April 1, 2009
April 1,
2009
Xxxxx X.
Xxxxxxx, Trustee
Xxxxxx X.
Xxxxxxx, Trustee
Xxxxx X.
Xxxxxxxx, Trustee
MainStreet
Financial Corporation Employee Stock Ownership Trust
000 X.
Xxxxx Xxxxxx
Hastings,
Michigan 49508
|
|
Re:
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Loan
Facility from Independent Bank (successor to Independent Bank South
Michigan) (the “Bank”)
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Dear
Trustees:
This
letter (the “Letter Agreement”) pertains to the credit facility outstanding from
the Bank to MainStreet Financial Corporation Employee Stock Ownership Trust (the
“Borrower”) pursuant to a certain Loan and Pledge Agreement, Promissory Note,
and other related documents and agreements dated December 22, 2006, by and
between the parties, as the same may be amended, modified, supplemented,
restated, or replaced from time to time (collectively, the “Loan Documents”),
which facility involves a term loan in the original principal amount of $284,280
(the “Loan”).
Conditional
Waiver of Failure to Meet Certain Covenants
The
Bank and the Borrower acknowledge the Loan Documents require MainStreet
Financial Corporation (the “Guarantor) to achieve a consolidate return on assets
(ROA) of greater than 0.00%, measured quarterly in accordance with generally
accepted accounting principles and regulatory requirements. The Guarantor has
advised the Bank that the Guarantor failed to achieve a consolidated ROA greater
than 0.00% during any quarter of 2008 and is not likely to achieve such required
ROA for the first two quarters of 2009.
The Bank
and the Borrower acknowledge the Loan Documents require the Borrower’s thrift
subsidiary to remain “well capitalized”. The Borrower has advised the
Bank that the Borrower’s thrift subsidiary failed to be “well capitalized” at
12/31/2008 and is not likely to achieve a “well capitalized” regulatory
designation for the first two quarters in 2009.
In
addition, the Bank and the Borrower acknowledge the Loan Documents require the
Guarantor to maintain consolidated non-accrual loans and ORE of less than 20% of
Tier 1 capital and less than 1.5% of total loans, in each case measured
quarterly in accordance with generally accepted accounting principals and
regulatory requirements. The Guarantor has advised the Bank that the Guarantor
failed to meet these covenants for one or more quarters in 2008 and may not
achieve these covenants for one or more quarters in 2009. The defaults described
in this paragraph and in the preceding paragraphs are collectively referred to
as the “Defaults”.
MainStreet
Financial Corporation Employee Stock Ownership Trust
April 1,
2009
Page
2
The
foregoing enumeration of Defaults is without prejudice to the rights of the Bank
to identify further defaults and events of the default, whether now existing or
hereafter arising, as and when said defaults become known to the
Bank.
As
a result of the Defaults, the Loan is due and payable in full and the Bank is
entitled to exercise the remedies available to it under the Loan Documents and
applicable law.
The
Bank hereby agrees to refrain and forbear from taking any action to enforce its
remedies with respect to the Defaults upon the following
conditions:
(a) The
Borrower must remain, in all respects and at all times, in full compliance with
this letter Agreement;
(b) Except
for the Defaults, the Borrower and the Guarantor must remain, in all respects
and at all times, in full compliance with each of the Loan Documents, including
(without limitation) the obligation to make all periodic payments on the Loan as
and when due; and
(c) The
Guarantor must remain, in all respects and at all times, in full compliance with
each of the Business Loan Agreement, Promissory Note, Pledge Agreement and
Irrevocable Proxy, and other related documents and agreements dated June 30,
2005, by and between the Bank and the Guarantor, as the same may be amended,
modified, supplemented, restated, or replaced from time to time (collectively,
the “Guarantor Loan Documents”), except to the extent specifically waived in
that certain letter agreement between the Guarantor and the Bank dated on or
about the same date as this Letter Agreement.
If
any of the above conditions are not met at any time and for any reason, this
Letter Agreement and the Bank’s forbearance hereunder shall automatically
terminate, without notice to Borrower or Guarantor and without prejudice to any
rights of the Bank. Without limiting the generality of the foregoing, in such
event, the Bank shall be entitled to claim and collect damages from the Borrower
and Guarantor with respect to all periods in which any default or event of
default existed pursuant to any of the Loan Documents, including at all times
from and after the date of this Letter Agreement and including with respect to
the Defaults.
Notwithstanding
the foregoing or anything to the contrary in this Letter Agreement, this Letter
Agreement and the Bank’s forbearance hereunder shall expire automatically and
without notice upon the earlier
of: (i) June 30, 2009; (ii) the occurrence of any default or event of default
under any of the Loan Documents, other than the defaults listed above; or (iii)
the occurrence of any default of event of any default under any of the Guarantor
Loan Documents, except to the extent specifically waived in that certain letter
agreement between the Guarantor and the Bank dated on or about the same date as
this Letter Agreement. Notwithstanding anything herein to the contrary, nothing
in this Agreement shall be construed so as to imply any commitment by the Bank
to forebear in any respect regarding any of the Loan Documents at any time on or
after June 30, 2009.
The
Bank’s agreement to forbear hereunder shall be effective only upon the
acceptance and execution of this Letter Agreement on the part of the Borrower
and Guarantor, which must occur by 5:00 p.m. (EDT) on April
10, 2009 or this Letter Agreement will be null and void and
of no force or effect. The Borrower’s and the Guarantor’s execution of this
Letter Agreement shall constitute their respective
MainStreet
Financial Corporation Employee Stock Ownership Trust
April 1,
2009
Page
3
acknowledgement
of the Defaults and the Bank’s rights and remedies resulting there from, and
shall further constitute the Borrower’s and the Guarantor’s acceptance of and
agreement to all of the terms and provisions of this Letter
Agreement.
In
consideration of the Bank’s agreements set forth in this Letter Agreement, the
Borrower and the Guarantor each hereby: (a) releases, quits and forever
discharges the Bank and its affiliates, officers, directors, agents (including,
without limitation, its legal representatives), successors and assigns
(collectively, the “Bank Affiliates”) of and from any and all actions, causes of
actions, claims, demands, damages and liabilities of whatever kind and nature,
known and unknown, which the Borrower or the Guarantor now has, claims or
asserts, or might or could hereafter have, claim or assert, against the Bank or
any of the Bank Affiliates, arising or alleged to arise from any act, omission
or neglect of the Bank or any Bank Affiliate up to and including the date of
this Letter Agreement, with respect to the Loan, the Loan Documents, or any
transaction related thereto; and (b) waives any and all defenses, setoffs, or
counterclaims, of whatever kind and nature, known and unknown, under or with
respect to the Loan, the Loan Documents, or any transaction related thereto and
based upon any act, omission, or neglect of the Bank or any Bank affiliate up to
and including the date of this Letter Agreement. The Borrower and the Guarantor
each acknowledges that this paragraph, together will all other provisions of
this Letter Agreement, is freely and voluntarily made, without any duress or
coercion and after careful review, with the assistance of legal counsel, of all
of the terms and provisions hereof, and further acknowledges and agrees that the
release and xxxxxx stated in this paragraph shall have been fully earned upon
the Bank’s execution of this Letter Agreement, shall not be subject to
rescission or nullification at any time hereafter due to the occurrence or
nonoccurrence of any subsequent event, and (notwithstanding anything in this
Letter Agreement to the contrary) shall survive the termination of this Letter
Agreement and the termination of the Bank’s forbearance
hereunder.
INDEPENDENT
BANK
/s/ Xxxxxx X.
Xxxxxxx
Xxxxxx X.
Xxxxxxx
Executive Vice
President
AGREED AND ACCEPTED:
MAINSTREET
FINANCIAL CORPORATION EMPLOYEE STOCK OWNERSHIP TRUST
/s/ Xxxxx X.
Xxxxxxx
Xxxxx X. Xxxxxxx,
Trustee
/s/ Xxxxxx X.
Xxxxxxx
Xxxxxx X. Xxxxxxx,
Trustee
/s/ Xxxxx X.
Xxxxxxxx
Xxxxx X. Xxxxxxxx,
Trustee
MAINSTREET
FINANCIAL CORPORATION
/s/ Xxxxx X.
Xxxxxxxx
Xxxxx X.
Xxxxxxxx
President
