minimum capital
requirement imposed by any of their federal or state regulators.
(d) The Borrower shall not permit its Weighted Average Return on Assets
for each fiscal year to be less than 0.85% and shall not permit the
Weighted Average Return on Assets of any Bank Subsidiary for each
fiscal year to be less than 0.85 %.
(e) The Borrower shall not permit the allowance for loan and lease losses
of any of the Bank Subsidiaries to be less than 1.00% of its gross
loans for each fiscal quarter.
(f) The Borrower shall not incur or permit to exist any indebtedness or
liability for borrowed money in excess of 25% of Capital other than to
the Lender or a wholly-owned Subsidiary of the Borrower without prior
Lender approval, except that this covenant shall not apply to
deposits, repurchase agreements, federal funds borrowings, overdrafts,
and other banking transactions entered into by a Subsidiary in the
ordinary course of its business.
(g) The Borrower shall not, directly or indirectly, become a guarantor of
any obligation of, or an endorser of, or otherwise assume or become
liable upon any notes, obligations, or other indebtedness of any other
Person (other than a Subsidiary) except in connection with the
depositing of checks in the normal and ordinary course of business.
(h) The Borrower neither shall transfer nor permit any Bank Subsidiary to
transfer all or substantially all of its assets to or consolidate or
merge with any other Person, or acquire all or substantially all of
the properties or capital stock of any other Person.
(i) The Borrower shall not permit any Bank Subsidiary to issue, sell or
otherwise dispose of or part with control of any shares of any class
of its stock (other than directors' qualifying shares) except to the
Borrower or a wholly-owned Subsidiary of the Borrower.
(j) The Borrower shall not sell or otherwise dispose of or part with
control of any of the Stock or any other securities or indebtedness of
any Bank Subsidiary, and the Borrower shall not pledge or otherwise
transfer or grant a security interest in any of the capital stock or
other securities of any of its Bank Subsidiaries.
5. Advances Under the Loan. The Lender shall not be obligated to make any
advance of the Loan to the Borrower unless:
(a) All representations and warranties of the Borrower contained in this
Agreement or the Note shall be true in all material respects on and as
of the date of each advance of the Loan.
(b) The Borrower and each Subsidiary shall have performed in all material
respects all their agreements and obligations required by the
Financing Documents.
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(c) No adverse change shall have occurred in the condition (financial or
otherwise) of the Borrower and its Subsidiaries, taken as a whole, or
in the business, properties, assets, liabilities or prospects of the
Borrower and its Subsidiaries, taken as a whole, since the date of
this Agreement.
(d) No Default or event which, with the giving of notice or passage of
time (or both), would constitute a Default under the terms of this
Agreement shall have occurred.
6. Default. A "Default" shall exist if any of the following occurs:
(a) Failure of the Borrower punctually to make any payment of any amount
payable, whether principal or interest or other amount, on any of the
Liabilities, whether at maturity, or at a date fixed for any
prepayment or partial prepayment, or by acceleration, or otherwise,
within 3 business days of the date such payment becomes due.
(b) Any statement, representation, or warranty of the Borrower made in any
of the Financing Documents or at any time furnished by or on behalf of
the Borrower to the Lender shall be false or misleading in any
material respect as of the date made.
(c) Failure of the Borrower to comply punctually and fully with (i) any of
the covenants in Section 4 of this Agreement or (ii) any of the other
covenants set forth in this Agreement if such failure under this
clause (ii) is not remedied within fifteen (15) business days after
notice from the Lender to the Borrower.
(d) The occurrence of a default under any other agreement to which the
Borrower and the Lender are parties or under any other instrument
executed by the Borrower in favor of the Lender.
(e) The Borrower or any Subsidiary becomes insolvent as defined in the
Georgia Uniform Commercial Code or makes an assignment for the benefit
of creditors; or any action is brought by the Borrower or any
Subsidiary seeking dissolution of the Borrower or such Subsidiary or
liquidation of its assets or seeking the appointment of a trustee,
interim trustee, receiver, or other custodian for any of its property;
or the Borrower or any Subsidiary commences a voluntary case under the
Federal Bankruptcy Code; or any reorganization or arrangement
proceeding is instituted by the Borrower or any Subsidiary for the
settlement, readjustment, composition or extension of any of its debts
upon any terms; or any action or petition is otherwise brought by the
Borrower or any Subsidiary seeking similar relief or alleging that it
is insolvent or unable to pay its debts as they mature.
(f) Any action is brought against the Borrower or any Subsidiary seeking
dissolution of the Borrower or such Subsidiary or liquidation of any
of its assets or seeking the appointment of a trustee, interim
trustee, receiver, or other custodian for any of its property, and
such action is consented to or acquiesced in by the Borrower or such
Subsidiary or is not dismissed within 60 days of the date upon which
it was instituted; or any proceeding under the Federal Bankruptcy Code
is instituted against the Borrower or any Subsidiary and (i) an order
for relief is entered in such proceeding or (ii) such proceeding is
consented to or acquiesced in by the Borrower or such Subsidiary or is
not dismissed within 60 days of the date upon which it was instituted;
or any reorganization or arrangement proceeding is instituted against
the Borrower or any Subsidiary for the settlement, readjustment
composition, or extension of any of its debts upon any terms, and such
proceeding is consented to or acquiesced in by the Borrower or such
Subsidiary or is not dismissed within 60 days of the date upon which
it was instituted; or any action or petition is otherwise brought
against the Borrower or any Subsidiary seeking similar relief or
alleging that it is insolvent, unable to pay its debts as they mature,
or generally not paying its
5
debts as they become due, and such action or petition is consented to
or acquiesced in by the Borrower or such Subsidiary or is not
dismissed within 60 days of the date upon which it was brought.
(g) The Borrower or any Subsidiary is in default (or an event has occurred
which, with the giving of notice or passage of time, or both, will
cause the Borrower or any Subsidiary to be in default) on indebtedness
to another Person, and the amount of such indebtedness exceeds
$25,000, or the acceleration of the maturity of such indebtedness
would have a material adverse effect upon the Borrower or such
Subsidiary.
(h) Any other material adverse change occurs in the Borrower's financial
condition or means or ability to pay the Liabilities.
(i) Any cease and desist or other order has been threatened in writing,
noticed, or entered against the Borrower or any Subsidiary by any bank
or bank holding company regulatory agency or body, or the Borrower or
any Subsidiary enters into any form of memorandum of understanding,
plan of corrective action, or letter agreement with any such
regulatory agency or body, or any other successful regulatory
enforcement action is taken against the Borrower or any Subsidiary
relating to the capitalization, management, or operation of the
Borrower or any Subsidiary.
(j) The Borrower or any Subsidiary is indicted for, convicted of, or
pleads guilty or nolo contendere to any charge that the Borrower or
such Subsidiary has violated any drug, controlled substances, money
laundering, currency reporting, racketeering, or
racketeering-influenced-and-corrupt-organization statute or
regulations or other forfeiture statute.
(k) The Borrower ceases to own 100% of the issued and outstanding capital
stock of the Bank or ceases to control any of the other Bank
Subsidiaries.
7. Remedies Upon Default. Upon the continuation of a Default, the Lender shall
be entitled, without limitation, to exercise the following rights at any
time and from time to time, which the Borrower hereby agrees to be
commercially reasonable:
(a) declare any of the Liabilities due and payable, whereupon they
immediately will become due and payable (notwithstanding any
provisions to the contrary, and without presentment, demand, notice or
protest of any kind (all of which are expressly waived by the
Borrower));
(b) (i) receive all amounts payable in respect of the Collateral otherwise
payable to the Borrower; (ii) settle all accounts, claims, and
controversies relating to the Collateral, (iii) transfer all or any
part of the Collateral into the Lender's or any nominee's name; and
(iv) execute all agreements and other instruments; bring, defend and
abandon all actions and other proceedings; and take all actions in
relation to the Collateral as the Lender in its sole discretion may
determine;
(c) enforce the payment of the Stock and exercise all of the rights,
powers and remedies of the Borrower thereunder, including the exercise
of all voting rights and other ownership or consentual rights of the
Stock (but the Lender is not hereby obligated to exercise such
rights), and in connection therewith the Borrower hereby appoints the
Lender to be the Borrower's true and lawful attorney-in-fact and
IRREVOCABLE PROXY to vote the Stock in any manner the Lender deems
advisable for or against all matters submitted to a vote of
shareholders, and such power-of-attorney is coupled with an interest
and is irrevocable;
(d) sell, assign and deliver, or grant options to purchase, all or any
part of or interest in the Collateral in one or more parcels, at any
public or private sale at any exchange, any of the Lender's
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offices, or elsewhere, without demand of performance, advertisement,
or notice of intention to sell or of the time or place of sale or
adjournment thereof or to redeem or otherwise (all of which are hereby
expressly and irrevocably waived by the Borrower), for cash, on
credit, or for other property, for immediate or future delivery
without any assumption of credit risk, and for such price and on such
terms as the Lender in its sole discretion may determine; the Borrower
agrees that, to the extent that notice of sale shall be required by
law, at least five business days' notice to the Borrower of the time
and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification; the Lender
shall not be obligated to make any sale of Collateral regardless of
notice of sale having been given; the Lender may adjourn any public or
private sale from time to time by announcement at the time and place
fixed therefor, and any such sale may, without further notice, be made
at the time and place to which it was so adjourned; the Borrower
hereby waives and releases to the fullest extent permitted by law any
right or equity of redemption with respect to the Collateral, whether
before or after sale hereunder, and all rights, if any, of marshalling
the Collateral and any other security for the Loan or otherwise; at
any such sale, unless prohibited by applicable law, the Lender may bid
for and purchase all or any part of the Collateral so sold free from
any such right or equity of redemption; and the Lender shall not be
liable for failure to collect or realize upon any or all of the
Collateral or for any delay in so doing nor shall any of them be under
any obligation to take any action whatsoever with regard thereto;
(e) appoint and dismiss managers or other agents for any of the purposes
mentioned in the foregoing provisions of this Section 7, as the Lender
in its sole discretion may determine; and
(f) generally, take all such other action as the Lender in its sole
discretion may determine as incidental or conducive to any of the
matters or powers mentioned in this Section 7 and which the Lender may
or can do lawfully and use the name of the Borrower for such purposes
and in any proceedings arising therefrom.
8. Application of Proceeds. The proceeds of the public or private sale or
other disposition of any Collateral hereunder shall be applied to (i) the
costs incurred in connection with the sale, expressly including, without
limitation, any costs under Section 11(a) hereof, (ii) any unpaid interest,
fees or other amounts which may have accrued on any obligations secured
hereby, and (iii) any unpaid principal on any obligations secured hereby,
in such order as the Lender may determine, and any remaining proceeds shall
be paid over to the Borrower or others as by law provided. If the proceeds
of the sale or other disposition of the Stock are insufficient to pay all
such amounts, the Borrower shall remain liable to the Lender for the
deficiency.
9. Additional Rights of Secured Parties. In addition to its other rights and
privileges under this Agreement, the Lender may exercise from time to time
any and all other rights and remedies available to a secured party when a
debtor is in default under a security agreement as provided in the Uniform
Commercial Code of Georgia, or available to the Lender under any other
applicable law or in equity, including without limitation the right to any
deficiency remaining after disposition of the Collateral. The Borrower
shall pay all of the reasonable costs and expenses (including reasonable
attorneys' fees) incurred by the Lender in enforcing its rights under this
Agreement.
10. Return of Stock to Borrower. Upon payment in full of all principal and
interest on the Note and full performance by the Borrower of all covenants
and other obligations under this Agreement, the Lender shall return to the
Borrower (i) all of the then remaining Stock and (ii) all rights received
by the Lender as agent for the Borrower as a result of its possessory
interest in the Stock.
11. Disposition of Stock by Lender. The Stock is not registered under the
various federal or state securities laws and disposition thereof after
default may be subject to prior regulatory approval and may be restricted
to one or more private (instead of public) sales in view of the lack of
such registration.
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The Borrower acknowledges that upon such disposition, the Lender may
approach only a restricted number of potential purchasers and that a sale
under such circumstances may yield a lower price for the Stock than if the
Stock were registered pursuant to federal and state securities laws and
sold on the open market. The Borrower, therefore, agrees that:
(a) if the Lender shall, pursuant to the terms of this Agreement, sell or
cause any of the Stock to be sold at a private sale, the Lender shall
have the right to rely upon the advice and opinion of any national
brokerage or investment firm having recognized expertise and
experience in connection with shares of companies in the banking
industry (but shall not be obligated to seek such advice and the
failure to do so shall not be considered in determining the commercial
reasonableness of the Lender's action) as to the best manner in which
to expose the Stock for sale and as to the best price reasonably
obtainable at the private sale thereof; and
(b) such reliance shall be conclusive evidence that the Lender has handled
such disposition in a commercially reasonable manner.
12. Borrower's Obligations Absolute. The obligations of the Borrower under this
Agreement shall be direct and immediate and not conditional or contingent
upon the pursuit of any other remedies against the Borrower or any other
Person, nor against other security or liens available to the Lender or its
successors, assigns or agents. The Borrower hereby waives any right to
require that an action be brought against any other Person or require that
resort be had to any security or to any balance of any deposit account or
credit on the books of the Lender in favor of any other Person prior to any
exercise of rights or remedies hereunder, or to require resort to rights or
remedies of the Lender in connection with the Loan.
13. Notices. Except as provided otherwise in this Agreement, all notices and
other communications under this Agreement are to be in writing and are to
be deemed to have been duly given and to be effective upon delivery to the
party to whom they are directed. If sent by U.S. mail, first class,
certified, return receipt required, postage prepaid, and addressed to the
Lender or to the Borrower at their respective addressees set forth below,
such communications are deemed to have been delivered on the second
business day after being so posted.
If to the Lender: Crescent Bank and Trust Company
▇▇▇ ▇▇▇. ▇▇▇ S.
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇, Executive Vice-President
If to the Borrower: Appalachian Bancshares, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇, Chief Financial Officer
Either the Lender or the Borrower may, by written notice to the other,
designate a different address for receiving notices under this Agreement;
provided, however, that no such change of address will be effective until
written notice thereof is actually received by the party to whom such change of
address is sent.
14. Binding Agreement. The provisions of this Agreement shall be construed and
interpreted, and all rights and obligations of the parties hereto
determined, in accordance with the laws of
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the State of Georgia. This Agreement, together with all documents referred
to herein, constitutes the entire Agreement between the Borrower and the
Lender with respect to the matters addressed herein and may not be modified
except by a writing executed by the Lender and delivered by the Lender to
the Borrower. This Agreement may be executed in multiple counterparts, each
of which shall be deemed an original but all of which, taken together,
shall constitute one and the same instrument. This Agreement hereby
replaces and supercedes that certain Loan and Stock Pledge Agreement, dated
April 3, 2000, previously entered into by and between the Borrower and the
Lender.
15. Participations. The Lender may at any time grant participations in or sell,
assign, transfer or otherwise dispose of all or any portion of the
indebtedness of the Borrower outstanding pursuant to the Financing
Documents. The Borrower hereby agrees that any holder of a participation
in, and any assignee or transferee of, all or any portion of any amount
owed by the Borrower under the Financing Documents (i) shall be entitled to
the benefits of the provisions of this Agreement as the Lender hereunder
and (ii) may exercise any and all rights of the banker's lien, set-off or
counterclaim with respect to any and all amounts owed by the Borrower to
such assignee, transferee or holder as fully as if such assignee,
transferee or holder had made the Loan in the amount of the obligation in
which it holds a participation or which is assigned or transferred to it.
16. Expenses. All reports and other documents or information furnished to the
Lender under this Agreement shall be supplied by the Borrower without cost
to the Lender. Further, the Borrower shall reimburse the Lender on demand
for all reasonable out-of-pocket costs and expenses (including reasonable
legal fees) incurred by the Lender in connection with the preparation,
interpretation, operation, and enforcement of the Financing Documents or
the protection or preservation of any right or claim of the Lender with
respect to such agreements. The Borrower will pay all taxes (if any) in
connection with the Financing Documents. The obligations of the Borrower
under this section shall survive the payment of the Liabilities and the
termination of this Agreement.
17. Indemnification. In addition to any other amounts payable by the Borrower
under this Agreement, the Borrower shall pay and indemnify the Lender from
and against all claims, liabilities, losses, costs, and expenses
(including, without limitation, reasonable attorneys' fees and expenses)
which the Lender may (other than as a result of the gross negligence or
willful misconduct of the Lender) incur or be subject to as a consequence,
directly or indirectly, of (I) any breach by the Borrower of any warranty,
term or condition in, or the occurrence of any default under, any of the
Financing Documents, including all fees or expenses resulting from the
settlement or defense of any claims or liabilities arising as a result of
any such breach or default, (ii) the Lender's making, holding, or
administering the Loan or the Collateral, (iii) allegations of
participation or interference by the Lender in the management, contractual
relations or other affairs of the Borrower or any Subsidiary, (iv)
allegations that the Lender has joint liability with the Borrower or any
Subsidiary for any reason, and (v) any suit, investigation, or proceeding
as to which the Lender or such participant is involved as a consequence,
directly or indirectly, of its execution of any of the Financing Documents,
or any other event or transaction contemplated by any of the foregoing. The
obligations of Borrower under this Section 17 shall survive the termination
of this Agreement.
18. Right to Set-Off. Upon the occurrence of a Default hereunder, the Lender,
without notice or demand of any kind, may hold and set off against such of
the Liabilities (whether matured or unmatured) as the Lender may elect any
balance or amount to the credit of the Borrower in any deposit, agency,
reserve, holdback or other account of any nature whatsoever maintained by
or on behalf of the Borrower with the Lender at any of its offices,
regardless of whether such amounts are general or special and regardless of
whether such accounts are individual or joint. Any Person purchasing an
interest in debt obligations under this Agreement held by the Lender may
exercise all rights of offset with respect to such
9
interest as fully as if such Person were a holder of debt obligations
hereunder in the amount of such interest.
19. Further Assurances. If at any time the Lender upon advice of its counsel
shall determine that any further document shall be required to give effect
to this Agreement and the transactions and other agreements contemplated
thereby, the Borrower shall, and shall cause its Subsidiaries to, execute
and deliver such document and otherwise carry out the purposes of this
Agreement.
20. Severability. If any paragraph or part thereof shall for any reason be held
or adjudged to be invalid, illegal, or unenforceable by any court of
competent jurisdiction, such paragraph or part thereof shall be deemed
separate, distinct, and independent, and the remainder of this Agreement
shall remain in full force and effect and shall not be affected by such
holding or adjudication.
21. Binding Effect. All rights of the Lender under the Financing Documents
shall inure to the benefit of its transferees, successors and assigns. All
obligations of the Borrower under the Financing Documents shall bind its
heirs, legal representatives, successors, and assigns.
22. Definitions.
(a) "Assessment Risk Classification" means the assessment risk
classification assigned to each of the Bank Subsidiaries for purposes
of assessment of premiums by the Federal Deposit Insurance Corporation
or deposit insurance pursuant to 12 C.F.R. ss.327.3(d) or the
corresponding assessment risk classification, as determined by the
Lender, pursuant to any successor assessment risk classification
system.
(b) "Bank Subsidiaries" means each banking Subsidiary of Borrower, now or
hereafter in existence, including but not limited to the Bank.
(c) "Capital" means all capital or all components of capital, other than
any allowance for loan and lease losses and net of any intangible
assets, as defined from time to time by the primary federal regulator
of the Borrower, the Bank, or each of the other Bank Subsidiaries (as
the case may be).
(d) "Collateral" means and includes all property assigned or pledged to
the Lender or in which the Lender has been granted security interest
or to which the Lender has been granted security title, whether under
any of the Financing Documents or any other agreement, instrument, or
document, and the proceeds thereof.
(e) "Financing Documents" means and includes this Agreement, the Note, and
all other associated loan and collateral documents including, without
limitation, all guaranties, suretyship agreements, stock powers,
security agreements, security deeds, subordination agreements,
exhibits, schedules, attachments, financing statements, notices,
consents, waivers, opinions, letters, reports, records, assignments,
documents, instruments, information and other writings related
thereto, or furnished by the Borrower to the Lender in connection
therewith or in connection with any of the Collateral, and any
amendments, extensions, renewals, modifications or substitutions
thereof or therefor.
(f) "Liabilities" means all indebtedness, liabilities, and obligations of
the Borrower arising under the Financing Documents of any nature
whatsoever which the Lender may now or hereafter have, own or hold,
and which are now or hereafter owing to the Lender regardless of
however and whenever created, arising or evidenced, whether now,
heretofore or hereafter incurred, whether now, heretofore or hereafter
due and payable, whether alone or together with another or others,
whether direct
10
or indirect, primary or secondary, absolute or contingent, or joint or
several, and whether as principal, maker, endorser, guarantor, surety
or otherwise, and also regardless of whether such Liabilities are from
time to time reduced and thereafter increased or entirely extinguished
and thereafter reincurred, including without limitation the Note and
any amendments, extensions, renewals, modifications or substitutions
thereof or therefor.
(g) "Note" shall mean the promissory note dated the date hereof in the
principal amount of $4,600,000 and any amendments, extensions,
renewals, modifications, or substitutions thereof or therefor in
effect at any particular time.
(h) "Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization or government, or any agency or political subdivision
thereof.
(i) "Subsidiary" means each of the Bank Subsidiaries and each other
corporation for which the Borrower has the power, directly or
indirectly, to direct its management or policies or to vote 25% or
more of any class of its voting securities.
(j) "Tier 1 Capital" means Tier 1 capital as defined by the capital
maintenance regulations of the primary federal bank regulatory agency
of the relevant Bank Subsidiary.
(k) "Weighted Average Return on Assets" means (i) with respect to the
Borrower, its net income for the previous calendar year plus the
amount of any interest payments by it on the Loan during the previous
calendar year, divided by its average assets during the previous
calendar year, and (ii) with respect to each Bank Subsidiary, its net
income for the previous calendar year divided by its average assets
during the previous calendar year.
(l) All accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP.
[signatures on following page]
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IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
affixed their seals by and through their duly authorized officers, as of the day
and year first above written.
BORROWER:
APPALACHIAN BANCSHARES, INC.
By: /s/ ▇▇▇▇ ▇▇▇
---------------------------------
▇▇▇▇ ▇▇▇, Chief Financial Officer
Attest: /s/ P. ▇▇▇ ▇▇▇▇▇▇
-----------------------------
Name: P. ▇▇▇ ▇▇▇▇▇▇
Title: Secretary
[CORPORATE SEAL]
LENDER:
CRESCENT BANK & TRUST COMPANY
By: /s/ ▇▇▇▇ ▇▇▇▇▇
------------------------------------
▇▇▇▇ ▇▇▇▇▇, Executive Vice-President
[BANK SEAL]