Exhibit 10.2
THIRD AMENDMENT AND RESTATEMENT
OF
LOAN AND STOCK PLEDGE
AGREEMENT
THIS THIRD AMENDMENT AND
RESTATEMENT OF LOAN AND STOCK PLEDGE AGREEMENT
(the “Agreement”),
entered into as of July 30, 2009, between APPALACHIAN
BANCSHARES, INC., a Georgia corporation (the
“Borrower”), and THE PARK AVENUE BANK, a Georgia
banking corporation (the “Lender”).
W I T N E S S E T
H:
WHEREAS, Borrower is the borrower
with regard to a revolving line of credit issued by Lender in the
original principal amount of TEN MILLION AND NO/100 DOLLARS
($10,000,000.00) which was reduced on March 21, 2008 to the
current principal amount of FOUR MILLION NINE HUNDRED SIXTY TWO
THOUSAND ONE HUNDRED FIVE AND 63/100THS DOLLARS ($4,962,105.63)
(the “Loan”); and
WHEREAS, the Loan is evidenced and
secured by that certain Promissory Note made by Borrower to the
order of Lender and dated November 21, 2007, as amended by
that certain Modification of Promissory Note, dated
November 21, 2008 reducing the principal amount to
$4,962,105.63 and that certain Second Modification to Promissory
Note dated May 20, 2009 (collectively, the “Existing
Note”), and that Loan and Stock Pledge Agreement dated
November 21, 2007 by and between Lender and Borrower, as
amended by that certain First Amendment to Loan and Stock Pledge
Agreement, dated November 21, 2008 and that certain Second
Amendment to Loan and Stock Pledge Agreement(collectively, the
“Pledge Agreement”) conveying to Lender a security
title and security interest in all of the issued and outstanding
common stock in Appalachian Community Bank (the
“Stock”); and
WHEREAS, the Loan proceeds were held
and retained by Lender to be disbursed by Lender to Borrower
pursuant to the terms and provisions of the Pledge Agreement (the
Pledge Agreement, the Existing Note and any and all other documents
and instruments evidencing and/or securing the Loan being
hereinafter referred to collectively as the “Existing Loan
Documents”); and
WHEREAS, at the request of Borrower,
Lender has agreed to modify the Note for the purpose of
(i) extending the Maturity Date to July 30, 2010; and
(ii) amending and modifying certain of the other terms and
provisions of the Note; and
WHEREAS, at the request of Borrower,
and for this purpose, Lender and Borrower have simultaneously
herewith executed that certain Third Modification to Promissory
Note (the “Third Note Modification”)(the Existing Note
as modified by the Third Note Modification shall be referred to as
the “Note”); and
WHEREAS, in order to induce Lender
to extend the Maturity Date, Borrower has agreed that (i) in
addition to the Stock, Borrower shall convey to Lender a security
title and security interest in all of the issued and outstanding
common stock in Appalachian Community Bank, F.S.B. (the
“Thrift Stock”) and (ii) other amendments and
modifications to the Existing Loan
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Documents shall be made (the Third Note
Modification, this Agreement and certain other documents and
instruments executed and delivered in connection with the
modification of the Loan as herein contemplated being hereinafter
referred to as the “Loan Modification Documents”) (the
Existing Loan Documents and the Loan Modification Documents being
hereinafter referred to collectively as the “Loan
Documents”); and
WHEREAS, Lender and Borrower are
desirous of entering into this Agreement for the purpose of
amending and restating all of the terms and provisions of the
Pledge Agreement.
NOW, THEREFORE, for and in
consideration of the sum of TEN AND NO/100 DOLLARS ($10.00), the
premises and the mutual agreements and representations in this
Agreement and other good and valuable consideration in hand
received by each party from the other, the receipt, adequacy and
sufficiency of which are hereby acknowledged, Lender and Borrower
hereby covenant and agree as follows:
1. Security Interest
.
(a) The Borrower hereby
unconditionally grants and assigns to the Lender and its successors
and assigns a continuing security interest in and security title to
the Stock and Thrift Stock. The Borrower hereby delivers to the
Lender all of its right, title and interest in and to the Stock and
Thrift Stock, together with certificates representing the Stock and
Thrift Stock and stock powers endorsed in blank, as security for
(i) all obligations of the Borrower to the Lender hereunder,
and (ii) payment and performance of all obligations of the
Borrower to the Lender under the Note, whether direct or indirect,
absolute or contingent, now or hereafter existing, or due or to
become due. If the Borrower receives, for any reason whatsoever,
any additional shares of the capital stock of the Bank or Thrift,
such shares shall thereupon constitute Stock or Thrift Stock, as
applicable, to be held by the Lender under the terms of this
Agreement and the Borrower shall immediately deliver such shares to
the Lender, together with stock powers endorsed in blank by the
Borrower. Beneficial ownership of the Stock and Thrift Stock,
including all voting, and dividend rights, shall remain in the
Borrower until the occurrence of a Default. Borrower shall have the
right until the occurrence of a Default hereunder to vote the Stock
and Thrift Stock, to receive and retain any and all dividends and
distributions with respect to such shares of Stock and Thrift
Stock, and to realize any and all other benefits and to exercise
any and all other rights as owner of the Stock and Thrift
Stock.
(b) If, prior to repayment in full
of the Loan, the aggregate book value of the Stock becomes less
than $30,000,000, the Borrower shall promptly deliver to the Lender
on demand additional collateral of a type and value acceptable to
the Lender (and the Lender’s judgment in valuing same shall
be conclusive) so that the sum of the value of such additional
collateral plus the aggregate book value of the Stock is equal to
or in excess of $30,000,000. The Borrower shall also execute any
security documents the Lender may request to evidence and perfect
the Lender’s rights in such additional collateral. If at any
time such additional collateral is no longer required pursuant to
this Section 1(b), the Lender shall release its security
interest in such additional collateral upon the request of the
Borrower.
(c) The Borrower hereby
unconditionally grants and assigns to the Lender and its successors
and assigns a continuing security interest in all cash proceeds
received by it from all Persons for (i) the issuance of its
shares of capital stock, either common or preferred; (ii) the
issuance of rights or options to acquire its shares of capital
stock, either common or preferred; and (iii) the issuance of
debt obligations other than obligations incurred in the ordinary
course of the business of the Borrower, as security for
(A) all obligations of the Borrower to the Lender hereunder,
and (B) payment and performance of all obligations of the
Borrower to the Lender under the Note, whether direct or indirect,
absolute or contingent, now or hereafter existing, or due or to
become due.
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2. Representations and
Warranties . The
Borrower represents and warrants to the Lender as
follows:
(a) The Borrower is a corporation
duly organized, validly existing, and in good standing under the
laws of the State of Georgia and is qualified to do business in all
jurisdictions where such qualification is necessary. The Borrower
is registered as a bank holding company with the Board of Governors
of the Federal Reserve System and the Georgia Department of Banking
and Finance. The chief executive office of the Borrower and the
principal place of business of the Borrower where the records of
the Borrower are kept are located at 822 Industrial Boulevard,
Ellijay, Georgia 30540 (Ellijay County), and the Borrower’s
U.S. employer identification number is 58-2242407.
(b) The Bank is a banking
corporation duly organized, validly existing, and in good standing
under the laws of the State of Georgia. The Borrower owns all the
capital stock of the Bank (consisting of 568,000 shares) and there
are no other outstanding shares of capital stock and no outstanding
options, warrants or other rights which can be converted into
shares of capital stock of the Bank. The Bank has all requisite
corporate power and authority and possesses all licenses, permits
and authorizations necessary for it to own its properties and
conduct its business as presently conducted.
(c) The Thrift is a federal savings
bank duly organized, validly existing, and in good standing under
the laws of the United States of America. The Borrower owns all the
capital stock of the Thrift (consisting of 1,000 shares) and there
are no other outstanding shares of capital stock and no outstanding
options, warrants or other rights which can be converted into
shares of capital stock of the Thrift. The Thrift has all requisite
corporate power and authority and possesses all licenses, permits
and authorizations necessary for it to own its properties and
conduct its business as presently conducted.
(d) Each financial statement of the
Borrower or any Subsidiary which has been delivered to the Lender
presents fairly in all material respects the financial condition of
the Borrower or such Subsidiary as of the date indicated therein
and the results of its operations for the periods shown therein.
There has been no material adverse change, either existing or
threatened, in the financial condition or operations of the
Borrower or any Subsidiary since the date of such financial
statement.
(e) The Borrower has full power and
authority to execute and perform the Financing Documents. The
execution, delivery, and performance by the Borrower of the
Financing Documents (i) have been duly authorized by all
requisite action by the Borrower, (ii) do not violate any
provision of law which violation would have a material adverse
effect on the Borrower, and (iii) do not result in a breach of
or constitute a default under any agreement or other instrument to
which the Borrower or any Subsidiary is a party or which the
Borrower or any Subsidiary is bound, which breach or default would
have a material adverse effect on the Borrower or any of its
Subsidiaries. Each of the Financing Documents constitutes the
legal, valid, and binding obligation of the Borrower enforceable in
accordance with its terms.
(f) Except for the security interest
created by this Agreement, the Borrower owns the Stock and Thrift
Stock free and clear of all liens, charges, and encumbrances. The
Stock and Thrift Stock are duly issued, fully paid and
non-assessable, and the Borrower has the unencumbered right to
pledge the Stock and Thrift Stock.
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(g) There is no action, arbitration,
or other proceeding at law or in equity, or by or before any court,
agency, or arbitrator, nor is there any judgment, order, or other
decree pending, anticipated, or, to its knowledge, threatened
against the Borrower or any Subsidiary or against any of their
properties or assets which might have a material adverse effect on
the Borrower, any Subsidiary, or their respective properties or
assets, or which might call into question the validity or
enforceability of the Financing Documents, or which might involve
the alleged violation by the Borrower or any Subsidiary of any law,
rule or regulation.
(h) No consent or other
authorization or filing with or of any governmental authority or
other public body on the part of the Borrower or any Subsidiary is
required in connection with the Borrower’s execution,
delivery, or performance of the Financing Documents; or if
required, all such prerequisites have been fully
satisfied.
(i) None of the transactions
contemplated in this Agreement (including, without limitation, the
use of the proceeds of the Loan) will violate or result in a
violation of Section 7 of the Securities Exchange Act of 1934,
or any regulations issued pursuant thereto.
(j) The following are attached as
exhibits hereto: true, correct and complete copies of (i) the
Borrower’s and Bank’s articles of incorporation as in
effect as of the date hereof ; (ii) the Thrift’s Charter
as in effect as of the date hereof; (iii) certificates of
existence for the Borrower and the Bank (issued by the Georgia
Secretary of State on July , 2009;
(iv) the bylaws of the Borrower in effect immediately prior to
the adoption of the resolutions referred to below (and such bylaws
have not been further altered or amended and have been in full
force and effect at all times since the adoption of such
resolutions through the date hereof); (v) the bylaws of the
Bank and Thrift as of the date hereof; (vi) resolutions (the
“Resolutions”) of the Board of Directors of the
Borrower duly adopted at a meeting duly called and held on July
, 2009. A quorum for the transaction of
business was present and acting throughout the meeting at which the
Resolutions were adopted, and the Resolutions have been since
adoption and are now in full force and effect and have not been
modified in any respect. There have been no further amendments or
other documents affecting or altering the Borrower’s, the
Bank’s or Thrift’s articles of incorporation since the
date of the certifications referred to above through the date
hereof, and the Borrower, the Bank and the Thrift have remained in
valid existence under the laws of the State of Georgia or the
United States since such dates.
3. Affirmative Covenants
. The Borrower agrees
that so long as the Note is outstanding or this Agreement is in
effect:
(a) The Borrower shall promptly
furnish to the Lender: (i) not later than 10 days after the
filing with the Securities and Exchange Commission
(“SEC”), a copy of each Form 10-K, Form 10-Q, Form 8-K,
and Proxy Statement; (ii) not later that 10 days after mailing
to the Borrower’s shareholders, a copy of any communication
with its shareholders including the delivery of the annual report
of financial condition; (iii) not later than 10 days after
filing with the Federal Reserve, copies of each Form FR Y-9LP and
Form FR Y-9C; (iv) not later than 10 days after filing with
the Federal Insurance Deposit Corporation, a copy of each Report of
Condition and Income of the Bank; (v) not later than 10 day
after filing with the Office of Thrift Supervision, a copy of each
Thrift Financial; (vi) immediately after the occurrence of a
material adverse change in the business, properties, condition,
management, or prospects (financial or otherwise) of the Borrower
or any Subsidiary, including, without limitation, imposition of any
letter agreement, memorandum of understanding, cease and desist
order, or other similar regulatory action involving the Borrower or
any Subsidiary, a statement of the Borrower’s chief executive
officer or chief financial officer setting forth in reasonable
detail such change and the action which the Borrower or any
Subsidiary proposes to take with respect thereto; and
(vii) from time to time upon request of the Lender, such other
information relating to the operations, business, condition,
management, properties, or prospects of
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the Borrower or any Subsidiary as the Lender may
reasonably request (including meetings with the Borrower’s or
Subsidiary’s officers and employees upon prior written notice
during normal business hours).
(b) The Borrower and each Subsidiary
shall punctually pay and discharge all taxes, assessments and other
governmental charges or levies imposed upon it or upon its income
or upon any of its property, except for such taxes, assessments and
other charges or levies which Borrower or any such Subsidiary is
disputing in good faith.
(c) The Borrower and each Subsidiary
shall comply in all material respects with all requirements of
constitutions, statutes, rules, regulations, and orders and all
orders and decrees of courts and arbitrators applicable to it or
its properties.
(d) The Borrower shall immediately
notify the Lender of any change in the Chief Executive Officer of
the Borrower or a material change (greater than 10%) of beneficial
ownership of the Borrower’s stock by any officer, director or
25% or greater shareholder of the Borrower.
(e) Until such time that the amounts
payable under Note are paid in full, the Borrower shall pay to the
Lender all of the cash proceeds received by it from all Persons for
(i) the issuance of its shares of capital stock, either common
or preferred; (ii) the issuance of rights or options to
acquire its shares of capital stock, either common or preferred;
and (iii) the issuance of debt obligations other than
obligations incurred in the ordinary course of the business of the
Borrower; provided, however , in the event the Borrower
receives cash by virtue of one of the events set forth in Sections
3(g), 3(h) or 3(i) below, then the cash proceeds paid to Lender
pursuant to such provisions shall be specifically limited to the
amounts set forth in Sections 3(g), 3(h) and 3(i)
respectively.
(f) No later than ninety
(90) days after the end of each fiscal year and not later than
forty-five (45) days after the end of each fiscal quarter, the
Borrower shall deliver to Lender a certificate of its chief
financial officer or chief executive officer in the form attached
hereto as Exhibit “J”, computing and certifying to the
financial covenants contained in Section 4(a) through
(f) of this Agreement, and further certifying that the
Borrower is in compliance with the other covenants of the Borrower
contained in Section 3 and Section 4 of this
Agreement.
(g) If Borrower is successful in
raising any additional capital (including, without limitation, by
private offering, preferred stock offering or common stock
offering) prior to the sale of the Thrift, then the Borrower shall
reduce the principal of the Loan by at least $2,000,000.00 prior to
or on the date such capital is raised by Borrower.
(h) If Borrower desires to sell the
Thrift to a third party prior to raising any additional capital as
described in Section 3(g) above, then Borrower shall reduce
the principal of the Loan by at least $1,000,000.00 prior to or at
the closing of such sale of the Thrift. Lender shall not release
its interest in and to the Thrift Stock until such $1,000,000.00
payment is received.
(i) If Borrower completes the sale
of the Thrift as contemplated in Section 3(h) above and
Borrower is successful in raising additional capital, then Borrower
shall reduce the principal of the Loan by at least $1,000,000.00
prior to or on the date such capital is raised by
Borrower.
(j) Borrower shall insure that the
capital plan prepared in accordance with the Cease and Desist
Letter issued by the FDIC will provide for the payment of interest
due under the Loan prior to and after the possible sale of the
Thrift and the repayment of the entire principal of Loan.
Simultaneously with the delivery of the capital plan to the FDIC
and any amendments thereto, Borrower shall provide a copy of the
capital plan to Lender.
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4. Negative Covenants
. The Borrower agrees
that so long as the Note is outstanding or this Agreement is in
effect:
(a) The Borrower shall not permit
the consolidated tangible Capital for the Borrower and its
Subsidiaries at any time during the term of this Agreement to be
less than $60,000,000.
(b) The Borrower shall not permit
the ratio of Tier 1 Capital to average total assets of the Borrower
as of the end of any fiscal quarter to be less than
7.0%.
(c) The Borrower shall not permit
the Total Risk Based Capital Ratio of the Borrower as of the end of
any fiscal quarter to be less than 8.0% for the Bank and 10.0% for
the Thrift.
(d) The Borrower shall not, and
shall not permit the Bank and the Thrift, to fail to comply with a
minimum Tier 1 Capital requirement of six percent (6%).
(f) The Thrift shall not be
classified in a classification below (worse than) the “well
capitalized” classification established by the applicable
Federal Regulator.
(g) The Borrower shall not incur or
permit to exist any indebtedness or liability for borrowed money
other than to the Lender or a wholly-owned Subsidiary of the
Borrower without prior Lender approval, except that this covenant
shall not apply to deposits, repurchase agreements, federal funds
borrowings, overdrafts, Federal Home Loan Bank borrowings,
borrowings from the United States Treasury in connection with the
Trouble Assets Relief Program under the Emergency Economic
Stabilization Act of 2008 and other banking transactions entered
into by a Subsidiary in the ordinary course of its
business.
(h) The Borrower shall not, directly
or indirectly, become a guarantor of any obligation of, or an
endorser of, or otherwise assume or become liable upon any notes,
obligations, or other indebtedness of any other Person (other than
a Subsidiary) except in connection with the depositing of checks in
the normal and ordinary course of business.
(i) The Borrower shall not, nor
permit any Subsidiary to, transfer all or substantially all of its
assets to or consolidate or merge with any other Person, or acquire
all or substantially all of the properties or capital stock of any
other Person, or create any Subsidiary or enter into any
partnership or joint venture without the prior written approval of
the Lender.
(j) The Borrower shall not permit
any Subsidiary to issue, sell or otherwise dispose or part with a
controlling interest in any shares of any class of its voting stock
(other than directors’ qualifying shares) except to the
Borrower or a wholly-owned Subsidiary of the Borrower.
(k) Except as contemplated in
Section (j) above, the Borrower shall not sell or otherwise
dispose or part with control of any of the Stock or any other
securities or indebtedness of any Subsidiary, and the Borrower
shall not pledge or otherwise transfer or grant a security interest
in any of the capital stock or other securities of any of its
Subsidiaries.
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(l) The Borrower shall not pay any
cash dividends if the Loan is in Default or if the payment of such
dividend would create a Default.
(m) The Borrower shall not enter
into any additional capital obligations or raise any additional
capital without obtaining the prior written consent of the
Lender.
5. Advances Under the Loan
. The Loan is
non-revolving. No payments of principal under the Loan are
available for future advance of such funds.
6. Default .
A “Default” shall exist
if any of the following occurs:
(a) Failure of the Borrower to pay
within ten (10) days when due any amount payable, whether
principal or interest or other amount, on any of the Liabilities,
whether at maturity, or at a date fixed for any prepayment or
partial prepayment, or by acceleration, or otherwise.
(b) Any statement, representation,
or warranty of the Borrower made in any of the Financing Documents
or at any time furnished by or on behalf of the Borrower to the
Lender shall be false or misleading in any material respect as of
the date made.
(c) Failure of the Borrower
punctually and fully to comply with (i) any of the covenants
in Section 4 of this Agreement or (ii) any of the other
covenants set forth in this Agreement; provided that if any such
failure (other than a payment default) occurs under this
Section 6(c) such failure is not remedied within 150 days
after notice from the Lender to the Borrower.
(d) The occurrence of a default
under any other agreement to which the Borrower and the Lender are
parties or under any
