EXHIBIT 10.1

 

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Branch Banking & Trust Co.

 

 

     

Correspondent Banking

 

P.O. Box 628

 

Monroe, NC 28111-0628

LETTER LOAN AGREEMENT - LINE OF CREDIT

June 25, 2008

Mr. Greg Gibson

Chief Executive Officer

1st Financial Services Corporation

101 Jack Street

Hendersonville, NC 28792

 

RE: Line of Credit

Dear Greg:

This letter sets forth the terms and conditions under which Branch Banking and
Trust Company (“Bank”) shall make to 1st Financial Services Corporation
(“Borrower”) the following loan:

A revolving line of credit (“Line”) up to the maximum principal amount
outstanding of ten million dollars ($10,000,000) subject to the terms and
conditions of this agreement.

Borrower and Bank hereby further agree as follows:

 

1. Promissory Note. All advances made to Borrower under the Line shall be
evidenced by Borrower’s Promissory Note dated of even date herewith in the face
amount of $10,000,000, which shall bear interest, prior to default, at the one
Month LIBOR Rate, adjusted monthly on the first day of each month for each LIBOR
interest period, as defined in Bank’s Note, plus one and one halve percent
(1.50%) per annum (including all extensions, renewals, modifications and
substitutions thereof, the “Note”). From and after the occurrence of an event of
default hereunder, Bank shall be entitled to charge interest at the default
rate, as set forth in the Note, at its option.

 

2. Advances and Repayment. Prior to maturity on June 25, 2009, or an occurrence
of an event of default hereunder, Bank shall make advances at the request of the
authorized officers of Borrower up to an aggregate principal amount not to
exceed $10,000,000 at any time. Borrower may borrow, repay, and re-borrow any
time through maturity. Accrued interest only shall be repayable quarterly
beginning on September 25, 2008. One final payment of the entire unpaid
principal balance then outstanding with accrued interest thereon shall be due in
full at maturity or it may be repaid over a period of five years in equal annual
installments.

Bank shall not be obligated to make advances after an event of default
hereunder, but may do so in its sole discretion.

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3. Collateral. To secure payment of the Line, Borrower shall grant, pledge,
assign and/or convey to Bank the following:

A first and prior security interest in the securities, securities account(s),
mutual fund account(s), or other investment property or financial asset(s) of
1st Financial services Corporation, pursuant to appropriate pledge, security and
control agreements.

 

4. Fees and Taxes. If not previously paid, Borrower shall pay a
commitment/origination fee in the amount of $5,000 at closing. In addition,
Borrower shall pay all legal fees and all other costs and expenses incurred by
Bank in connection with the making, documenting and closing of the Loan.

OTHER TERMS AND CONDITIONS:

Representations and Warranties. Borrower represents and warrants to Bank (which
shall survive the execution hereof) that: (i) it is a corporation duly organized
and validly existing in good standing under the laws of North Carolina, having
the legal name set forth in the first paragraph hereof; (ii) Borrower owns the
Collateral free and clear of all liens, security interests, and encumbrances
except for those granted to Bank; (iii) Borrower has paid all income and
property taxes due and owing by Borrower; (iv) there is no pending or threatened
litigation against Borrower or the Collateral which, if adversely decided, would
materially and adversely affect the financial condition of Borrower; (v) all
financial reports, statements, and related information furnished to Bank on
Borrower accurately reflect its financial condition on the dates thereof, and no
material adverse change has occurred in such financial conditions since the date
of the most recently furnished thereof; (vi) it has all necessary and
appropriate authority to borrow money and pledge assets under its Articles of
Incorporation and no consents are required of its shareholders to be obtained
or, if required, such consent has been obtained; (vii) this agreement, the Note,
the Security Agreement, and all other security documents and agreements executed
by Borrower in connection therewith constitutes the valid and legally binding
obligation of Borrower enforceable against Borrower in accordance with their
terms; and (viii) authorized officers of Borrower have read this agreement, the
Note, and the accompanying security documents and fully understands and accept
each of their respective terms.

Covenants.

 

  a. Borrower shall: (I) maintain its existence in good standing as a
corporation; (ii) maintain its current management and ownership; (iii) maintain
insurance covering the risks usually carried by companies in the same business
with an insurance company acceptable to Bank; (iv) furnish, in addition to an
annual financial statement within 120 days after the end of each fiscal year, a
quarterly financial statement within 30 days after the end of such period
consistently prepared in accordance with GAAP and in a form satisfactory to
Bank; (v) furnish information and documentation as required by the Bank
sufficient to verify the identify of the Borrower as required under the USA
Patriot Act; (vi) furnish notice to Bank of any event of default under this
agreement, of any law suit against Borrower involving any claim of $10,000 or
more, or of any complaint involving a violation of environmental law; and
(vii) comply with applicable law including without limitation payment of all
taxes due (including withholding taxes).

 

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  b. Borrower shall not, without the prior written consent of Bank: (i) grant or
permit a security interest, lien or encumbrance of any kind on the Collateral;
(ii) incur or guarantee any significant debt except to Bank and except for debt
showing on its most recent financial statement preceding this agreement, other
than trade accounts payable incurred in the ordinary course of business or
purchase money loans which are secured only by the asset purchased; (iii) sell
all or substantially all of its assets to any person or entity.

Key Financial Ratios and Limitations. Borrower shall at all times maintain the
following financial covenants and ratios all in accordance with GAAP unless
otherwise specified:

 

  a. Minimum equity of $45 million;

 

  b. Minimum return on assets (ROA) of .50%;

 

  c. Minimum loan loss reserve of 1.00%;

 

  d. Maximum nonperforming assets to total assets of 1.25%.

Events of Default. Borrower shall be in default under this agreement upon the
occurrence of any of the following events: (i) failure to pay within five
(5) days of the date due any installment of principal or interest under the
Note; (ii) should any representation or warranty made herein or in any security
document, or should any financial statement furnished, be false or misleading in
any material respect; (iii) failure to comply with any covenant or requirement
set forth in this agreement, the Note, or any security document; (iv) failure to
maintain its existence as a corporation, (v) should Borrower become a “debtor”,
as defined in the U.S. Bankruptcy Code, whether voluntarily or otherwise;
(vi) should the liens and security interests granted to Bank in the Collateral
fail to have the priority expected or should the security instruments be invalid
or unenforceable for any reason, or (vii) should Bank in good faith deem itself
insecure or believe that the prospect of payment or performance by Borrower is
impaired.

Remedies. Upon the occurrence of any one or more events of default listed above,
Bank may, at its option, take all or any number of the following actions:
(i) declare the outstanding balance of the Note to be immediately due and
payable together with accrued interest without demand presentment, protest or
notice thereof of any kind, all of which are hereby waived by Borrower;
(ii) take immediate possession of the Collateral and foreclose upon the same;
(iii) exercise all rights of offset against Borrower’s accounts with Bank;
(iv) exercise all rights and remedies of a secured party under the North
Carolina Uniform Commercial Code, and (v) exercise all other legal rights and
remedies.

Miscellaneous Covenants. Borrower and Bank further agree as follows:

 

  a. This agreement is made in and shall be construed in accordance with the
laws of the State of North Carolina and shall bind Borrower and its successors
and assigns.

 

  b. This agreement may not be modified or supplemented except by a written
instrument signed by Borrower and Bank.

 

  c. Should Borrower default in the payment or performance of its obligations
hereunder, and Bank believes it necessary to employ an attorney to assist in the
enforcement hereof or collection of the debt, or to defend Bank in a law suit or
other legal proceeding, Borrower hereby agrees to pay all attorneys’ fees,
related fees and expenses, and all court costs that may be reasonably incurred
by Bank, whether or not any suit or proceeding actually commences.

 

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  d. This agreement, the Note(s), and the security documents executed in
connection herewith constitute the entire agreement among the parties hereto and
no oral agreements or unwritten understandings with respect to the indebtedness
and obligations described in this agreement exist as of the date hereof.

 

  e. Borrower shall indemnify and hold Bank harmless from, and shall reimburse
Bank for, all obligations, suits, judgments, claims, demands, damages,
proceedings, expenses (including all attorneys’ fees), or liabilities whatsoever
which may be asserted against Bank or which may be incurred by Bank arising out
of or relating to a breach of Borrower’s representations and warranties made in
Paragraph 3 hereof, or arising out of or relating to a breach or non-performance
by Borrower of any covenant or provision of this agreement.

 

  f. The failure or delay of Bank to exercise any right under this agreement,
the Note(s), or the security documents, shall not operate as a waiver thereof,
and any single or partial exercise of any such right shall not preclude the
exercise of any other right or remedy which Bank may have hereunder or by law.

 

  g. Borrower shall furnish to Bank upon Bank’s request any additional financial
information, reports on the Collateral, and any information or documentation,
including but not limited to Borrower’s legal name, address, and tax
identification number sufficient for the Bank to verify the identify of the
Borrower in accordance with the USA Patriot Act. Borrower shall notify Bank
promptly of any change in such information.

Upon Borrower’s acceptance of the terms and provisions of this agreement, the
Note and the accompanying security documents, please so indicate by having the
duly authorized officer of Borrower sign below on its behalf. We appreciate the
opportunity to offer this commitment to your company and look forward to
establishing a continued, mutually beneficial relationship.

Sincerely,

BRANCH BANKING AND TRUST COMPANY

 

By:  

/s/ Clegg E. Sell, Jr.

Title:   SVP Phone:   704 239 7438

Read and accepted this 25 day of June, 2008.

 

1st Financial Services Corporation   (SEAL)

(Name of Borrower)

  By:  

/s/ Gregory Gibson

  Title:   CEO  

 

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