THIRD MODIFICATION AGREEMENT AND COVENANT WAIVER
Exhibit
10.19
THIRD
MODIFICATION AGREEMENT AND COVENANT WAIVER
This
Third Modification Agreement and Covenant Waiver (this “Agreement”) is made
as of April 11, 2008 but effective March 15, 2008 (the “Effective Date”), by
and between VINEYARD NATIONAL BANCORP, a California corporation (“Borrower”) and FIRST
TENNESSEE BANK NATIONAL ASSOCIATION (“Lender”). Unless
otherwise set forth herein, all capitalized terms used herein shall have the
meaning given such terms in the Loan Documents (defined below).
WHEREAS, in connection with a $70,000,000.00 loan from Lender to Borrower (the
“Loan”), the
Borrower executed and delivered to Lender that certain Amended and Restated
Promissory Note (“Note”) dated March
29, 2007, that certain Loan Agreement (“Loan Agreement”),
that certain Pledge Agreement together with Addendum to Pledge
Agreement (collectively the “Pledge”), each dated
as of March 17, 2006, that certain Modification Agreement effective as of May
11, 2006 (“First Modification”),
and that certain Second Modification Agreement and Covenant Waiver effective
as
of March 29, 2007 (“Second Modification”) (this Agreement, the Note, the Loan
Agreement, the Pledge, the First Modification, the Second Modification and
any
other documents executed by Borrower in connection with the Loan are
collectively herein referred to as the “Loan
Documents”);
WHEREAS, Borrower desires to extend the maturity date of the Loan through June
30, 2008;
WHEREAS, on or about May 17, 2006, Lender granted Borrower a waiver of the
Tier
1 Capital Ratio covenant as set forth in Section 4.11 of the Loan Agreement
through and including the period ending March 31, 2007 and on March 10, 2008
Lender granted Borrower a waiver (the “Financial Covenant
Waiver”) of the Tier 1 Capital Ratio, Return on Average Assets Ratio, and
Non-performing Loans Ratio covenants (collectively, the “Financial Covenants”)
set forth in Sections 4.11, 6.1(e), and 6.1(f), respectively, of the Loan
Agreement between the period of December 31, 2007 and March 15, 2008 and
Borrower has requested that Lender extend the Financial Covenant Waiver through
and including June 30, 2008;
WHEREAS,
Borrower has disclosed to and
has requested from Lender a waiver (the “Additional Waiver”)
of Borrower’s non-compliance with (i) Section 4.5 (Financial Reports) due to
Borrower’s failure to submit its 2007 Annual Report on Form 10-K to Lender
within ninety (90) days after the year ended December 31, 2007, and (ii) Section
5.2 (Dividends, Redemptions and Other Payments) due to Borrower’s payment of a
dividend on its common stock during the first quarter of 2008;
WHEREAS,
Borrower (i) is the sole common stockholder of Vineyard Statutory Trust I,
Vineyard Statutory Trust II, Vineyard Statutory Trust III, Vineyard Statutory
Trust IV, Vineyard Statutory Trust V, Vineyard Statutory Trust VI, Vineyard
Statutory Trust VII, Vineyard Statutory Trust VIII, Vineyard Statutory Trust
IX,
and Vineyard Statutory Trust X (collectively, “the Trusts”), and (ii)
issued approximately $115 million of Floating Rate Junior Subordinated
Debentures (collectively, the “Subordinated
Debentures”) representing the amounts owed by Borrower to the
Trusts. As of March 15, 2008, the weighted average annual interest
rate on the Subordinated Debentures was 6.60% and Borrower is required to make
quarterly payments of accrued interest on the Subordinated Debentures (the
“Subordinated
Debenture Interest Payments”);
WHEREAS,
in 2002 Borrower issued approximately $5 million of subordinated debentures
(the
“Subordinated
Debt”), which Subordinated Debt bears a floating rate of interest of
3.05% over the three month LIBOR and requires quarterly interest payments (the
“Subordinated Debt
Interest Payments”);
WHEREAS,
Borrower (i) in 2006 issued 10,000 shares of Floating Rate Series C
Noncumulative Redeemable Perpetual Preferred Stock (the “Series C Preferred
Stock”), each share of which Series C Preferred Stock is entitled to a
noncumulative, annual dividend at the rate of three-month LIBOR plus 3.80%,
payable quarterly (the “Series C Preferred
Stock
Dividend”), and (ii) in 2007 issued 2,300,000 shares of 7.50%
Series D Noncumulative Preferred Stock (the “Series D Preferred
Stock”), each share of which is entitled to a noncumulative annual
dividend at a fixed rate of 7.50% per annum, payable quarterly (the “Series D Preferred
Stock
Dividend” and collectively with the Subordinated Debenture Interest
Payments, the Subordinated Debt Interest Payments and the Series C Preferred
Stock Dividends, the “Dividend”);
WHEREAS,
Borrower has requested from Lender a waiver Section 5.2 (Dividends, Redemptions
and Other Payments) (the “Dividend Covenant”)
with respect to Borrower’s payment of the Dividend during the period ending on
the New Maturity Date (defined below) (the “Dividend Waiver” and
collectively with the Financial Covenant Waiver and the Additional Waiver,
the
“Waivers”)
WHEREAS,
subject to the terms and conditions contained herein, Lender is willing to
(i)
extend the Maturity Date of the Loan, (ii) grant the Financial Covenant Waiver,
(iii) grant the Additional Waiver, and (iv) grant the Dividend Waiver.
NOW,
THEREFORE, FOR MUTUAL CONSIDERATIONS, the receipt and sufficiency of which
is
hereby acknowledged, the undersigned Borrower and Lender do hereby modify the
Loan Documents as follows:
1) Capitalized
Terms. Any
capitalized term used but not defined herein shall have the meaning ascribed
to
it in the Loan Documents. All references to the “Loan Documents” in
the Loan Agreement and any of the other Loan Documents shall include, without
limitation, this Agreement and all other such Loan Documents, as modified by
this Agreement.
2) Extension
of
Maturity Date; Waiver.
Subject to Borrower’s compliance with all representations, warranties, covenants
and agreements contained in this Agreement and all the other Loan Documents
as
modified hereby:
a. Maturity
Date. The
“Maturity
Date” set
forth in the Loan Agreement and elsewhere in the Loan Documents is hereby
modified to mean June 30, 2008 (the “New
Maturity
Date”).
2
b. Financial
Covenant Waiver. Lender
hereby extends the Financial Covenant Waiver
for
a period through and including
the
New Maturity Date. The waiver
contained in this Section 2(b) is
limited to only the Financial Covenants (i.e. the covenants contained in
Sections 4.11, 6.1(e), and 6.1(f) of the Loan Agreement) for the period ending
on the New Maturity Date. Lender’s waiver of the Financial
Covenants
as set forth in this Section 2(b)
shall
not constitute Lender’s consent to
waive any other covenants or defaults by Borrower under the Loan
Documents.
c. Additional
Waiver. Lender
hereby grants the Additional Waiver to Borrower. Lender’s grant
of the Additional Waiver is a
single waiver of
Borrower’s
non-compliance
with the applicable covenants prior to the date of this Agreement and shall
not constitute Lender’s
waiver
or consent to any
future non-compliance, nor shall it
constitute Lender’s waiver
ofany other covenants or
defaults by
Borrower under the Loan Documents.
d. Dividend
Waiver. Lender
hereby grantsthe
Dividend
Waiver for a period
through and including
the New Maturity Date.
The waiver
contained in this Section 2(d) is
limited to only the Dividend (i.e. the Subordinated Debenture
Interest
Payments, the Subordinated Debt Interest Payments, the
Series C Preferred Stock
Dividendsand the
Series
D Preferred Stock
Dividend) for the period
ending on the New Maturity Date. Lender’s waiver of the Dividend
Covenant as set forth in
this Section 2(d) shall not constitute
Lender’s consent to
waive any other covenants or defaults by Borrower under the Loan
Documents.
3) Modification
of the
Note. The Note and, where applicable, the other Loan
Documents) are hereby modified as follows:
a. Interest
Rate. From and after March 15, 2008, interest shall accrue on
the outstanding principal balance of the Note at a variable annual rate equal
to
the LIBOR Rate, as hereinafter defined, plus three hundred five (305) basis
points (LIBOR Rate + 3.05%). As used herein, the term "LIBOR Rate" refers to
the
one month London Interbank Offered Rate, as determined by Lender from time
to
time in its sole (but reasonable) discretion. The LIBOR Rate shall be
determined by Lender as of March 15, 2008 and adjusted by Lender on the same
day
of each month hereafter (or, if such date is not a business day, then on the
next preceding business day). Each change in the rate of
interest to be charged hereunder shall become effective, without notice to
Borrower, on the date of such adjustment. Interest shall be calculated on the
basis of a 360 day year and the actual number of calendar days
elapsed. Notwithstanding anything else in this instrument to the
contrary, in no event shall the maximum rate of interest payable in respect
to
the indebtedness evidenced hereby exceed the maximum rate of interest allowed
to
be charged by applicable law.
b. Payment
Schedule. Said principal and accrued interest thereon shall be
due and payable as hereinafter set forth:
i) Prior
to June 30, 2008, Borrower shall have repaid at least Five Million Dollars
($5,000,000.00) of the outstanding principal balance of the Loan.
3
ii) On
the New Maturity Date the entire outstanding principal balance of the Loan,
all
accrued and unpaid interest thereon, and all incurred fees shall be due and
payable without demand.
c. No
New
Advances. Borrower may not reborrow any sums repaid under the
Loan, and Lender has no obligation to advance any new loan proceeds under the
Loan.
4) Modification
of Loan
Agreement. Section 5 of the Loan Agreement shall be amended to
include the following as a new Section 5.9:
5.9
Management,
Ownership. Borrower shall not permit any significant change in
the ownership, executive staff or management of Borrower or the Bank without
the
prior written consent of Lender. The ownership, executive staff and management
of Borrower and the Bank are material factors in Lender’s willingness to
institute and maintain a lending relationship with Borrower.
5) Conditions
of Extension of Maturity Date; Waiver. Lender’s
agreement
to extend the Maturity Date
and to grant
the Waiversis conditioned
upon and subject to the timely satisfaction by Borrower of each of the following
conditions (collectively the “Conditions
of Modification”):
a. Correctness
and
Warranties. Except as expressly modified or waived herein, all
representations and warranties made by Borrower to Lender under this Agreement
and the other Loan Documents (including without limitation all of Borrower’s
representations and warranties set forth in Section 3.9 of the Loan Agreement
regarding the Pledged Shares of Bank stock) are and shall remain true and
correct through and including the New Maturity Date and payment in full of
the
Loan.
b. No
Defaults Hereunder. Borrower shall not breach
any promise or covenant contained in this Agreement
and shall not be in default
under any provision of this Agreement or the other Loan Documents (except
withrespect to the
Financial Covenants, as waived hereby).
6) Termination
Events. Each of
the following shall constitute a Termination Event and an Event of Default
under
this Agreement and all
other Loan Documents without any further cure or grace period, notwithstanding
anything to the contrary in the Loan Documents (each, a “Termination
Event”):
a. Conditions
of Modification; Compliance. If
Borrower shall fail to comply in a
timely manner with any of the Conditions of Modificationset
forth above.
b. Bankruptcy. If
Borrower shall become a debtor in
bankruptcy by means of either a voluntary or involuntary petition.
c. Receivership;
Insolvency. If
any kind of receivership or
insolvency proceeding is commenced by or against Borrower.
4
7) New
Maturity Date; Acceleration of Loan. Borrower
agrees that the Loan automatically,
and without notice, shall
be immediately all due
and
payable in full upon the
earlier of:
a. New
Maturity Date; or
b. The
occurrence of any Termination
Event, as defined above.
The
entire amount of the Loan, including all accrued
and unpaid
interest,shall be
immediately due and payable upon the earlier to occur
of the New Maturity
Date or the occurrence of any Termination Eventand Lendershall
be entitled immediately to
exercise all of its rights and remedies under the Loan Documents, all without
further notice to Borrower.
8) Representations,
Warranties and Covenants. As an inducement to
Lenderto
enter into this Agreement, Borrower
makes the following representations, warranties and covenants:
a. Enforceability. The
Loan, this
Agreement, and all
the other Loan Documents are fully
enforceable,
and the Loan is not subject to any defense or counterclaim or any claim of
setoff or recoupment by Borrower.
b. Representation
by Counsel. Borrower
has been represented by, or
advised to consult with, counsel in connection with the negotiation and
execution of this Agreement; this Agreement represents an arms-length
transaction; and Borrower has acted in good faith in the making of this
Agreement.
c. Consents. The
execution and performance of this
Agreement by Borrower does not and will not violate any agreement to which
Borrower is a party, and the execution and performance of this Agreement by
Borrower does not require the consent of any third party, or if the consent
of a
third party is required, such consent has been previously obtained by
Borrower.
d. Saleof
Assets. Through
and including the
New Maturity Date, Borrower
will not dispose of any of its property outside the ordinary course of business
or as otherwiseprovided
for in this Agreement.
e. New
Debt. Through
and including the New Maturity Date,Borrower will not incur
any additional
debt except for unsecured trade debt incurred in the ordinary course of
businesswithout the prior
written consent of Lender in its sole and absolute discretion.
f. Impairment. Borrower
will
take
no action which would impair its
ability to perform its obligations hereunder or to satisfy any of the Conditions
of Modification.
g. Extension
Fee. Concurrently
with Borrower’s execution
hereof, Borrower shall pay (i) Lender
a fee of one-quarter of one
percent (1/4%) of the current outstanding $53,300,000.00 principal balance
of
the loan, or $133,250.00,
and (ii) Lender’s attorneys fees in connection herewith in the amount of
$4,500.00.
5
9) Further
Assurances. At
any time and from time to time after the date of thisAgreement,
at the request of
Lender,
Borrower shall, without further
consideration, and at Borrower’s sole expense, execute and deliver such
documents and instruments, and take such actions, as Lendermay
deem necessary (a) to perfect any of
Lender’s
security interests or liens granted
in any of the Loan Documents, and/or (b) to carry out the purposes and
intentions of this Agreement and the Loan Documents.
10) Effectiveness
of the Loan. This Agreement shall
not
constitute a novation of any of the other Loan Documents, and all the Loan
Documents shall survive the execution of this Agreement and remain in full
force
and effect subject only to the Waivers as
set forth herein and to any express
modifications thereto as herein provided. The lien and security
interest on the
Collateral granted pursuant to the Pledge is hereby extended, and the lien
and
security interest on the Collateral shall continue to secure the remaining
amounts outstanding in respect of all indebtedness that may be due and owing
pursuant to the terms of the Loan Documents, including without limitation
principal and interest on all amounts loaned pursuant to the Note. There
are no oral representations or
assurances from Lenderto
Borrower which survive the execution
of this Agreement.
11) Release
and
Waiver. Borrower hereby
acknowledges and stipulates that it has no claims or causes of action of any
kind whatsoever against Lender. Borrower
represents that it
is entering into this Agreement freely, and with the advice of counsel as to
its
legal alternatives. Borrower hereby releases Lenderfrom
any and all claims, causes of
action, demands and liabilities of any kind whatsoever whether direct or
indirect, fixed or contingent, liquidated or unliquidated, disputed or
undisputed, known or unknown, which Borrower has or may acquire in the future
relating in any way to any event, circumstance, action or failure to act to
the
date of this Agreement. The release by Borrower herein, together with
the other terms and provisions of this Agreement, is executed by Borrower
advisedly and without coercion or duress from Lender,
Borrower having determined that the
execution of this Agreement, and all its terms and provisions are in Borrower's
economic best interest.
12) No
Obligation to Extend; No Waiver. Borrower
acknowledges and agrees that
Lenderis
not obligated and does not agree to
any additional extensions
of the New Maturity Date or any further Waivers except as expressly
set forth
herein. Except as expressly provided herein as to the New Maturity
Date and the Waivers, (i) this Agreement shall not constitute
a waiver by
Lender of
any defaults under the Loan
Documents, (ii) Lender reserves
all of its rights and remedies
under the other Loan Documents, and (iii) all of the
Loan Documents
are in all respects confirmed, ratified and approved and are in full force
and
affect as of the date hereof. No action or course of
dealing on the part of Lender,
its officers, employees, consultants,
or agents, nor any failure or delay by Lender with
respect to exercising any right,
power or privilege of Lender under
the Loan Documents or this
Agreement, shall operate as a waiver thereof, except to the extent expressly
provided herein.
13) Costs
and Expenses. Borrower agrees to pay
on
demand all out-of-pocket costs and expenses of Lender,
including the fees and out-of-pocket
expenses of counsel for Lender,
in connection with the administration,
enforcement, or protection of Lender's
rights under this Agreement and/or
the Note and other Loan Documents.
6
14) Governing
Law. This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Tennessee.
15) Amendments. This
Agreement cannot
be amended, rescinded, supplemented or modified except in writings signed by
the
parties hereto.
16) Entire
Agreement. This
Agreement contains the entire agreement of the parties and supersedes any other
discussions or agreements relating to the subject of this Agreement.
17) Time
of the Essence.
TIME
IS OF THE ESSENCE OF THIS
AGREEMENT.
18) Counterpart
Signature Pages. This Agreement may be
executed in one or more counterparts and may be delivered by facsimile or
electronic mail, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
[Signatures
on Following Page]
7
COUNTER
PART SIGNATURE PAGE TO
THIRD
MODIFICATION AGREEMENT AND COVENANT WAIVER
IN
WITNESS WHEREOF, the parties have
executed this Agreement as of the date first above written.
BORROWER:
a Californiacorporation
|
|
By:
|
/s/ ▇▇▇▇▇▇ ▇▇▇▇ | |
| Name: | ▇▇▇▇▇▇ ▇▇▇▇ | ||
| Title: | Executive Vice President and Chief Financial Officer | ||
STATE
OF
COUNTY
OF
Before
me, __Susan McClaran__________, Notary
Public of the state and county aforesaid, personally appeared __Gordon Fong_________________, with
whom I am personally acquainted (or proved to me on the basis of satisfactory
evidence), and who, upon oath, acknowledged himself to be ____EVP - CFO____________ (or other
officer authorized to execute the instrument) of VINEYARD
NATIONAL
BANCORP, a California
corporation, the within named bargainor, and that he as such ____EVP - CFO_____________, executed
the foregoing instrument for the purpose therein contained, by signing the
name
of the corporation by himself as ____EVP - CFO________________.
WITNESS
MY HAND, at office, this 11th
day of April,
2008.
_/s/
▇▇▇▇▇
McClaran__________________
Notary
Public
My
Commission Expires:
_March
10,
2010__________________
8
COUNTER
PART SIGNATURE PAGE TO
THIRD
MODIFICATION AGREEMENT AND COVENANT WAIVER
IN
WITNESS WHEREOF, the parties have
executed this Agreement as of the date first above written.
LENDER:
FIRST
TENNESSEE BANK
NATIONALASSOCIATION,
a national banking
association
|
|
By:
|
/s/ ▇▇▇▇ ▇▇▇▇▇▇ | |
| Name: | ▇▇▇▇ ▇▇▇▇▇▇ | ||
| Title: | SVP | ||
STATE
OF
COUNTY
OF
Before
me, _Porter Robinson_______, Notary Public
of the state and county aforesaid, personally appeared ____Jeff Hudson____________________, with
whom I am personally acquainted (or proved to me on the basis of satisfactory
evidence), and who, upon oath, acknowledged himself to be __SVP________________ (or other
officer
authorized to execute the instrument) of First Tennessee Bank National
Association, a national banking association, the within named bargainor, and
that he as such ______SVP_____________, executed the foregoing instrument
for the purpose therein contained, by signing the name of the national banking
association by himself as ____SVP__________________.
WITNESS
MY HAND, at office,
this 15th day of April,
2008.
/s/
▇.
▇▇▇▇▇▇ Robinson_________________
Notary
Public
My
Commission Expires:
April
28,
2009___________
9
CERTIFICATE OF SECRETARY
OF
I,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇., being the duly appointed, qualified and acting Secretary of VINEYARD
NATIONAL BANCORP, a California corporation (the "Company"), DO HEREBY CERTIFY
that I am charged with the duty of keeping and having official custody
of the minutes and records of the Company.
I
do further certify
that attached hereto a collective Exhibit "A" is a true and correct copy of
the
resolutions adopted by written consent of the Directors of VINEYARD NATIONAL
BANCORP, and that all such resolutions and instruments remain in effect, without
change, to the date hereof.
IN
WITNESS WHEREOF, I have hereunto subscribed
my name as Secretary.
DATED: April
11, 2008 but
effective
March
15, 2008
|
|
By:
|
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. | |
| ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. | |||
| Secretary of Vineyard National Bancorp | |||
LOAN MODIFICATION
RESOLUTION
RESOLVED,
that it is in the best interests of
the Company to modify a certain loan transaction between, on the one hand,
the
Company, acting on its own behalf as borrower, and on the other hand, FIRST
TENNESSEE BANK NATIONAL ASSOCIATION, a national banking association, as lender,
for a $70,000,000.00 loan originally made on March 17, 2006 (the "Loan"), for the purpose of (i)
extending the maturity date of the Loan until June 30, 2008 ("Maturity Date Extension"), and (ii)
obtaining certain covenant Waivers, as more particularly defined and described
in that certain Third Modification Agreement and Covenant Waiver of even date
(collectively, the Maturity Date Extension and the Waivers are referred to
as
the "Modification").
FURTHER
RESOLVED, that the President or other
officers of the Company, be, and each is hereby authorized, empowered, and
directed, for and on behalf of this Company, to sign and execute the Third
Modification Agreement and Covenant Waiver and any other such agreements,
certificates, instruments and documents of any kind and nature, and to take
any
action that, in his or their discretion, may be necessary or appropriate to
consummate the Modification.