EXHIBIT 99.1
CONSENT SUPERVISORY AGREEMENT
This Supervisory Agreement (Agreement) is made and is effective this
3/rd/ day of December, 2001 (Effective Date), by and between Approved Federal
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Savings Bank, Virginia Beach, Virginia, OTS Docket No. 08569 (Approved or the
Association), a federally chartered stock savings association, and the Office of
Thrift Supervision (OTS), a bureau of the United States Department of the
Treasury, acting through its Southeast Regional Director or his designee
(Regional Director).
WHEREAS, the parties hereto acknowledge that this is a consent supervisory
agreement, voluntarily entered into by the parties in their mutual efforts to
improve the Association;
WHEREAS, the OTS is the primary federal regulator of the Association;
WHEREAS, based upon: (i) the April 2, 2001 OTS Safety and Soundness Report
of Examination of Approved (SROE), (ii) the April 2, 2001 OTS examination of
Approved Financial Corporation (AFC), the Association's holding company, (XX
XXX); (iii) the September 25, 2000 OTS Compliance Examination Report (CROE); and
(iv) the results of the OTS's ongoing Field Visit that began on June 6, 2001
(Field Visit), the OTS is of the opinion that the Association has engaged in
acts and practices that: (a) have resulted in violations of certain of the laws
or regulations to which the Association is subject; and (b) are considered to be
unsafe and unsound;
WHEREAS, as a result of the foregoing, the OTS is of the opinion that
grounds exist for the initiation of an administrative proceeding against the
Association;
WHEREAS, as a result of the foregoing, the OTS issued a Directive to the
Association dated April 20, 2001, requiring specific immediate actions by the
Association and changes in future operations;
WHEREAS, on September 24, 2001, the Association submitted a written plan
addressing issues raised in the SROE, and on September 7, 2001, resubmitted a
revised version of a compliance plan originally dated February 19, 2001,
relating to issues in the CROE, and which together will be referred to as the
"Compliance Plan";
WHEREAS, the OTS and the Association are of the view that it is appropriate
for the Association to enter into this Agreement and to take measures intended
to ensure that the Association will: (i) comply with all applicable laws and
regulations; and (ii) engage in safe and sound practices; and
WHEREAS, the Association, acting through its Board of Directors (Board),
without admitting or denying that such grounds exist except those as to
jurisdiction, which are admitted, wishes to cooperate with the OTS and to
evidence the intent to: (i) comply with all applicable laws and regulations; and
(ii) engage in safe and sound practices.
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NOW THEREFORE, in consideration of the above premises and the mutual
undertakings set forth herein, the parties hereto agree as follows:
1. Compliance With Laws, Regulations & Safe and Sound Practices.
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The Association, its directors, officers, employees, agents, and
subordinate organizations shall take all necessary and appropriate actions to
achieve compliance with the following laws, regulations, and safe and sound
business practices:
a. 12 U.S.C. (S)1468 (Transactions with Affiliates)
b. 12 U.S.C. (S)2601 et seq. (Real Estate Settlement Procedures)
c. 15 U.S.C. (S)1601 (Truth in Lending)
d. 12 C.F.R. (S)226.32 (Truth in Lending)
e. 12 U.S.C. (S)2301 (Home Mortgage Disclosure)
f. 12 C.F.R. (S)203.1 et seq.
g. 12 U.S.C. (S)1464(v) (Financial Reporting)
h. 12 C.F.R. (S)563.170(c) (Financial Reporting)
i. 12 C.F.R. (S)(S) 563.550, 563.555, and 563.560 (Notice of Change of
Director or Senior Executive Officer;
j. 12 C.F.R. (S) 563.161 and Thrift Activities Handbook Section 310
(Director and Officer Contracts and Compensation);
k. 12 C.F.R. (S) 502 and Thrift Bulletin 48-17 (Fees).
x. Xxxxxx Activities Handbook Section 310 (Third Party Contracts); and
m. Regulatory Bulletin (RB) 3b (Asset Growth).
2. Promissory Note.
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On or before the Effective Date of this Agreement, Approved must obtain a
note from AFC, in the form mutually agreed upon by the Association and the OTS,
evidencing AFC's legal obligation to repay the Association $3,049,264.00 (Note).
Upon execution, the Note shall be incorporated into this Agreement, it may not
be amended without the written approval of the
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Regional Director, and any deviation from the approved terms of the Note shall
be a violation of this Agreement.
3. Lending.
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The Board has submitted to the Regional Director, for his prior written
approval a comprehensive policy addressing the lending issues raised by the SROE
(Lending Policy). The OTS is currently reviewing the Lending Policy to
determine whether it complies with the minimal standards outlined in subsection
a, below.
a. The Lending Policy must include, at a minimum:
i. provisions ensuring that for any assignment or transfer of loans
or any other assets (Assets) from the Association to AFC, Approved
simultaneously receives full payment, in cash, for each Asset assigned or
transferred;
ii. provisions stipulating that Approved may only underwrite and
originate loans that meet the underwriting standards and criteria of the various
investors that purchase those loans and that all loans made and funded by
Approved must be saleable under those standards;
iii. provisions that will prevent Approved from underwriting and
originating loans that would increase the dollar amount of, or the number of
loans included in, its portfolio of loans held for yield; and
iv. a detailed fee schedule and written rationale for proposed future
charges to Approved for any services rendered to it by AFC and its employees.
b. The Lending Policy shall conform to all applicable statutes,
regulations, OTS policy and guidance. The Board shall make all changes to the
Lending Policy required by the Regional Director within 10 days of receipt of
written direction from the Regional Director. Upon approval by the Regional
Director, the Lending Policy shall be incorporated into this Agreement and any
deviation from the approved terms of the Lending Policy shall be a violation of
this Agreement. All reports required by the Lending Policy, together with
applicable Board minutes relating to them, shall be transmitted to the Regional
Director no later than 15 days after the Board meeting at which they are
presented. If, thereafter, the Association proposes changes to the Lending
Policy, the Regional Director must approve such changes in writing at least 30
days prior to their implementation.
4. Consumer Compliance.
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The Board has submitted to the Regional Director, for his prior written
approval, revisions to update and amend the Association's September 7, 2001
Consumer Compliance Plan
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to address certain issues raised by the CROE (Consumer Compliance Policy). The
OTS is currently reviewing the Consumer Compliance Policy to determine whether
it complies with the minimal standards outlined in subsections a through e,
below.
a. The Consumer Compliance Policy must include, at a minimum, the
following provisions relating to administration:
i. procedures for a reporting mechanism to permit the Board to
determine that Management is completing the compliance procedures set forth in
the Consumer Compliance Policy;
ii. procedures that will ensure all loans adhere to risk-based
pricing guidelines, and that broker and loan fees are not excessive, and
requiring detailed written explanations of variations from investor rate sheets;
iii. procedures to enhance record retention and ensure compliance with
regulatory requirements;
iv. procedures requiring all loans include an analysis of the
borrower's ability to repay the loan from assets or income independent of the
collateral for the loan;
v. procedures requiring that the analysis set forth in iv., above,
will include, without limitation, applicable debt to income ratios, sources of
income, and the impact of any pre-payment or balloon features of the loan; and
vi. the procedures in iv and v above shall be implemented regardless
of whether the Association is required by Section 3(a)(ii) to adhere to
underwriting guidelines of individual investors that do not include such
procedures.
b. The Consumer Compliance Policy must include, at a minimum, the
following provisions relating to the Home Mortgage Disclosure Act:
i. procedures implementing a program of testing data generated
pursuant to the requirements of the Home Mortgage Disclosure Act (HMDA) and
Regulation C (12 C.F.R. Part 203); and
ii. procedures ensuring that specific fields are being completed
correctly.
c. The Consumer Compliance Policy must include, at a minimum, the
following provisions relating to the Truth in Lending Act:
i. procedures ensuring that the Association will address the 14
loans
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identified at page 10 of the CROE that violate the provisions of 12 C.F.R.
(S)226.32;
ii. a plan, acceptable to the Regional Director, that will relieve
these 14 borrowers from paying a prepayment penalty on the loans in question;
and
iii. provisions ensuring that the Board will adopt procedures
requiring that the Compliance Officer review all advertisements and mailers to
be used by the Association prior to their dissemination, and that the average
rate paid by its borrowers for a particular type of loan be displayed at least
as prominently as its best rate in any written advertisement.
d. The Consumer Compliance Policy must include, at a minimum, the
following provisions relating to the Real Estate Settlement Procedures Act
(RESPA):
i. procedures ensuring that loan and broker fees actually charged
to customers reasonably approximate those disclosed in the Good Faith Estimates;
ii. procedures providing for implementation of a signed agreement
between broker and applicant regarding loan fees at the time the Good Faith
Estimate is given;
iii. procedures providing for approval of the loan by Approved's
Compliance Committee where loan fees charged by a broker exceed the Good Faith
Estimate by 25% or more; and
iv. procedures providing that all such approvals by the Compliance
Committee must be reported to the Board on a quarterly basis no later than 30
days after the end of each calendar quarter during which the Consumer Compliance
Policy is in effect.
e. The following portions of the Association's September 7, 2001
Compliance Plan submission shall become part of the Consumer Compliance Policy
and are incorporated herein by reference: (i) procedures for transactional
reviews to detect errors; (ii) procedures for development of a schedule for
compliance training and centralization of records; (iii) procedures to ensure
that personnel verify the accuracy and timeliness of ARM loan adjustments; and
(iv) procedures for correction of the standard servicing transfer letter.
f. The Consumer Compliance Policy shall conform to all applicable
statutes, regulations, OTS policy and guidance. The Board shall make all changes
to the Consumer Compliance Policy required by the Regional Director within 10
days of receipt of written direction from the Regional Director. Upon approval
by the Regional Director the Consumer Compliance Policy shall be incorporated
into this Agreement and any deviation from the approved terms of the Consumer
Compliance Policy shall be a violation of this Agreement. All reports required
by the Consumer Compliance Policy, together with applicable Board minutes
relating to them, shall be transmitted to the Regional Director no later than 15
days after the
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Board meeting at which they are presented. Any reimbursement of pre-payment
penalties called for by this section shall be completed within 90 days of the
Effective Date. If, thereafter, the Association proposes changes to the Consumer
Compliance Policy, the Regional Director must approve such changes in writing at
least 30 days prior to their implementation.
5. Operational Policies and Procedures.
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The Board has submitted to the Regional Director, for his prior
written approval, a comprehensive policy addressing the operational and policy
procedures issues raised by the 2001 Field Visit (Operations Policy). The OTS is
currently reviewing the Operations Policy to determine whether it complies with
the minimal standards outlined in subsection a, below.
a. The Operations Policy must include, at a minimum:
i. procedures to ensure that Approved complies with Section 11 of
the Home Owners' Loan Act, 12 U.S.C. (S) 1468, Sections 23A and 23B of the
Federal Reserve Act, 12 U.S.C. (S)(S)371c and 371c-1, and 12 C.F.R. (S)(S)563.41
and 563.42;
ii. procedures, in connection with Section 5(a)(i), above, that
operate to prohibit AFC from withholding or retaining funds due to Approved from
loan servicing activities, and that prevent the establishment of additional
receivables in connection with funds owed by AFC to Approved;
iii. procedures to ensure that Approved uses its best efforts to
obtain adequate warehouse line of credit facilities at the Association for the
purpose of providing additional funding sources for loans held for sale;
iv. procedures to ensure the Association adopts a policy that no
request for dividends will be made to OTS until Approved's regulatory capital
levels are restored to at least the levels reported as of December 31, 2000; and
the Association will remain well-capitalized following the payment of the
dividend; and
v. procedures to ensure the Association develops a plan to achieve
operational efficiencies through ongoing cost controls and ongoing efforts to
reduce the average time that loans are held by Approved before the loans are
sold.
b. The Operations Policy shall conform to all applicable statutes,
regulations, OTS policy and guidance. The Board shall make all changes to the
Operations Policy required by the Regional Director within 10 days of receipt of
written direction from the Regional Director. Upon approval by the Regional
Director, the Operations Policy shall be incorporated into this Agreement and
any deviation from the approved terms of the Operations Policy shall be a
violation of this Agreement. All reports required by the Operations Policy,
together with applicable Board minutes relating to them, shall be transmitted to
the Regional Director no later
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than 15 days after the Board meeting at which they are presented. If,
thereafter, the Association proposes changes to the Lending Policy, the Regional
Director must approve such changes in writing at least 30 days prior to their
implementation.
6. Financial Reporting.
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The Board has submitted to the Regional Director for his prior written
approval, a comprehensive policy addressing the financial reporting issues
raised by the SROE (Financial Reports Policy). The OTS is currently reviewing
the Financial Reports Policy to determine whether it complies with the minimal
standards outlined in subsections a, b, c, and d, below.
a. The Financial Reports Policy shall contain provisions ensuring that
the OTS is provided the following Daily Financial Reports based on consolidated
activity for AFC and Approved as of the 15th and final day of each calendar
month:
i. Loan Funding Report listing by day the number and dollar amount
of loans funded, categorized by retail conforming, retail non-conforming, retail
government, wholesale -East Division, and wholesale - West Division;
ii. Loan Sales Report listing by day the number and dollar amount of
loans sold to investors and average sales premiums, categorized by investor;
iii. Sources of Funds Report listing by day the aggregate balance of
deposit liabilities, the balance and unused capacity of all other borrowings,
categorized by source, and the balance of liquid assets, categorized by type;
and
iv. The Report Policy also must include provisions to ensure that OTS
is provided each Daily Financial Report as of the 15th day of the month no later
than the 20th day of the month and each Daily Financial Report as of month end
no later than the 5th day of the following month.
b. The Board shall also adopt provisions ensuring that OTS is provided
the following Monthly Financial Reports no later than the 30th day of the month
following the month for which the report is prepared:
i. Monthly Income Statement (consolidated and thrift-only);
ii. Month-end Statement of Financial Condition (consolidated and
thrift only); and
iii. Month-end Deposit Maturity Schedule.
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c. The Board shall further adopt provisions to ensure that on each
financial reporting date:
i. management evaluates and reports all held for sale loans at the
lower of cost or market value;
ii. any decline in value, including those attributable to credit
quality, are accounted for as increases in a valuation allowance for held-for-
sale loans, not as adjustments to the allowance for loan and lease losses
(ALLL);
iii. such valuation allowances are not reported as part of ALLL; and
iv. are not eligible for inclusion in Tier 2 capital for risk based
capital purposes.
d. The Financial Reports Policy must include provisions to ensure that
any reports filed with OTS, whether pursuant to the Financial Reports Policy or
otherwise, are complete, accurate, free from misrepresentation and in compliance
with 12 C.F.R. (S)562.2(b)(1), the TFR Instructions and any directives of OTS.
e. The Financial Reports Policy shall conform to all applicable statutes,
regulations, OTS policy and guidance. The Board shall make all changes to the
Financial Reports Policy required by the Regional Director within 10 days of
receipt of written direction from the Regional Director. Upon approval by the
Regional Director, the Financial Reports Policy shall be incorporated into this
Agreement and any deviation from the approved terms of the Financial Reports
Policy shall be a violation of this Agreement. All Board minutes relating to
reports required by the Financial Reports Policy shall be transmitted to the
Regional Director no later than 15 days after the Board meeting at which they
are presented. If, thereafter, the Association proposes changes to the
Financial Reports Policy, the Regional Director must approve such changes in
writing at least 30 days prior to their implementation.
7. Modeling Tool.
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The Board has submitted to the Regional Director, for his prior written
approval, a modeling tool for the purpose of forecasting, monitoring and stress
testing projections of operational performance and balance sheet composition of
both the Association and AFC (Modeling Tool). The OTS is currently reviewing
the Modeling Tool to determine whether it complies with the minimal standards
outlined in subsection a, below.
a. The Modeling Tool must include, at a minimum:
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i. the capability of projecting profit and loss, balances of loans
held for sale, and adequacy of regulatory capital given inputs of projected loan
origination and sale volumes and other inputs and assumptions; and
ii. provisions that require it be used quarterly, and the results of
the tests conducted be reported in the minutes of the Board.
b. The Modeling Tool shall conform to all applicable statutes,
regulations, OTS policy and guidance. The Board shall make all changes to the
Modeling Tool required by the Regional Director within 30 days of receipt of
written direction from the Regional Director. Upon approval by the Regional
Director, the Modeling Tool shall be incorporated into this Agreement and any
deviation from the approved terms of the Modeling Tool shall be a violation of
this Agreement. All reports required by the Modeling Tool, together with
applicable Board minutes relating to them, shall be transmitted to the Regional
Director no later than 15 days after the Board meeting at which they are
presented. If, thereafter, the Association proposes changes to the Modeling
Tool, the Regional Director must approve such changes in writing at least 30
days prior to their implementation.
8. Director Responsibility.
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Notwithstanding the requirements of this Agreement that the Board submit
various matters to the Regional Director for the purpose of receiving his
approval, non-objection or notice of acceptability, such regulatory oversight
does not derogate or supplant each individual director's continuing fiduciary
duty. The Board shall have the ultimate responsibility for overseeing the safe
and sound operation of the Association at all times, including compliance with
the determinations of the Regional Director as required by this Agreement.
9. Compliance with Agreement.
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a. The Board and officers of the Association shall take immediate action
to cause the Association to comply with the terms of this Agreement and shall
take all actions necessary or appropriate thereafter to cause the Association to
continue to carry out the provisions of this Agreement.
b. The Board, on a quarterly basis, shall adopt a board resolution (the
Compliance Resolution) formally resolving that, following a reasonably diligent
inquiry of relevant information (including reports of management), to the best
of its knowledge and belief, during the immediately preceding calendar quarter,
the Association has complied with each provision of this Agreement currently in
effect, except as otherwise stated. The Compliance Resolution shall: (i) specify
in detail how, if at all, full compliance was found not to exist, and (ii)
identify all notices of exemption or non-objection issued by the Regional
Director that were outstanding as of the date of its adoption.
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c. The minutes of the meeting of the Board shall set forth the following
information with respect to the adoption of each Compliance Resolution: (i) the
identity of each director voting in favor of its adoption, and (ii) the identity
of each director voting in opposition to its adoption or abstaining from voting
thereon, setting forth each such director's reasoning for opposing or
abstaining.
d. Within 30 calendar days after the end of each calendar quarter,
beginning with the end of the first calendar quarter following the Effective
Date, the Association shall provide to the Regional Director a certified true
copy of the Compliance Resolution[s] adopted at the Board meeting. The Board, by
virtue of the Association's submission of a certified true copy of such
Compliance Resolution to the Regional Director, shall be deemed to have
certified to the accuracy of the statements set forth in each Compliance
Resolution, except as provided below. In the event that one or more directors
do not agree with the representations set forth in a Compliance Resolution, such
disagreement shall be noted in the minutes of the Association.
e. The Board shall promptly respond to any request from the OTS for
documents to demonstrate compliance with this Agreement.
10. Definitions.
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All technical words or terms used in this Agreement for which meanings are
not specified or otherwise provided by the provisions of this Agreement shall,
insofar as applicable, have meanings as defined in Chapter V of Title 12 of the
Code of Federal Regulations, HOLA, FDIA or OTS Memoranda. Any such technical
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words or terms used in this Directive and undefined in said Code of Federal
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Regulations, HOLA, FDIA, or OTS Memoranda shall have meanings that are in
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accordance with the best custom and usage in the savings and loan industry.
11. Successor Statutes, Regulations, Guidance, Amendments.
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Reference in this Agreement to provisions of statutes, regulations, and OTS
Memoranda shall be deemed to include references to all amendments to such
provisions as have been made as of the Effective Date and references to
successor provisions as they become applicable.
12. Notices.
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Except as otherwise provided herein, any request, demand, authorization,
direction, notice, consent, waiver or other document provided or permitted by
the Agreement to be made upon, given or furnished to, delivered to, or filed
with:
a. The OTS by the Association, shall be sufficient for every purpose
hereunder if in writing and mailed, first class, postage prepaid or sent via
overnight delivery service or physically delivered, in each case addressed to
the Regional Director, Office of Thrift Supervision, Department of the Treasury,
0000 Xxxxxxxxx Xxxxxx, X.X., Xxxxxxx, Xxxxxxx, 00000,
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or telecopied to (000) 000-0000 and confirmed by first class mail, postage
prepaid, overnight delivery service or physically delivered, in each case to the
above address.
b. The Association by the OTS, shall be sufficient for every purpose
hereunder if in writing and mailed, first class, postage prepaid or sent via
overnight delivery service or physically delivered, in each case addressed to
the Association at 0000 Xxxxxxxxx Xxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxxx Xxxxx,
Xxxxxxxx 00000 and confirmed by first class mail, postage prepaid, overnight
delivery service or physically delivered, in each case to the above address.
13. Duration, Termination or Suspension of Agreement.
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a. This Agreement shall: (i) become effective upon its execution by the
OTS, through its authorized representative whose signature appears below, and
(ii) remain in effect until terminated, modified or suspended in writing by the
OTS, acting through its Director or the Regional Director (including any
authorized designee thereof).
b. The Regional Director in his sole discretion, may, by written notice,
suspend any or all provisions of this Agreement.
14. Time Limits.
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Time limitations for compliance with the terms of this Agreement run from
the Effective Date, unless otherwise noted.
15. Effect of Headings.
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The Section headings herein are for convenience only and shall not affect
the construction hereof.
16. Separability Clause.
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In case any provision in this Agreement is ruled to be invalid, illegal or
unenforceable by the decision of any Court of competent jurisdiction, the
validity, legality and enforceability of the remaining provisions hereof shall
not in any way be affected or impaired thereby, unless the Regional Director in
his sole discretion determines otherwise.
17. No Violations of Law, Rule, Regulation or Policy Statement Authorized; OTS
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Not Restricted.
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Nothing in this Agreement shall be construed as: (i) allowing the
Association to violate any law, rule, regulation, or policy statement to which
it is subject, or (ii) restricting the OTS from taking such action(s) as are
appropriate in fulfilling the responsibilities placed upon it by
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Supervisory Agreement (12/03/01)
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law, including, without limitation, any type of supervisory, enforcement or
resolution action that the OTS determines to be appropriate.
18. Successors in Interest/Benefit.
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The terms and provisions of this Agreement shall be binding upon, and inure
to the benefit of, the parties hereto and their successors in interest. Nothing
in this Agreement, express or implied, shall give to any person or entity, other
than the parties hereto and the Federal Deposit Insurance Corporation and their
successors hereunder, any benefit or any legal or equitable right, remedy or
claim under this Agreement.
19. Signature of Directors.
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Each Director signing the Agreement attests, by such act, that she or he
voted in favor of a Board resolution authorizing the execution of this Agreement
by the Association.
20. Integration Clause.
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This Agreement represents the final written agreement of the parties with
respect to the subject matter hereof and constitutes the sole agreement of the
parties, as of the Effective Date, with respect to such subject matter. However,
upon approval by the Regional Director, all policies required by this Agreement
shall become part of this Agreement and any deviation from these policies shall
be deemed a violation of this Agreement.
21. Enforceability of Agreement.
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The Association represents and warrants that this Agreement has been duly
authorized, executed, and delivered, and constitutes, in accordance with its
terms, a valid and binding obligation of the Association. The Association
acknowledges that this Agreement, is a "written agreement" entered into with the
OTS within the meaning of Xxxxxxx 0 xx xxx XXXX 00 X.X.X. (X)0000.
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IN WITNESS WHEREOF, the OTS, acting by and through the Regional Director
and the Association, in accordance with a duly adopted resolution of its Board,
hereby execute this Agreement as of the Effective Date.
OFFICE OF THRIFT SUPERVISION THE ASSOCIATION
By: By:
___________________________________ ____________________________
Xxxx X. Xxxx Xxxx X. Xxxxxxxx
Regional Director Director/President
___________________________________ ____________________________
Xxxx X. Xxxxxx Xxxxx Xxxxxxx
Director/Executive Vice president Director/Managing Director
___________________________________ ____________________________
Xxxx X. Xxxxxx Xxxxxx X. Xxxxxxx
Director Director
___________________________________ ____________________________
Xxxx X. Xxxxxx Xxxxxxx X. Xxxxxxxx
Director Director
PROMISSORY NOTE
Three Million Forty Nine Thousand Two Hundred Sixty Four and 00/100 Dollars
($3,049,264.00)
FOR VALUE RECEIVED, the undersigned, APPROVED FINANCIAL CORPORATION
(MAKER), hereby promises to pay to the order of APPROVED FEDERAL SAVINGS BANK, a
savings association chartered under the laws of the United States and having its
principal business office at 0000 Xxxxxxxxx Xxxxxxx Xxxxxxx, Xxxxx 000, Xxxxxxxx
Xxxxx, Xxxxxxxx (HOLDER), by wire transfer, on or before January 1, 2007 (as
provided herein), in lawful money of the United States, the principal sum of
Three Million Forty Nine Thousand Two Hundred Sixty Four and 00/100 Dollars
($3,049,264.00), together with interest on the unpaid principal balance of this
Note outstanding from time to time from the date hereof until this Note and all
accrued interest thereon is fully paid at the Interest Rate, as hereinafter
defined (computed on the basis of the actual number of days elapsed in a 365-day
year).
From and after the date hereof, interest on this note shall begin to
accrue. Interest on this note shall be paid in consecutive quarterly
installments, commencing on January 1, 2002, and on the first day of April,
July, October, and January thereafter (each such date shall sometimes herein be
called a Payment Date). Interest hereunder due and payable on each Payment Date
shall be calculated as of and shall accrue through the last day of the month
immediately preceding each such Payment Date (each such quarterly period shall
sometime herein be called a Payment period). Principal on this note shall be
paid in quarterly installments, beginning on July
1, 2002, and each Payment Date thereafter. Principal payments shall be equal to
1/40th of the face amount of this note, or $76, 231.60. However, the payment on
July 1, 2007 will be a balloon payment of the remaining principal balance and
all accrued and unpaid interest.
Except for any assignment made in connection with the HOLDER'S pledge of
this Note to secure any indebtedness, this Note shall not otherwise be
assignable or negotiable without the prior written consent of the MAKER. Subject
to the preceding sentence, the provisions of this Note shall inure to the
benefit of and be a binding obligation of any successor in interest to the
HOLDER and MAKER, respectively.
1. Determination of Interest Rate. As used herein, for any Payment Period
------------------------------
the term "Interest Rate" means the rate of interest determined through
application of the following formula: Prime-Rate + 100 basis points. To
determine the interest payment during each payment period, MAKER shall multiply
the outstanding principal balance times the interest rate times 1/365th for each
day during the payment period. At the end of the payment period, MAKER shall
pay, on the Payment Date, the sum of each of these daily calculations. For
purposes of the formula, Prime Rate means the Prime Rate published by the Wall
Street Journal on each business day. For calculations on Saturday and Sunday,
MAKER shall use the Prime Rate effective the prior Friday. MAKER shall adjust
the interest rate used for each day based on any applicable adjustment in the
published Prime Rate.
2. Prepayment of Principal and Interest. The MAKER may, at its option, at
------------------------------------
any time or from time to time prepay all or any portion of the principal balance
of this Note, without premium or penalty, upon 15 days prior written notice
delivered to the HOLDER, provided that such prepayment shall be made together
with accrued and unpaid interest on the principal amount so prepaid to the date
of such prepayment.
3. Events of Default; Acceleration of Principal and Interest. If the
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MAKER shall fail to pay any principal or interest when due and payable hereunder
and such failure shall continue for 15 days after written demand for such
payment has been delivered to the MAKER by the HOLDER, if the Maker experiences
a material adverse change in its financial or operating condition, or if the
MAKER shall fail to observe and perform any of its covenants or agreements
hereunder and such failure shall continue for 15 days after written notice
thereof has been delivered to the MAKER by the HOLDER, there shall be an Event
of Default. If an Event of Default shall occur, the HOLDER may by further
written notice delivered to the MAKER declare the entire unpaid principal
balance hereunder and all accrued and unpaid interest thereon to be immediately
due and payable, whereupon the same shall forthwith become due and payable
without any presentment or further demand or notice of any kind, all of which
are hereby expressly waived by the MAKER. HOLDER shall not undertake any action
to declare an Event of Default without the prior written approval of the
Regional Director of the Southeast Region of the Office of Thrift Supervision
(OTS) (Regional Director) The HOLDER shall certify to the OTS that payment has
been made after each quarterly installment has been paid, and shall immediately
notify the OTS of an event of default. The Regional Director may, upon the
occurrence of the above, require the HOLDER to declare an Event of Default,
which HOLDER agrees it will do if so directed.
4. Replacement of a Lost, Stolen, Destroyed or Mutilated Note. Upon
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receipt of evidence reasonably satisfactory to the MAKER of the loss, theft,
destruction, or mutilation of this Note and, in the case of any such loss,
theft, or destruction, upon receipt of indemnity reasonably satisfactory to the
MAKER, or, in the case of any such mutilation, upon surrender and cancellation
of this Note, the MAKER will, at the HOLDER'S expense, issue and deliver to
the HOLDER, in lieu of or in exchange for such lost, stolen, destroyed or
mutilated Note, a new note of like tenor and having a principal amount and
accrued interest thereon equal to the unpaid principal balance of this Note and
the accrued interest thereon, if any.
5. Delivery of Notices. Except as otherwise provided herein, any request,
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demand, authorization, direction, notice, consent, waiver or other document
provided or permitted by the Agreement to be made upon, given or furnished to,
delivered to, or filed with:
a. The HOLDER by the MAKER, shall be sufficient for every purpose
hereunder if in writing and mailed, first class, postage prepaid or sent via
overnight delivery service or physically delivered at 0000 Xxxxxxxxx Xxxxxxx
Xxxxxxx, Xxxxx 000, Xxxxxxxx Xxxxx, Xxxxxxxx 00000, and confirmed by first class
mail, postage prepaid, overnight delivery service or physically delivered, in
each case to the above address, with a copy addressed to the Regional Director,
Office of Thrift Supervision, Department of the Treasury, 0000 Xxxxxxxxx Xxxxxx,
X.X., Xxxxxxx, Xxxxxxx, 00000, or telecopied to (000) 000-0000.
b. The MAKER by the HOLDER, shall be sufficient for every purpose
hereunder if in writing and mailed, first class, postage prepaid or sent via
overnight delivery service or physically delivered, at 0000 Xxxxxxxxx Xxxxxxx
Xxxxxxx, Xxxxx 000, Xxxxxxxx Xxxxx, Xxxxxxxx 00000 and confirmed by first class
mail, postage prepaid, overnight delivery service or physically delivered, in
each case to the above address, with a copy addressed to the Regional Director,
Office of Thrift Supervision, Department of the Treasury, 0000 Xxxxxxxxx Xxxxxx,
X.X., Xxxxxxx, Xxxxxxx, 00000, or telecopied to (000) 000-0000.
6. Governing Law. This Note shall be governed by and construed in
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accordance with the substantive laws of the State of Virginia, except where
such instruments are controlled
by statutes, regulations, rulings or interpretations of the Federal Government
of the United States of America or any agency thereof.
7. Headings. The headings of the paragraphs of this Note are for convenience
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only and do not constitute a part of this Note.
IN WITNESS WHEREOF, the MAKER has caused this note to be duly executed and
sealed as of the date first written above.
ATTEST: APPROVED FINANCIAL CORPORATION
By: Xxxxx X. Xxxxx
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Chief Executive Officer
Agreed to and Acknowledged: APPROVED FEDERAL SAVINGS BANK
By: Xxxx Xxxxxxxx
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President
Dated: November 28, 2001
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