EXHIBIT 10.3
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GUARANTEE AGREEMENT
APPALACHIAN BANCSHARES, INC.
Dated as of August 28, 2003
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS AND INTERPRETATION
Section 1.1. Definitions and Interpretation................................................................. 1
ARTICLE II
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
Section 2.1. Powers and Duties of the Guarantee Trustee..................................................... 4
Section 2.2. Certain Rights of the Guarantee Trustee........................................................ 5
Section 2.3. Not Responsible for Recitals or Issuance of Guarantee.......................................... 7
Section 2.4. Events of Default; Waiver...................................................................... 7
Section 2.5. Events of Default; Notice...................................................................... 8
ARTICLE III
THE GUARANTEE TRUSTEE
Section 3.1. The Guarantee Trustee; Eligibility............................................................. 8
Section 3.2. Appointment, Removal and Resignation of the Guarantee Trustee.................................. 9
ARTICLE IV
GUARANTEE
Section 4.1. Guarantee...................................................................................... 9
Section 4.2. Waiver of Notice and Demand.................................................................... 10
Section 4.3. Obligations Not Affected....................................................................... 10
Section 4.4. Rights of Holders.............................................................................. 11
Section 4.5. Guarantee of Payment........................................................................... 11
Section 4.6. Subrogation.................................................................................... 11
Section 4.7. Independent Obligations........................................................................ 11
Section 4.8. Enforcement.................................................................................... 12
ARTICLE V
LIMITATION OF TRANSACTIONS; SUBORDINATION
Section 5.1. Limitation of Transactions..................................................................... 12
Section 5.2. Ranking........................................................................................ 13
ARTICLE VI
TERMINATION
Section 6.1. Termination.................................................................................... 13
ARTICLE VII
INDEMNIFICATION
Section 7.1. Exculpation.................................................................................... 13
Section 7.2. Indemnification................................................................................ 14
Section 7.3. Compensation; Reimbursement of Expenses........................................................ 15
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TABLE OF CONTENTS
(continued)
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ARTICLE VIII
MISCELLANEOUS
Section 8.1. Successors and Assigns......................................................................... 15
Section 8.2. Amendments..................................................................................... 15
Section 8.3. Notices........................................................................................ 16
Section 8.4. Benefit........................................................................................ 16
Section 8.5. Governing Law.................................................................................. 17
Section 8.6. Counterparts................................................................................... 17
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GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Guarantee"), dated as of August 28, 2003, is
executed and delivered by Appalachian Bancshares, Inc., a bank holding company
incorporated in Georgia (the "Guarantor"), and Wilmington Trust Company, a
Delaware banking corporation, as trustee (the "Guarantee Trustee"), for the
benefit of the Holders (as defined herein) from time to time of the Capital
Securities (as defined herein) of Appalachian Capital Trust I, a Delaware
statutory trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of August 28, 2003, among the trustees named therein of
the Issuer, Appalachian Bancshares, Inc., as sponsor, and the Holders from time
to time of undivided beneficial interests in the assets of the Issuer, the
Issuer is issuing on the date hereof securities, having an aggregate liquidation
amount of up to $6,000,000, designated the Floating Rate TruPS(R) (the "Capital
Securities"); and
WHEREAS, as incentive for the Holders to purchase the Capital Securities,
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth in this Guarantee, to pay to the Holders of Capital Securities the
Guarantee Payments (as defined herein) and to make certain other payments on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of the
Capital Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this Guarantee for the benefit of
the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1. Definitions and Interpretation.
In this Guarantee, unless the context otherwise requires:
(a) capitalized terms used in this Guarantee but not defined in the
preamble above have the respective meanings assigned to them in this
Section 1.1;
(b) a term defined anywhere in this Guarantee has the same meaning
throughout;
(c) all references to "the Guarantee" or "this Guarantee" are to this
Guarantee as modified, supplemented or amended from time to time;
(d) all references in this Guarantee to Articles and Sections are to
Articles and Sections of this Guarantee, unless otherwise specified;
(e) terms defined in the Declaration as of the date of execution of this
Guarantee have the same meanings when used in this Guarantee, unless
otherwise defined in this Guarantee or unless the context otherwise
requires; and
(f) a reference to the singular includes the plural and vice versa.
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"Beneficiaries" means any Person to whom the Issuer is or hereafter becomes
indebted or liable.
"Corporate Trust Office" means the office of the Guarantee Trustee at which
the corporate trust business of the Guarantee Trustee shall, at any particular
time, be principally administered, which office at the date of execution of this
Guarantee is located at Xxxxxx Square North, 0000 Xxxxx Xxxxxx Xxxxxx,
Xxxxxxxxxx, XX 00000-0000.
"Covered Person" means any Holder of Capital Securities.
"Debentures" means the junior subordinated debentures of Appalachian
Bancshares, Inc., designated the Floating Rate Junior Subordinated Debt
Securities due 2033, held by the Institutional Trustee (as defined in the
Declaration) of the Issuer.
"Event of Default" has the meaning set forth in Section 2.4.
"Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Capital Securities, to the extent not paid or
made by the Issuer: (i) any accrued and unpaid Distributions (as defined in the
Declaration) which are required to be paid on such Capital Securities to the
extent the Issuer has funds available in the Property Account (as defined in the
Declaration) therefor at such time, (ii) the Redemption Price (as defined in the
Indenture) to the extent the Issuer has funds available in the Property Account
therefor at such time, with respect to the Capital Securities at maturity on any
Capital Securities called for redemption by the Issuer, (iii) the Special
Redemption Price (as defined in the Indenture) to the extent the Issuer has
funds available in the Property Account therefor at such time, with respect to
Capital Securities called for redemption upon the occurrence of a Special Event
(as defined in the Indenture), and (iv) upon a voluntary or involuntary
liquidation, dissolution, winding-up or termination of the Issuer (other than in
connection with the distribution of Debentures to the Holders of the Capital
Securities in exchange therefor as provided in the Declaration), the lesser of
(a) the aggregate of the liquidation amount and all accrued and unpaid
Distributions on the Capital Securities to the date of payment, to the extent
the Issuer has funds available in the Property Account therefor at such time,
and (b) the amount of assets of the Issuer remaining available for distribution
to Holders in liquidation of the Issuer after satisfaction of liabilities to
creditors of the Issuer as required by applicable law (in either case, the
"Liquidation Distribution").
"Guarantee Trustee" means Wilmington Trust Company, until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee and thereafter means each such Successor
Guarantee Trustee.
"Holder" means any holder, as registered on the books and records of the
Issuer, of any Capital Securities; provided, however, that, in determining
whether the holders of the requisite percentage of Capital Securities have given
any request, notice, consent or waiver hereunder, "Holder" shall not include the
Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Guarantee Trustee (including in its
individual capacity), any Affiliate of the Guarantee Trustee, or any officers,
directors, shareholders, members, partners, employees, representatives,
nominees, custodians or agents of the Guarantee Trustee.
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"Indenture" means the Indenture, dated as of August 28, 2003, between the
Guarantor and Wilmington Trust Company, not in its individual capacity but
solely as trustee, and any indenture supplemental thereto pursuant to which the
Debentures are to be issued to the Institutional Trustee of the Issuer.
"Liquidation Distribution" has the meaning set forth in the definition of
"Guarantee Payments" herein.
"Majority in liquidation amount of the Capital Securities" means Holder(s)
of outstanding Capital Securities, voting together as a class, but separately
from the holders of Common Securities, of more than 50% of the aggregate
liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to,
but excluding, the date upon which the voting percentages are determined) of all
Capital Securities then outstanding.
"Obligations" means any costs, expenses or liabilities (but not including
liabilities related to taxes) of the Issuer, other than obligations of the
Issuer to pay to holders of any Trust Securities the amounts due such holders
pursuant to the terms of the Trust Securities.
"Officer's Certificate" means, with respect to any Person, a certificate
signed by one Authorized Officer of such Person. Any Officer's Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Guarantee shall include:
(a) a statement that each officer signing the Officer's Certificate has
read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officer's
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable
such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer, such
condition or covenant has been complied with.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Responsible Officer" means, with respect to the Guarantee Trustee, any
officer within the Corporate Trust Office of the Guarantee Trustee with direct
responsibility for the administration of any matters relating to this Guarantee,
including any vice president, any assistant vice president, any secretary, any
assistant secretary, the treasurer, any assistant treasurer, any trust officer
or other officer of the Corporate Trust Office of the Guarantee Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to
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whom such matter is referred because of that officer's knowledge of and
familiarity with the particular subject.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 3.1.
"Trust Securities" means the Common Securities and the Capital Securities.
ARTICLE II
POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE
SECTION 2.1. Powers and Duties of the Guarantee Trustee.
(a) This Guarantee shall be held by the Guarantee Trustee for the benefit
of the Holders of the Capital Securities, and the Guarantee Trustee
shall not transfer this Guarantee to any Person except a Holder of
Capital Securities exercising his or her rights pursuant to Section
4.4(b) or to a Successor Guarantee Trustee on acceptance by such
Successor Guarantee Trustee of its appointment to act as Successor
Guarantee Trustee. The right, title and interest of the Guarantee
Trustee shall automatically vest in any Successor Guarantee Trustee,
and such vesting and cessation of title shall be effective whether or
not conveyancing documents have been executed and delivered pursuant
to the appointment of such Successor Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer of the
Guarantee Trustee has occurred and is continuing, the Guarantee
Trustee shall enforce this Guarantee for the benefit of the Holders of
the Capital Securities.
(c) The Guarantee Trustee, before the occurrence of any Event of Default
and after the curing or waiving of all Events of Default that may have
occurred, shall undertake to perform only such duties as are
specifically set forth in this Guarantee, and no implied covenants
shall be read into this Guarantee against the Guarantee Trustee. In
case an Event of Default has occurred (that has not been cured or
waived pursuant to Section 2.4(b)) and is actually known to a
Responsible Officer of the Guarantee Trustee, the Guarantee Trustee
shall exercise such of the rights and powers vested in it by this
Guarantee, and use the same degree of care and skill in its exercise
thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Guarantee shall be construed to relieve the
Guarantee Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after the
curing or waiving of all Events of Default that may have
occurred:
(A) the duties and obligations of the Guarantee Trustee shall be
determined solely by the express provisions of this
Guarantee, and the Guarantee Trustee shall not be liable
except for the performance of such duties and obligations as
are specifically set forth in this Guarantee, and no implied
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covenants or obligations shall be read into this Guarantee
against the Guarantee Trustee; and
(B) in the absence of bad faith on the part of the Guarantee
Trustee, the Guarantee Trustee may conclusively rely, as to
the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or
opinions furnished to the Guarantee Trustee and conforming
to the requirements of this Guarantee; but in the case of
any such certificates or opinions furnished to the Guarantee
Trustee, the Guarantee Trustee shall be under a duty to
examine the same to determine whether or not on their face
they conform to the requirements of this Guarantee;
(ii) the Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the
Guarantee Trustee, unless it shall be proved that such
Responsible Officer of the Guarantee Trustee or the Guarantee
Trustee was negligent in ascertaining the pertinent facts upon
which such judgment was made;
(iii)the Guarantee Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in
accordance with the written direction of the Holders of not less
than a Majority in liquidation amount of the Capital Securities
relating to the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee, or
exercising any trust or power conferred upon the Guarantee
Trustee under this Guarantee; and
(iv) no provision of this Guarantee shall require the Guarantee
Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers, if the
Guarantee Trustee shall have reasonable grounds for believing
that the repayment of such funds is not reasonably assured to it
under the terms of this Guarantee, or security and indemnity,
reasonably satisfactory to the Guarantee Trustee, against such
risk or liability is not reasonably assured to it.
SECTION 2.2. Certain Rights of the Guarantee Trustee.
(a) Subject to the provisions of Section 2.1:
(i) The Guarantee Trustee may conclusively rely, and shall be fully
protected in acting or refraining from acting upon, any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this
Guarantee shall be sufficiently evidenced by an Officer's
Certificate.
(iii)Whenever, in the administration of this Guarantee, the Guarantee
Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting any action
hereunder, the Guarantee Trustee (unless other evidence is herein
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specifically prescribed) may, in the absence of bad faith on its
part, request and conclusively rely upon an Officer's Certificate
of the Guarantor which, upon receipt of such request, shall be
promptly delivered by the Guarantor.
(iv) The Guarantee Trustee shall have no duty to see to any recording,
filing or registration of any instrument or other writing (or any
rerecording, refiling or re-registration thereof).
(v) The Guarantee Trustee may consult with counsel of its selection,
and the advice or opinion of such counsel with respect to legal
matters shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with such advice or
opinion. Such counsel may be counsel to the Guarantor or any of
its Affiliates and may include any of its employees. The
Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Guarantee from
any court of competent jurisdiction.
(vi) The Guarantee Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Guarantee at the
request or direction of any Holder, unless such Holder shall have
provided to the Guarantee Trustee such security and indemnity,
reasonably satisfactory to the Guarantee Trustee, against the
costs, expenses (including attorneys' fees and expenses and the
expenses of the Guarantee Trustee's agents, nominees or
custodians) and liabilities that might be incurred by it in
complying with such request or direction, including such
reasonable advances as may be requested by the Guarantee Trustee;
provided, however, that nothing contained in this Section
2.2(a)(vi) shall be taken to relieve the Guarantee Trustee, upon
the occurrence of an Event of Default, of its obligation to
exercise the rights and powers vested in it by this Guarantee.
(vii)The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the
Guarantee Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see
fit.
(viii) The Guarantee Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by
or through agents, nominees, custodians or attorneys, and the
Guarantee Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with
due care by it hereunder.
(ix) Any action taken by the Guarantee Trustee or its agents hereunder
shall bind the Holders of the Capital Securities, and the
signature of the Guarantee Trustee or its agents alone shall be
sufficient and effective to perform any such action. No third
party shall be required to inquire as to the authority of the
Guarantee Trustee to so act or as to its compliance with any of
the terms and provisions of this Guarantee, both of which shall
be conclusively evidenced by the Guarantee Trustee's or its
agent's taking such action.
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(x) Whenever in the administration of this Guarantee the Guarantee
Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other
action hereunder, the Guarantee Trustee (A) may request
instructions from the Holders of a Majority in liquidation amount
of the Capital Securities, (B) may refrain from enforcing such
remedy or right or taking such other action until such
instructions are received and (C) shall be protected in
conclusively relying on or acting in accordance with such
instructions.
(xi) The Guarantee Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith and
reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this
Guarantee.
(b) No provision of this Guarantee shall be deemed to impose any duty or
obligation on the Guarantee Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on
it, in any jurisdiction in which it shall be illegal or in which the
Guarantee Trustee shall be unqualified or incompetent in accordance
with applicable law to perform any such act or acts or to exercise any
such right, power, duty or obligation. No permissive power or
authority available to the Guarantee Trustee shall be construed to be
a duty.
SECTION 2.3. Not Responsible for Recitals or Issuance of Guarantee.
The recitals contained in this Guarantee shall be taken as the statements
of the Guarantor, and the Guarantee Trustee does not assume any responsibility
for their correctness. The Guarantee Trustee makes no representation as to the
validity or sufficiency of this Guarantee.
SECTION 2.4. Events of Default; Waiver.
(a) An Event of Default under this Guarantee will occur upon the failure
of the Guarantor to perform any of its payment or other obligations
hereunder.
(b) The Holders of a Majority in liquidation amount of the Capital
Securities may, voting or consenting as a class, on behalf of the
Holders of all of the Capital Securities, waive any past Event of
Default and its consequences. Upon such waiver, any such Event of
Default shall cease to exist, and shall be deemed to have been cured,
for every purpose of this Guarantee, but no such waiver shall extend
to any subsequent or other default or Event of Default or impair any
right consequent thereon.
SECTION 2.5. Events of Default; Notice.
(a) The Guarantee Trustee shall, within 90 days after the occurrence of an
Event of Default, transmit by mail, first class postage prepaid, to
the Holders of the Capital Securities, notices of all Events of
Default actually known to a Responsible Officer of the Guarantee
Trustee, unless such defaults have been cured before the giving of
such notice, provided, however, that the Guarantee Trustee shall be
protected in withholding such notice if and so long as a Responsible
Officer of the Guarantee Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders of the
Capital Securities.
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(b) The Guarantee Trustee shall not be charged with knowledge of any Event
of Default unless the Guarantee Trustee shall have received written
notice thereof from the Guarantor or a Holder of the Capital
Securities, or a Responsible Officer of the Guarantee Trustee charged
with the administration of this Guarantee shall have actual knowledge
thereof.
ARTICLE III
THE GUARANTEE TRUSTEE
SECTION 3.1. The Guarantee Trustee; Eligibility.
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation or national association organized and doing
business under the laws of the United States of America or any
state or territory thereof or of the District of Columbia, or
Person authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least 50
million U.S. dollars ($50,000,000), and subject to supervision or
examination by federal, state, territorial or District of
Columbia authority. If such corporation or national association
publishes reports of condition at least annually, pursuant to law
or to the requirements of the supervising or examining authority
referred to above, then, for the purposes of this Section
3.1(a)(ii), the combined capital and surplus of such corporation
or national association shall be deemed to be its combined
capital and surplus as set forth in its most recent report of
condition so published.
(b) If at any time the Guarantee Trustee shall cease to be eligible to so
act under Section 3.1(a), the Guarantee Trustee shall immediately
resign in the manner and with the effect set forth in Section 3.2(c).
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture
Act, the Guarantee Trustee shall either eliminate such interest or
resign to the extent and in the manner provided by, and subject to,
this Guarantee.
SECTION 3.2. Appointment, Removal and Resignation of the Guarantee Trustee.
(a) Subject to Section 3.2(b), the Guarantee Trustee may be appointed or
removed without cause at any time by the Guarantor except during an
Event of Default.
(b) The Guarantee Trustee shall not be removed in accordance with Section
3.2(a) until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by written instrument executed by such
Successor Guarantee Trustee and delivered to the Guarantor.
(c) The Guarantee Trustee appointed to office shall hold office until a
Successor Guarantee Trustee shall have been appointed or until its
removal or resignation. The Guarantee Trustee may resign from office
(without need for prior or subsequent accounting) by an instrument in
writing executed by the Guarantee Trustee and delivered to the
Guarantor, which
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resignation shall not take effect until a Successor Guarantee Trustee
has been appointed and has accepted such appointment by an instrument
in writing executed by such Successor Guarantee Trustee and delivered
to the Guarantor and the resigning Guarantee Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 3.2 within 60 days
after delivery of an instrument of removal or resignation, the
Guarantee Trustee resigning or being removed may petition any court of
competent jurisdiction for appointment of a Successor Guarantee
Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper, appoint a Successor Guarantee Trustee.
(e) No Guarantee Trustee shall be liable for the acts or omissions to act
of any Successor Guarantee Trustee.
(f) Upon termination of this Guarantee or removal or resignation of the
Guarantee Trustee pursuant to this Section 3.2, the Guarantor shall
pay to the Guarantee Trustee all amounts owing to the Guarantee
Trustee under Sections 7.2 and 7.3 accrued to the date of such
termination, removal or resignation.
ARTICLE IV
GUARANTEE
SECTION 4.1. Guarantee.
(a) The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by the Issuer), as and when due, regardless of any
defense (except as defense of payment by the Issuer), right of set-off
or counterclaim that the Issuer may have or assert. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by
causing the Issuer to pay such amounts to the Holders.
(b) The Guarantor hereby also agrees to assume any and all Obligations of
the Issuer and in the event any such Obligation is not so assumed,
subject to the terms and conditions hereof, the Guarantor hereby
irrevocably and unconditionally guarantees to each Beneficiary the
full payment, when and as due, of any and all Obligations to such
Beneficiaries. This Guarantee is intended to be for the Beneficiaries
who have received notice hereof.
SECTION 4.2. Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of this Guarantee and of
any liability to which it applies or may apply, presentment, demand for payment,
any right to require a proceeding first against the Issuer or any other Person
before proceeding against the Guarantor, protest, notice of nonpayment, notice
of dishonor, notice of redemption and all other notices and demands.
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SECTION 4.3. Obligations Not Affected.
The obligations, covenants, agreements and duties of the Guarantor under
this Guarantee shall in no way be affected or impaired by reason of the
happening from time to time of any of the following: (e) (f) (g)
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Capital
Securities to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price, Special Redemption
Price, Liquidation Distribution or any other sums payable under the
terms of the Capital Securities or the extension of time for the
performance of any other obligation under, arising out of, or in
connection with, the Capital Securities (other than an extension of
time for the payment of the Distributions, Redemption Price, Special
Redemption Price, Liquidation Distribution or other sums payable that
results from the extension of any interest payment period on the
Debentures or any extension of the maturity date of the Debentures
permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Capital
Securities, or any action on the part of the Issuer granting
indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the
Issuer or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the Capital Securities;
(f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the
intent of this Section 4.3 that the obligations of the Guarantor
hereunder shall be absolute and unconditional under any and all
circumstances.
There shall be no obligation of the Holders to give notice to, or obtain
consent of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 4.4. Rights of Holders.
(a) The Holders of a Majority in liquidation amount of the Capital
Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee
Trustee in respect of this Guarantee or to direct the exercise of any
trust or power conferred upon the Guarantee Trustee under this
Guarantee; provided, however, that (subject to Sections 2.1 and 2.2)
the Guarantee Trustee shall have the right to decline to follow
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any such direction if the Guarantee Trustee shall determine that the
actions so directed would be unjustly prejudicial to the Holders not
taking part in such direction or if the Guarantee Trustee being
advised by legal counsel determines that the action or proceeding so
directed may not lawfully be taken or if the Guarantee Trustee in good
faith by its board of directors or trustees, executive committee or a
trust committee of directors or trustees and/or Responsible Officers
shall determine that the action or proceeding so directed would
involve the Guarantee Trustee in personal liability.
(b) Any Holder of Capital Securities may institute a legal proceeding
directly against the Guarantor to enforce the Guarantee Trustee's
rights under this Guarantee, without first instituting a legal
proceeding against the Issuer, the Guarantee Trustee or any other
Person. The Guarantor waives any right or remedy to require that any
such action be brought first against the Issuer, the Guarantee Trustee
or any other Person before so proceeding directly against the
Guarantor.
SECTION 4.5. Guarantee of Payment.
This Guarantee creates a guarantee of payment and not of collection.
SECTION 4.6. Subrogation.
The Guarantor shall be subrogated to all (if any) rights of the Holders of
Capital Securities against the Issuer in respect of any amounts paid to such
Holders by the Guarantor under this Guarantee; provided, however, that the
Guarantor shall not (except to the extent required by applicable provisions of
law) be entitled to enforce or exercise any right that it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this Guarantee, if, after giving effect to any such
payment, any amounts are due and unpaid under this Guarantee. If any amount
shall be paid to the Guarantor in violation of the preceding sentence, the
Guarantor agrees to hold such amount in trust for the Holders and to pay over
such amount to the Holders.
SECTION 4.7. Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are independent
of the obligations of the Issuer with respect to the Capital Securities and that
the Guarantor shall be liable as principal and as debtor hereunder to make
Guarantee Payments pursuant to the terms of this Guarantee notwithstanding the
occurrence of any event referred to in subsections (a) through (g), inclusive,
of Section 4.3 hereof.
SECTION 4.8. Enforcement.
A Beneficiary may enforce the Obligations of the Guarantor contained in
Section 4.1(b) directly against the Guarantor, and the Guarantor waives any
right or remedy to require that any action be brought against the Issuer or any
other person or entity before proceeding against the Guarantor.
The Guarantor shall be subrogated to all rights (if any) of any Beneficiary
against the Issuer in respect of any amounts paid to the Beneficiaries by the
Guarantor under this Guarantee; provided, however, that the Guarantor shall not
(except to the extent required by applicable
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provisions of law) be entitled to enforce or exercise any rights that it may
acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee, if, after
giving effect to such payment, any amounts are due and unpaid under this
Guarantee.
ARTICLE V
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 5.1. Limitation of Transactions.
So long as any Capital Securities remain outstanding, if (a) there shall
have occurred and be continuing an Event of Default or (b) the Guarantor shall
have selected an Extension Period as provided in the Declaration and such
period, or any extension thereof, shall have commenced and be continuing, then
the Guarantor may not (x) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Guarantor's capital stock or (y) make any payment of principal of or
interest or premium, if any, on or repay, repurchase or redeem any debt
securities of the Guarantor that rank pari passu in all respects with or junior
in interest to the Debentures (other than (i) payments under this Guarantee,
(ii) repurchases, redemptions or other acquisitions of shares of capital stock
of the Guarantor (A) in connection with any employment contract, benefit plan or
other similar arrangement with or for the benefit of one or more employees,
officers, directors, or consultants, (B) in connection with a dividend
reinvestment or stockholder stock purchase plan or (C) in connection with the
issuance of capital stock of the Guarantor (or securities convertible into or
exercisable for such capital stock), as consideration in an acquisition
transaction entered into prior to the occurrence of the Event of Default or the
applicable Extension Period, (iii) as a result of any exchange or conversion of
any class or series of the Guarantor's capital stock (or any capital stock of a
subsidiary of the Guarantor) for any class or series of the Guarantor's capital
stock or of any class or series of the Guarantor's indebtedness for any class or
series of the Guarantor's capital stock, (iv) the purchase of fractional
interests in shares of the Guarantor's capital stock pursuant to the conversion
or exchange provisions of such capital stock or the security being converted or
exchanged, (v) any declaration of a dividend in connection with any
stockholder's rights plan, or the issuance of rights, stock or other property
under any stockholder's rights plan, or the redemption or repurchase of rights
pursuant thereto, or (vi) any dividend in the form of stock, warrants, options
or other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior to such stock).
SECTION 5.2. Ranking.
This Guarantee will constitute an unsecured obligation of the Guarantor and
will rank subordinate and junior in right of payment to all present and future
Senior Indebtedness (as defined in the Indenture) of the Guarantor. By their
acceptance thereof, each Holder of Capital Securities agrees to the foregoing
provisions of this Guarantee and the other terms set forth herein.
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ARTICLE VI
TERMINATION
SECTION 6.1. Termination.
This Guarantee shall terminate as to the Capital Securities (i) upon full
payment of the Redemption Price or the Special Redemption Price, as the case may
be, of all Capital Securities then outstanding, (ii) upon the distribution of
all of the Debentures to the Holders of all of the Capital Securities or (iii)
upon full payment of the amounts payable in accordance with the Declaration upon
dissolution of the Issuer. This Guarantee will continue to be effective or will
be reinstated, as the case may be, if at any time any Holder of Capital
Securities must restore payment of any sums paid under the Capital Securities or
under this Guarantee.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1. Exculpation.
(a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Guarantor or any Covered Person for any
loss, damage or claim incurred by reason of any act or omission of
such Indemnified Person in good faith in accordance with this
Guarantee and in a manner that such Indemnified Person reasonably
believed to be within the scope of the authority conferred on such
Indemnified Person by this Guarantee or by law, except that an
Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's negligence or willful
misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Issuer or the Guarantor and upon such
information, opinions, reports or statements presented to the Issuer
or the Guarantor by any Person as to matters the Indemnified Person
reasonably believes are within such other Person's professional or
expert competence and who, if selected by such Indemnified Person, has
been selected with reasonable care by such Indemnified Person,
including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses, or any other
facts pertinent to the existence and amount of assets from which
Distributions to Holders of Capital Securities might properly be paid.
SECTION 7.2. Indemnification.
(a) The Guarantor agrees to indemnify each Indemnified Person for, and to
hold each Indemnified Person harmless against, any and all loss,
liability, damage, claim or expense incurred without negligence or
willful misconduct on the part of the Indemnified Person, arising out
of or in connection with the acceptance or administration of the trust
or trusts hereunder, including but not limited to the costs and
expenses (including reasonable legal fees and expenses) of the
Indemnified Person defending itself against, or investigating, any
claim or liability in connection with the exercise or performance of
any of the Indemnified Person's powers or duties hereunder. The
obligation to indemnify as set forth in this Section 7.2 shall
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survive the resignation or removal of the Guarantee Trustee and the
termination of this Guarantee.
(b) Promptly after receipt by an Indemnified Person under this Section 7.2
of notice of the commencement of any action, such Indemnified Person
will, if a claim in respect thereof is to be made against the
Guarantor under this Section 7.2, notify the Guarantor in writing of
the commencement thereof; but the failure so to notify the Guarantor
(i) will not relieve the Guarantor from liability under paragraph (a)
above unless and to the extent that the Guarantor did not otherwise
learn of such action and such failure results in the forfeiture by the
Guarantor of substantial rights and defenses and (ii) will not, in any
event, relieve the Guarantor from any obligations to any Indemnified
Person other than the indemnification obligation provided in paragraph
(a) above. The Guarantor shall be entitled to appoint counsel of the
Guarantor's choice at the Guarantor's expense to represent the
Indemnified Person in any action for which indemnification is sought
(in which case the Guarantor shall not thereafter be responsible for
the fees and expenses of any separate counsel retained by the
Indemnified Person or Persons except as set forth below); provided,
however, that such counsel shall be satisfactory to the Indemnified
Person. Notwithstanding the Guarantor's election to appoint counsel to
represent the Indemnified Person in any action, the Indemnified Person
shall have the right to employ separate counsel (including local
counsel), and the Guarantor shall bear the reasonable fees, costs and
expenses of such separate counsel, if (i) the use of counsel chosen by
the Guarantor to represent the Indemnified Person would present such
counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the
Indemnified Person and the Guarantor and the Indemnified Person shall
have reasonably concluded that there may be legal defenses available
to it and/or other Indemnified Persons which are different from or
additional to those available to the Guarantor, (iii) the Guarantor
shall not have employed counsel satisfactory to the Indemnified Person
to represent the Indemnified Person within a reasonable time after
notice of the institution of such action or (iv) the Guarantor shall
authorize the Indemnified Person to employ separate counsel at the
expense of the Guarantor. The Guarantor will not, without the prior
written consent of the Indemnified Persons, settle or compromise or
consent to the entry of any judgment with respect to any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or
not the Indemnified Persons are actual or potential parties to such
claim or action) unless such settlement, compromise or consent
includes an unconditional release of each Indemnified Person from all
liability arising out of such claim, action, suit or proceeding.
SECTION 7.3. Compensation; Reimbursement of Expenses.
The Guarantor agrees:
(a) to pay to the Guarantee Trustee from time to time such compensation
for all services rendered by it hereunder as the parties shall agree
to from time to time (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an
express trust); and
(b) except as otherwise expressly provided herein, to reimburse the
Guarantee Trustee upon request for all reasonable expenses,
disbursements and advances incurred or made by it in accordance with
any provision of this Guarantee (including the reasonable compensation
and the
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expenses and disbursements of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to its
negligence or willful misconduct.
The provisions of this Section 7.3 shall survive the resignation or removal
of the Guarantee Trustee and the termination of this Guarantee.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Successors and Assigns.
All guarantees and agreements contained in this Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the Guarantor
and shall inure to the benefit of the Holders of the Capital Securities then
outstanding. Except in connection with any merger or consolidation of the
Guarantor with or into another entity or any sale, transfer or lease of the
Guarantor's assets to another entity, in each case to the extent permitted under
the Indenture, the Guarantor may not assign its rights or delegate its
obligations under this Guarantee without the prior approval of the Holders of
not less than a Majority in liquidation amount of the Capital Securities.
SECTION 8.2. Amendments.
Except with respect to any changes that do not adversely affect the rights
of Holders of the Capital Securities in any material respect (in which case no
consent of Holders will be required), this Guarantee may be amended only with
the prior approval of the Holders of not less than a Majority in liquidation
amount of the Capital Securities. The provisions of the Declaration with respect
to amendments thereof shall apply equally with respect to amendments of the
Guarantee.
SECTION 8.3. Notices.
All notices provided for in this Guarantee shall be in writing, duly signed
by the party giving such notice, and shall be delivered, telecopied or mailed by
first class mail, as follows:
(a) If given to the Guarantee Trustee, at the Guarantee Trustee's mailing
address set forth below (or such other address as the Guarantee
Trustee may give notice of to the Holders of the Capital Securities):
Wilmington Trust Company
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attention: Corporate Trust Administrator
Telecopy: 000-000-0000
Telephone: 000-000-0000
(b) If given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of
to the Holders of the Capital Securities and to the Guarantee
Trustee):
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Appalachian Bancshares, Inc.
000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
Telecopy: 000-000-0000
Telephone: 000-000-0000
(c) If given to any Holder of the Capital Securities, at the address set
forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 8.4. Benefit.
This Guarantee is solely for the benefit of the Holders of the Capital
Securities and, subject to Section 2.1(a), is not separately transferable from
the Capital Securities.
SECTION 8.5. Governing Law.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES
THEREOF.
SECTION 8.6. Counterparts.
This Guarantee may contain more than one counterpart of the signature page
and this Guarantee may be executed by the affixing of the signature of the
Guarantor and the Guarantee Trustee to any of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.
THIS GUARANTEE is executed as of the day and year first above written.
Appalachian Bancshares, Inc., as Guarantor
By:
-------------------------------------------
Name:
Title:
Wilmington Trust Company, as Guarantee Trustee
By:
-------------------------------------------
Name:
Title:
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