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Exhibit
10.1
CREDIT AGREEMENT
This Credit Agreement (this "Agreement") is dated as of February
21, 2007 and is made by and between City National Bancshares
Corporation, a New Jersey corporation and bank holding company
under the Bank Holding Company Act of 1956, as amended (the "
Borrower "), and The Prudential Insurance Company of
America, a New Jersey stock insurance company (the " Lender
").
STATEMENT OF PURPOSE:
The Borrower has requested that the Lender extend credit to the
Borrower in the form of a term loan (the "Loan") in the amount of
$5,000,000, for the purpose of making a subordinated loan to its
wholly owned Subsidiary, City National Bank of New Jersey
("CNB").
The Lender has agreed to make such extensions of credit on the
terms and conditions set forth therein.
ACCORDINGLY, the parties hereto hereby agree as follows:
ARTICLE I - DEFINITIONS
1.01 Defined Terms.
As used in this Agreement, the following terms have the
following meanings:
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" Affiliate ": as to any Person, (a) any other
Person which, directly or indirectly, is in control of, is
controlled by, or is under common control with, such Person,
including, without limitation, any joint venture of such Person, or
(b) any Person who is a director or officer, or a shareholder or
partner owning at least 25% of the voting equity, (i) of such
Person, (ii) of any Subsidiary of such Person or (iii) of any
Person described in the preceding clause (a). For purposes of
this definition, "control" of a Person means the power, directly or
indirectly, either to (i) vote 10% or more of the securities having
ordinary voting power for the election of directors of such Person
or (ii) direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
" Business Day ": a day other than a Saturday,
Sunday or other day on which commercial banks in New Jersey are
authorized or required by law to close.
" Capital Stock ": any and all shares, interests,
participations or other equivalents (however designated) of capital
stock of a corporation, any and all equivalent ownership interests
in a Person (other than a corporation) and any and all warrants or
options to purchase any of the foregoing.
" Capitalized Lease Obligation ": any rental
obligation which, under GAAP would
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" Closing Date ": the date of this Agreement.
" CNB ": as defined in the Statement of Purpose.
" Code ": the Internal Revenue Code of 1986, as
amended from time to time.
" Commonly Controlled Entity ": an entity, whether
or not incorporated, which is under common control with the
Borrower within the meaning of Section 4001 of ERISA or is part of
a group which includes the Borrower and which is treated as a
single employer under Section 414 of the Code.
" Consolidated Loss Reserve Allowance ": the consolidated
loss reserve allowance of the Borrower and its Subsidiaries
determined in accordance with the Borrower’s underwriting
standards or as required by law or any regulatory agency.
" Consolidated Operating Profit ": for any period,
consolidated net income of the Borrower and its Subsidiaries for
such period, plus all amounts deducted in calculating consolidated
net income in respect of:
(i)
net interest expense (including amortization of debt discount and
imputed interest on Capitalized Lease Obligations) on
Indebtedness,
(ii)
taxes imposed on or measured by income or excess profit, and
(iii) all
charges for depreciation of fixed assets and amortization of
intangibles, all determined in accordance with GAAP.
" Consolidated Non-Performing Loans ": Restructured
Assets or loans made by the Borrower and its Subsidiaries which are
not accruing or in which either a scheduled principal payment,
interest payment or other anticipated economic return is past due
for more than 90 days after the date originally scheduled for such
payment.
" Consolidated Tangible Net Worth ": the aggregate amount
of (a) capital stock (less any treasury stock, capital stock
subscribed and unissued and other contra-equity accounts), (b)
surplus, and (c) retained earnings of the Borrower and its
Subsidiaries, determined on a consolidated basis in accordance with
GAAP, excluding any (i) intercompany transactions, (ii) the net
book value of all assets which would be treated as intangible under
GAAP, and (iii) the cumulative amount of any net write-up or
write-down of asset values after the date of the audit immediately
preceding the Closing Date.
" Consolidated Total Assets ": the aggregate amount of
assets carried on the books of the Borrower, on a consolidated
basis after eliminating all intercompany items, in accordance with
GAAP.
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" Contractual Obligation ": as to any Person, any
provision of any security issued by such Person or of any
agreement, instrument or other undertaking to which such Person is
a party or by which it or any of its property is bound, including
without limitation any Indebtedness.
" Default ": any of the events specified in ARTICLE
VIII, whether or not any requirement for the giving of notice, the
lapse of time, or both, or any other condition, has been
satisfied.
" Depository Institution Subsidiary ": CNB and any
federal or state chartered banking institution in which all of the
Capital Stock is owned, directly or indirectly by the Borrower.
" Dollars " and " $ ": dollars in lawful
currency of the United States of America.
" ERISA ": the Employee Retirement Income Security
Act of 1974, as amended from time to time.
" Event of Default ": any of the events specified
in ARTICLE VIII, provided that any requirement for the
giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.
" FDIC ": the Federal Deposits Insurance Corporation or
any successor agency.
" Federal Reserve Lender ": a Federal Reserve Bank
providing credit to the Lender.
" Financing Lease ": any lease of property, real or
personal, the obligations of the lessee in respect of which are
required in accordance with GAAP to be capitalized on a balance
sheet of the lessee.
" GAAP ": generally accepted accounting principles
in the United States of America in effect from time to time.
" Governmental Authority ": any nation or
government, any state or other political subdivision thereof and
any entity exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government.
" Government Securities ": securities issued by the
United Sates Treasury or any United States government agency.
" Guarantee Obligation ": as to any Person, any
obligation of such Person guaranteeing or in effect guaranteeing
any Indebtedness, leases, dividends or other obligations of any
other third Person in any manner, whether directly or indirectly or
otherwise to assure or hold harmless the owner of any primary
obligation against loss in respect thereof.
" Indebtedness ": of any Person at any date, (a)
all indebtedness of such Person for
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borrowed money or for the deferred purchase price
of property or services (other than current trade liabilities
incurred in the ordinary course of business) or which is evidenced
by a note, bond, debenture or similar instrument, (b) all
obligations of such Person under Financing Leases, (c) all
obligations of such Person in respect of letters of credit or
acceptances issued or created for or for the account of such
Person, (d) all obligations of such Person under currency exchange
contracts or interest rate swap agreements, and (e) all liabilities
secured by any Lien on any property owned by such Person even
though such Person has not assumed or otherwise become liable for
the payment thereof.
" Insolvency ": with respect to any Multiemployer
Plan, the condition that such Plan is insolvent within the meaning
of Section 4245 of ERISA.
" Insolvent ": pertaining to a condition of
insolvency.
" Investment ": any advance, loan, extension of
credit or capital contribution to, or purchase of any stock, bonds,
notes, debentures or other securities of or any assets constituting
a business unit of, or any other investment in, any Person;
provided, however, that any advance, loan or extension of credit
(including the receipt of any collateral security therefor) made by
a Depository Institution Subsidiary in the normal course of
business is not an Investment under this Agreement.
" Lien ": any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or
other), or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title
retention agreement, any Financing Lease having substantially the
same economic effect as any of the foregoing, and the filing of any
financing statement under the Uniform Commercial Code or comparable
law of any jurisdiction in respect of any of the foregoing).
" Liquid Assets ": without duplication, the
Borrower’s and each Subsidiary’s consolidated cash and
cash equivalents, other short term Investments, securities
available for sale, Government Securities, loans fully guaranteed
by the Small Business Administration, excluding federal funds
purchased and securities sold subject to repurchase obligations and
reserves of the Borrower and each Subsidiary required by the
Federal Reserve Bank.
" Liquidity Ratio ": the ratio of Liquid Assets
over Volatile Liabilities.
" Loan ": as defined in the Statement of
Purpose.
" Loan Documents ": the documents in Section 4.01
whose delivery is a condition to the effectiveness of this
Agreement and all other documents executed and delivered in
connection herewith or therewith, including any amendments,
supplements or other modifications to any of the foregoing.
" Loan Maturity Date ": as defined in Section
2.03(a).
" Material Adverse Effect ": a material adverse
effect on (a) the business,
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prospects, operations, property or financial
condition of the Borrower and its Subsidiaries taken as a whole,
(b) the ability of the Borrower to perform its obligations under
the Loan Documents, or (c) the validity or enforceability of the
Loan Documents or the rights or remedies of the Lender hereunder or
thereunder.
" Multiemployer Plan ": a Plan which is a
multiemployer plan as defined in Section 4001(a)(3) of ERISA.
" Non-Excluded Taxes ": as defined in Section
2.07.
" Note ": as defined in Section 2.02.
" OCC ": the Office of the Comptroller of the
Currency or any successor agency.
" Payment Date ": as defined in Section 2.03(a).
" PBGC ": the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA.
" Person ": an individual, partnership,
corporation, business trust, joint stock company, limited liability
company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
" Plan ": at a particular time, any employee
benefit plan which is covered by ERISA and in respect of which the
Borrower or a Commonly Controlled Entity is (or, if such plan were
terminated at such time, would under Section 4069 of ERISA be
deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
" Regulation U ": Regulation U of the Board of
Governors of the Federal Reserve System as now and form time to
time hereafter in effect.
" Reorganization ": with respect to any
Multiemployer Plan, the condition that such plan is in
reorganization within the meaning of Section 4241 of ERISA.
" Reportable Event ": any of the events set forth
in Section 4043(b) of ERISA, other than those events as to which
the thirty day notice period is waived under subsection .13, .14,
.16, .18, .19 or .20 of PBGC Reg. §2615.
" Requirement of Law ": as to any Person, (i) the
Articles of Incorporation and By-Laws or other organizational or
governing documents of such Person, and (ii) any law, treaty, rule
or regulation or determination of an arbitrator or a court or other
Governmental Authority, in the case of each of the foregoing
clauses (i) and (ii) applicable to or binding upon such Person or
any of its property or to which such Person or any of its material
property is subject.
" Responsible Officer ": the chief executive
officer, the president or the chief financial officer of the
Borrower.
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" Restricted Payments ": (i) any dividend or other
distribution, direct or indirect, on account of the
Borrower’s Capital Stock now or hereafter outstanding, except
a dividend payable solely on the Borrower’s Capital Stock,
and (ii) any redemption, retirement, purchase or other acquisition,
direct or indirect, of the Borrower’s Capital Stock now or
hereafter outstanding, except to the extent that the consideration
therefore consists solely of the Borrower’s Capital Stock or
is funded solely from the proceeds of the substantially concurrent
sale of any of the foregoing.
" Restructured Asset ": means any loan in any
Person made by the Borrower or any Subsidiary in which the Borrower
or any Subsidiary has agreed to a change in any payment term,
including (a) a change in maturity, principal amount or allocation
of any mandatory or scheduled prepayment or repayment with respect
to principal of, (b) the rate or payment date with respect to
interest on, or (c) a change in any term reducing the anticipated
economic return of, such loan.
" Risk-Weighted Assets ": as defined in 12 C.F.R.
Part 3, Appendix A.
" Single Employer Plan ": any Plan which is covered
by Title IV of ERISA, but which is not a Multiemployer Plan.
" Subsidiary ": as to any Person, a corporation,
partnership or other entity of which more than 50% of the shares of
stock, or other ownership interests having ordinary voting power
(other than stock or such other ownership interests having such
power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such
corporation, partnership or other entity, are at the time owned,
directly or indirectly, through one or more intermediaries, or
both, by such Person.
" Taxes ": any amounts paid by a Person to any
Governmental Authority or accrued and which would be classified as
taxes in accordance with GAAP (including, without limitation,
deferred Taxes).
" Tier 1 Capital ": as defined in 12 C.F.R. Part 3,
Appendix A, §2(a).
" Tier 2 Capital ": as defined in 12 C.F.R. Part 3,
Appendix A, §2(b).
" Transfer ": as defined in Section 7.01.
" Transferee ": as defined in Section 9.07.
" Volatile Liabilities ": the Borrower’s and each
Subsidiaries’ consolidated total deposits payable to federal
and state agencies and municipalities, taxes and loan note option
accounts, excluding insurance premiums payable to the FDIC.
" Well Capitalized Bank ": as defined at 12 C.F.R. Part
6, Subpart A, §6.4(b)(1).
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1.02 Other Definitional Provisions.
(a) Unless otherwise specified therein, all terms
defined in this Agreement shall have the defined meanings when used
in the Note or any certificate or other document made or delivered
pursuant hereto.
(b) As used herein and in the Note, and any
certificate or other document made or delivered pursuant hereto,
accounting terms relating to the Borrower not defined in subsection
1.01 and accounting terms partly defined in subsection 1.01, to the
extent not defined, shall have the respective meanings given to
them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to
this Agreement as a whole and not to any particular provision of
this Agreement, and Section, Subsection, Schedule and Exhibit
references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall
be equally applicable to both the singular and plural forms of such
terms.
ARTICLE II- THE LOAN
2.01 The Loan.
Subject to the terms and conditions hereof, the Lender hereby
agrees to make a loan to the Borrower in the amount of FIVE MILLION
DOLLARS ($5,000,000) on the Closing Date.
2.02 Note.
The Loan shall be evidenced by a note substantially in the form
of Exhibit A hereto (the " Note ").
2.03 Repayments.
(a) Beginning on March 31, 2017 and continuing on
the last day of March, June, September and December of each year
(each such date, a " Payment Date "), the Borrower shall
make consecutive payments of principal in the amount of
$250,000. The Borrower shall make a final principal
payment of $250,000, together with any other amounts due under this
Agreement which remain unpaid on February 21, 2022 (the " Loan
Maturity Date ").
(b) The Borrower may, at any time and from time to
time, prepay the Loan, without premium or penalty. Any
prepayments with respect to the Loan shall be in an aggregate
principal amount of $50,000 or a whole multiple thereof and shall
be applied towards satisfaction of the obligation to make payments
under Section 2.03(a) in inverse order of maturity. Any amounts
repaid or prepaid under the Loan may not be reborrowed.
2.04 Interest Rates and Payment Dates.
(a) From the date of this Agreement through February
21, 2017 the Loan will
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bear interest at a rate per annum of 5%. From and after
February 21, 2017 the Loan will bear interest at a rate per annum
equal to the sum of (i) the yield as of February 21, 2017 on United
States Treasury obligations having a maturity on about February 21,
2027, plus (ii) 1.50% per annum. Interest on the Loan shall
be payable in arrears on n the last day of March, June, September
and December of each year and the day the Loan is repaid.
(b) If an Event of Default shall occur and be
continuing all amounts due under the Loan Documents shall bear
interest at a rate per annum which is the rate that would otherwise
be applicable thereto pursuant to the foregoing provisions of this
subsection plus 2%, until such amount is paid in full (as well
after as before judgment). Interest accruing pursuant to this
paragraph shall be payable from time to time on demand.
(c) Anything in this Agreement or the Note to the
contrary notwithstanding, any payment of principal or interest on
the Note that is due on a date other than a Business Day is to be
made on the next succeeding Business Day. If the date for any
payment is extended to the next succeeding Business Day by reason
of the preceding sentence, the period of such extension is to be
included in the computation of the interest payable on such
Business Day.
2.05 Computation of Interest.
Interest on the Loan shall be calculated on the basis of a 360
day year for the actual days elapsed. The determination of
any interest rate by the Lender pursuant to any provision of this
Agreement shall be conclusive and binding on the Borrower in the
absence of manifest error. In determining the yield of United
States Treasury obligations, the Lender shall make reference to
financial information services nationally recognized at such
time.
2.06 Requirements of Law.
(a) If the adoption of or any change in any
Requirement of Law (excluding for purposes of this Section 2.06
clause (i) of such definition) or in the interpretation or
application thereof or compliance by the Lender with any request or
directive (whether or not having the force of law) from any central
bank or other Governmental Authority made subsequent to the date
hereof shall subject the Lender to any tax of any kind whatsoever
with respect to any Loan Document or any Loan made by it, or change
the basis of taxation of payments to such Lender in respect thereof
(except for Non-Excluded Taxes covered by Section 2.07 and changes
in the rate of tax on the overall net income of the Lender), then
from time to time, after submission by the Lender to the Borrower
of a written request therefor, the Borrower shall pay to the Lender
such additional amount or amounts as will compensate the Lender
therefor.
(b) If the Lender shall have determined that the
adoption of or any change in any Requirement of Law (excluding for
purposes of this Section 2.06 clause (i) of such definition)
regarding capital adequacy or in the interpretation or application
thereof or compliance by the Lender or any corporation controlling
such Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) from any
Governmental Authority made subsequent to the date hereof does or
shall have the effect of reducing the rate of return on such
Lender’s or such corporation’s capital as a consequence
of its obligations hereunder to a level below that which the Lender
or such corporation could have achieved but for such change or
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compliance (taking into consideration the
Lender’s or such corporation’s policies with respect to
capital adequacy) by an amount deemed by the Lender to be material,
then from time to time, after submission by the Lender to the
Borrower of a written request therefor, the Borrower shall pay to
the Lender such additional amount or amounts as will compensate the
Lender for such reduction.
2.07 Taxes.
All payments made by the Borrower under any Loan Document shall
be made free and clear of, and without deduction or withholding for
or on account of, any present or future income, stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld
or assessed by any Governmental Authority, excluding net income
taxes and franchise taxes (imposed in lieu of net income taxes)
imposed on the Lender as a result of a present or former connection
between the Lender and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing
authority thereof or therein (other than any such connection
arising solely from the Lender having executed, delivered or
performed its obligations or received a payment under, or enforced,
any Loan Document). If any such non-excluded taxes, levies,
imposts, duties, charges, fees deductions or withholdings ("
Non-Excluded Taxes ") are required to be withheld from any
amounts payable to the Lender hereunder or under the Note, the
amounts so payable to the Lender shall be increased to the extent
necessary to yield to the Lender (after payment of all Non-Excluded
Taxes) interest or any such other amounts payable hereunder at the
rates or in the amounts specified in any Loan Document.
Whenever any Non-Excluded Taxes are payable by the Borrower, as
promptly as possible thereafter the Borrower shall send to the
Lender a certified copy of an original official receipt received by
the Borrower showing payment thereof. If the Borrower fails
to pay any Non-Excluded Taxes when due to the appropriate taxing
authority or fails to remit to the Lender the required receipts or
other required documentary evidence, the Borrower shall indemnify
the Lender for any incremental taxes, interest or penalties that
may become payable by the Lender as a result of any such
failure. The agreements in this subsection shall survive the
termination of this Agreement and the payment of the Note and all
other amounts payable hereunder.
ARTICLE III - REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into this Agreement and to make
the Loan the Borrower hereby represents and warrants to the Lender
that:
3.01 Financial Condition.
The audited consolidated balance sheets of the Borrower as of
December 31, 2005 and the related audited consolidated statements
of operations, stockholders’ equity and cash flows for the
fiscal year ended on such date, reported on by KPMG LLP, copies of
which have heretofore been furnished to the Lender, present fairly
the consolidated financial condition and results of operations of
the Borrower and its Subsidiaries as of such dates. All such
financial statements, including the related schedules and notes
thereto, have been prepared in accordance with GAAP applied
consistently throughout the periods involved.
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3.02 No Change.
Except as set forth in Schedule 3.02 or as set forth in the
financial statements referred to in Section 3.01, since September
30, 2006 (a) there has been no development or event which has had
or could reasonably be expected to have a Material Adverse Effect,
(b) no dividends or other distributions have been declared, paid or
made upon the Capital Stock of the Borrower or any Subsidiary nor
has any of the Capital Stock of the Borrower or any Subsidiary been
redeemed, retired, purchased or otherwise acquired for value by the
Borrower or any such Subsidiary, and there has been no sale,
transfer or other disposition by the Borrower or any Subsidiary of
any material part of its business or property and no purchase or
other acquisition of any business or property (including any
capital stock of any other Person).
3.03 Corporate Existence; Compliance with Law.
The Borrower and each of its Subsidiaries:
(a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation or
similar formation;
(b) has the corporate or other organizational power
and authority to own and operate its property, to lease the
property it operates as lessee and to conduct the business in which
it is currently engaged;
(c) is duly qualified as a foreign corporation or
other entity and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification except to
the extent that the failure to be so qualified could not, in the
aggregate, have a Material Adverse Effect; and
(d) is in compliance with all Requirements of Law
except to the extent that the failure to comply therewith could
not, individually or in the aggregate, have a Material Adverse
Effect.
3.04 Corporate Power; Authorization; Enforceable
Obligations.
The Borrower has the corporate power and authority to make,
deliver and perform its obligations under each of the Loan
Documents, and to borrow thereunder and has taken all necessary
corporate action to authorize the borrowings on the terms and
conditions of the Loan Documents and to authorize the execution,
delivery and performance of the Loan Documents. No consent or
authorization of, filing with or other act by or in respect of, any
Governmental Authority or any other Person is or will be required
in respect of the Borrower or any Subsidiary in connection
with the borrowings hereunder or with the execution, delivery,
performance, validity or enforceability of the Loan
Documents. This Agreement has been, and each Loan Document
will be, duly executed and delivered on behalf of the
Borrower. This Agreement constitutes, and each Loan Document
when executed and delivered, will constitute, legal, valid and
binding obligations of the Borrower enforceable against the
Borrower in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of
creditors’ rights generally and by general equitable
principles (whether enforcement is sought by proceedings in
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equity or at law).
3.05 No Legal Bar.
The execution, delivery and performance of any Loan Document,
the borrowings thereunder and the use of the proceeds thereof will
not violate any Requirement of Law or Contractual Obligation of the
Borrower or any of its Subsidiaries and will not result in, or
require, the creation or imposition of any Lien on any of its
properties or revenues pursuant to any such Requirement of Law or
Contractual Obligation.
3.06 No Material Litigation.
Except as set forth in Schedule 3.06, no litigation,
investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of the
Borrower, threatened by or against the Borrower or any Subsidiary
or against any of their properties or revenues (a) with respect to
the Loan Documents or any of the transactions contemplated thereby,
or (b) which could reasonably be expected to have a Material
Adverse Effect.
3.07 No Default.
Neither the Borrower nor any Subsidiary is in default under or
with respect to any of its Contractual Obligations in any respect
which could reasonably be expected to have a Material Adverse
Effect. No Default or Event of Default has occurred and is
continuing.
3.08 No Burdensome Restrictions.
No Requirement of Law or Contractual Obligation of the Borrower
or any Subsidiary has a Material Adverse Effect.
3.09 Intellectual Property.
The Borrower and each Subsidiary owns, or is licensed to use,
all material trademarks, tradenames, copyrights, technology,
know-how and processes necessary for the conduct of its businesses
as currently conducted (" Intellectual Property "). No
claim has been asserted and is pending by any Person challenging or
questioning the use of any such Intellectual Property or the
validity or effectiveness of any such Intellectual Property, nor
does the Borrower know of any valid basis for such claim. The
use of such Intellectual Property by the Borrower and its
Subsidiaries does not infringe the
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