PRE-OPENING FUNDS AGREEMENT
EXHIBIT
10.11
This
Pre-Opening Funds Agreement
(“Agreement”) is entered into as of the 12th
day of
July, 2007 by and among Grand River Commerce, Inc., a corporation organized
under the laws of the State of Michigan (“Company”), and each of the undersigned
individuals (each, an “Organizer”).
RECITALS
WHEREAS,
the
Organizers have the mutual intention and objective to organize a commercial
bank
(the “Proposed Bank”) and have established the Company to pay the Proposed
Bank’s organizational expenses and to enter into agreements in furtherance of
the organization of the Proposed Bank; and
WHEREAS,
the
Organizers desire to take such steps and actions as may be necessary in the
furtherance of their mutual intentions and objectives, including, but not
limited to, the filing of regulatory applications (the “Applications”) with the
Federal Reserve, the Federal Deposit Insurance Corporation (“FDIC”), the Office
of the Comptroller of the Currency (“OCC”) and/or any applicable state bank
regulatory authority (“State Regulator”), as applicable (the “Regulators”); and
WHEREAS,
the
Organizers further desire by this Agreement to provide for the solicitation
of
funds to cover the organizational (pre-incorporation and pre-opening) expenses
of the Company and the Proposed Bank among the Organizers, to be expended for
the purpose of paying expenses to be incurred in order to determine the
feasibility of the Proposed Bank and to prepare the Applications and to organize
the Proposed Bank; and
NOW,
THEREFORE,
in
consideration of the foregoing and the promises, covenants and conditions
hereinafter set forth, and the contribution of money provided for herein, the
Organizers hereto agree as follows:
1. Payments
of Funds for Pre-Opening Expenses.
Each
Organizer, by execution of a counterpart hereof, hereby agrees to contribute
funds in the amount of $45,000 (“Pre-Opening Funds”) for the purpose of funding
organizational expenses of the Company and the Proposed Bank. A payment of
$15,000 shall be made by such Organizer concurrently with the execution of
this
Agreement, and two (2) additional payments of $15,000 each shall be made within
five (5) business days after notice from the Co-Managers (as defined below)
that
the next payment is due. Pre-Opening Funds paid by check shall be made payable
to “Grand River Commerce, Inc.” Unless otherwise agreed by a vote of two-thirds
of the then-existing Organizers, the failure of an Organizer to contribute
the
amounts provided hereunder this Section shall constitute a voluntary withdrawal
of the Organizer as set forth in Section 9 hereof; provided, however, the
Co-Managers shall have the authority to enter into specific arrangements with
various organizers to pay the $45,000 of Pre-Opening Funds at some point other
than at execution hereof if the Co-Managers determine that such an arrangement
is in the best interests of the Company.
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The
Organizers anticipate the Co-Managers will present a budget for the pre-opening
expenses of the Company and the Proposed Bank. It is currently anticipated
that
these expenses will be covered by the cash advances provided for in this Section
1 and by a line of credit provided to the Company by a financial institution
upon the receipt of preliminary regulatory approvals to organize the Proposed
Bank. If required by the issuing financial institution in order to issue the
pre-opening line of credit, each Organizer further agrees to provide a limited
guarantee (not joint and several) with respect to any advances made under such
line of credit; provided, however, that the exposure of each Organizer pursuant
to such limited guarantee shall not be in excess of the multiple of such
Organizer’s pro rata share of any advances made under such line of credit
required by the issuing financial institution.
Each
Organizer/Director, by executing this Agreement, hereby authorizes the Company
to enter into agreements with Jenkens & Xxxxxxxxx, P.C.
2. Account,
Co-Managers, and Terms Under Which Pre-Opening Funds Shall Be
Held.
All
Pre-Opening Funds shall be deposited in a deposit account (the “Account”)
established in the name of the Company at a federally-insured depository
institution domiciled or authorized to do business in Michigan and selected
by
the Co-Managers (as defined below). No other funds shall be deposited in the
Account. The Co-Managers or the Organizers (including the Co-Managers), acting
by a vote of at least two-thirds of their number, may transfer the Account
to
another banking organization domiciled or authorized to do business in
Michigan.
Pre-Opening
Funds may be accepted from a proposed Organizer only by one of the Co-Managers.
Following execution of this Agreement by an Organizer, any funds accepted by
the
Co-Managers from an Organizer shall not be returned to the Organizer except
as
provided herein.
Unless
and until changed by the vote of two-thirds of the Organizers, Xxxxx Xxxxxx
and
Xxxxxx Xxxxxxx are hereby appointed to serve as Co-Managers of the Account
(the
“Co-Managers”), and are authorized to receive, deposit and disburse all funds to
be collected or paid pursuant to the terms of this Agreement and to take such
other actions as may be contemplated by this Agreement.
3. Terms
Under Which Pre-Opening Funds Shall Be Disbursed.
Disbursements from the Account may be made only upon the order and signature
of
either of the Co-Managers, and only for purpose of paying organizational
expenses of the Company or the Proposed Bank, including but not limited to
(i)
marketing and banking consulting fees, (ii) economic study fees, (iii)
pre-opening consulting fees to be paid to one or more proposed officers of
the
Proposed Bank, and others (all as approved by a majority of the Organizers),
(iv) accounting and legal fees, (v) application fees and expenses, and (vi)
rent, lease and/or option payments and security deposits; provided, however,
that no disbursement in excess of $1,000 (except reimbursement of out-of-pocket
expenses) shall be made to any Co-Manager unless and until such payment or
payments have been approved in advance by at least a majority of the Organizers
who are then parties to this Agreement or unless such payment is subject to
another agreement with the Company.
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4. Additional
Organizers.
Upon
the approval of the Co-Managers, additional Organizers may be added from time
to
time, provided that such additional Organizers ratify and agree to be bound
by
and comply with the provisions, terms and conditions of this Agreement. Each
additional Organizer shall execute a signature page to this Agreement (and
such
other instrument as counsel to the Company shall require) and shall immediately
contribute funds in the same amount as has been contributed as of such date
by
each of the other Organizers.
5. Records.
The
Co-Managers shall keep and maintain records containing:
(a) With
respect to each deposit to the Account:
(i) date
of
deposit,
(ii) amount
deposited, and
(iii) name
of
person from whom such money was accepted.
(b) With
respect to each withdrawal from the Account:
(i) date
of
withdrawal,
(ii) amount
of
money withdrawn,
(iii) name
of
person or entity to whom such money was paid,
(iv) description
of purpose of such payment, and
(v) any
invoice or billing relating to such payment.
(c) The
Co-Managers or, upon opening, the Proposed Bank, shall preserve the records
described above for a period of not less than four (4) years after such Account
is closed.
(d) The
Co-Managers shall, upon request, make the records described above available
for
inspection and copying by (i) the Regulators, (ii) any proposed director,
officer, or organizer of the Company or the Proposed Bank, (iii) any person
from
whom Pre-Opening Funds have been accepted, (iv) the Company, or (v) the Proposed
Bank, if and when organized.
6. Reports.
On
or
before the 21st day of each calendar quarter, commencing with the calendar
quarter after Pre-Opening Funds are first accepted and continuing until the
Account is closed in accordance with this Agreement, the Co-Managers will
provide to each person from whom Pre-Opening Funds have been accepted a report
stating, with respect to the last calendar quarter:
(a) Opening
balance of the Account.
(b) Total
amount deposited in the Account during the calendar quarter.
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(c) Itemized
schedule of deposits showing, with respect to each deposit, date of deposit,
amount of money deposited, name of person from whom such money was accepted
and
aggregate total amount.
(d) Total
amount disbursed from the Account during the calendar quarter.
(e) An
itemized schedule of disbursements showing, with respect to each person to
whom
the amount disbursed, together with amounts previously disbursed to each person,
is $500 or more: name of person, amount disbursed to the person, description
of
purpose of such disbursement, and the aggregate total amount disbursed to date
to the person.
(f) Closing
balance of Account.
7. Circumstances
Under Which Pre-Opening Funds Shall Be Repaid.
(a) The
Organizers understand and agree that the Pre-Opening Funds advanced by the
Organizers shall be reimbursed to the Organizers if, and only if, the
Proposed Bank becomes duly organized when the Proposed Bank is issued a charter
to transact a commercial banking business by the OCC or the State Regulator,
as
applicable, the Proposed Bank receives approval from the FDIC of its application
for deposit insurance and all subscription funds held in escrow for Proposed
Bank stock have been released.
(b) The
Co-Managers shall cause the Company, after making all disbursements authorized
under the terms of this Agreement, to pay any and all balances in the Account,
on a pro rata basis, to the Organizers upon the occurrence of any of the
following events:
(i) two-thirds
of the Organizers determines to discontinue efforts to organize the Proposed
Bank; or
(ii) an
application for authority to organize the Proposed Bank filed with the OCC
or
the State Regulator within such time is denied by the OCC or the State Regulator
and a reapplication for authority to organize the Proposed Bank is not filed
with the OCC or the State Regulator within 90 days after such
denial.
(c) Each
Organizer acknowledges and agrees that the return of any Pre-Opening Funds
following the removal of an Organizer shall be governed by the provisions of
Section 10.
(d) Each
Organizer acknowledges and agrees that there is no assurance that any of the
conditions described in this Section will be met and that if the conditions
described above do not occur, such Organizer shall not be entitled to
reimbursement of any of the Pre-Opening Funds, except as expressly provided
herein. Such Organizer further waives any and all claims against any other
Organizers hereto, the Company, the Proposed Bank and their respective officers,
directors, shareholders, attorneys, agents and representatives for reimbursement
of his or her share of Pre-Opening Funds as a result of the failure to occur
of
any of the conditions described above.
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8. Application;
Services.
The
Co-Managers are hereby authorized and directed to execute and deliver written
agreements with attorneys, accountants, economists and banking/fundraising
consultants, relating to the various applications to be filed with the
Regulators in connection with the organization of the Proposed Bank, and for
other services related to the organization of the Company or the Proposed Bank.
The Co-Managers are hereby authorized and directed to pay, to the extent of
funds made available by the Organizers as described herein, all amounts agreed
to in said agreements for all such services rendered.
9. Voluntary
Withdrawal. An
Organizer may withdraw as an organizer of the Company or the Proposed Bank
by
giving written notice to the Co-Managers. Notwithstanding the foregoing, the
withdrawal of an Organizer shall not affect in any manner any obligation
incurred by the Organizer pursuant to this Agreement or any other agreement
entered into by the Organizer. Upon the withdrawal of an Organizer, the
Organizer shall forfeit any and all options or warrants to which the Organizer
would otherwise have been entitled upon the Proposed Bank’s opening for business
by virtue of his status as an Organizer, a director or executive officer or
as a
result of any actions taken by him pursuant to this Agreement.
10. Removal
of Organizers.
An
Organizer may be removed with or without cause upon the vote of two-thirds
of
the then-active Organizers.
11. Indemnification
of Co-Managers; Covenant Not to Xxx.
The
Organizers hereto agree that the Company shall indemnify and hold the
Co-Managers harmless from all liabilities, obligations, claims or costs
(including attorneys, accountants, paralegal fees and expenses) incurred by
them
in their capacities as such or in the course of their performance of their
duties as such, except liabilities or obligations arising from or out of willful
misconduct or gross negligence. Such indemnification is limited in amount of
the
Company’s resources. In no case will an Organizer have to increase the amount
advanced to the Company for this purpose. In no event shall any Organizer bring
suit, initiate a mediation or arbitration or otherwise bring a cause of action
or claim against any other Organizer except in the case of gross negligence,
willful misconduct or failure to make the payments or guarantees required by
Section 1 of this Agreement.
12. Unauthorized
Acts.
Notwithstanding anything contained herein to the contrary, no party hereto
shall
be authorized in any manner or form to perform any act or to render any
communication or information with regard to the organization of the Company
or
the Proposed Bank that is contrary to applicable federal and applicable state
law, including the rules, regulations and policies of the Federal Reserve,
OCC,
State Regulator and/or FDIC. In addition, each Organizer acknowledges the
following:
(a) that
the
Proposed Bank is not being organized for the sole purpose of immediately selling
to or merging or consolidating with any other financial
institution;
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(b) that
such
Organizer may not indicate, either orally or in writing, that he or she is
an
officer or director of the Proposed Bank or that the Proposed Bank is in
existence prior to receiving the consent of the Regulators, if required at
such
time;
(c) that
the
Proposed Bank, upon organization, will not refinance, either directly or
indirectly, any loan, advance, or credit extension made to any prospective
shareholder by any existing financial institution or other lender, if such
loan,
advance, or credit extension was originally made to the prospective shareholder
to obtain funds to purchase stock in the Proposed Bank;
(d) that
all
subscription funds for capital stock will be held in escrow subject to the
order
of the applicable Regulators and that these funds will be released only after
all conditions precedent to the commencement of operations at the Proposed
Bank
have been satisfied;
(e) that
such
Organizer shall make an equity investment (pursuant to the terms and conditions
of the Offering) in the common stock of the Proposed Bank in an amount at least
equal to the minimum amount expected of Organizers by the Regulators in order
to
issue the charter;
(f) that
no
representations have been made by the Co-Managers, any of the Organizers, any
of
the other signatories hereto or attorneys, accountants or any other service
providers to the Company or the Proposed Bank guaranteeing or representing
that:
(a) a charter for the Proposed Bank will be issued and approved by the
Regulators; (b) approval of the Proposed Bank by the Regulators will occur
on or
before any specified date or approximate date, or that such approval will be
received at all; (c) such Organizer will be approved by the Regulators as an
organizing director of the Proposed Bank; (d) the Proposed Bank will be able
to
successfully sell any amount of its initial capital stock; (e) such Organizer
will be approved by the Regulators to purchase any specific number of shares
of
the capital stock of the Proposed Bank; (f) the Regulators will approve any
specific stock options or other benefit for such Organizer(s); (g) the Proposed
Bank will be located in any specific location or city; or (h) the Proposed
Bank
will open for business on or before any specific date or approximate date;
and
(g) that
the
Organizers will respect and honor the confidential nature of all personal
information of each individual Organizer, and that the Organizers will not
request copies of or access to review any such confidential information of
another Organizer which information is delivered to any consultant in connection
with preparing or reviewing necessary documentation for the Proposed Bank.
13. Borrowings/Guarantees. The
parties understand and agree that it may be necessary for the Company to borrow
funds or otherwise secure lines of credit for the purpose of obtaining funds
to
pay pre-incorporation and pre-opening expenses of the Proposed Bank and that
lenders may require such financing arrangements to be evidenced by one or more
notes co-signed or guaranteed by each of the undersigned on a joint or several
or other basis. An agreement to borrow funds under the provisions of this
Section 13 requires the unanimous written approval of all the Organizers who
undertake any such guarantee. All funds obtained pursuant to this Section 13
shall be maintained and disbursed by the Co-Managers
in conformity with the duties set forth in this Agreement.
To the
extent that an Organizer is not willing to execute any guarantee required
pursuant to this Section 13, then such Organizer, in order to continue to
participate in this project, must find another Organizer who is willing to
provide the amount of guarantee, in whole or in part, on behalf of such
Organizer that is declining to execute the guarantee.
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14. Termination.
The
Agreement shall terminate upon the occurrence of any of the following
events:
(a) by
mutual
written consent of two-thirds of the Organizers who are bound by the terms
hereof; or
(b) following
an event described in Section 7(a) or 7(b) upon the reimbursement of funds
due
to Organizers or upon a determination by the Co-Managers that no reimbursement
shall be due.
15. General
Corporate Matters.
(a) Initial
Board of Directors. It
is
anticipated that the number of directors of the Company shall be increased
prior
to filing the Applications and that the vacancies shall be filled by Organizers.
The board of directors reserves the right, however, to fill any vacancies
created by an increase in the number of directors with persons who are not
Organizers if the board determines that the addition of such person(s) to the
board of directors of the Company would enhance the ability of the Proposed
Bank
to receive regulatory approval or to operate following receipt of regulatory
approval. The board of directors of the Company shall also be empowered to
identify the individuals to serve as the proposed board of directors of the
Proposed Bank. It is expected that each Organizer shall serve as a director,
advisory director or a member of an organizers’ advisory committee of the
Proposed Bank unless the board of directors of the Company determines that
such
service would impair the ability of the Proposed Bank to receive all required
regulatory approvals.
(b) Organizer
Warrants.
The
Organizers will receive warrants to purchase shares of stock at the initial
offering price. These warrants would be issued when the Proposed Bank opens
for
business and, to the extent permitted by the Regulators, would be exercisable
upon issuance and would expire ten years following the date that the Proposed
Bank opens for business. It is anticipated that each Organizer would receive
one
warrant for every $10.00 dollars advanced to the Company by the Organizer or
guaranteed (on a pro rata portion of the indebtedness basis without any
consideration of any portion of the guaranty above 100%) by the Organizer for
the benefit of the Company or the Proposed Bank; provided such Organizer
purchases a number of shares equal to the warrants to be received. Each
Organizer acknowledges and understands that they must purchase at least the
number of shares of stock of the Company or the Proposed Bank as they will
receive warrants.
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The
board
of directors of the Company shall be empowered to determine the amount of
warrants to be issued within the prescribed range, and may amend the range
upon
a determination that such range would impair the ability of the Proposed Bank
to
receive all required regulatory approvals or is otherwise not in the best
interests of the Proposed Bank. This grant of warrants is contingent upon the
approval of the applicable Regulators and may be reduced as necessary to such
level as may be required to obtain such regulatory approval.
(c) Shareholder
Warrants.
The
initial shareholders of the Proposed Bank will receive warrants to purchase
shares of stock at an exercise price of $12.50 per share. These warrants would
be issued when the Proposed Bank opens for business and, to the extent permitted
by the Regulators, would be exercisable upon issuance and would expire three
years following the date that the Proposed Bank opens for business. It is
anticipated that each initial shareholder would receive a minimum of one warrant
for every five shares purchased in the initial offering of stock.
Notwithstanding the foregoing, the board of directors of the Company shall
be
empowered to vary the amount and terms of the initial shareholder warrants
upon
a determination that such terms would impair the ability of the Proposed Bank
to
receive all required regulatory approvals or is otherwise not in the best
interests of the Proposed Bank.
(d) Stock
Options.
The
board of directors believes that it is in the best interests of the Proposed
Bank to promote shareholder value by aligning the financial interests of
executive officers and employees providing services to the Proposed Bank with
long-term shareholder value. Accordingly, it is anticipated that a certain
number of shares of stock will be reserved for issuance under a stock incentive
plan, which would provide, among other things, for the issuance of employee
stock options to management and future management. It is anticipated that
between 10% and 15% of the shares of stock issued in the initial public offering
would be reserved for issuance of these stock-based incentives. However, the
board of directors of the Proposed Bank reserves the right to revise this amount
as it determines necessary to attract and retain qualified employees to fill
positions of substantial responsibility, either current or
prospective.
16. Miscellaneous.
(a) Notices.
Any
notice required by this Agreement shall be given by telephone and confirmed
by
facsimile, express or certified mail to the parties at the addresses heretofore
furnished by each party hereto or such other address as a party may later
specify. With respect to notice confirmed by facsimile, notice shall be deemed
duly given when facsimile confirmation is received. With respect to notice
confirmed by express or certified mail, notice shall be deemed duly given upon
the earlier of actual receipt of such confirmation by mail or three (3) business
days after deposit in the United States mail, postage prepaid.
(b) Complete
Agreement.
This
Agreement contains the entire understanding of the parties and supersedes all
existing agreements and all other oral, written or other communications between
the parties concerning its subject matter. There are no agreements, arrangements
or undertakings, oral or written, between or among the parties hereto relating
to the subject matter of this Agreement that are not fully expressed
herein.
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(c) Governing
Law.
This
Agreement shall be governed by the laws of Michigan without regard to principles
of conflicts of laws. Any dispute or controversy arising under, out of or in
connection with this Agreement, shall be determined and settled by arbitration
in Michigan in accordance with the rules of the American Arbitration
Association. Any decision rendered thereby shall be non-appealable, final and
binding on the parties and judgment may be entered thereon.
(d) Assignment.
This
Agreement is personal to the parties hereto and may not be assigned, except
with
respect to the Company to a successor corporate entity, including the Proposed
Bank, once established.
(e) Amendment.
This
Agreement may be amended only by a writing signed by two-thirds of the
Organizers; provided however, that any action under this Agreement requiring
the
approval or consent of more than two-thirds may be amended only by a writing
signed by at least the same number of Organizers as would be required to take
such action under the Agreement.
(f) Waiver.
Failure
to insist upon strict compliance with any of the terms, covenants or conditions
hereof shall not be deemed a waiver of such term, covenant, or condition. A
waiver of any provision of this Agreement must be made in writing, designated
as
a waiver, and signed by the party against who its enforcement is sought or
in
the case of the Organizers as a group, by two-thirds of the Organizers. Any
waiver or relinquishment of such right or power at any one or more times shall
not be deemed a waiver or relinquishment of such right or power at any other
time or times.
(g) Illegality,
Severability.
If any
provisions of this Agreement (or any portion thereof) shall be held to be
invalid, illegal or unenforceable, the validity, legality or enforceability
of
the remainder of this Agreement shall not in any way be affected or impaired
thereby.
(h) Counterparts.
This
Agreement may be executed in any number of counterparts and each of such
counterparts shall be deemed an original, and all such counterparts shall
together constitute but one and the same instrument.
(i) Headings.
The
headings of sections in this Agreement are for convenience of reference only
and
are not intended to qualify the meaning of any of the language in this
Agreement.
(j) Relationship
of the Organizers.
This
Agreement shall not be deemed to create a partnership or joint venture among
the
Organizers or among the Company and the Organizers. Except with respect to
the
authorized acts of the Co-Managers, as expressly described in this Agreement,
no
Organizer shall be authorized or have the right to bind or obligate any other
Organizer to any debt, obligation or liability with any third party without
the
prior written consent of all of the other Organizers.
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[Remainder
of Page Intentionally Left Blank]
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IN
WITNESS WHEREOF,
the
undersigned parties have executed this Agreement and agree to be bound by the
terms hereof.
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GRAND
RIVER COMMERCE, INC.
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By:
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/s/
Xxxxxx X. Xxxxxxx
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Name:
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Xxxxxx
X. Xxxxxxx
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Title:
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President
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ORGANIZERS
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/s/
Xxxxxx X. Xxxxxxx
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/s/
Xxxxxxx X. Xxxxx, Xx.
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/s/
Xxxxxx X. Xxxxx
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/s/
Xxxxx X. Xxxx
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/s/
Xxxxxxx X. Xxxxxx
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/s/
Xxxxxxxxx X. Xxxxx
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/s/
Xx. Xxxxx X. XxXxxxxx
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/s/
Xxxxxxx X. Elders
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/s/
Xxxxxx X. Xxxxx
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/s/
Xx. Xxxxxxx Xxxxxxxxxx
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/s/
Xx. Xxxx X. Xxxxxxxxxx
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/s/
Xxxxxxx X. Xxxxxxxxxx
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/s/
Xxxxxxx X. Xxxxxxx, Xx.
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/s/
Xxxxx X. Xxxxxxx
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/s/
Xx. Xxxx Xxxxxxxx
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/s/
Xxxx Xxxxxx
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/s/
Xxxxxxx X. Xxxxx
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/s/
Xxxxx X. Xxxxx
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/s/
Xxxxxxx X. Xxxxxxxxx
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/s/
Xxxxx X. Xxxxxx
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/s/
Xxxx X. XxxXxxxx
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/s/
Xxxxx X. Xxxxxxx
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/s/
Xxxxxx X. Xxxxxx
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