RESTRUCTURING AGREEMENT
Exhibit 10.17
This Restructuring Agreement (this “Agreement”) is entered into as of this 30th day of
September, 2008 by and between CAPITALSOUTH BANCORP, a Delaware
corporation (the “Company”),
and XXXXX X. XXXXX, an individual resident of the State of Florida (“Xxxxx”).
R E C I T A L S:
A. Prior to the date hereof, and as contemplated by the Agreement and Plan of Merger by and
between the Company and Monticello Bancshares, Inc. and joined into by Xxxxx (the “Merger
Agreement”) and the Non-Recourse Indemnity and Security Agreement entered into by and between
CapitalSouth Bank, an Alabama banking corporation, and Xxxxx, and joined in by the Company (the
“Indemnity Agreement”), Xxxxx made two loans to the Company evidenced by the following
notes:
(i) A Convertible Promissory Note in the original principal amount of $6,500,000, dated
September 14, 2007 made by the Company in favor of Xxxxx, as amended and restated by that certain
Amended and Restated Convertible Promissory Note in the original principal amount of $5,530,319.40,
dated November 30, 2007, made by the Company in favor of Xxxxx (the “Non-Pledged Note”);
and
(ii) A Promissory Note in the original principal amount of $1,500,000, dated September 14,
2007, made by the Company in favor of Xxxxx (the “Pledged-Note”), which note secures
certain obligations of Xxxxx to the Company in accordance with the terms of the Indemnity
Agreement.
The indebtedness represented by the Non-Pledged Note and the Pledged-Note are hereafter
collectively referred to as the “Xxxxx Credit”, and the Non-Pledged Note and the
Pledged-Note are hereafter collectively referred to as the “Xxxxx Notes”.
B. Under the terms of the Xxxxx Notes, the Company is required to pay Xxxxx (i) quarterly
installments of principal in the amount of $400,000 plus interest on the outstanding principal
balance of the Non-Pledged Note at a rate of LIBOR plus fifty (50) basis points, and (ii) quarterly
payments of interest on the outstanding principal of the Pledged Note at a rate of LIBOR plus fifty
(50) basis points. The next payment due to Xxxxx from the Company under the Xxxxx Notes is on
October 1, 2008.
C. The Company and Xxxxx desire to restructure the Xxxxx Credit by (1) converting a portion of
the Pledged Note to common shares of the Company and issuing a new promissory note to Xxxxx for the
remaining amount of the Pledged Note, and (2) converting a portion of the Non-Pledged Note to an
unsecured convertible subordinated debenture of the Company and issuing a new promissory note to
Xxxxx for the remaining amount of the Non-Pledged Note, all upon the terms and conditions contained
herein.
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X. Xxxxx has agreed to restructure the Xxxxx Credit in accordance with the terms herein and
has obtained or is seeking the consent of the lienholder, Silverton Bank (the “Silverton
Consent”), on the Non-Pledged Note.
E. The effective time of the restructure of the Xxxxx Credit is contingent upon (i) receipt of
the Silverton Consent and (ii) approval of all applicable regulatory authorities including, but not
limited to, the Federal Reserve Bank of Atlanta and the Alabama State Banking Department, and the
Company and Xxxxx anticipate that the Agreement will not be effective until after the declared
effectiveness by the Securities and Exchange Commission (the “SEC”) of the Company’s
Registration Statement on Form S-1 filed with the SEC on June 11, 2008, and amended on August 29,
2008 (the “Registration Statement”) and the completion by the Company of an offering to
current stockholders of the Company of non-transferable subscription rights to purchase shares of
the Company’s common stock (the “Rights Offering”).
F. The Company does not expect the Silverton Consent and the approval of the regulatory
authorities to be obtained prior to October 1, 2008, and, in light of the restructuring
contemplated hereby, the Company has requested that Xxxxx waive certain of Xxxxx’x rights and
remedies under the Xxxxx Notes, including the right to receive principal payment under the Xxxxx
Notes on October 1, 2008.
X. Xxxxx is willing to waive the right to receive principal payment under the Xxxxx Notes on
the terms and conditions set forth herein, provided that Xxxxx receives the interest payment due
under the Xxxxx Notes on October 1, 2008.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the foregoing premises and the agreements and undertakings
contained herein, and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Acknowledgments by the Company. The Company acknowledges and agrees that (A) the
Company is indebted to Xxxxx under the Xxxxx Notes in the amounts set forth on Exhibit A
attached hereto; (B) on and as of the date hereof, all of the foregoing amounts remain outstanding
and unpaid; and (C) as of October 1, 2008, $5,873,365.59 is due and payable to Xxxxx under the
Xxxxx Notes.
2. Waiver by Xxxxx. Upon the terms and conditions set forth herein, Xxxxx agrees to
waive his rights to receive principal payment under the Xxxxx Notes on October 1, 2008, provided,
for the avoidance of doubt, that Xxxxx shall be entitled to receive the interest payment due under
the Xxxxx Notes on October 1, 2008 (which payment shall be for interest on the outstanding
principal of the Xxxxx Notes at a rate of LIBOR plus fifty (50) basis points).
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3. Restructuring of Loan Documents. Upon occurrence of the conditions set forth in
Section 4, below, Xxxxx agrees to surrender the Xxxxx Notes to the Company for cancellation, at
which point the Xxxxx Notes shall be of no further force and effect, and the Company and Xxxxx
agree to restructure the Xxxxx Credit as follows:
A. Conversion of Non-Pledged Note. The outstanding principal indebtedness due under
the Non-Pledged Note shall be converted into (i) a new promissory note in the amount of
$2,400,000.00 to be made by the Company in favor of Xxxxx with an interest rate of LIBOR plus two
percent (2%), paid quarterly, in substantially the same form as attached hereto as Exhibit
B (“Xxxxx Note I”) and (ii) an unsecured convertible subordinated debenture in the
amount of $1,930,319.40 issued by the Company to Xxxxx with an interest rate of LIBOR plus two
percent (2%), paid quarterly, in substantially the same form as attached hereto as Exhibit
C (the “Xxxxx Debenture”);
B. Conversion of the Pledged Note. The outstanding principal indebtedness due under
the Pledged Note shall be converted into (i) a new promissory note in the amount of $500,000 to be
made by the Company in favor of Xxxxx with an interest rate of LIBOR plus two percent (2%), paid
quarterly, in substantially the same form as attached hereto as Exhibit D (“Xxxxx Note
II”), and (ii) the maximum number of shares of common stock of the Company which may be
purchased at the same price established under the Rights Offering for $1,000,000 or such lesser
amount which is necessary to cause the total stock holdings of Xxxxx in the Company, after such
purchase, to equal 9.9% of the outstanding common stock of the Company, in accordance with a
securities purchase agreement in substantially the same form as attached hereto as Exhibit
E (the “Securities Purchase Agreement”). Xxxxx Note I, Xxxxx Note II and the Xxxxx
Debenture are hereafter collective referred to as the “New Xxxxx Finance Documents”.
X. Xxxxx Indemnity. Xxxxx Note II shall replace the Pledged Note under the Indemnity
Agreement, and the Indemnity Agreement shall be amended to limit Xxxxx’x indemnity under the Merger
Agreement to $500,000.
4. Conditions Precedent to Enforceability of Agreement. The restructuring of the
Xxxxx Credit shall become effective immediately upon the last to occur of the following: (i) the
date Silverton Consent is obtained by Xxxxx; (ii) the date the Company obtains the consent of any
necessary regulatory authorities; and (iii) the expiration of the Rights Offering by the Company
and a determination of the number of shares of common stock of the Company to be issued in
connection therewith.
5. Miscellaneous.
A. Scope of Agreement. Except as expressly modified by this Agreement, the provisions
of the Xxxxx Notes shall remain in full force and effect. All agreements of and undertakings by
the Company pursuant to this Agreement are intended to be cumulative with any other agreements or
undertakings by the Company under the
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Xxxxx Notes, the Merger Agreement or the Indemnity Agreement and are not intended to limit the
generality of any such agreement or undertaking.
B. Governing Law. This Agreement shall be governed by, and shall be construed in
accordance with, the laws of the State of Alabama, without regard to principles governing conflicts
of law, and all applicable laws of the United States of America.
C. WAIVER OF RIGHT TO JURY TRIAL. The parties desire to avoid the additional time and
expense related to a jury trial of any disputes arising under this Agreement or any of the Xxxxx
Notes. Accordingly, with respect to any such dispute, Xxxxx and the Company each hereby waive
their right to a trial by jury and consent to the granting of such legal or equitable relief as is
deemed appropriate by the judge of a court of competent jurisdiction. The parties acknowledge and
agree that this waiver is knowingly, freely and voluntarily given, is made after opportunity to
consult with counsel about this waiver and is in the best interests of each party.
D. Counterparts. This Agreement may be executed in multiple counterparts, each of
which shall be an original and all of which, taken together, shall constitute but one and the same
agreement among the parties.
E. Binding Nature. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.
F. Captions. The captions to the sections and paragraphs of the Agreement are for the
convenience of the parties only, and are not a part of this Agreement.
G. Further Documents. The Company and Xxxxx agree to execute and deliver, or cause to
be executed and delivered, to the other party from time to time such additional confirmatory or
supplementary agreements, notices or other documents, instruments or agreements as the Company or
Xxxxx may, in its or his sole discretion, request which are in the requesting party’s judgment
necessary or desirable to obtain the benefit of this Agreement and of the transactions described or
referenced in this Agreement.
H. Interpretation. This Agreement shall be construed to liberally effectuate the
rights and remedies of the parties hereto as expressed herein, and neither such principle of
interpretation nor the express language of this Agreement shall be impaired or adversely affected
by any instruments and documents executed in connection herewith. Should any provision of this
Agreement require judicial interpretation, it is agreed that a court interpreting or construing
same shall not apply a presumption that the terms hereof shall be more strictly construed against
one party by reason of the rule of construction that a document is to be construed more strictly
against the party who itself
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or through its agent prepared the same, it being agreed that all parties hereto have
participated in the preparation hereof.
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IN WITNESS WHEREOF, the parties have hereunto set their hands and seals effective as of the
date first above written.
| BORROWER: CAPITALSOUTH BANCORP |
||||
| By: | /S/ W. XXX XXXXXXX | |||
| Name: | W. Xxx Xxxxxxx | |||
| Its: Chief Executive Officer and Chairman | ||||
| XXXXX: |
||||
| /S/ XXXXX X. XXXXX | ||||
| Xxxxx X. Xxxxx | ||||
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STATE OF ALABAMA
|
) | |
| : | ||
COUNTY OF JEFFERSON
|
) |
I, the undersigned, a notary public in and for said county in said state, hereby certify that
W. Xxx Xxxxxxx, whose name as Chief Executive Officer and Chairman of CapitalSouth Bancorp, a
Delaware corporation, is signed to the foregoing instrument, and who is known to me, acknowledged
before me on this day that, being informed of the contents of said instrument, he, as such officer
and with full authority, executed the same voluntarily for and as the act of said corporation.
Given under my hand and official seal this 2nd day of October, 2008.
| /S/ XXXXXX XXXX | ||||
| Notary Public | ||||
[NOTARIAL SEAL] My commission expires: 11/17/2008
STATE OF GEORGIA
|
) | |
| : | ||
COUNTY OF XXX XXXX
|
) |
I, the undersigned, a notary public in and for said county in said state, hereby certify that
Xxxxx X. Xxxxx, whose name is signed to the foregoing instrument, and who is known to me,
acknowledged before me on this day that, being informed of the contents of said instrument, he
executed the same voluntarily on the day the same bears date.
Given under my hand and official seal this 30th day of September, 2008.
| /S/ Xxxxx Xxxxxxxxx | ||||
| Notary Public | ||||
[NOTARIAL SEAL] My commission expires: 3/3/2012
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EXHIBIT A
INDEBTEDNESS
| Amount Outstanding | ||||
| September 30, 2008 | ||||
Amended and Restated Convertible
Promissory Note dated November 30, 2007
in the original amount of $5,530,319.40 |
$ | 4,330,319.40 | ||
Promissory Note dated September 14, 2007
in the original amount of $1,500,000.00 |
$ | 1,500,000.00 | ||
Interest due on above notes |
$ | 43,046.19 | ||
| $ | 5,873,365.59 | |||
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