THIS FORBEARANCE
AGREEMENT (“ Agreement ”) is entered into as of
October 22, 2009 but effective as of July 3, 2009, by and
between M&I MARSHALL & ILSLEY BANK (the “ Bank
”), and MIDWEST BANC HOLDINGS, INC., a Delaware corporation
and bank holding company (“ Borrower
”).
A. The Bank
previously agreed to provide to the Borrower: (1) a revolving
line of credit pursuant to which the Borrower could borrow up to
$15,000,000.00 from the Bank, and Borrower previously executed and
delivered to the Bank a Promissory Note (which promissory note
amended and restated a promissory note dated March 24, 2006,
the “ Revolving Note ”) in the face amount of
$15,000,000.00 and dated June 3, 2009 evidencing such
revolving loans; and (2) a term loan pursuant to which the
Borrower borrowed $75,000,000.00 from the Bank, and Borrower
previously executed and delivered to the Bank a Promissory Note
(the “ Term Note ”) dated September 28,
2007, in the face amount of $75,000,000.00 (which amount was
reduced to $55,000,000 pursuant to a First Amendment to Note dated
March 31, 2008 between the Bank and the Borrower) (the
Revolving Note and the Term Note, each a “ Note
” and collectively, the “ Notes
”).
B. Each Note
is also governed by a Letter Agreement dated as of April 3,
2009 by and between the Borrower and the Bank (which Letter
Agreement amended and restated a Letter Agreement dated as of
March 31, 2008, and as further amended, the “ Letter
Agreement ”).
C. Payment
and performance of each Note, the Letter Agreement and the
liabilities, indebtedness, and obligations evidenced thereby
(collectively, the “ Indebtedness ”) are
secured, and continue to be secured, by a Commercial Pledge
Agreement dated as of March 24, 2006 (as amended, the “
Pledge Agreement ”), and the pledge and delivery to
the Bank of stock certificates evidencing Borrower’s
ownership of 1,076,640 issued and outstanding shares of Midwest
Bank and Trust Company (“ Midwest Bank ”)
(collectively, along with all other Collateral (as that term is
defined in the Pledge Agreement), the “ Pledged
Collateral ”). The stock certificates evidencing
Borrower’s ownership of 1,076,640 issued and outstanding
shares of Midwest Bank constitute 100% of the issued and
outstanding shares of Midwest Bank.
D. Borrower
did not comply with: (1) Section 3(i) of the Letter
Agreement with respect to the requirement that Midwest Bank
maintain a ratio of non-performing loans to total loans of not
greater than 3.00% for the periods ending March 31, 2009 and
June 30, 2009; and (2) Section 3(ii) of the Letter
Agreement with respect to the requirement that Borrower report a
quarterly profit for the periods ending September 30, 2008,
March 31, 2009 and June 30, 2009 (the “
Financial Covenant Defaults ”). In addition, the
Revolving Note matured on July 3, 2009 and the Borrower was
obligated to pay to the Bank all of the aggregate outstanding
principal and accrued but unpaid interest on the Revolving Note on
such date. As of October 22, 2009 the Borrower has not repaid
the Revolving Note in full, and such failure constitutes an
additional event of default (the “ Payment Default
”) under the Loan Documents (as hereinafter
defined).
E. The
Borrower has previously received from the Bank contingent waiver
letters (the “ Contingent Waiver Letters ”)
dated September 12, 2008, September 23, 2008 and
March 4, 2009. Pursuant to the Contingent Waiver Letters, the
Bank contingently waived compliance by the Borrower with
Section 3(ii) of the Letter Agreement caused by the
Borrower’s failure to report a quarterly profit for the
period ending September 30, 2008. This contingent waiver was
contingent on the Borrower prepaying the principal amount of the
Indebtedness owed to the Bank by at least $5,000,000 on or before
July 1, 2009. The Borrower failed to make that payment, and
has previously informed the Bank that it
will not make
this payment. Such non-compliance constitutes a continuing event of
default under the Letter Agreement and the Security Documents (as
that term is defined in the Letter Agreement) (the “
Contingent Waiver Default ”). The Financial Covenant
Defaults, the Contingent Waiver Default and the Payment Default are
severally and collectively referred to as the “ Existing
Defaults .”
F. The
Borrower has previously received from the Bank a default letter
dated July 8, 2009, informing the Borrower of the Existing
Defaults (the “ Default Letter ”).
G. Because of
the Existing Defaults, the Bank is now entitled to exercise all
rights and remedies provided to it under the Notes, the Letter
Agreement and the Pledge Agreement.
H. Borrower
has requested that the Bank forbear from exercising such rights and
remedies for the time period provided in this Agreement.
I. The Bank
is willing to forbear from exercising such rights and remedies in
reliance upon the representations, warranties and agreements set
forth below, and pursuant to the Loan Documents (as hereinafter
defined).
J. This
Agreement is a continuation of, and not a repayment or novation of,
the obligations and liabilities of Borrower contained in the Notes
and the Letter Agreement. As used herein, the Notes, Letter
Agreement, Pledge Agreement, the Deposit Control Agreement (as
hereinafter defined), the Tax Security Agreement (as hereinafter
defined) and this Agreement, along with all now or hereafter
existing documents, certificates and agreements related thereto,
are severally and collectively referred to herein as the “
Loan Documents .”
K. Borrower
further acknowledges and agrees that forbearance by the Bank from
the current exercise of its rights and remedies shall result in a
direct and substantial benefit to Borrower.
NOW THEREFORE, in
consideration of the agreements and undertakings contained herein,
and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
1.
Recitals . The foregoing recitals are true and correct in
all respects as of the date hereof, and are incorporated into this
Agreement by this reference.
2.
Acknowledgments by Borrower . Borrower acknowledges and
agrees that, as of October 22, 2009 and thereafter:
(a) the Existing Defaults constitute Events of Default under
the Loan Documents; (b) timely, adequate and proper notice of
such Events of Defaults were received by Borrower from the Bank;
(c) all grace periods, if any, applicable to cure such
Existing Defaults have expired or are hereby waived by Borrower;
(d) the Bank is entitled to immediate payment of the Notes and
all other sums due under the Loan Documents; (e) the Bank has
not waived the Existing Defaults; (f) the Loan Documents are
free from any offset, defense, recoupment, or counterclaim, in law
or in equity, of any kind or nature; (g) the Indebtedness is
fully secured by valid, perfected and enforceable first priority
security interests in the Pledged Collateral and the Accounts (as
defined in the Deposit Control Agreement); (h) the Bank has
fully performed all of its respective obligations and duties under
all previously existing agreements between Borrower and the Bank;
(i) all actions taken by the Bank prior to the date of this
Agreement have been reasonable and appropriate under the
circumstances and have been within the Bank’s rights;
(j) the Bank’s commitment to enter into this Agreement
represents new value given by the Bank for the benefit of Borrower,
the value of which is substantially greater than the value to the
Bank of all agreements,
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