LOAN AGREEMENT COUNTY OF SPARTANBURG )
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STATE
OF SOUTH CAROLINA
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COUNTY
OF SPARTANBURG
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THIS
LOAN AGREEMENT (the “Agreement”), made this 28th day of
December, 2007, by and among NEXITY BANK, a banking association with its
principal office and place of business at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (hereinafter called the “Lender”), and FIRST
NATIONAL BANCSHARES, INC., a South Carolina corporation (hereinafter called the
“Borrower”).
W I T N E
S S E T H:
THAT
THE LENDER AND THE BORROWER for consideration, the receipt and adequacy of which
is hereby acknowledged, covenant and agree as follows:
Section
1. The
Loan. Subject to the terms and conditions and
relying upon the representations and warranties set forth in this Agreement, the
Lender agrees to make loans (each, a “Loan” and, collectively, the “Loans”) to
the Borrower at any time and from time to time on or after the Closing Date and
to and including December 31, 2009 (the “Draw Period”), in an aggregate
principal amount not exceeding at any time outstanding
$15,000,000.00. Subject to the provisions of this Agreement, during
the Draw Period, the Borrower may borrow, repay and reborrow under this Section
1. On December 31, 2009, the outstanding principal balance of all
Loans shall be converted to a term loan. The Loan by the Lender to the Borrower
shall be evidenced by the promissory note or notes of the Borrower (each, a "Note" and collectively, the “Notes”), the terms of the Notes being incorporated by reference, with
interest on so much of such sum as shall have been disbursed and remain
unpaid. To secure the payment of each Note and to secure the performance of the
Borrower’s covenants contained herein and in the Commitment (as defined in
Section 7 below), the Borrower has given or will
give the Lender a first priority stock pledge agreement satisfactory to
the Lender (the “Stock Pledge Agreement”) covering the outstanding shares of
common stock (the “Stock”) of First National Bank of the South, a national
banking association and a wholly owned Subsidiary of the Borrower (the "Bank"),
and described in more detail in the Stock Pledge Agreement and loan documents
given to evidence or secure the Loan or applicable
portion thereof.
Section
2. Use
of Loan Proceeds. The proceeds of the Loan are to
be used to pay cash in exchange for certain shares of common stock of Carolina
National Corporation pursuant to the terms of an Agreement providing for the
merger of Carolina National Corporation with and into the Borrower, with the
Borrower surviving the merger, all as further described in the filings made by
the Borrower with the Securities and Exchange Commission (the
"SEC").
Section
3. Warranties
of the Borrower; Conditions to Disbursement. Prior to the
disbursement of any portion of the Loan,
the Lender must have received, in addition to other requirements set forth in
the Commitment, confirmation of the following warranties from the Borrower, such confirmation being a
condition to disbursement:
(a)
The Borrower is a corporation duly organized, validly existing, and in good
standing under the laws of the State of South Carolina 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 South Carolina
Board of Financial Institutions. The chief executive office of the
Borrower and the principal place of business of the Borrower where the records
of the Borrower are kept are located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
(b)
The Bank is a national banking association duly organized, validly existing, and
in good standing pursuant to the laws of the United States of America and
subject to examination by the Office of the Comptroller of the
Currency. The Borrower owns all the Stock (consisting of One Million
One Hundred Thousand (1,100,000 shares) of the Bank and there are no other
outstanding shares of capital stock and no outstanding options, warrants or
other rights that 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 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 the results of its
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 date of the most recent
financial statements delivered to the Lender or the most recent SEC report filed
with the SEC.
(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 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. 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 or filing with or of 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 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 are attached as exhibits hereto: true, correct and complete copies
of (i) the Borrower's articles of incorporation as in effect as of the date
hereof (as certified by the South Carolina Secretary of State on December 27,
2007); (ii) the Bank's charter as in effect as of the date hereof (as certified
by the Office of the Comptroller of the Currency on December 27, 2007); (iii)
certificate of existence for the Borrower issued by the South Carolina Secretary
of State on December 27, 2007; (iv) the bylaws of the Borrower in effect
immediately prior to the adoption of the resolutions referred to below (and such
bylaws have not been further altered or amended and have been in full force and
effect at all times since the adoption of such resolutions through the date
hereof); (v) the bylaws of the Bank as of the date hereof; (vi) resolutions (the
"Resolutions") of the Board of Directors of the Borrower adopted at a duly
called meeting on December 17, 2007. The Resolutions are now in full
force and effect and 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 South
Carolina since such dates.
Section
4. Covenants
of the Borrower. The Borrower hereby covenants and agrees with the Lender as
follows:
Affirmative
Covenants:
(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 accounting principles
generally accepted in the United States of America ("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
certified by the chief financial officer of the Borrower; (iii) not later
than 45 days after the end of each of the first three quarters of each year,
copies of the Call Reports and Problem Asset Summaries of the Bank for the
Fiscal Quarter then ended, in compliance with the requirements of the
governmental regulatory agency which has authority to examine the Borrower
and/or any Subsidiary, all prepared in accordance with the requirements imposed
by the applicable the governmental regulatory agency; (iv) immediately
after the occurrence of a material adverse change in the business, properties,
condition, management, or prospects (financial or otherwise) of the Borrower or
any Subsidiary, including, without limitation, 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; (v) from time to time upon
request of the Lender, copies of the Borrower's annual reports and quarterly
regulatory reports and each Subsidiary's annual reports and quarterly regulatory
reports, as applicable; and (vi) 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, except taxes, assessments and other charges
which are in good faith being timely litigated or otherwise properly contested
by the Borrower or the Subsidiary and as to which the contestant has established
an adequate reserve on its books.
(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.
(d)
The Borrower shall, immediately upon printing, provide the Lender with a copy of
any offering disclosure materials for any stock offering along with any
additional information about commitments for sale of stock associated with any
such offering.
(e)
The Borrower shall furnish the Lender with a copy of the most recent external
loan review for the Bank and Carolina National Bank, a national bank located in
Columbia, South Carolina which is anticipated to become part of the Bank pending
successful completion of the merger described in Section 2 above.
(f)
The Borrower shall pay all costs and expenses incurred by the Borrower and the
Lender in connection with this commitment.
Negative
Covenants:
(a)
The Borrower's Capital shall remain at a sufficient level to maintain a
loan/book value of no more than 35%, provided that for purposes of calculating
the loan to book value, such calculation shall be determined based upon the book
value of the Bank.
(b)
The Borrower shall not permit the Bank's Capital as of the end of any fiscal
quarter during the term of this Agreement to be less than "well capitalized"
according to regulatory guidelines.
(c)
The Borrower's earnings ratio, or Return On Average Assets shall remain above
0.50% and increase to 0.75% by December 31, 2009.
(d)
The Borrower shall not permit the Allowance for Loan and Lease Losses of the
Bank to be less than 1.00% of its gross loans for each fiscal quarter until such
time as dictated by changes made in the calculation by the appropriate bank
regulatory agency and industry.
(e)
The Borrower shall not permit the ratio of Adjusted Non-performing Assets to
Total Assets of the Bank to exceed 1.50%.
(f)
The Borrower shall not permit the ratio of Non-performing loans to gross loans
of the Bank to exceed 2.00%.
(g)
The Borrower shall not permit the ratio of Net charge-offs to average loans of
the Bank to exceed 0.50%.
(h)
The Borrower shall pay no dividend, without prior Lender approval, if the loan
is in default or if the dividend would create a default under this
Agreement.
(i)
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) without prior approval by the Lender except in connection with
deposits, repurchase agreements, overdrafts, and other banking transactions
entered into by a Bank Subsidiary in the ordinary course of its business,
including without limitation borrowings of federal funds and Federal Home Loan
Bank advances. Notwithstanding this provision, the Borrower and the
Lender acknowledge that the projections of the Bank indicate additional earnings
will be generated during the term of the Loan, and that such additional earnings
could be used to service additional debt in the form of trust preferred
securities. Provided that the Borrower and the Bank are otherwise in
compliance and will remain in compliance with all of the ratio requirements of
the Loan, the Borrower may incur additional debt without the consent of the
Lender, with such additional debt restricted to trust preferred
securities.
Section
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 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.
(c)
No material adverse change shall have occurred in the Borrower's or any
Subsidiary's condition (financial or otherwise), or in the business, properties,
assets, liabilities, prospects, or management of the Borrower or any Subsidiary
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.
Section
6. No
Third-Party Beneficiary. All conditions precedent to the obligation
of the Lender to make the disbursement hereunder are imposed solely and
exclusively for the benefit of the Lender and its assigns. No Person
other than the Borrower shall, under any circumstances, be deemed a beneficiary
of this Agreement, or any of the terms or conditions hereof, any or all of which
may be freely waived in whole or in part by the Lender at any time if in its
sole discretion it deems it advisable to do so.
Section
7. The
Commitment; Incorporation by Reference. The terms,
conditions, warranties, representations and agreements contained in that loan
commitment, dated December 14, 2007 (the “Commitment”) are incorporated herein
by reference and made a part hereof as fully and completely as if set out herein
verbatim. If there shall be any conflict between the terms of this
Agreement and the Commitment, the terms of this Agreement shall
control.
Section
8. Events
of Default. The following shall constitute defaults
(each a “default”) hereunder:
(i)
The failure of the Borrower to pay when due any payment of interest or of
principal and interest due and payable under the Note.
(ii)
The failure of the Borrower to keep, perform or observe any covenant, agreement,
term or condition herein required to be kept, performed or observed by the
Borrower.
(iii) If
the Borrower or the Bank (a) files a petition or has a petition filed
against it under the Bankruptcy Code or any proceeding for the relief of
insolvent debtors; (b) generally fails to pay its debts as
such debts become due; (c) has a custodian appointed for
the Borrower or a guarantor or for the assets of any
thereof; (d) benefits from or is subject to the entry of
any order for relief by any court of insolvency; (e) makes
an admission of insolvency seeking relief provided in the Bankruptcy Code or any
other insolvency law; (f) makes an assignment for the
benefit of creditors; (g) has a receiver appointed,
voluntarily or otherwise, for its property; (h) suspends
business; (i) permits a judgment in the amount of $50,000.00 or more to be obtained against it which
is not promptly paid or promptly appealed and secured pending
appeal; or (j) becomes insolvent, however otherwise
evidenced.
(iv) The
occurrence of a default under the Stock Pledge Agreement, the Commitment or any
of the Financing Documents.
(v) If
any representation or certificate given or at any time hereafter required to be
given hereunder shall be false or erroneous in any material respect when
made.
Section
9. Remedies. Upon
the occurrence of a default, the Lender may, at its option, declare the entire
indebtedness evidenced by the Note to be immediately due and payable and may
exercise each and every other remedy granted herein, in the Stock Pledge
Agreement, in the Financing Documents, or as otherwise provided by
law. All rights and remedies of the Lender shall be cumulative and
the exercise of one right or remedy shall not be deemed to be an election of
remedies to the exclusion of the exercise of other rights and
remedies. No failure or delay by the Lender to exercise any right,
power or privilege hereunder shall operate as a waiver of any such right, power
or privilege or preclude any other or future exercise thereof.
Section
10. Agreement
to Survive. This Agreement shall survive the
disbursements of funds under the Note and shall remain in full force and effect
until such time as the Loan shall have been paid in full.
Section
11. Counterparts. This
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute but one and the same instrument.
Section
12. Successors
and Assigns. The covenants, terms and conditions
herein contained shall bind (and the benefits and powers shall inure to) the
respective heirs, executors, administrators, successors and assigns of the
parties hereto. The Borrower, however, shall not assign its rights or
obligations under this Agreement unless such assignment has been consented to by
the Lender in writing. Whenever used herein, the singular number
shall include the plural, he plural the singular, and the term the “Lender”
shall include any payee of the indebtedness hereby secured and any transferee of
assignee thereof, whether by operation of law or otherwise.
Section
13. Governing
Law.This Agreement shall be governed by and construed in all respects under the
laws of the State of South Carolina.
Definitions.
(a) "Bank
Subsidiaries" means each banking Subsidiary of the Borrower, now or hereafter in
existence, including but not limited to the Bank.
(b) "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).
(c) "Financing
Documents" means and includes this Agreement, the Note, the Stock Pledge
Agreement, 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 therefore.
(d) "Non-performing
loans" means those loans on non-accrual plus all other loans 90 days or more
past due, less the government guaranteed portion of those loans.
(e) "Person"
means any individual, corporation, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization or government or any
agency or political subdivision thereof.
(f) "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.
(g) "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.
(i)
All accounting terms not otherwise defined herein have the meanings assigned to
them in accordance with generally accepted accounting principles in effect from
time to time.
IN
WITNESS WHEREOF, this Agreement has been executed under seal by the parties
hereto.
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BORROWER:
FIRST NATIONAL BANCSHARES, INC.
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By:
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| ▇▇▇▇▇ ▇. ▇▇▇▇▇ | |||
| Its: | Chief Financial Officer | ||
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LENDER:
NEXITY BANK
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By:
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| Its: | Senior Vice President | ||