November 12, 2008 FIRST TENNESSEE BANK NATIONAL ASSOCIATION David Work Executive Vice President Correspondent Services
Exhibit 10.2
November
12, 2008
FIRST
TENNESSEE BANK NATIONAL ASSOCIATION
▇▇▇▇▇
▇▇▇▇
Executive
Vice President
Correspondent
Services
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
Memphis,
TN 38117
Dear
Mr. Work:
Reference
is made to (i) that certain ▇▇▇▇▇▇▇ and Restated Promissory Note dated March
29,
2007 (“Note”);
(ii) that certain Loan Agreement dated March 17, 2006 (“Loan Agreement”), as
amended by that certain Modification Agreement effective as of May 11, 2006
(“First
Modification”), as further amended by that certain Second Modification
Agreement and Covenant Waiver effective as of March 29, 2007 (“Second
Modification”), as further amended by that certain Third Modification
Agreement and Covenant Waiver effective as of March 15, 2008 (“Third Modification”),
as further amended by that certain Fourth Modification Agreement and Covenant
Waiver effective as of June 30, 2008 (“Fourth
Modification”), as further amended by that certain Fifth Modification
Agreement and Covenant Waiver effective as of August 29, 2008 (“Fifth Modification”),
as further amended by that certain Amendment to Fifth Modification Agreement
and
Covenant Waiver effective as of September 23, 2008 (“Amendment to Fifth
Modification”), as further amended by that certain Sixth Modification
Agreement and Covenant Waiver effective as of October 28, 2008 (“Sixth Modification”),
and as further amended by that certain Seventh Modification Agreement and
Covenant Waiver effective as of the date hereof (“Seventh
Modification”); and (iii) that certain Pledge Agreement together with
Addendum to Pledge Agreement (collectively, the “Pledge”), each
dated
as of March 17, 2006 (the Note, the Loan Agreement, the First Modification,
the
Second Modification, the Third Modification, the Fourth Modification, the
Fifth
Modification, the Amendment to Fifth Modification, the Sixth Modification,
the
Seventh Modification, the Pledge and any other documents executed by the
Borrower in connection with the loan in the original principal amount of
$70,000,000.00 from the Lender, but expressly excluding this letter agreement,
are collectively herein referred to as the “Loan
Documents”). All capitalized terms used but not otherwise
defined herein shall have the meanings set forth on Exhibit B attached
hereto and incorporated by reference herein.
Pursuant
to the Purchase Agreement, Borrower proposes to sell the Bank Shares to Vineyard
Bancshares or another purchaser (Vineyard Bancshares or such other purchaser
as
the purchaser of the Bank Shares, the “Buyer”) for the
Initial Purchase Price. Upon closing of the sale of the Bank Shares,
Borrower shall pay (or cause Buyer to pay) to Lender an amount equal to the
Initial Payoff. In addition to the Initial Payoff, Lender shall also
be entitled to receive the Contingent Payoff from the Buyer, as described
below. The Total Payoff must be paid to Lender by wire transfer of
immediately available funds to the account designated by Lender which is
set
forth on Exhibit
A attached hereto (or as otherwise directed in writing by
▇▇▇▇▇▇). The Total Payoff represents the negotiated discounted payoff
of the Loan Liabilities. ▇▇▇▇▇▇ agrees that receipt of the Total
Payoff shall be satisfaction in full for all Loan Liabilities, subject to
the
express condition that ▇▇▇▇▇▇ receives the Initial Payoff no later than March
31, 2009. Lender may extend such deadline in its sole and absolute
discretion. If ▇▇▇▇▇▇ has not received the Initial Payoff by such
date, it may terminate this letter agreement and all of the parties’ rights and
obligations hereunder by written notice to the other parties.
In
consideration of (and conditioned upon) ▇▇▇▇▇▇’s receipt of the Initial Payoff
and Buyer’s agreement to pay the Contingent Payoff to Lender, Lender hereby
agrees that (i) immediately upon ▇▇▇▇▇▇’s receipt of the Initial Payoff, all
Loan Liabilities shall be deemed discharged and satisfied in full; (ii)
immediately upon ▇▇▇▇▇▇’s receipt of the Initial Payoff, Lender shall be deemed
to have waived any right to file or assert a claim against or receive
any distribution or payment from Borrower or, in the event Borrower becomes
a
debtor under the United States Bankruptcy Code (the “Bankruptcy Code”),
Borrower’s bankruptcy estate with respect to any Loan Liabilities,
provided, however, that (a) if Lender is required to repay all or part of
the payment of the Initial Payoff to Borrower or Borrower’s bankruptcy
estate, Lender may assert and/or file a claim against Borrower or
Borrower’s bankruptcy estate in an amount equal to the amount Lender actually
repays to Borrower or Borrower’s bankruptcy estate, and (b) Lender may
assert and/or file claims against Borrower or Borrower’s bankruptcy estate
that arise under the Surviving Indemnities; (iii) immediately upon ▇▇▇▇▇▇’s
receipt of the Initial Payoff, all of Lender’s Liens shall be deemed to be
automatically released; (iv) immediately upon Lender’s receipt of the
Initial Payoff, Borrower, Vineyard Bank, the Buyer or any of their designees
shall be authorized to file or record all documents, instruments and filings,
including, without limitation, UCC-3 termination statements, deeds of release,
or other release agreements as any such party deems necessary in order to
fully
evidence its release of Lender’s Liens; (v) against payment to Lender of the
Initial Payoff, Lender will deliver to Borrower any collateral in its
possession, including, without limitation, all certificates and stock powers
associated with the Bank Shares; and (vi) at the request of Borrower, ▇▇▇▇▇▇
will execute and deliver such other termination statements or other release
documents, as Borrower, Vineyard Bank or the Buyer may reasonably request
in
connection with its release of Lender’s Liens.
Notwithstanding
anything in this letter agreement or the Loan Documents to the contrary,
as
additional consideration for Lender’s agreements set forth in this letter
agreement, Buyer shall pay Lender the Contingent Payoff as set forth
below:
On
or before December 15, 2011, Buyer shall pay Lender Eight Million and No/100
Dollars ($8,000,000.00) on the condition that the Loan Losses of Vineyard
Bank
for the period from and including October 1, 2008 through and including
September 30, 2011 are less than One Hundred Twenty Five Million and No/100
Dollars ($125,000,000.00).
As
an inducement to Lender to enter into this letter agreement with the Borrower
and to accept the Total Payoff, both as of the date hereof and as of the
date
Lender receives the Initial Payoff, Borrower further hereby reaffirms and
agrees
to be bound by the Surviving Indemnities.
▇▇▇▇▇▇
agrees that, in the event Borrower becomes a debtor under the Bankruptcy
Code,
this letter agreement shall remain in full force and effect and Lender shall
support a sale of the Bank Shares as set forth in the Purchase Agreement,
and in
accordance with the terms of this letter agreement, pursuant to 11 U.S.C.
§ 363
or a plan, and ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ likewise agree to pursue and support such
a
sale. ▇▇▇▇▇▇ agrees that in connection with such sale, ▇▇▇▇▇▇ shall
not object to the sale under 11 U.S.C. Section 363 (or otherwise) subject
to the
condition that the order approving such sale provides that ▇▇▇▇▇▇’s lien on the
Bank Shares attaches to the proceeds of such sale in an amount equal to the
amount of the Initial Payoff and that Lender shall be paid the Initial Payoff
from such proceeds upon the closing of such sale within the time required
hereby.
▇▇▇▇▇▇
agrees that it will not sell, assign, transfer or convey the Loan Documents
unless the assignee agrees in writing and for the benefit of the Buyer and
the
Borrower to be bound by the terms of this Agreement.
In
the event that Vineyard Bancshares is not the Buyer, the parties hereto agree
that such other Buyer (“Replacement Buyer”) must become a party hereto, unless
otherwise agreed in writing between Borrower and ▇▇▇▇▇▇, by delivering an
executed counterpart of this letter agreement to Lender and Borrower in which
such Replacement Buyer acknowledges and agrees to the terms hereof as the
“Buyer,” in which case this letter agreement shall be binding on Lender,
Borrower and Replacement Buyer as if the Replacement Buyer were the Buyer
originally party hereto.
By
signing below, each of the undersigned parties irrevocably agrees to the
terms
and conditions set forth in this letter. This letter agreement shall
be governed by the laws of the State of Tennessee without regard to its conflict
of laws principles.
Sincerely,
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇
Name:
▇▇▇▇ ▇. ▇▇▇▇▇
Title:
President and Chief Executive Officer
▇▇▇▇▇▇▇▇▇▇▇
and agreed:
LENDER:
FIRST
TENNESSEE BANK NATIONAL ASSOCIATION
By:
/s/ ▇▇▇▇▇ ▇.
Work
Name: ▇▇▇▇▇
▇.
Work
Title: Executive
Vice
President
Date: November
12,
2008
VINEYARD
BANCSHARES:
VINEYARD
BANCSHARES, INC.
By: /s/
▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇
Name: ▇▇▇▇▇▇▇
▇.
▇▇▇▇▇
Title: President
and Chief Executive
Officer
Date: November
12,
2008
cc:
▇▇▇▇ ▇▇▇▇▇▇▇ – Bank MidWest
▇▇▇▇
▇▇▇▇▇▇ – First Tennessee
EXHIBIT
B
DEFINITIONS
“Accounting
Standards” shall mean generally accepted accounting principles
as modified by applicable regulatory accounting principles and consistent
with
past practices.
“Bank
Shares” means
all of the issued and outstanding shares of common stock of Vineyard
Bank.
“Borrower”
shall
mean
Vineyard National Bancorp, a California corporation.
“Contingent
Payoff”
shall mean Eight Million Dollars ($8,000,000.00).
“Initial
Payoff” shall
mean the Initial Purchase Price less One Million Dollars ($1,000,000.00)
if
Vineyard Bancshares is the buyer of the Bank Shares. If Vineyard
Bancshares is not the buyer of the Bank Shares, the Initial Payoff shall
mean
the Initial Purchase Price less the sum of the following: (i) One
Million Dollars ($1,000,000.00), plus (ii) the Break-Up Fee, and plus (iii)
Buyer’s Expenses, all as defined in the Purchase Agreement. However,
and notwithstanding the foregoing or anything in this letter agreement to
the
contrary:
(a)
if the Initial Payoff, as calculated pursuant to the preceding two (2)
sentences, would exceed Nine Million Dollars ($9,000,000.00), then the Initial
Payoff shall be reduced by an amount equal to twenty-five percent of such
excess; and
(b)
in no event will the Initial Payoff ever be less than Nine Million Dollars
($9,000,000.00) or more than the Maximum Amount.
For
example, if the Initial Payoff as calculated pursuant to the first two (2)
sentences of this definition would be $10,000,000.00, then it shall be reduced
by $250,000.00, to $9,750,000.00.
“Initial
Purchase
Price” shall mean the greater of (x) Ten Million Dollars
($10,000,000.00), or (y) the actual bid accepted for the sale of the Bank
Shares.
“Lender”
shall
mean
First Tennessee Bank National Association, a national bank.
“▇▇▇▇▇▇’s
Liens” mean
all security interests, liens and pledges which Lender has or may have in
or to
Borrower’s property (including without limitation the Bank Shares) pursuant to
the Loan Documents or otherwise.
“Loan
Liabilities”
shall mean all indebtedness and obligations (including all accrued
and unpaid
interest, principal, penalties, other fees, expense reimbursements and
indemnities) owed to Lender by Borrower pursuant to the Loan Documents, but
expressly excluding the Reserved Claims.
“Loan
Losses” mean the
sum of (a) any loan loss which occurs beginning on October 1, 2008 through
and
including September 30, 2011 and which is recognized in accordance with the
Accounting Standards, (b) any losses on real property that is included in
the
Other Real Estate Owned (OREO) account (the “Oreo Account”) of Vineyard Bank,
National Association as of October 1, 2008, and (c) any losses on real property
that is added to the OREO Account following foreclosure by Vineyard Bank,
National Association with respect to a Designated Loan (as defined below),
whether or not Vineyard Bank, National Association recognizes any loss on
the
loan at the time of foreclosure. Loan Losses shall be recognized only
on those loans or loan assets (including OREO assets) which were reflected
in
the Bank Financial Statements (as defined in Section 4.7 of the Purchase
Agreement) as of September 30, 2008, and they will not include losses recognized
on any loans made by the Bank subsequent to September 30, 2008 (the “Designated
Loans”). Loan Losses shall be netted against any recoveries with
respect to the Designated Loans actually collected by the Bank on or prior
to
November 29, 2011.
“Maximum
Amount” shall
mean the aggregate amount of all indebtedness and obligations (unpaid principal,
accrued interest and otherwise) that would be due to Lender under the Loan
Documents in the absence of this letter agreement until ▇▇▇▇▇▇ has been paid
the
full, undiscounted amount thereof, including interest on all unpaid balances
at
the interest rate set forth in the Seventh Modification.
“Purchase
Agreement”
means that certain Stock Purchase Agreement dated November 12, 2008
between
Vineyard Bancshares, as buyer, and ▇▇▇▇▇▇▇▇, as seller.
“Reserved
Claims”
shall mean all of Lender’s rights and claims against Borrower under this letter
agreement, which include (x) Lender’s right to receive the Initial Payoff (until
it has been paid to Lender in accordance herewith) and (y) ▇▇▇▇▇▇’s rights and
claims under the Surviving Indemnities.
“Surviving
Indemnities” shall mean the terms and provisions of Section
7.12, “Indemnification”, of the Loan Agreement and Section 10,
“Release and Waiver”, of the Fifth Modification.
“Total
Payoff” shall
mean the Initial Payoff and Contingent Payoff; provided that if no Contingent
Payoff is required to be paid pursuant to the terms of this Letter Agreement,
then the Total Payoff shall mean the Initial Payoff. In no event
shall the Total Payoff exceed the Maximum Amount.
“Vineyard
Bancshares”
shall mean Vineyard Bancshares, Inc., a Minnesota corporation.
“Vineyard
Bank” shall
mean Vineyard Bank, National Association, a national bank.