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Exhibit 10.1
LOAN AGREEMENT
THIS LOAN AGREEMENT is made as of September 7, 2007 by and
between
COMMUNITY SHORES BANK CORPORATION, a Michigan corporation, of
1030 West Norton
Avenue, Muskegon, Michigan 49441 ("BORROWER"), and FIFTH THIRD
BANK, a Michigan
banking corporation, of 111 Lyon Street, NW, Grand Rapids,
Michigan 49503
("LENDER").
Borrower has requested Lender to extend to it a revolving line
of
credit of up to Five Million Dollars ($5,000,000). Lender is
willing to extend
the line of credit on the terms and subject to the conditions
set forth in this
Agreement
Lender and Borrower agree as follows:
SECTION 1. DEFINITIONS.
In this Agreement:
"AFFILIATE OF A PERSON" means any Person that now or in the
future
controls, is controlled by, or is under common control with, the
Person.
"AGREEMENT" means this Loan Agreement, as amended, including the
schedules
attached to this Loan Agreement.
"BANK" means Community Shores Bank, a Michigan banking
corporation.
"CAPITALIZED LEASE OBLIGATION" means any obligation of a Person
to pay
future rentals under a lease that, in accordance with GAAP, is
required to be
shown as a liability on that Person's balance sheet.
"CHANGE IN CONTROL" means the acquisition by a Person and the
Person's
Affiliates of 51% or more of the issued and outstanding shares
of the voting
capital stock of Borrower.
"COMPANY" means each of Borrower and Bank.
"CONTAMINATION" or "CONTAMINATED" means, when used with
reference to any
real or personal property, that a Hazardous Substance is present
on or in the
property in any amount or level.
A Person "CONTROLS" another Person if the Person has, directly
or
indirectly, the power to direct or cause the direction of the
management or
policies of the other Person.
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"DEFAULT" means an event, condition or circumstance that, with
the lapse of
time or giving of notice (absent any permitted cure), would be
an Event of
Default.
"ENVIRONMENTAL LAW" means at any time any applicable federal,
state, local
or foreign law (including common law), ordinance, rule,
regulation, permit,
order or other requirement that then (1) regulates the quality
of air, water,
soil or other environmental media, (2) regulates the generation,
management,
transportation, treatment, storage, recycling or disposal of any
waste, (3)
protects public health, occupational safety and health, natural
resources or the
environment or (4) establishes liability for the investigation,
removal or
remediation of, or harm caused by, Contamination.
"ERISA" means the Employee Retirement Income Security Act of
1974, as now
and in the future amended, together with all regulations issued
under it.
"EVENT OF DEFAULT" has the meaning specified in Section 8 of
this
Agreement.
"FDIC" means the Federal Deposit Insurance Corporation.
"GAAP" means generally accepted accounting principles
consistently applied.
"GUARANTOR" means each Person who has guaranteed or in the
future
guarantees payment of all or any part of the Lender
Indebtedness.
"HAZARDOUS SUBSTANCE" means at any time any substance or waste
that is then
regulated by or subject to any Environmental Law.
"INDEBTEDNESS" means indebtedness for borrowed money,
indebtedness
representing the deferred purchase price of property (excluding
indebtedness
under normal trade credit for property purchased in the normal
course of
operations), any obligation under a note payable or draft
accepted representing
an extension of credit, indebtedness (whether or not assumed)
secured by a
mortgage, security interest or other lien on property, and any
Capitalized Lease
Obligation.
"LENDER INDEBTEDNESS" means any indebtedness, obligation or
liability, of
whatever type or nature, that Borrower now or in the future owes
to Lender,
including, without limitation, all indebtedness and obligations
under this
Agreement and all Rate Management Obligations.
"LOAN" means any loan that Lender makes to Borrower under this
Agreement.
"LOAN DOCUMENT" means this Agreement, each Revolving Credit Note
and other
promissory note that Borrower has given or in the future gives
to Lender, each
renewal,
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extension, and replacement of the note, each Rate Management
Agreement and every
other agreement, instrument and document that has been or in the
future is
signed or delivered in connection with this Agreement or in
connection with any
Lender Indebtedness.
"MATERIAL ADVERSE EFFECT" means any material adverse effect upon
(1) the
validity, performance or enforceability of any Loan Document,
(2) the
properties, contracts, business operations, prospects, profits
or condition
(financial or otherwise) of Borrower or (3) the ability of
Borrower or any
Guarantor to fulfill any obligation under any Loan Document.
"MATURITY" of an indebtedness or obligation means the time when
that
indebtedness or obligation has become due and payable, for
whatever reason.
"NOTE" means any Revolving Credit Note and any other promissory
note that
Borrower has signed or in the future signs and that now or in
the future
evidences any Lender Indebtedness, including any renewals,
extensions or
modifications.
"PERSON" means an individual and a corporation, partnership,
limited
liability company, trust, association and any other entity.
"PLAN" means an "employee pension benefit plan" with respect to
which
Borrower or any Affiliate is an "employer" or "party in
interest," as ERISA
defines those terms.
"RATE MANAGEMENT AGREEMENT" means any agreement, device or
arrangement that
provides for payments that are related to fluctuations of
interest rates,
exchange rates, forward rates or equity prices, including, but
not limited to,
dollar-denominated or cross-currency interest rate exchange
agreements, forward
currency exchange agreements, interest rate cap or collar
protection agreements,
forward rate currency or interest rate options, puts and
warrants and any
agreement pertaining to equity derivative transactions (e.g.,
equity or equity
index swaps, options, caps, floors, collars and forwards),
including without
limitation any ISDA Master Agreement, between Borrower and
Lender or any
affiliate of Fifth Third Bancorp, and any schedules,
confirmations and documents
and other confirming evidence between the parties that confirm
transactions
under any such agreement, device or agreement, all whether now
existing or
arising in the future, and in each case as amended, modified or
supplemented
from time to time.
"RATE MANAGEMENT OBLIGATION" means any obligation of Borrower to
Lender or
any affiliate of Fifth Third Bancorp, whether absolute,
contingent or otherwise
and whether the obligation now exists or is created or arises or
is acquired or
evidenced in the future and however it has been or is created,
evidenced or
acquired and however it has arisen or arises in the future,
under or in
connection with (1) any Rate Management Agreement or (2) any
cancellation,
buy-back, reversal, termination or assignment of any Rate
Management Agreement,
including any renewal, extension, modification or substitution
of any such
obligation.
"REVOLVING CREDIT COMMITMENT" means at any given time an amount
equal to
Five Million ($5,000,000).
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"REVOLVING CREDIT LOANS" has the meaning specified in Section
3.1 of this
Agreement.
"REVOLVING CREDIT NOTE" has the meaning specified in Section 3.3
of this
Agreement.
"SCHEDULE" means a schedule attached to this Agreement.
"SEC" means the Securities and Exchange Commission.
"SUBORDINATED INDEBTEDNESS" means, at any time, all Indebtedness
that
either Company owes to any Person or Persons to the extent that
its repayment is
subordinated to payment of the Lender Indebtedness in form and
manner
satisfactory to Lender.
SECTION 2. WARRANTIES AND REPRESENTATIONS.
Borrower represents and warrants to Lender, and agrees, as
follows:
2.1 Bank is a banking corporation duly organized and validly
existing under
the laws of the state of Michigan. Borrower is a corporation
duly organized,
validly existing and in good standing under the laws of the
State of Michigan.
Each Company is duly qualified and authorized to do business,
and is in good
standing, as a foreign corporation in each jurisdiction in which
the failure to
be so qualified or authorized to do business could have a
Material Adverse
Effect.
2.2 Each Company has all requisite corporate power and authority
and all
necessary licenses and permits to own and operate its properties
and to carry on
its business as it now conducts it and as it contemplates that
it will conduct
it in the future. Each Company is in compliance with all laws,
rules and
regulations that apply to it, its operations or its
properties.
2.3 The balance sheets of Borrower as of December 31, 2006,
March 31, 2007
and June 30, 2007 and the related statements of income, of
retained earnings and
of changes in financial position for the periods then ended,
copies of all of
which have been delivered to Lender, have been prepared in
accordance with GAAP
and present fairly the financial position of Borrower as of
those dates and the
results of its operations for those periods. Since the date of
the most recent
of those financial statements, there has not been any change in
Borrower's
financial condition or operations that could have a Material
Adverse Effect.
2.4 Neither this Agreement nor any financial statement that
Section 2.3
above refers to nor any other written statement that Borrower
has furnished to
Lender in connection with the negotiation of any Loan, contains
any untrue
statement of a material fact or omits a
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material fact necessary to make the statements contained in this
Agreement, the
financial statement or other written statement not misleading.
There is not any
fact that Borrower has not disclosed to Lender in writing that
has, or, to the
best of the knowledge of the officers and directors of Borrower,
in the future
could have, a Material Adverse Effect.
2.5 Except as identified on SCHEDULE 2.5, there is not any
proceeding
pending, or to the knowledge of the officers and directors of
Borrower
threatened, before any court, governmental authority or
arbitration board or
tribunal, against or affecting Borrower or Bank, that, if
determined adversely
to Borrower or Bank, could reasonably be expected to have a
Material Adverse
Effect. Neither Company is in default with respect to any order,
judgment or
decree of any court, governmental authority or arbitration board
or tribunal.
2.6 Each Company has good and marketable title to all of the
assets that it
purports to own, including the assets that the financial
statements referred to
in Section 2.3 of this Agreement describe, free and clear from
all liens,
encumbrances, security interests, claims, charges and
restrictions, except
Permitted Liens.
2.7 Each Company owns and controls all of the patents,
trademarks, service
marks, trade names, copyrights, licenses and rights that are
necessary for the
present and planned future conduct of its business, without any
conflict with
the right of any other Person.
2.8 Borrower has full power and authority to sign, deliver and
perform the
Loan Documents; the signing, delivery and performance of the
Loan Documents that
Borrower has given or is required to give to Lender (1) have
been duly
authorized by appropriate action of Borrower, (2) will not
violate the
provisions of Borrower's articles of incorporation or bylaws or
other governing
agreement or document or of any law, rule, judgment, order,
agreement or
instrument to which Borrower is a party or by which it is bound
and (3) do not
require any approval or consent of any public authority or other
third party;
and the parties to the Loan Documents have properly signed and
delivered them,
and the Loan Documents are the valid and binding obligations of
the parties to
them and are enforceable in accordance with their terms.
2.9 Each Company has filed each tax return that it is required
to file in
any jurisdiction, and each Company has paid each tax,
assessment, fee and other
governmental charge upon it or upon its assets, income or
franchises before the
time when its nonpayment could give rise to a lien. Borrower
does not know of
any proposed additional tax assessment against it or the
Bank.
2.10 Except as identified on SCHEDULE 2.10, Borrower does not
have any
investments in the securities of any Person. Borrower does not
intend to carry
or purchase any "margin security" within the meaning of
Regulation U of the
Board of Governors of the Federal Reserve System, 12 C.F.R.
Chapter II.
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2.11 Attached to this Agreement as SCHEDULE 2.11 is a list of
all Plans. No
Plan has been terminated since the effective date of ERISA. No
Plan is a
"multi-employer plan" within the meaning of Section 3(37)(A) of
ERISA. An
"accumulated deficiency" (within the meaning of Section 412 of
the Internal
Revenue Code, as amended) or a "reportable event" (as defined in
Title IV of
ERISA) has not occurred with respect to any Plan. Neither
Borrower nor any
Affiliate has incurred any material liability to the Pension
Benefit Guaranty
Corporation ("PBGC") or otherwise under ERISA. The PBGC has not
started or
threatened to start a proceeding against Borrower or any
Affiliate under ERISA.
2.12 Borrower is not, and no person, firm or corporation that
has "control"
of Borrower is, an "executive officer," "director" or "person
who directly or
indirectly, or in concert with one or more persons owns,
controls or has the
power to vote more than 10 percent of any class of voting
securities" (within
the meaning of 12 U.S.C. Section 375(b) and regulations issued
under that
section), of Lender, Fifth Third Bancorp or any subsidiary of
Fifth Third
Bancorp.
2.13 All of each Company's real and personal property, and all
operations
and activities on it, are in compliance with all Environmental
Laws; and none of
Borrower's real or personal property is or will be (1)
Contaminated or the site
of the disposal or release of any Hazardous Substance (2) the
source of any
Contamination of any adjacent property or of any groundwater or
surface water or
(3) the source of any air emissions in excess of any legal limit
or standard
that is now or in the future in effect.
2.14 Borrower owns all of the issued and outstanding capital
stock of Bank.
2.15 Borrower is qualified, and registered with the Federal
Reserve Board,
as a financial holding company under the Bank Holding Company
Act of 1956, as
amended.
SECTION 3. REVOLVING LINE OF CREDIT.
3.1 Subject to satisfaction of the conditions precedent set
forth in
Section 9 of this Agreement, and as long as there shall not have
occurred any
Default or Event of Default, Lender shall extend to Borrower
from time to time
loans ("REVOLVING CREDIT LOANS") in amounts that shall not at
any time in the
aggregate exceed the Revolving Credit Commitment.
3.2 If the aggregate principal amount of the Revolving Credit
Loans
outstanding at any time exceeds the Revolving Credit Commitment,
then Borrower
shall immediately repay the amount of the Loans that is required
to eliminate
the excess.
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3.3 All Revolving Credit Loans shall be evidenced by and payable
with
interest in accordance with the terms of the promissory note in
the form of
SCHEDULE 3.3 ("REVOLVING CREDIT NOTE"), which Borrower shall
sign and deliver to
Lender.
3.4 Each Revolving Credit Loan shall be made upon Borrower's
request.
3.5 Borrower shall have the right to prepay all Revolving Credit
Loans, in
whole or in part, at any time without penalty. Borrower may
reborrow amounts
that it prepays, subject to the other provisions of this
Agreement.
3.6 Unless it is sooner terminated under Section 8 of this
Agreement or
Lender extends it in writing, Lender's obligation to make or to
renew Revolving
Credit Loans shall expire on September 1, 2008. If Lender
extends it, then
Lender's obligation to make or to renew Revolving Credit Loans
shall expire on
the date stated in the extension. If Lender's obligation to make
or to renew
Revolving Credit Loans expires, then the aggregate unpaid
principal balance of
all outstanding Revolving Credit Loans, together with all
interest accrued on
them, shall be payable in full on the expiration date.
SECTION 4. AFFIRMATIVE COVENANTS.
From the date of this Agreement and until all Lender
Indebtedness is
fully paid and Lender does not have any obligation to extend
loans or other
credit facilities to Borrower, Borrower shall:
4.1 Furnish to Lender, within 120 days after the end of each of
Borrower's
fiscal years, beginning with its fiscal year ending December 31,
2007, an
audited financial report prepared in accordance with GAAP by
independent
certified public accountants, containing (1) Borrower's
consolidated balance
sheet as of the end of that year, its related consolidated
profit and loss and
reconciliation of surplus statements for that year and its
consolidated
statement of cash flows for that year, (2) all comments and
financial details
that are customarily included in reports of that type and (3)
and the
unqualified opinion of the certified public accountants as to
the fairness of
the statements contained in the report.
4.2 Within 120 days after the last day of each fiscal year of
Borrower,
Borrower shall furnish to Lender a copy of Borrower's report for
that year on
Form 10-K as filed with the SEC.
4.3 Within 120 days after the last day of each calendar year,
Borrower
shall furnish to Lender a copy of Bank's report for that year on
form FR Y-9SP
as filed with the Federal Reserve Board.
4.4 Within 45 days after the last day of each calendar quarter,
Borrower
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