SECURITIES PURCHASE AGREEMENT
Exhibit 10.1
This SECURITIES PURCHASE AGREEMENT (this “Agreement”), dated as of February 24, 2009,
is by and between CapitalSouth Bancorp, a Delaware corporation and a registered bank holding
company (the “Company”), and Xxxxx X. Xxxxx a resident of the State of Florida
(“Xxxxx”).
R E C I T A L S:
A. Prior to the date hereof, the Company issued to Xxxxx that certain Promissory Note in the
original principal amount of $1,500,000, dated September 14, 2007, made by the Company in favor of
Xxxxx, a copy of which is attached hereto as Exhibit A (the “Pledged Note”).
B. Pursuant to that certain Restructuring Agreement by and between the Company and Xxxxx dated
September 30, 2008 (the “Restructuring Agreement”), the Company and Xxxxx agreed that the
outstanding principal balance of the Pledged Note, and all accrued but unpaid interest thereon,
shall be converted into (i) a new promissory note in the amount of $500,000 to be made by the
Company in favor of Xxxxx, and (ii) the maximum number of shares of common stock of the Company
which may be purchased at the subscription price established under the Rights Offering (as defined
below) for $1,000,000, or such lesser amount which is necessary to cause the total stock holdings
of Xxxxx in the Company, after such purchase, to equal 9.9% of the outstanding common stock of the
Company.
C. The effectiveness of the Restructuring Agreement was contingent upon, among other things,
completion of an offering to current stockholders of the Company of non-transferable subscription
rights to purchase shares of the Company’s common stock (the “Rights Offering”). The
Rights Offering closed on January 20, 2009, and the subscription price under the Rights Offering
was $2.00 per share.
A G R E E M E N T:
NOW THEREFORE, in consideration of the foregoing and the mutual covenants herein contained,
and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:
Section 1. Conversion of Note.
A. The Company and Xxxxx hereby agree that the outstanding principal amount of the Pledged
Note, and all accrued but unpaid interest thereon, is hereby converted into (i) a new promissory
note in the amount of $500,000 to be made by the Company in favor of Xxxxx with an interest rate of
LIBOR plus two percent (2%), paid quarterly, in substantially the same form as attached hereto as
Exhibit B (“Xxxxx Note II”), (ii) 285,000 shares of common stock of the Company,
which will cause the total stock holdings of Xxxxx in the Company, after such purchase, to equal
9.9% of the outstanding common stock of the Company (the “Conversion Shares”), and (iii) a
new promissory note in the amount of $430,000 to be made by
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the Company in favor of Xxxxx with an interest rate of LIBOR plus two percent (2%), paid
quarterly, in substantially the same form as attached hereto as Exhibit C (“Xxxxx Note
III”), which represents the difference between the price paid for the Conversion Shares and
$1,000,000.
B. The Company shall deliver a stock certificate evidencing the Conversion Shares plus, in
lieu of any fractional share of common stock of the Company to which Xxxxx would otherwise be
entitled, cash based on the Conversion Price, as soon as practicable following the date hereof.
C. The Pledged Note is hereby terminated in its entirety and is null and void.
Section 2. Representations and Warranties.
A. Representations and Warranties of Xxxxx. Xxxxx represents and warrants to the
Company as of the date hereof as follows:
(i) Xxxxx is an individual resident in the State of Florida.
(ii) Xxxxx has full legal right, power and authority to enter into this Agreement and has full
legal right, power and authority to convert the outstanding principal amount of the Pledged Note,
and all accrued but unpaid interest thereon, into Xxxxx Note II, the Conversion Shares and Xxxxx
Note III.
(iii) There are no actions, suits, or proceedings (including, without limitation, any
condemnation or bankruptcy proceedings), in law or equity, pending or threatened against or
affecting Xxxxx or the Pledged Note which may adversely affect the validity or enforceability of
this Agreement, at law or in equity.
(iv) This Agreement constitutes the valid and binding obligation of Xxxxx, enforceable against
Xxxxx in accordance with its terms, except as such enforceability may be subject to the laws of
general application relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies.
(v) Xxxxx is and reasonably expects to continue to be an “accredited investor” as that term is
defined in Rule 501(a) of Regulation D promulgated by the U.S. Securities and Exchange Commission
(the “SEC”) under the Act.
(vi) Xxxxx is voluntarily converting the outstanding principal amount of the Pledged Note, and
all accrued but unpaid interest thereon, into Xxxxx Note II, the Conversion Shares and Xxxxx Note
III.
(vii) In connection with the conversion contemplated hereby, Xxxxx has had an opportunity to
read carefully that certain Registration Statement on Form S-1 filed with the SEC on June 11, 2008,
Registration No. 333-151605, as amended through the date hereof (the “Registration
Statement”), relating to the Company’s Rights Offering, and the exhibits and annexes thereto,
and is fully familiar with the contents thereof.
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(viii) No written or oral representations or warranties have been made to Xxxxx other than
those contained in the Registration Statement and Xxxxx has not relied upon any representation or
warranty not contained in the Registration Statement in making the decision to convert a portion of
the outstanding principal amount of the Pledged Note, and the accrued but unpaid interest thereon,
into the Conversion Shares pursuant to this Agreement.
(ix) Xxxxx has such knowledge and experience in financial and business matters that Xxxxx is
capable of evaluating the merits and risks of the conversion a portion of the outstanding principal
amount of the Pledged Note, and the accrued but unpaid interest thereon, into the Conversion Shares
pursuant to this Agreement.
(x) Xxxxx has consulted with legal counsel, tax advisors or other third parties of his choice
in connection with the conversion of a portion of the outstanding principal amount of the Pledged
Note, and the accrued but unpaid interest thereon, into the Conversion Shares pursuant to this
Agreement.
(xi) Xxxxx is acquiring the Conversion Shares for his own account, with the intention of
holding the Conversion Shares for investment and with no present intention of participating,
directly or indirectly, in a distribution of the Conversion Shares, and he will not make any sale,
transfer or other disposition of the Securities for a period of six months from the date he
receives the Conversion Shares.
(xii) Xxxxx is familiar with the business in which the Company is engaged, and based upon his
knowledge and experience in financial and business matters: he is familiar with the investments of
the type that he is undertaking to purchase; he is fully aware of the problems and risks involved
in making an investment of this type, including, without limitation, the risks described under the
heading “Risk Factors” in the Registration Statement, and that an investment in the Conversion
Shares involves a high degree of risk; he is capable of evaluating the merits and risks of
this investment; and he has determined that the purchase of the Conversion Shares is consistent
with his investment objectives.
(xiii) Xxxxx confirms that all documents, records, and books pertaining to the Company have
been made available to Xxxxx and, to the extent he desired to do so, he has been given an
opportunity to make further inquiries of the Company and its representatives with respect to the
Company and the conversion contemplated hereby.
B. Representations and Warranties of the Company. The Company represents and warrants
to Xxxxx as of the date hereof as follows:
(i) The Company has full legal right, power and authority to enter into this Agreement and has
full legal right, power and authority to issue the Conversion Shares.
(ii) There are no actions, suits or proceedings (including, without limitation, any
condemnation or bankruptcy proceedings), in law or equity, pending or threatened against or
affecting the Company or the Conversion Shares which may adversely affect the enforceability or
validity of this Agreement.
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(iii) This Agreement constitutes the valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as such enforceability may be subject to
the laws of general application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other equitable remedies.
(iv) All of the Conversion Shares have been duly authorized for issuance, and, when issued and
distributed in accordance with this Agreement, will be validly issued, fully paid and
non-assessable.
(v) The Company has received approval to enter into the Restructuring Agreement and the
transactions contemplated thereby from the Federal Reserve Bank of Atlanta and the Alabama State
Banking Department.
C. Survival or Representations and Warranties and Acknowledgments. The representations
and warranties of the parties contained in this Section 2 shall survive the conversion of
the outstanding principal amount of the Pledged Note, and all accrued but unpaid interest thereon,
into Xxxxx Note II, the Conversion Shares and Xxxxx Note III pursuant to this Agreement.
Section 3. Further Assurances. Each of the parties hereto hereby agrees to from time
to time execute and deliver, or cause to be executed and delivered, such additional or further
instruments, and do or cause to be done such further acts, as any other party hereto may reasonably
request for the purpose of effectively carrying out the transactions contemplated by this
Agreement.
Section 4. Public Statements. Neither the Company nor Xxxxx shall issue any public
announcement, statement or other disclosure with respect to this Agreement or the transactions
contemplated hereby without the prior consent of the other parties hereto, which consent shall not
be unreasonably withheld or delayed, except if such public announcement, statement or other
disclosure is required by applicable law or applicable stock market regulations (including, without
limitation, any filings required by the SEC), in which case the disclosing party shall consult in
advance with respect to such disclosure with the other party to the extent reasonably practicable.
Section 5. Regulatory Filing. If the Company or Xxxxx determines a filing is or may be
required under applicable law in connection with the transactions contemplated hereunder, the
Company and Xxxxx shall use commercially reasonable efforts to promptly prepare and file all
necessary documentation and to effect all applications that are necessary or advisable under
applicable law with respect to the transactions contemplated hereunder.
Section 6. Indemnification.
X. Xxxxx Indemnity. Xxxxx agrees to indemnify and hold harmless the Company and its
respective affiliates, officers, directors, employees and shareholders (other than Xxxxx and his
successors in interest), and their successors and assigns from, against and with respect to any and
all losses, claims, shortages, damages, liabilities, and expenses (including reasonable attorneys’
fees) (“Losses”) arising out of or in any manner incident, relating or
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attributable to any breach of, or failure by Xxxxx to perform or observe in full, any
covenant, agreement or condition to be performed or observed by Xxxxx under this Agreement.
B. Company Indemnity. The Company agrees to indemnify and hold harmless Xxxxx and his
successors and assigns from, against and with respect to any and all Losses arising out of or in
any manner incident, relating or attributable any breach of, or failure by the Company to perform
or observe in full, any covenant, agreement or condition to be performed or observed by the Company
under this Agreement.
Section 7. Assignment; Binding Effect. This Agreement may not be assigned by Xxxxx
without the express prior written consent of the Company. This Agreement shall bind and inure to
the benefit of the parties hereto and their respective heirs, administrators, executors, personal
and legal representatives, successors and assigns.
Section 8. Entire Agreement; Amendment. This Agreement represents the entire
understanding and agreement between the parties with respect to the subject matter hereof and shall
supersede any prior agreements and understandings between the parties with respect to that subject
matter. This Agreement may not be amended, modified or changed, in whole or in part, except by a
written instrument signed by both of the parties hereto.
Section 9. Notices. Any notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, sent by overnight courier (providing
proof of delivery), or sent by registered or certified mail, postage pre-paid, return receipt
requested, to the parties at the following addresses (or at such other address for a party as shall
be specified by like notice):
If to Xxxxx, to:
Xxxxx X. Xxxxx
0000 Xxx Xxxx Xx.
Xxxxxxxxxx, XX 00000
0000 Xxx Xxxx Xx.
Xxxxxxxxxx, XX 00000
If to the Company, to:
Section 10. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the substantive laws of the State of Alabama, without regard to
principles governing conflicts of law.
Section 11. Venue. All actions with respect to this Agreement may be instituted in
the Circuit Courts of the State of Alabama sitting in Jefferson County, Alabama, or the United
States District Court for the Northern District of Alabama sitting in Birmingham, Alabama, and by
execution and delivery of this Agreement, the parties irrevocably and unconditionally submit to the
jurisdiction (both subject matter and personal) of each such court and irrevocably and
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unconditionally waive: (1) any objection the parties might now or hereafter have to the venue
in any such court; and (2) any claim that any action or proceeding brought in any such court has
been brought in an inconvenient forum.
Section 12. WAIVER OF RIGHT TO JURY TRIAL. The parties desire to avoid the additional
time and expense related to a jury trial of any disputes arising under this Agreement.
Accordingly, with respect to any such dispute, Xxxxx and the Company each hereby waive their right
to a trial by jury and consent to the granting of such legal or equitable relief as is deemed
appropriate by the judge of a court of competent jurisdiction. The parties acknowledge and agree
that this waiver is knowingly, freely and voluntarily given, is made after opportunity to consult
with counsel about this waiver and is in the best interests of each party.
Section 13. Substitution of Note. This Agreement is made in substitution of, and not
in payment or novation of, the Pledged Note. A portion of the Pledged Note has been converted into
Xxxxx Note II, and the remaining balance of the Pledged Note has been converted into the Conversion
Shares and Xxxxx Note III pursuant to this Agreement.
Section 14. Interpretation. In the event of any ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly by the parties and
no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.
Section 15. Severability. If any provision of this Agreement or the application
thereof to any person or circumstances is determined by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining provisions hereof, or the application of such
provision to persons or circumstances other than those as to which it has been held invalid, void
or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired
or invalidated thereby, so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner adverse to any party. Upon such determination, the parties
shall negotiate in good faith in an effort to agree upon a suitable and equitable substitute
provision to effect the original intent of the parties.
Section 16. Expenses. Each of Xxxxx and the Company will bear his or its own costs
and expenses (including legal fees and expenses) incurred in connection with the drafting,
negotiation, performance and modification of this Agreement and the transactions contemplated
hereby. If either party shall at any time be in breach hereunder and the other party shall deem it
necessary to engage attorneys to enforce his or its rights hereunder, the prevailing party in any
such litigation or proceeding shall be reimbursed by the other party for its reasonable expenses
incurred thereby, including but not limited to court costs and reasonable attorney’s fees.
Section 17. Section Headings; Counterparts. The section headings contained herein are
for convenience of reference only and are not to be considered in interpreting or construing this
Agreement. This Agreement may be executed in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same instrument. The
facsimile signature of any party to this Agreement for purposes of execution or
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otherwise, is to be considered as an original signature, and the document transmitted is to be
considered to have the same binding effect as an original signature on an original document.
Section 18. Effective Date. The conversion of the outstanding principal amount of the
Pledged Note, and all accrued but unpaid interest thereon, into Xxxxx Note II, the Conversion
Shares and Xxxxx Note III and all other transactions contemplated hereby shall be effective as of
the date of this Agreement.
(Signature Page Follows)
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of
the date first above written.
| COMPANY: | ||||
| CAPITALSOUTH BANCORP | ||||
| By: | /s/ W. Xxx Xxxxxxx | |||
| Name: | W. Xxx Xxxxxxx | |||
| Title: | Chairman and Chief Executive Officer | |||
| XXXXX: | ||||
| /s/ Xxxxx X. Xxxxx | ||||
| Xxxxx X. Xxxxx | ||||
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Exhibit A
Pledged Note
A-1
THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (“ACT”), OR THE SECURITIES LAWS OF ANY OTHER JURISDICTION INCLUDING, WITHOUT LIMITATION,
ALABAMA, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN ANY
MANNER UNLESS THEY ARE REGISTERED UNDER SUCH ACT AND THE SECURITIES LAWS OF ANY APPLICABLE
JURISDICTIONS OR UNLESS PURSUANT TO AN EXEMPTION THEREFROM.
PROMISSORY NOTE
| Birmingham, Alabama | ||
$1,500,000.00
|
September 14, 2007 |
For value received, CapitalSouth Bancorp, a Delaware corporation (the “Surviving
Corporation”), promises to pay to Xxxx Xxxxx, an individual resident of the State of Florida (the
“Holder”), at such place as the Holder may designate from time to time in writing, the principal
sum of ONE MILLION FIVE HUNDRED THOUSAND AND NO/100 Dollars ($1,500,000.00) with interest on the
unpaid balance thereof from the date hereof until paid in full. Interest shall accrue on the
outstanding principal balance from the date hereof until paid at a variable per annum rate equal to
fifty (50) basis points above the LIBOR Rate (as defined herein). The interest rate accruing on
the principal balance of this Note shall be set as of the date hereof and adjusted on the first
(1st) day of each calendar month thereafter during the term of this Note (each such day
being hereinafter referred to as a “Change Date”). The “LIBOR Rate” shall mean the London Interbank
Offered Rate, as published in The Wall Street Journal for deposits of United States Dollars. The
LIBOR Rate shall be determined by the Holder and shall be based upon the then applicable one-month
LIBOR Rate on each respective Change Date. In the event that any Change Date falls on a day on
which The Wall Street Journal is not published or the LIBOR Rate is not available, the LIBOR Rate
shall be determined from the immediately preceding edition of The Wall Street Journal in which the
LIBOR Rate is available. If the LIBOR Rate is no longer published in the Wall Street Journal or is
no longer available, the Holder will select a new index that is reasonably determined by the Holder
to be comparable to the LIBOR Rate. On the 14th day of September, 2012, any and all
amounts due under this Note, including but not limited to, any outstanding principal and accrued
but unpaid interest, shall be immediately due and payable by the Surviving Corporation (the
“Maturity Date”). This Note is the “Pledged Xxxxx Promissory Note” contemplated by the Agreement
and Plan of Merger by and between the Surviving Corporation and Monticello Bancshares, Inc. and
joined into by the Holder (the “Merger Agreement”) and the Non-Recourse Indemnity and Security
Agreement entered into by and between CapitalSouth Bank, an Alabama banking corporation and the
Holder, and joined in by the Surviving Corporation (the “Indemnity Agreement”). Capitalized terms
used in this Note and not otherwise defined shall have the meanings ascribed to them in the Merger
Agreement or the Indemnity Agreement unless the context clearly requires otherwise.
Surviving Corporation promises to pay accrued interest on the outstanding principal sum of
this Note on the 1st day of each calendar quarter (or if not a business day, the next
business day) hereafter commencing January 1, 2008, and at final maturity of the principal sum.
The outstanding principal sum of this Note on which interest shall accrue and be payable may be
reduced by Surviving Corporation in accordance with the terms of the Indemnity Agreement
Surviving Corporation promises to pay the principal sum of this Note in 1 quarterly
installment of principal in the amount of $300,000 and three quarterly installments of principal in
the amount of $400,000; provided, however, that Surviving Corporation may, in its
sole discretion, reduce such quarterly installments of principal in accordance with the reduction,
if any, of the outstanding principal sum of this Note pursuant to the terms of the Indemnity
Agreement. The first such installment shall be due and payable on January 1, 2012, and another
such installment shall be due and payable on the 1st day of each of April and July
thereafter until September 14, 2012, at which time the final installment of principal and all other
sums due under this Note, if not sooner paid, shall be due and payable.
The Surviving Corporation may pay in advance the principal sum of this loan, in whole or in
part, with accrued interest to the date of prepayment, without penalty or fee.
It is hereby agreed that if default be made in the payment of this Note or any part hereof or
any interest hereon and such remains uncured for a period of ten (10) days or more after written
notice from the Holder to the Surviving Corporation at its address as provided for in the
Agreement, or if the Surviving Corporation shall become bankrupt or insolvent, then, at the option
of the Holder, the entire unpaid principal balance of this Note, with accrued interest thereon,
shall become due and payable in full, time being of the essence of this instrument and thereafter
the unpaid principal balance hereof shall bear interest at a fixed rate of 8% per annum.
The Surviving Corporation waives demand, presentment, protest, notice of protest, suit and all
other requirements necessary to hold it liable, and the Surviving Corporation agrees that time of
payment may be extended or renewal notes taken or other indulgences granted without notice of, or
consent to, such action, and without release of liability. The Surviving Corporation agrees to pay
after default all costs of collecting or securing or attempting to collect or secure this Note,
including reasonable attorneys’ fees.
The provisions hereof are binding on the successors and assigns of the Surviving Corporation,
and shall inure to the benefit of the Holder, his heirs, executors, administrators and assigns.
THIS NOTE IS SUBJECT TO THE TERMS OF THAT CERTAIN NON-RECOURSE INDEMNITY AND SECURITY
AGREEMENT, TO WHICH THE HOLDER, OR HIS OR ITS PREDECESSOR IN INTEREST, IS A PARTY, WHICH AGREEMENT
PROVIDES FOR CERTAIN RESTRICTIONS ON TRANSFER. SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE
OF THE SURVIVING CORPORATION AND AFFECTS THE TRANSFERABILITY OF THE NOTE.
All rights and remedies of the Holder hereunder and under any statute or rule of law shall be
cumulative and may be exercised successively or concurrently. This Note shall be governed by and
construed in accordance with the laws of the State of Alabama.
THE SURVIVING CORPORATION HEREBY UNCONDITIONALLY WAIVES SURVIVING CORPORATION’S RIGHT TO A
JURY TRIAL ON ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE OF ANY AND ALL
DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS
AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS). THIS WAIVER IS IRREVOCABLE AND THE WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS, OR MODIFICATIONS TO THIS NOTE. IN THE
EVENT OF LITIGATION. THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
All actions with respect to this Note may be instituted in the Circuit Courts of the State of
Alabama sitting in Jefferson County, Alabama, or the United States District Court for the Northern
District of Alabama sitting in Birmingham, Alabama, as the Holder might elect from time to time,
and by execution and delivery of this Note, Surviving Corporation irrevocably and unconditionally
submits to the jurisdiction (both subject matter and personal) of each such court and irrevocably
and unconditionally waives: (1) any objection the undersigned might now or hereafter have to the
venue in any such court; and (2) any claim that any action or proceeding brought in any such court
has been brought in an inconvenient forum.
| CAPITALSOUTH BANCORP | ||||
| /s/ W. Xxx Xxxxxxx | ||||
| By: | W. Xxx Xxxxxxx | |||
| Its: | Chairman and Chief Executive Officer | |||
Exhibit B
Xxxxx Note II
B-1
THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (“ACT”), OR THE SECURITIES LAWS OF ANY OTHER JURISDICTION INCLUDING, WITHOUT LIMITATION,
ALABAMA, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN ANY
MANNER UNLESS THEY ARE REGISTERED UNDER SUCH ACT AND THE SECURITIES LAWS OF ANY APPLICABLE
JURISDICTIONS OR UNLESS PURSUANT TO AN EXEMPTION THEREFROM.
PROMISSORY NOTE
| Birmingham, Alabama | ||
$500,000.00
|
February 24, 2009 |
For value received, CapitalSouth Bancorp, a Delaware corporation (the “Company”), promises to
pay to Xxxx Xxxxx, an individual resident of the State of Florida (the “Holder”), at such place as
the Holder may designate from time to time in writing, the principal sum of Five Hundred Thousand
and 00/100 Dollars ($500,000.00) with interest on the unpaid balance thereof from the date hereof
until paid in full. Interest shall accrue on the outstanding principal balance from the date hereof
until paid at a variable per annum rate equal to the LIBOR Rate (as defined herein) plus 2.0%. The
interest rate accruing on the principal balance of this Note shall be set as of the date hereof and
adjusted on the first (1st) day of each calendar month thereafter during the term of
this Note (each such day being hereinafter referred to as a “Change Date”). The “LIBOR Rate” shall
mean the London Interbank Offered Rate, as published in The Wall Street Journal for deposits of
United States Dollars. The LIBOR Rate shall be determined by the Holder and shall be based upon
the then applicable one-month LIBOR Rate on each respective Change Date. In the event that any
Change Date falls on a day on which The Wall Street Journal is not published or the LIBOR Rate is
not available, the LIBOR Rate shall be determined from the immediately preceding edition of The
Wall Street Journal in which the LIBOR Rate is available. If the LIBOR Rate is no longer published
in The Wall Street Journal or is no longer available, the Holder will select a new index that is
reasonably determined by the Holder to be comparable to the LIBOR Rate.
This Note is the “Pledged Note” contemplated by the Agreement and Plan of Merger by and
between the Company and Monticello Bancshares, Inc. and joined into by the Holder (the “Merger
Agreement”) and the Amended Non-Recourse Indemnity and Security Agreement entered into by and
between CapitalSouth Bank, an Alabama banking corporation and the Holder, and joined in by the
Company (the “Indemnity Agreement”). Capitalized terms used in this Note and not otherwise defined
shall have the meanings ascribed to them in the Merger Agreement or the Indemnity Agreement unless
the context clearly requires otherwise.
On the 1st day of January, 2012, any and all amounts due under this Note, including but not
limited to, any outstanding principal and accrued but unpaid interest shall be immediately due and
payable by the Company (the “Maturity Date”).
The Company promises to pay accrued interest on the outstanding principal sum of this Note on
the 1st day of each calendar quarter (or if not a business day, the next business day)
hereafter commencing April 1, 2009, and at final maturity of the principal sum.
The Company may pay in advance the principal sum of this loan, in whole or in part, with
accrued interest to the date of prepayment, without penalty or fee.
It is hereby agreed that if default is made in the payment of this Note or any part hereof
or any interest hereon and such remains uncured for a period of ten (10) days or more after
written notice from the Holder to the Company at its address as provided for in the Merger
Agreement, or if the Company shall become bankrupt or insolvent, then, at the option of the Holder,
the entire unpaid principal balance of this Note, with accrued interest thereon, shall become due
and payable in full at the option of the Holder, time being of the essence of this instrument and
thereafter the unpaid principal balance hereof shall bear interest at a fixed rate of 8% per annum.
The Company waives demand, presentment, protest, notice of protest, suit and all other
requirements necessary to hold it liable, and the Company agrees that time of payment may be
extended or renewal notes taken or other indulgences granted without notice of, or consent to, such
action, and without release of liability. The Company agrees to pay after default all costs of
collecting or securing or attempting to collect or secure this Note, including reasonable
attorneys’ fees.
The provisions hereof are binding on the successors and assigns of the Company, and shall
inure to the benefit of the Holder, his heirs, executors, administrators and assigns.
THIS NOTE IS SUBJECT TO THE TERMS OF THAT CERTAIN AMENDED NON-RECOURSE INDEMNITY AND SECURITY
AGREEMENT, TO WHICH THE HOLDER, OR HIS OR ITS PREDECESSOR IN INTEREST, IS A PARTY, WHICH AGREEMENT
PROVIDES FOR CERTAIN RESTRICTIONS ON TRANSFER. SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE
OF THE SURVIVING CORPORATION AND AFFECTS THE TRANSFERABILITY OF THE NOTE.
All rights and remedies of the Holder hereunder and under any statute or rule of law shall be
cumulative and may be exercised successively or concurrently. This Note shall be governed by and
construed in accordance with the laws of the State of Alabama.
THE CORPORATION HEREBY UNCONDITIONALLY WAIVES CORPORATION’S RIGHT TO A JURY TRIAL ON ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE OF ANY AND ALL DISPUTES THAT MAY BE FILED
IN ANY COURT (INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS). THIS WAIVER IS IRREVOCABLE AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS, OR MODIFICATIONS TO THIS NOTE. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
All actions with respect to this Note may be instituted in the Circuit Courts of the State of
Alabama sitting in Jefferson County, Alabama, or the United States District Court for the Northern
District of Alabama sitting in Birmingham, Alabama, as the Holder might elect from time to time,
and by execution and delivery of this Note, Company irrevocably and unconditionally submits to the
jurisdiction (both subject matter and personal) of each such court and irrevocably and
unconditionally waives: (1) any objection the undersigned might now or hereafter have to the venue
in any such court; and (2) any claim that any action or proceeding brought in any such court has
been brought in an inconvenient forum.
This Note is given in substitution of, and not in payment or novation of, that certain
Promissory Note, dated September 14, 2007, in the amount of $1,500,000 (the “Original Note”). A
portion of the Original Note has been converted into common stock of the Company and certain
promissory notes, including this Note, have been issued with respect to the remaining balance
thereof.
| CAPITALSOUTH BANCORP | ||||
| By: | [EXHIBIT ONLY] | |||
| Name: | W. Xxx Xxxxxxx | |||
| Its: | Chairman and Chief Executive Officer |
Exhibit C
Xxxxx Note III
C-1
THE SECURITIES REPRESENTED BY THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (“ACT”), OR THE SECURITIES LAWS OF ANY OTHER JURISDICTION INCLUDING, WITHOUT LIMITATION,
ALABAMA, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN ANY
MANNER UNLESS THEY ARE REGISTERED UNDER SUCH ACT AND THE SECURITIES LAWS OF ANY APPLICABLE
JURISDICTIONS OR UNLESS PURSUANT TO AN EXEMPTION THEREFROM.
CONVERTIBLE PROMISSORY NOTE
| Birmingham, Alabama | ||
$430,000.00
|
February 24, 2009 |
For value received, CapitalSouth Bancorp, a Delaware corporation (the “Company”), promises to
pay to Xxxx Xxxxx, an individual resident of the State of Florida (the “Holder”), at such place as
the Holder may designate from time to time in writing, the principal sum of Four Hundred Thirty
Thousand and 00/100 Dollars ($430,000.00) with interest on the unpaid balance thereof from the date
hereof until paid in full. Interest shall accrue on the outstanding principal balance from the date
hereof until paid at a variable per annum rate equal to the LIBOR Rate (as defined herein) plus
2.0%. The interest rate accruing on the principal balance of this Note shall be set as of the date
hereof and adjusted on the first (1st) day of each calendar month thereafter during the
term of this Note (each such day being hereinafter referred to as a “Change Date”). The “LIBOR
Rate” shall mean the London Interbank Offered Rate, as published in The Wall Street Journal for
deposits of United States Dollars. The LIBOR Rate shall be determined by the Holder and shall be
based upon the then applicable one-month LIBOR Rate on each respective Change Date. In the event
that any Change Date falls on a day on which The Wall Street Journal is not published or the LIBOR
Rate is not available, the LIBOR Rate shall be determined from the immediately preceding edition of
The Wall Street Journal in which the LIBOR Rate is available. If the LIBOR Rate is no longer
published in The Wall Street Journal or is no longer available, the Holder will select a new index
that is reasonably determined by the Holder to be comparable to the LIBOR Rate.
Any and all amounts due under this Note, including but not limited to, any outstanding
principal and accrued but unpaid interest shall be immediately due and payable by the Company on
the earlier of (i) the 1st day of January, 2012, or (ii) the date Xxxxx receives approval to
purchase the Additional Shares (as defined below) pursuant to a Notice of Change in Control filed
by Xxxxx with the Board of Governors of the Federal Reserve System (the “FRB”) (the “Maturity
Date”).
Interest shall be payable on the Maturity Date. The Company may pay in advance the principal
sum of this loan, in whole or in part, with accrued interest to the date of prepayment, without
penalty or fee.
This Note is “Xxxxx Note III” contemplated by the Securities Purchase Agreement by and between
the Company and Xxxxx dated as of the date hereof (the “Securities Purchase Agreement”).
Capitalized terms used in this Note and not otherwise defined shall have the meanings ascribed to
them in the Securities Purchase Agreement unless the context clearly requires otherwise.
Upon receipt of approval by the FRB of a Notice in Change in Control filed by Xxxxx and his
affiliates with respect to the Additional Shares (as defined in the Securities Purchase Agreement),
the then outstanding principal balance of this Note and all accrued but unpaid interest thereon
shall automatically convert into 215,000 shares of common stock of the Company, or if the FRB
approves a lesser amount, the amount of shares of common stock of the Company actually approved by
the FRB (the
“Conversion Shares”). Upon conversion of this Note, Xxxxx shall surrender this Note, duly
endorsed, at the principal office of the Company. The Company will, as soon as practicable
thereafter, issue and deliver to Xxxxx a certificate for the Conversion Shares. If the FRB
approves an amount of shares to be purchased by Xxxxx which is less than 215,000 shares, then, in
addition to delivering a new certificate for the Conversion Shares, the Company will deliver a new
promissory note to Xxxxx in the amount of the difference between (i) $430,000 and (ii) the amount
of the Conversion Shares multiplied by $2.00 per share, on terms mutually agreed upon by the
parties.
It is hereby agreed that if default is made in the payment of this Note or any part hereof or
any interest hereon and such remains uncured for a period of ten (10) days or more after written
notice from the Holder to the Company, or if the Company shall become bankrupt or insolvent, then,
at the option of the Holder, the entire unpaid principal balance of this Note, with accrued
interest thereon, shall become due and payable in full at the option of the Holder, time being of
the essence of this instrument and thereafter the unpaid principal balance hereof shall bear
interest at a fixed rate of 8% per annum.
The Company waives demand, presentment, protest, notice of protest, suit and all other
requirements necessary to hold it liable, and the Company agrees that time of payment may be
extended or renewal notes taken or other indulgences granted without notice of, or consent to, such
action, and without release of liability. The Company agrees to pay after default all costs of
collecting or securing or attempting to collect or secure this Note, including reasonable
attorneys’ fees.
The provisions hereof are binding on the successors and assigns of the Company, and shall
inure to the benefit of the Holder, his heirs, executors, administrators and assigns.
All rights and remedies of the Holder hereunder and under any statute or rule of law shall be
cumulative and may be exercised successively or concurrently. This Note shall be governed by and
construed in accordance with the laws of the State of Alabama.
THE CORPORATION HEREBY UNCONDITIONALLY WAIVES CORPORATION’S RIGHT TO A JURY TRIAL ON ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS NOTE OF ANY AND ALL DISPUTES THAT MAY BE FILED
IN ANY COURT (INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS). THIS WAIVER IS IRREVOCABLE AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS, OR MODIFICATIONS TO THIS NOTE. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
All actions with respect to this Note may be instituted in the Circuit Courts of the State of
Alabama sitting in Jefferson County, Alabama, or the United States District Court for the Northern
District of Alabama sitting in Birmingham, Alabama, as the Holder might elect from time to time,
and by execution and delivery of this Note, Company irrevocably and unconditionally submits to the
jurisdiction (both subject matter and personal) of each such court and irrevocably and
unconditionally waives: (1) any objection the undersigned might now or hereafter have to the venue
in any such court; and (2) any claim that any action or proceeding brought in any such court has
been brought in an inconvenient forum.
This Note is given in substitution of, and not in payment or novation of, that certain
Promissory Note, dated September 14, 2007, in the amount of $1,500,000 (the “Original Note”). A
portion of the Original Note has been converted into common stock of the Company and certain
promissory notes, including this Note, have been issued with respect to the remaining balance
thereof.
| CAPITALSOUTH BANCORP | ||||
| By: | [EXHIBIT ONLY] | |||
| Name: | W. Xxx Xxxxxxx | |||
| Its: | Chairman and Chief Executive Officer |
