LOAN AGREEMENT

 

 

 

 

 

                                 LOAN AGREEMENT

 

                                 by and between

 

                       EMPLOYEE STOCK OWNERSHIP PLAN TRUST

                                       of

                               ROME BANCORP, INC.

 

                                        and

 

                               ROME BANCORP, INC.

 

 

 

 

 

 

 

 

 

 

 

 

 

                           Made and Entered Into as of

                                 March 24, 2005

 

 

 

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                                TABLE OF CONTENTS

 

                                                                            Page

 

                                    Article I

 

 

                                   Definitions

 

Section 1.1            Business Day............................................2

Section 1.2            Code....................................................2

Section 1.3            Default.................................................2

Section 1.4            ERISA...................................................2

Section 1.5            Event of Default........................................2

Section 1.6            Fiscal Year.............................................2

Section 1.7            Independent Counsel.....................................2

Section 1.8             Loan....................................................2

Section 1.9            Loan Documents..........................................2

Section 1.10           Pledge Agreement........................................2

Section 1.11           Principal Amount........................................2

Section 1.12           Promissory Note.........................................2

Section 1.13           Register................................................2

 

                                   Article II

 

 

         The Loan; Principal Amount; Interest; Security; Indemnification

 

Section 2.1            The Loan; Principal Amount..............................2

Section 2.2            Interest................................................3

Section 2.3             Promissory Note.........................................4

Section 2.4            Payment of Trust Loan...................................4

Section 2.5            Prepayment..............................................5

Section 2.6            Method of Payments......................................5

Section 2.7            Use of Proceeds of Loan.................................6

Section 2.8            Security................................................6

Section 2.9            Registration of the Promissory Note.....................6

 

                                   Article III

 

 

                 Representations and Warranties of the Borrower

 

Section 3.1            Power, Authority, Consents..............................7

Section 3.2            Due Execution, Validity, Enforceability.................7

Section 3.3            Properties, Priority of Liens...........................7

Section 3.4            No Defaults, Compliance with Laws.......................7

Section 3.5            Purchases of Common Stock...............................7

 

 

 

                                      (i)

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                                   Article IV

 

 

                  Representations and Warranties of the Lender

 

Section 4.1            Power, Authority, Consents..............................8

Section 4.2            Due Execution, Validity, Enforceability.................8

Section 4.3            ESOP; Contributions.....................................8

Section 4.4            Trustee; Committee......................................8

Section 4.5            Compliance with Laws; Actions...........................9

 

                                    Article V

 

 

                                Events of Default

 

Section 5.1            Events of Default under Loan Agreement..................9

Section 5.2            Lender's Rights upon Event of Default...................9

 

                                   Article VI

 

 

                            Miscellaneous Provisions

 

Section 6.1            Payments Due to the Lender.............................10

Section 6.2            Payments...............................................10

Section 6.3            Survival...............................................10

Section 6.4            Modifications, Consents and Waivers; Entire Agreement..10

Section 6.5            Remedies Cumulative....................................11

Section 6.6            Further Assurances; Compliance with Covenants..........11

Section 6.7            Notices................................................11

Section 6.8             Counterparts...........................................12

Section 6.9            Construction; Governing Law............................12

Section 6.10           Severability...........................................13

Section 6.11           Binding Effect; No Assignment or Delegation............13

 

EXHIBIT A Form of Promissory Note...........................................A-1

EXHIBIT B Form of Pledge Agreement..........................................B-1

EXHIBIT C Form of Assignment................................................C-1

 

 

 

                                      (ii)

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                                 LOAN AGREEMENT

                                 --------------

 

                  This LOAN AGREEMENT ("Loan Agreement") is made and entered

into effective as of the 24th day of March, 2005, by and between the EMPLOYEE

STOCK OWNERSHIP PLAN TRUST OF ROME BANCORP, INC. ("Borrower"), a trust forming

part of the Employee Stock Ownership Plan of Rome Bancorp, Inc. ("ESOP"), acting

through and by its Trustee, RSGroup Trust Company ("Trustee"), a trust company

organized under the laws of the State of Maine; and Rome Bancorp, Inc.

("Lender"), a corporation organized and existing under the laws of the State of

Delaware.

 

                               W I T N E S S E T H:

                               - - - - - - - - - -

 

                  WHEREAS, the Compensation Committee of the Lender

("Committee") has authorized the Borrower to purchase shares of common stock of

Rome Bancorp, Inc. ("Common Stock"), either directly from Rome Bancorp, Inc. or

in open market purchases in an amount not to exceed four percent (4%) of the

shares of Common Stock issued in connection with the transactions effected

pursuant to the Plan of Conversion and Agreement and Plan of Reorganization

adopted by Lender (the "Reorganization");

 

                  WHEREAS, the Committee has further authorized the Borrower to

borrow funds from the Lender for the purpose of financing authorized purchases

of Common Stock; and

 

                   WHEREAS, the Lender is willing to make a loan to the Borrower

for such purpose;

 

                  NOW, THEREFORE, the parties hereto agree as follows:

 

                                    ARTICLE I

 

                                   DEFINITIONS

 

                  The following definitions shall apply for purposes of this

Loan Agreement, except to the extent that a different meaning is plainly

indicated by the context:

 

                  SECTION 1.1 BUSINESS DAY means any day other than a Saturday,

Sunday or other day on which banks are authorized or required to close under

federal law or the laws of the State of New York.

 

                  SECTION 1.2 CODE means the Internal Revenue Code of 1986

(including the corresponding provisions of any succeeding law).

 

                  SECTION 1.3 DEFAULT means an event or condition which would

constitute an Event of Default. The determination as to whether an event or

condition would constitute an Event of Default shall be determined without

regard to any applicable requirement of notice or lapse of time.

 

                  SECTION 1.4 ERISA means the Employee Retirement Income

Security Act of 1974, as amended (including the corresponding provisions of any

succeeding law).

 

 

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                  SECTION 1.5 EVENT OF DEFAULT means an event or condition

described in Article V.

 

                  SECTION 1.6 FISCAL YEAR means the fiscal year of Rome Bancorp,

Inc.

 

                  SECTION 1.7 INDEPENDENT COUNSEL means Thacher Proffitt & Wood

LLP or other counsel mutually satisfactory to both the Lender and the Borrower.

 

                  SECTION 1.8 LOAN means the loan described in section 2.1.

 

                  SECTION 1.9 LOAN DOCUMENTS means, collectively, this Loan

Agreement, the Promissory Note and the Pledge Agreement and all other documents

now or hereafter executed and delivered in connection with such documents,

including all amendments, modifications and supplements of or to all such

documents.

 

                  SECTION 1.10 PLEDGE AGREEMENT means the agreement described in

section 2.8(a).

 

                  SECTION 1.11 PRINCIPAL AMOUNT means the face amount of the

Promissory Note, determined as set forth in section 2.1(c).

 

                  SECTION 1.12 PROMISSORY NOTE means the promissory note

described in section 2.3.

 

                  SECTION 1.13 REGISTER means the register described in section

2.9.

 

                                   ARTICLE II

 

                           THE LOAN; PRINCIPAL AMOUNT;

                       INTEREST; SECURITY; INDEMNIFICATION

 

                  SECTION 2.1 The Loan; Principal Amount.

 

                  (a) The Lender hereby agrees to lend to the Borrower such

amounts, and at such times, as shall be determined under this section 2.1;

provided, however, that in no event shall the aggregate amount lent under this

Loan Agreement from time to time exceed the aggregate amount paid by the

Borrower, exclusive of commissions, fees and other charges, to purchase a number

of shares of Common Stock not to exceed four percent (4%) of the shares of

Common Stock issued in connection with the Reorganization.

 

                  (b) Subject to the limitations of section 2.1(a), the Borrower

shall determine the amounts borrowed under this Agreement, and the times at

which such borrowings are effected. Each such determination shall be evidenced

in a writing which shall set forth the amount to be borrowed and the date on

which the Lender shall disburse such amount, and such writing shall be furnished

to the Lender by notice from the Borrower. The Lender shall disburse to the

Borrower the amount specified in each such notice on the date specified therein

or, if later, as promptly as practicable following the Lender's receipt of such

notice; provided, however, that the Lender shall have no obligation to disburse

funds pursuant to this Agreement following the

 

 

 

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occurrence of a Default or an Event of Default until such time as such Default

or Event of Default shall have been cured.

 

                   (c) For all purposes of this Loan Agreement, the Principal

Amount on any date shall be equal to the excess, if any, of:

 

                  (i) the aggregate amount disbursed by the Lender pursuant to

         section 2.1(b) on or before such date; over

 

                  (ii) the aggregate amount of any repayments of such amounts

         made before such date.

 

The Lender shall maintain on the Register a record of, and shall record on the

Promissory Note, the Principal Amount, any changes in the Principal Amount and

the effective date of any changes in the Principal Amount.

 

                  SECTION 2.2 INTEREST.

 

                  (a) The Borrower shall pay to the Lender interest on the

Principal Amount, for the period commencing on the date of this Loan Agreement

and continuing until the Principal Amount shall be paid in full, at the rate of

five percent (5.00%) per annum. Interest payable under this Agreement shall be

computed on the basis of a year of 360 days and months consisting of 30 days

each and actual days elapsed (including the first day but excluding the last) in

the period to which the computation relates.

 

                  (b) Except as otherwise provided in this section 2.2(b),

accrued interest on the Principal Amount shall be payable by the Borrower

quarterly in arrears commencing December 31, 2005 and continuing on the last

Business Day of each calendar quarter thereafter and upon the payment or

prepayment of such Loan. All interest on the Principal Amount shall be paid by

the Borrower in immediately available funds. The Lender shall remit to the

Borrower, at least three (3) Business Days before the end of each calendar

quarter, a statement of the interest payment due under section 2.2(a) for such

quarter; provided, however, that a delay or failure by the Lender in providing

the Borrower with such statement shall not alter the Borrower's obligation to

make such payment.

 

                  (c) Anything in this Loan Agreement or the Promissory Note to

the contrary notwithstanding, the obligation of the Borrower to make payments of

interest shall be subject to the limitation that payments of interest shall not

be required to be made to the Lender to the extent that the Lender's receipt

thereof would not be permissible under the law or laws applicable to the Lender

limiting rates of interest which may be charged or collected by the Lender. Any

such payment referred to in the preceding sentence shall be made by the Borrower

to the Lender on the earliest interest payment date or dates on which the

receipt thereof would be permissible under the laws applicable to the Lender

limiting rates of interest which may be charged or collected by the Lender. Such

deferred interest shall not bear interest.

 

 

 

 

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                  SECTION 2.3 PROMISSORY NOTE.

 

                  The Loan shall be evidenced by a Promissory Note of the

Borrower in substantially the form of EXHIBIT A attached hereto, dated the date

hereof, payable to the order of the Lender in the Principal Amount and otherwise

duly completed.

 

                  SECTION 2.4 PAYMENT OF TRUST LOAN.

 

                  (a) The Principal Amount of the Loan shall be repaid in annual

installments payable on the last Business Day of each Fiscal Year ending after

the date of this Agreement. The amount of each such annual installment shall be

that portion of the Principal Amount which will result in the release for

allocation to participants in the ESOP, pursuant to the Pledge Agreement, of a

cumulative fraction of the Collateral (within the meaning of the Pledge

Agreement and determined as of the last Business Day of December, 2005) equal to

the percentage set forth in column II below:

 

               COLUMN I                             COLUMN II

 

           INSTALLMENT DUE ON

         LAST BUSINESS DAY OF                CUMULATIVE FRACTION OF

         FISCAL YEAR ENDING IN                 COLLATERAL RELEASED

         ---------------------                 -------------------

                 2005                                   1/15

                 2006                                  2/15

                 2007                                  3/15

                 2008                                  4/15

                 2009                                   5/15

                 2010                                  6/15

                 2011                                  7/15

                 2012                                  8/15

                 2013                                  9/15

                  2014                                 10/15

                 2015                                 11/15

                 2016                                 12/15

                 2017                                 13/15

                 2018                                  14/15

                 2019                                 15/15

 

; provided, however, that the Borrower shall not be required to make any payment

of principal due to be made in any Fiscal Year to the extent that such payment

would not be deductible from federal income tax purposes for such Fiscal Year

under Section 404 of the Code. Principal payments may be deferred to the extent

that such payments would be in excess of the amount described above or otherwise

would be nondeductible for federal income tax purposes. Any payment not required

to be made pursuant to the immediately preceding sentence shall be

 

 

 

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deferred to and be payable on the last day of the first Plan Year in which such

payment may be made on a tax deductible basis.

 

                  SECTION 2.5 PREPAYMENT.

 

                  The Borrower shall be entitled to prepay the Loan in whole or

in part, at any time and from time to time; provided, however, that the Borrower

shall give notice to the Lender of any such prepayment. Any such prepayment

shall be: (a) permanent and irrevocable: (b) accompanied by all accrued interest

through the date of such prepayment; (c) made without premium or penalty; and

(d) applied first to the installment of principal due and payable in the Fiscal

Year in which the prepayment is made and second in the order of the maturity of

the remaining installments thereof unless the Lender and the Borrower agree to

apply such prepayments in some order.

 

                   SECTION 2.6 METHOD OF PAYMENTS.

 

                  (a) All payments of principal, interest, other charges

(including indemnities) and other amounts payable by the Borrower hereunder

shall be made in lawful money of the United States, in immediately available

funds, to the Lender at the address specified in or pursuant to this Loan

Agreement for notices to the Lender, not later than 3:00 P.M., Eastern Standard

time, on the date on which such payment shall become due. Any such payment made

on such date but after such time shall, if the amount paid bears interest, and

except as expressly provided to the contrary herein, be deemed to have been made

on, and interest shall continue to accrue and be payable thereon until, the next

succeeding Business Day. If any payment of principal or interest becomes due on

a day other than a Business Day, such payment may be made on the next succeeding

Business Day, and when paid, such payment shall include interest to the day on

which such payment is in fact made.

 

                  (b) Notwithstanding anything to the contrary contained in this

Loan Agreement or the Promissory Note, neither the Borrower nor the Trustee

shall be obligated to make any payment, repayment or prepayment on the

Promissory Note or take or refrain from taking any other action hereunder or

under the Promissory Note if doing so would cause the ESOP to cease to be an

employee stock ownership plan within the meaning of section 4975(e)(7) of the

Code or qualified under section 401(a) of the Code or cause the Borrower to

cease to be a tax exempt trust under section 501(a) of the Code or if such act

or failure to act would cause the Borrower or the Trustee to engage in any

"prohibited transaction" as such term is defined in section 4975(c) of the Code

and the regulations promulgated thereunder which is not exempted by section

4975(c)(2) or (d) of the Code and the regulations promulgated thereunder or in

section 406 of ERISA and the regulations promulgated thereunder which is not

exempted by section 408(b) of ERISA and the regulations promulgated thereunder;

provided, however, that in each case, the Borrower or the Trustee or both, as

the case may be, may act or refrain from acting pursuant to this section 2.6(b)

on the basis of an opinion of Independent Counsel. The Borrower and the Trustee

may consult with Independent Counsel, and any opinion of such Independent

Counsel shall be full and complete authorization and protection in respect of

any action taken or suffered or omitted by it hereunder in good faith and in

accordance with such opinion of Independent Counsel. Nothing contained in this

section 2.6(b) shall be construed as imposing a duty on either the Borrower or

the Trustee to consult with Independent Counsel. Any obligation

 

 

 

                                        5

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of the Borrower or the Trustee to make any payment, repayment or prepayment on

the Promissory Note or to take or refrain from taking any other act hereunder or

under the Promissory Note which is excused pursuant to this section 2.6(b) shall

be considered a binding obligation of the Borrower or the Trustee, or both, as

the case may be, for the purposes of determining whether a Default or Event of

Default has occurred hereunder or under the Promissory Note and nothing in this

section 2.6(b) shall be construed as providing a defense to any remedies

otherwise available upon a Default or an Event of Default hereunder (other than

the remedy of specific performance).

 

                  SECTION 2.7 USE OF PROCEEDS OF LOAN.

 

                   The entire proceeds of the Loan shall be used solely for

acquiring shares of Common Stock, and for no other purpose whatsoever.

 

                  SECTION 2.8 SECURITY.

 

                  (a) In order to secure the due payment and performance by the

Borrower of all of its obligations under this Loan Agreement, simultaneously

with the execution and delivery of this Loan Agreement by the Borrower, the

Borrower shall:

 

                  (i) pledge to the Lender as Collateral (as defined in the

          Pledge Agreement), and grant to the Lender a first priority lien on and

         security interest in, the Common Stock purchased with the Principal

         Amount, by the execution and delivery to the Lender of a Pledge

         Agreement in the form attached hereto as EXHIBIT B; and

 

                  (ii) execute and deliver, or cause to be executed and

         delivered, such other agreements, instruments and documents as the

         Lender may reasonably require in order to effect the purposes of the

         Pledge Agreement and this Loan Agreement.

 

                  (b) The Lender shall release from encumbrance under the Pledge

Agreement and transfer to the Borrower, as of the date on which any payment or

prepayment of the Principal Amount is made, a number of shares of Common Stock

held as Collateral pursuant to section 6.4 of the ESOP.

 

                  SECTION 2.9 REGISTRATION OF THE PROMISSORY NOTE.

 

                  (a) The Lender shall maintain a Register providing for the

registration of the Principal Amount and any stated interest and of transfer and

exchange of the Promissory Note. Transfer of the Promissory Note may be effected

only by the surrender of the old instrument and either the reissuance by the

Borrower of the old instrument to the new holder or the issuance by the Borrower

of a new instrument to the new holder. The old Promissory Note so surrendered

shall be canceled by the Lender and returned to the Borrower after such

cancellation.

 

                  (b) Any new Promissory Note issued pursuant to section 2.9(a)

shall carry the same rights to interest (unpaid and to accrue) carried by the

Promissory Note so transferred or exchanged so that there will not be any loss

or gain of interest on the note surrendered. Such new Promissory Note shall be

subject to all of the provisions and entitled to all of the benefits of this

Agreement. Prior to due presentment for registration or transfer, the Borrower

may deem

 

 

 

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and treat the registered holder of any Promissory Note as the holder thereof for

purposes of payment and all other purposes. A notation shall be made on each new

Promissory Note of the amount of all payments of principal and interest

theretofore paid.

 

                                   ARTICLE III

 

                 REPRESENTATIONS AND WARRANTIES OF THE BORROWER

 

                  The Borrower hereby represents and warrants to the Lender as

follows:

 

                  SECTION 3.1 POWER, AUTHORITY, CONSENTS.

 

                  The Borrower has the power to execute, deliver and perform

this Loan Agreement, the Promissory Note and the Pledge Agreement, all of which

have been duly authorized by all necessary and proper corporate or other action.

 

                  SECTION 3.2 DUE EXECUTION, VALIDITY, ENFORCEABILITY.

 

                  Each of the Loan Documents, including, without limitation,

this Loan Agreement, the Promissory Note and the Pledge Agreement, have been

duly executed and delivered by the Borrower; and each constitutes the valid and

legally binding obligation of the Borrower, enforceable in accordance with its

terms.

 

                  SECTION 3.3 PROPERTIES, PRIORITY OF LIENS.

 

                  The liens which have been created and granted by the Pledge

Agreement constitute valid, first liens on the properties and assets covered by

the Pledge Agreement, subject to no prior or equal lien.

 

                  SECTION 3.4 NO DEFAULTS, COMPLIANCE WITH LAWS.

 

                  The Borrower is not in default in any material respect under

any agreement, ordinance, resolution, decree, bond, note, indenture, order or

judgment to which it is a party or by which it is bound, or any other agreement

or other instrument by which any of the properties or assets owned by it is

materially affected.

 

                  SECTION 3.5 PURCHASES OF COMMON STOCK.

 

                  Upon consummation of any purchase of Common Stock by the

Borrower with the proceeds of the Loan, the Borrower shall acquire valid, legal

and marketable title to all of the Common Stock so purchased, free and clear of

any liens, other than a pledge to the Lender of the Common Stock so purchased

pursuant to the Pledge Agreement. Neither the execution and delivery of the Loan

Documents nor the performance of any obligation thereunder violates any

provision of law or conflicts with or results in a breach of or creates (with or

without the giving of notice or lapse of time, or both) a default under any

agreement to which the Borrower is a party or by which it is bound or any of its

properties is affected. No consent of any federal, state or local governmental

authority, agency or other regulatory body, the absence of which could have a

materially adverse effect on the Borrower or the Trustee, is or was required to

be obtained

 

 

 

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in connection with the execution, delivery or performance of the Loan Documents

and the transactions contemplated therein or in connection therewith, including,

without limitation, with respect to the transfer of the shares