THIS WAIVER AND
AGREEMENT dated as of March 13, 2009 (this “ Waiver
Agreement ”) is entered into by and between MERCANTILE
BANCORP, INC. , a Delaware corporation (“ Borrower
”), and GREAT RIVER BANCSHARES, INC. , a Nevada
corporation (“ Lender ”). All capitalized terms
used herein and not otherwise defined herein shall have the
meanings given to such terms in the Loan Agreement (as defined
below).
WHEREAS, Borrower
and U.S. Bank National Association, a national banking association
(“ US Bank ”), previously entered into the Third
Amended and Restated Term Loan Agreement, dated as of
November 10, 2006, as subsequently amended by the First
Amendment to Third Amended and Restated Loan Agreement, dated
March 20, 2007, the Second Amendment to Third Amended and
Restated Loan Agreement, dated June 30, 2007 and the Third
Amendment to Third Amended and Restated Loan Agreement, dated
September 7, 2007 (collectively, as amended, the “
Loan Agreement ”), and Borrower previously executed a
Revolving Credit Note, dated as of November 10, 2006 in the
principal amount of $15,000,000 in favor of US Bank, a Term Loan
Promissory Note, dated as of November 10, 2006 in the
principal amount of $15,000,000 in favor of US Bank, a Term Loan B
Promissory Note, dated as of September 7, 2007 in the
principal amount of $5,000,000 in favor of US Bank and a Term Loan
C Promissory Note, dated as of September 7, 2007 in the
principal amount of $5,000,000 in favor of US Bank (collectively,
the “ Purchased Notes ”).
WHEREAS, as of
December 23, 2008, Lender purchased the Purchased Notes from
US Bank, and US Bank assigned all of its rights and interests in
and to the Loan Agreement, the Purchased Notes and all documents
and agreements related thereto to Lender.
WHEREAS, on
December 31, 2008, Lender made an additional loan to Borrower,
and Borrower executed a Secured Demand Promissory Note, dated
December 31, 2008, in the principal amount of $7,552,000 in
favor of Lender (the “ First Secured Demand Note
”), which was secured by the Stock Pledge Agreement
(Borrower) between Lender and Borrower dated December 31, 2008
(the “ December Security Agreement
”).
WHEREAS, on
February 5, 2009, Lender made an additional loan to Borrower,
and Borrower executed a $4,000,000 Secured Demand Note, dated
February 5, 2009, in the principal amount of $4,000,000 in
favor of Lender (the “ Second Secured Demand Note
”, and together with the First Secured Demand Note, the
“ Secured Demand Notes ”), which was secured by
the Stock Pledge Agreement (Borrower) between Lender and Borrower
dated February 5, 2009 (the “ February Security
Agreement ”) and the Collateral Assignment of Promissory
Note and Other Loan Documents between Lender and Borrower dated
February 5, 2009 (the “ Collateral Assignment ,
and together with the December Security Agreement and the February
Security Agreement, the “ Demand Note Security
Documents ”).
WHEREAS, as of the
date hereof, an Event of Default has occurred under the Loan
Agreement as a result of breaches of Sections 5.13, 5.14(i),
6.01 and 6.12 of the Loan Agreement
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(the “
Breached Sections ”) and as a result of a memorandum
of understanding dated September 30, 2008, being issued by the
Florida Office of Financial Regulation with respect to The Royal
Palm Bank of Florida (the “ MOU ”) and a cease
and desist order, dated March 9, 2009, being issued by the
Federal Deposit Insurance Corporation (“ FDIC ”)
and the Office of the State Bank Commissioner for the State of
Kansas (“ Kansas Bank Commissioner ”) with
respect to Heartland Bank (the “ Order ”). As a
result of the foregoing Events of Default, the Lender has the right
to declare the entire outstanding principal balance of, and all
accrued and unpaid interest on, the Purchased Notes issued under
the Loan Agreement and the Secured Demand Notes to be immediately
due and payable;
WHEREAS, the
Borrower has received a draft memorandum of understanding from the
Federal Reserve Bank of St. Louis, which is not dated, with respect
to Borrower (“Draft MOU”). It is anticipated that the
memorandum of understanding with respect thereto will be entered
into within the next thirty days (upon execution, the
“Anticipated MOU”);
WHEREAS, The Royal
Palm Bank of Florida has been notified by the FDIC that it will
change the MOU to a cease and desist order within the next thirty
days (upon issuance, the “Anticipated
Order”);
WHEREAS, the
Borrower has requested that Lender waive the Events of Default
under the Loan Agreement and the Secured Demand Notes caused by the
breach of the Breached Sections by the Borrower and the issuance of
the MOU, the Order, the Anticipated MOU and the Anticipated Order;
and
WHEREAS, the
Lender has agreed to provide such a waiver;
NOW, THEREFORE, in
consideration of the premises and the mutual covenants contained
herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1.
Waivers . Subject to the other terms and conditions of this
Waiver Agreement, the Lender hereby waives each existing Event of
Default resulting from breaches of the Breached Sections of the
Loan Agreement and resulting from the issuance of the MOU, the
Order, Draft MOU and the Anticipated Order to the extent such
Events of Default are caused (a) solely by the fact that
Mid-America Bancorp, Inc. incurred $4,000,000 of Indebtedness in
violation of Section 6.01 of the Loan Agreement and is now in
default in the payment of such debt, (b) solely by the fact
that the Non-Performing Assets of all Subsidiary Banks on a
combined basis exceed 18% of the Primary Capital of all Subsidiary
Banks as determined according to GAAP in violation of
Section 6.12 of the Loan Agreement, (c) solely by the
fact that the Borrower failed to maintain a Consolidated Fixed
Charge Coverage Ratio of at least 1.10 to 1.00 for the four
(4) consecutive fiscal quarter period ended on
December 31, 2008, (d) that the Florida Office of
Financial Regulation issued the MOU, (e) that the FDIC and the
Kansas Bank Commissioner issued the Order, (f) that the
Federal Reserve Bank of St. Louis will issue the Anticipated MOU,
provided that the Anticipated MOU is not materially different from
the Draft MOU, and (g) that the FDIC and the Florida Office of
Financial Regulation will issue the Anticipated Order, provided
the
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Anticipated
Order is in substantially the same form and substance as the MOU
(collectively, the “ Waiver ” and such Events of
Default, the “ Waived Defaults ”).
2.
Covenants . Borrower covenants and agrees that it (the
following, collectively, the “ Additional Covenants
”):
(a) shall
ensure that the aggregate amount of Non-Performing Assets of all
Subsidiary Banks on a combined basis does not at any time equal or
exceed Thirty-Five Percent (35%) of the then Primary Capital of all
Subsidiary Banks, as determined according to GAAP;
(b) shall
maintain a Consolidated Fixed Charge Coverage Ratio of at least 0.5
to 1.00 for the period from January 1, 2009, through the last
day of each fiscal quarter ended after the date of this Waiver
Agreement, as measured as of each such fiscal quarter
end;
(c) shall
deliver to Lender, each in form and substance satisfactory to
Lender in its reasonable discretion, each of the
following:
(i) on
or before the twenty-first day of each calendar month following the
end of each calendar quarter, and with respect to the immediately
preceding calendar quarter, a written report of Borrower’s
compliance with each requirement set forth in the MOU and
Anticipated MOU;
(ii) on
or before the twenty-first day of each calendar month following the
end of each calendar quarter, and with respect to the immediately
preceding calendar quarter, a written report of Borrower’s
compliance with each requirement set forth in the Order and
Anticipated Order;
(iii) within
five days of its occurrence, a written notice of any modification
of, or amendment to, or of failure to comply with, the Order, the
MOU, the Anticipated MOU and the Anticipated Order;
(iv) within
five days of its occurrence, a written notice of any default
occurring after the date hereof on any loan made by Borrower, any
Subsidiary Holding Company or any Subsidiary Bank with an
outstanding principal amount in excess of $1,000,000;
(v) on
or before the twenty-first day of each calendar month, and with
respect to the immediately preceding calendar month, a balance
sheet and income statement prepared in accordance with GAAP with
respect to Borrower, each Subsidiary Holding Company and Subsidiary
Bank;
(vi) within
one Business Day after learning of the occurrence of any event set
forth in Sections 5.14(h) or (i) of the Loan Agreement,
written notice of the occurrence of such event, describing the
same, and if applicable, the steps being taken by the Person(s)
affected with respect thereto;
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(vii) within
three Business Day after learning of the occurrence of any other
event set forth in Section 5.14 of the Loan Agreement, written
notice of the occurrence of such event, describing the same, and if
applicable, the steps being taken by the Person(s) affected with
respect thereto; and.
(viii) within
twenty-one days of the end of each calendar month, and with respect
to the immediately preceding calendar month, a certificate signed
by the Chief Executive Officer and the Chief Financial Officer of
Borrower certifying compliance with all of the Additional
Covenants;
(d) shall not
declare or incur any liability to make any Distribution in respect
of its capital stock;
(e) shall
give Lender access to the books, records and officers of Borrower
upon at least 48 hours notice, and if Lender deems necessary,
Borrower shall arrange for Lender to have access to the books,
records and officers of each Subsidiary Holding Company and each
Subsidiary Bank during normal business hours and upon at least 48
hours notice; and
(f) shall
have stockholders equity in excess of the remainder of (i)
$90 million minus (ii) any write-down of goodwill,
as determined in accordance with GAAP
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