Exhibit 10.7
FOUNDER LOAN AGREEMENT
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THIS FOUNDER LOAN AGREEMENT (this "Agreement") is entered into by and among
each of the individuals executing this Agreement (each a "Lender" and
collectively, the "Lenders") and HCNB BANCORP, INC., a Maryland corporation (the
"Company").
WHEREAS, on February 24, 1998, the Company was incorporated under the laws
of the State of Maryland primarily to own all of the outstanding capital stock
of a de novo national bank
to be named Harbor Capital National Bank (the "Bank"); and
WHEREAS, on December 16, 1998, certain of the Lenders (the "Organizers")
filed an application with the Office of Comptroller of the Currency ("OCC") to
charter the Bank as a national bank; and
WHEREAS, the Organizers intend to file an application with the Board of
Governors of the Federal Reserve System for the Company to become a bank
holding company; and
WHEREAS, the Company intends to offer to the public (the "Offering") shares
of its common stock (the "Common Stock") pursuant to a registration statement
filed with the Securities and Exchange Commission (the "SEC"); and
WHEREAS, subject to regulatory approval, each Organizer will serve as
either an officer or director of the Company and the Bank; and
WHEREAS, in furtherance of the transactions described above (the
"Transactions"), each Lender desires to lend funds or has loaned funds to the
Company on a non-recourse basis to pay for the expenses incurred or to be
incurred in connection with the Transactions, in the amount set opposite such
Lender's name on the signature page of this Agreement; and
WHEREAS, the Lenders understand that if the necessary regulatory approvals
are not obtained or if the Bank does not commence banking operations for any
reasons or if the Company does not sell at least 700,000 shares of Common Stock
in the Offering, the Lenders may not receive the repayment of any of the funds
loaned by them to the Company; and
WHEREAS, the Lenders and the Company intend by this Agreement to delineate
their respective rights and obligations with respect to their loans to the
Company.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. THE LOANS; REPAYMENT OR OTHER SATISFACTION. In accordance with this
Agreement, each Lender hereby agrees to loan to the Company on a non-recourse
basis the
amount set forth opposite his name on the signature page of this Agreement (the
"Loan Amount"). All Loan Amounts shall bear interest accruing at the rate of 5%
per annum.
Each Lender agrees that the Company is obligated to repay such loans only (x)
from the proceeds of the Offering, or, (y) at the Lender's option, by the
issuance of shares of Common Stock in the Offering in satisfaction of such loan.
Such repayment by cash or stock shall be made on the date that proceeds of the
Offerings are first released from escrow and made available to the Company. The
Lenders further agree that if the Offering has not been successfully completed
for any reason by December 31, 1999, the Company shall be dissolved and
liquidated and each of the Lenders shall: (i) receive, on a pro rata basis based
upon the loans made by all of the Lenders, a portion of any of the Company's
remaining assets (after the satisfaction of all liabilities to all other
creditors); and (ii) accept such distribution in full satisfaction of any
amounts due from the Company to the Lenders pursuant to this Agreement.
2. DEPOSIT AND EXPENDITURE OF FUNDS.
a. All funds collected from the Lenders pursuant to this Agreement (the
"Lenders' Funds") have been or will be deposited into an account (the "Loan
Account") established with FMB Bank. Each Lender shall disburse the Loan Amount
to the Company in the following installments due on the following dates:
$10,000 October 31, 1998 $10,000 February 28, 1999
$10,000 December 31, 1998 $10,000 March 31, 1999
$20,000 January 31, 1999 $20,000 April 15, 1999
b. The proper officers of the Company may withdraw funds from the Loan
Account, such funds to be used to pay normal and customary expenses relating to
the Transactions, including, but not limited to, the following: (a) expenses
arising from or relating to the organization, capitalization and operation of
the Company or the Bank; (b) expenses arising from or relating to the Offering;
(c) accounting, legal and due diligence expenses relating to or in connection
with the Transactions; and (d) other expenses arising from or directly relating
to the Transactions. The Lenders hereby acknowledge that the Company will make
withdrawals from the Loan Account when and as funds are deposited, and,
accordingly, if the Offering is not successfully completed, the Lenders will not
receive a repayment of 100% of the Loan Amounts, and may not receive the return
of any of the Loan Amounts.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS. Each Lender hereby
represents and warrants to, and acknowledges to and agrees with, the Company,
the Bank and each other Lender as follows:
(a) Each Lender recognizes that the Bank is a de novo bank to be
organized in the future and has no financial or operating history, that the
organization and operation of the Company and the Bank entails significant
risks, including, without limitation, that the organization of the Company and
the Bank is subject to regulatory approvals and that there are no assurances
that such
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approvals will be obtained and that the Offering may never be commenced, and
that even if commenced, it may be unsuccessful and not raise sufficient funds to
repay the indebtedness arising from the funds loaned by the Lenders to the
Company pursuant to this Agreement.
(b) Within five days after receipt of a request from the Company, each
Lender hereby agrees to provide such information and to execute and deliver such
documents as may be reasonably necessary to comply with any and all laws and
ordinances to which the Company or the Bank is subject.
4. TERMINATION OF PRIOR AGREEMENTS. In the event that any Lender has
entered into any other agreement with the Company or the Bank which is in any
way related to the Transactions, such agreement is hereby terminated and of no
further force or effect.
5. INDEMNIFICATION. Each Lender agrees to indemnify and hold harmless
the Company, the Bank and each of the other Lenders and all of their respective
agents and representatives who are associated with the Transactions and all of
the officers and directors of the Company and the proposed officers and
directors of the Bank against any and all loss, liability, claim, damage and
expense whatsoever (including, but not limited to, any and all expenses
reasonably incurred in investigating, preparing or defending against any
litigation commenced or threatened or any claim whatsoever) arising out of or
based upon any false representations or warranty or breach or failure by the
Lender to comply with any covenant or agreement made by the Lender in this
Agreement.
6. IRREVOCABILITY; BINDING EFFECT. Each Lender hereby acknowledges and
agrees that: (a) the Lender is not entitled to cancel, terminate or revoke this
Agreement; and (b) this Agreement shall survive the death or disability of the
Lender and shall be binding upon and inure to the benefit of the parties and
their heirs, executors, administrators, successors, legal representatives and
assigns.
7. MODIFICATION. Neither this Agreement nor any provisions hereof shall
be waived, modified, discharged or terminated except by an instrument in writing
signed by the party against whom any such waiver, modification, discharge or
termination is sought.
8. NOTICES. Any notice, demand or other communication which any party
hereto may be required, or may elect, to give to any other party hereunder shall
be sufficiently given if: (a) deposited, postage prepaid, in a United States
mail box, stamped registered or certified mail, return receipt requested,
addressed to (i) a Lender at his address as on file with the Company or (ii) the
Company at 0000 X. Xxxx Xxxxx, Xxxxx 000X, Xxxxxxxxx, Xxxxxxxx 00000; or (b)
delivered personally at such address.
9. COUNTERPARTS. This Agreement may be executed through the use of one
or more counterparts, and each counterpart shall, for all purposes, constitute
one agreement binding on all parties, notwithstanding that all parties are not
signatories to the same counterpart.
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10. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties with respect to the subject matter hereof and there are no
representations, covenants or other agreements except as stated or referred to
herein.
11. SEVERABILITY. Each provision of this Agreement is intended to be
severable from every other provision, and the invalidity or illegality of any
portion hereof shall not affect the validity or legality of the remainder
hereof.
12. ASSIGNABILITY. This Agreement is not transferable or assignable by
any of the undersigned.
13. HEADINGS. All headings in this Agreement are included herein for
convenience of reference only, and shall not be deemed to affect the meaning or
construction of any of the provisions hereof.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Maryland applied to residents of that
state executing contracts wholly to be performed in that state.
15. CERTIFICATE OF NON-FOREIGN STATUS. Each Lender declares that, to the
best of his knowledge and belief, the following statements are true, correct and
complete: (a) that unless an Internal Revenue Service Form 4224 has been
completed, the Lender is not a foreign person for purposes of U.S. income
taxation (i.e., he is not a nonresident alien, nor executing this document as an
officer of a foreign corporation, as a partner in a foreign partnership, or as a
fiduciary of a foreign employee benefit plan, foreign trust or foreign estate)
and (b) that the Lender agrees to inform the Company promptly if each of the
Lender becomes a nonresident alien.
16. ADDITIONAL LENDERS. Notwithstanding anything to the contrary
contained in this Agreement, the Company may add additional Lenders (an
"Additional Lender") to this Agreement without obtaining the consent of the
other Lenders executing this Agreement, and to the extent the Lenders make any
representations, warranties or agreements to each other pursuant to this
Agreement, such representations, warranties or agreements shall also be deemed
made to the Additional Lenders.
IN WITNESS WHEREOF, the Lenders and the Company have executed and delivered
this Agreement under their respective seals as of the date indicated under the
parties' signature.
[SIGNATURES BEGIN ON FOLLOWING PAGE]
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Amount of Loan:
$80,000*
---------------------------- ----------------------------------
Xxxxxxx X. Xxxxx
Date:
$80,000*
---------------------------- ----------------------------------
Chi Ping Xxxxx Xxxx
Date:
$80,000*
---------------------------- ----------------------------------
Xxxxxx X. Xxxxxxx
Date:
$80,000*
---------------------------- ----------------------------------
Xxxxx X. Xxxxxxxx
Date:
$80,000*
---------------------------- ----------------------------------
Li-xxx Xxx
Date:
$80,000*
---------------------------- ----------------------------------
Xxxxxx X. Xxxx
Date:
* The loans will be disbursed by the above-named Lenders in the installments
described in Section 2 of this Agreement.
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