exv10w1






Exhibit 10.1




FORBEARANCE AGREEMENT




     THIS FORBEARANCE AGREEMENT (“Agreement”) is entered into as of October 22, 2009 but
effective as of July 3, 2009, by and between M&I MARSHALL & ILSLEY BANK (the “Bank”), and
MIDWEST BANC HOLDINGS, INC., a Delaware corporation and bank holding company (“Borrower”).



RECITALS:




     A. The Bank previously agreed to provide to the Borrower: (1) a revolving line of credit
pursuant to which the Borrower could borrow up to $15,000,000.00 from the Bank, and Borrower
previously executed and delivered to the Bank a Promissory Note (which promissory note amended and
restated a promissory note dated March 24, 2006, the “Revolving Note”) in the face amount
of $15,000,000.00 and dated June 3, 2009 evidencing such revolving loans; and (2) a term loan
pursuant to which the Borrower borrowed $75,000,000.00 from the Bank, and Borrower previously
executed and delivered to the Bank a Promissory Note (the “Term Note”) dated September 28,
2007, in the face amount of $75,000,000.00 (which amount was reduced to $55,000,000 pursuant to a
First Amendment to Note dated March 31, 2008 between the Bank and the Borrower) (the Revolving Note
and the Term Note, each a “Note” and collectively, the “Notes”).



     B. Each Note is also governed by a Letter Agreement dated as of April 3, 2009 by and between
the Borrower and the Bank (which Letter Agreement amended and restated a Letter Agreement dated as
of March 31, 2008, and as further amended, the “Letter Agreement”).



     C. Payment and performance of each Note, the Letter Agreement and the liabilities,
indebtedness, and obligations evidenced thereby (collectively, the “Indebtedness”) are
secured, and continue to be secured, by a Commercial Pledge Agreement dated as of March 24, 2006
(as amended, the “Pledge Agreement”), and the pledge and delivery to the Bank of stock
certificates evidencing Borrower’s ownership of 1,076,640 issued and outstanding shares of Midwest
Bank and Trust Company (“Midwest Bank”) (collectively, along with all other Collateral (as
that term is defined in the Pledge Agreement), the “Pledged Collateral”). The stock
certificates evidencing Borrower’s ownership of 1,076,640 issued and outstanding shares of Midwest
Bank constitute 100% of the issued and outstanding shares of Midwest Bank.



     D. Borrower did not comply with: (1) Section 3(i) of the Letter Agreement with respect to the
requirement that Midwest Bank maintain a ratio of non-performing loans to total loans of not
greater than 3.00% for the periods ending March 31, 2009 and June 30, 2009; and (2) Section 3(ii)
of the Letter Agreement with respect to the requirement that Borrower report a quarterly profit for
the periods ending September 30, 2008, March 31, 2009 and June 30, 2009 (the “Financial
Covenant Defaults”). In addition, the Revolving Note matured on July 3, 2009 and the Borrower
was obligated to pay to the Bank all of the aggregate outstanding principal and accrued but unpaid
interest on the Revolving Note on such date. As of October 22, 2009 the Borrower has not repaid
the Revolving Note in full, and such failure constitutes an additional event of default (the
“Payment Default”) under the Loan Documents (as hereinafter defined).



     E. The Borrower has previously received from the Bank contingent waiver letters (the
“Contingent Waiver Letters”) dated September 12, 2008, September 23, 2008 and March 4,
2009. Pursuant to the Contingent Waiver Letters, the Bank contingently waived compliance by the
Borrower with Section 3(ii) of the Letter Agreement caused by the Borrower’s failure to report a
quarterly profit for the period ending September 30, 2008. This contingent waiver was contingent
on the Borrower prepaying the principal amount of the Indebtedness owed to the Bank by at least
$5,000,000 on or before July 1, 2009. The Borrower failed to make that payment, and has previously
informed the Bank that it



 









 







will not make this payment. Such non-compliance constitutes a continuing event of default
under the Letter Agreement and the Security Documents (as that term is defined in the Letter
Agreement) (the “Contingent Waiver Default”). The Financial Covenant Defaults, the
Contingent Waiver Default and the Payment Default are severally and collectively referred to as the
“Existing Defaults.”



     F. The Borrower has previously received from the Bank a default letter dated July 8, 2009,
informing the Borrower of the Existing Defaults (the “Default Letter”).



     G. Because of the Existing Defaults, the Bank is now entitled to exercise all rights and
remedies provided to it under the Notes, the Letter Agreement and the Pledge Agreement.



     H. Borrower has requested that the Bank forbear from exercising such rights and remedies for
the time period provided in this Agreement.



     I. The Bank is willing to forbear from exercising such rights and remedies in reliance upon
the representations, warranties and agreements set forth below, and pursuant to the Loan Documents
(as hereinafter defined).



     J. This Agreement is a continuation of, and not a repayment or novation of, the obligations
and liabilities of Borrower contained in the Notes and the Letter Agreement. As used herein, the
Notes, Letter Agreement, Pledge Agreement, the Deposit Control Agreement (as hereinafter defined),
the Tax Security Agreement (as hereinafter defined) and this Agreement, along with all now or
hereafter existing documents, certificates and agreements related thereto, are severally and
collectively referred to herein as the “Loan Documents.”



     K. Borrower further acknowledges and agrees that forbearance by the Bank from the current
exercise of its rights and remedies shall result in a direct and substantial benefit to Borrower.



AGREEMENT:




     NOW THEREFORE, in consideration of the agreements and undertakings contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:


1. Recitals. The foregoing recitals are true and correct in all respects as of the date
hereof, and are incorporated into this Agreement by this reference.



2. Acknowledgments by Borrower. Borrower acknowledges and agrees that, as of October 22,
2009 and thereafter: (a) the Existing Defaults constitute Events of Default under the Loan
Documents; (b) timely, adequate and proper notice of such Events of Defaults were received by
Borrower from the Bank; (c) all grace periods, if any, applicable to cure such Existing Defaults
have expired or are hereby waived by Borrower; (d) the Bank is entitled to immediate payment of the
Notes and all other sums due under the Loan Documents; (e) the Bank has not waived the Existing
Defaults; (f) the Loan Documents are free from any offset, defense, recoupment, or counterclaim, in
law or in equity, of any kind or nature; (g) the Indebtedness is fully secured by valid, perfected
and enforceable first priority security interests in the Pledged Collateral and the Accounts (as
defined in the Deposit Control Agreement); (h) the Bank has fully performed all of its respective
obligations and duties under all previously existing agreements between Borrower and the Bank; (i)
all actions taken by the Bank prior to the date of this Agreement have been reasonable and
appropriate under the circumstances and have been within the Bank’s rights; (j) the Bank’s
commitment to enter into this Agreement represents new value given by the Bank for the benefit of
Borrower, the value of which is substantially greater than the value to the Bank of all agreements,


2









 






covenants, representations, warranties and acknowledgements contained herein for the benefit of the
Bank; and (k) it is the express intention of Borrower that the agreements, covenants,
representations, warranties and acknowledgements contained in this Agreement constitute a
contemporaneous exchange for new value given to Borrower by the Bank.



3. Reaffirmation of Warranties and Representations. Borrower hereby reaffirms the accuracy
of the representations and warranties contained in the Loan Documents, and affirms the accuracy of
the recitals contained in this Agreement. Borrower hereby confirms that there is no other default
or event of default under the Loan Documents, except for the Existing Defaults identified in
Recitals.



4. Acknowledgment of Indebtedness; Reduction in Commitment. Borrower acknowledges and
agrees that: (a) as of October 22, 2009, Indebtedness in the amount of $63,600,000.00 of principal,
plus accrued interest thereon and all costs incurred by the Bank (including reasonable
attorneys’ fees) is due and payable to the Bank, without offset, deduction, defense, recoupment or
counterclaim, and (b) effective as of July 3, 2009, the aggregate commitment of the Bank to
Borrower under the Revolving Note was reduced to $8,600,000.00 from $15,000,000.00, notwithstanding
the $15,000,000.00 face amount of the Revolving Note.



5. Forbearance. The Bank agrees to forbear from exercising the rights and remedies
available to it under the Loan Documents and under applicable law as a consequence of the Existing
Defaults for a period (the “Forbearance Period”) commencing on the effective date hereof
and ending on the first to occur of: (a) March 31, 2010; (b) the date on which Borrower
breaches or defaults in any of its representations, warranties or obligations to the Bank under
this Agreement; (c) the date on which Borrower defaults in complying with any of its continuing
obligations under the Loan Documents (except that, as provided in Section 7(b) hereof, the Borrower
shall not be obligated to comply with the covenants contained in Section 3 and Section 5 of the
Letter Agreement, and, as provided in Section 7(d) hereof, the Borrower shall be obligated to make
payments to the Bank only from the amounts maintained in the Account (as hereinafter defined)); and
(d) the date on which Midwest Bank becomes subject to a receivership by the Federal Deposit
Insurance Corporation, or the date on which the Borrower becomes subject to a bankruptcy or
insolvency type proceeding.



6. Interest Rate. As provided in the Default Letter, interest will continue to accrue on
the Revolving Note and the Term Note at the default rate of interest specified in each such
promissory note.



7. Covenants and Agreements of Borrower During Forbearance Period. As a condition to the
Bank’s agreements set forth herein and to the continuation of the Forbearance Period pursuant to
Section 5, above, Borrower covenants and agrees as follows:




     (a) Borrower shall not request, and the Bank shall not be obligated to make, any additional
loans or advances on the Revolving Note.



     (b) Borrower shall continue to comply with all covenants, terms and conditions of the Loan
Documents; provided, however, that the Borrower shall not be obligated to comply
with the financial covenants contained in Section 3 of the Letter Agreement or the requirements of
Section 5 of the Letter Agreement, each during the Forbearance Period, and the Borrower shall be
obligated to make payments to the Bank only from the amounts maintained in the Account.



     (c) On October 22, 2009, Borrower shall enter into that certain Deposit Account Security and
Control Agreement in favor of the Bank (the “Deposit Control Agreement”), and shall
initially deposit $325,000.00 into the DDA account described therein (the “Account”).



3









 





     (d) Borrower shall pay all accrued interest, accrued late fees, principal payments and
interest due under the Notes during the Forbearance Period, and make all other payments or
reimbursements required by the Loan Documents; provided, however, that (1) all such
payments shall be made by the Bank debiting the amounts maintained in the Account, and (2) if there
is no money in the Account, the Borrower shall not be obligated to make any such payments to the
Bank prior to the termination of the Forbearance Period.



     (e) Except as prohibited by law, Borrower and Midwest Bank shall continue to provide the Bank
with copies of all documents and information that Borrower or Midwest Bank is required to provide
to the Federal Deposit Insurance Corporation and/or any other regulatory authority responsible for
the examination or oversight of the Borrower or Midwest Bank.



     (f) Beginning October 31, 2009, the Borrower shall provide to the Bank, within fifteen days of
the end of each month, a Borrower prepared balance sheet and income statement for Midwest Bank,
along with a detailed list of all Pass-Watch, OAEM, substandard, nonaccrual and OREO assets of
Midwest Bank, all in form and substance satisfactory to the Bank.



     (g) On October 22, 2009, the Borrower shall enter into that certain Tax Refund Security
Agreement in favor of the Bank (the “Tax Security Agreement”). Upon receipt by the
Borrower of the Royal American Corporation 2004 federal income tax refund resulting from the 2006
NOL carryback on the amended tax return filed with the IRS on February 2, 2009, the Borrower shall
promptly deliver all of the proceeds received by the Borrower to the Bank, which proceeds will be
maintained in the Account and shall be subject to the Deposit Control Agreement.


8. Termination of Forbearance Period and Preservation of Rights. Immediately upon the
termination of the Forbearance Period for any reason: (a) the forbearance provided by this
Agreement shall terminate; (b) the Notes and Indebtedness shall be immediately due and payable
without further notice; (c) the Loan Documents shall be enforceable against Borrower in accordance
with their terms; and (d) the Bank shall be entitled to exercise all its rights and remedies under
the Loan Documents and at law (without any further notice or demand). During the Forbearance
Period, the Bank shall be entitled to take any actions deemed necessary by it to preserve its
rights and its interests under the Loan Documents, exclusive of the actions permitted or
contemplated by subsections (a) through (d) of this Section 8.



9. Costs and Expenses. Borrower agrees to pay all costs and expenses (including reasonable
attorneys’ fees) incurred by the Bank in connection with the preparation and negotiation of this
Agreement and enforcement of the Bank’s rights hereunder.



10. No Further Accommodations. Nothing contained in this Agreement shall be construed to
implicitly or explicitly promise, agree or commit to extend the terms of the forbearance beyond the
end of the Forbearance Period, or to require or commit the Bank to extend any other financial
accommodation to Borrower. Borrower acknowledges that Borrower is required to pay the Notes and
Indebtedness in full upon the termination of the Forbearance Period, without setoff, recoupment or
reduction of any kind.



11. No Waiver or Amendment. The effectiveness of this Agreement shall not constitute a
waiver by the Bank of the Existing Defaults or any other default under the Loan Documents, all of
which shall be deemed to remain in existence. This Agreement shall not in any way impair the right
of the Bank to exercise any or all of its rights and remedies under the Loan Documents or under law
with respect to such defaults at any time after the expiration of the Forbearance Period, all of
which rights and remedies are hereby expressly reserved. Borrower represents, warrants and agrees
there are no oral or written statements or agreements which add to, modify or amend in any manner
the terms of this Agreement or
the Loan Documents, and that neither this Agreement nor any of the Loan Documents shall be modified
or amended except by a writing signed by all parties hereto.





4









 







12. Governing Law. This Agreement shall be construed, interpreted and governed by the
internal laws of the State of Wisconsin.



13. Conflicts. In the event of any conflict or inconsistency between the terms of this
Agreement and any of the other Loan Documents, the applicable terms of this Agreement shall
control.



14. Recommendation of Counsel. Borrower acknowledges and understands that the Bank has
recommended that it consult with their legal counsel prior to the execution of this Agreement.
Borrower acknowledges the recommendation and represent that Borrower has either consulted with
counsel prior to executing this Agreement and any agreements referenced herein, or has knowingly
waived the right to do so notwithstanding the express recommendation of the Bank.



15. WAIVER OF RIGHT TO JURY TRIAL. BORROWER AND THE BANK EACH KNOWINGLY AND VOLUNTARILY
WAIVE TRIAL BY JURY WITH RESPECT TO ALL MATTERS ARISING OUT OF THEIR RELATIONSHIPS AND CONSENT TO
THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY A JUDGE OF A COURT OF
COMPETENT JURISDICTION, AND ACKNOWLEDGE HAVING SOUGHT THE ADVICE OF LEGAL COUNSEL IN CONNECTION
WITH THIS WAIVER.



16. SUBMISSION TO JURISDICTION. THE BANK MAY ENFORCE ANY CLAIM ARISING OUT OF THIS
AGREEMENT OR THE LOAN DOCUMENTS IN ANY STATE OR FEDERAL COURT HAVING SUBJECT MATTER JURISDICTION
AND LOCATED IN MILWAUKEE, WISCONSIN. FOR THE PURPOSE OF ANY ACTION OR PROCEEDING INSTITUTED WITH
RESPECT TO ANY SUCH CLAIM, BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURTS.



17. NO CLAIMS. BORROWER, FOR ITSELF AND ITS DIRECTORS, OFFICERS, SHAREHOLDERS, EMPLOYEES,
AGENTS, PERSONAL REPRESENTATIVES, SUCCESSORS, ASSIGNS AND SUBSIDIARIES, DOES HEREBY FULLY
UNCONDITIONALLY AND IRREVOCABLY RELEASE THE BANK AND ANY PARTICIPANT FROM, AND WAIVES AGAINST THE
BANK AND ANY PARTICIPANT, THEIR DIRECTORS, OFFICERS, SHAREHOLDERS, EMPLOYEES, AGENTS, SUBSIDIARIES,
AFFILIATES, ATTORNEYS, SUCCESSORS AND ASSIGNS, ANY AND ALL CLAIMS, LIABILITIES, CAUSES OF ACTION,
DEFENSES, COUNTERCLAIMS AND SETOFFS OF ANY KIND, WHETHER KNOWN OR UNKNOWN (WHETHER IN CONTRACT,
TORT, STATUTE OR UNDER ANY OTHER LAW OR PRINCIPLE OF EQUITY) ARISING OUT OF, RELATED TO OR IN
CONNECTION WITH ANY ACT OR OMISSION BY THE BANK OR ANY PARTICIPANT ON OR BEFORE THE DATE OF THIS
AGREEMENT, OR WITH RESPECT TO THIS AGREEMENT AND THE LOAN DOCUMENTS; PROVIDED,
HOWEVER, NOTHING CONTAINED IN THIS SECTION SHALL BE DEEMED TO BE A WAIVER OR DISCHARGE OF
THE TERMS AND CONDITIONS OF THIS AGREEMENT OR THE LOAN DOCUMENTS.



18. Successors and Assigns. The provisions of this Agreement shall inure to the benefit
of, and be binding upon, the permitted successors and assigns of the parties hereto. The
Borrower’s rights and liabilities under this Agreement and the Loan Documents are not assignable in
whole or in part without the prior written consent of the Bank.




5









 







19. Equity Swap. The Bank may, in its sole discretion, consider any proposal from the
Borrower concerning a debt for equity swap with respect to the Notes and any equity interest in the
Borrower and/or Midwest Bank. The parties hereto acknowledge and agree that the foregoing shall
not obligate the Bank to consummate any such potential transaction, and any such potential
transaction shall be subject to the Bank’s standard underwriting procedures and to the Bank’s sole
discretion.




[signature page to follow]




6









 







This Agreement is effective as of the date and year first written above.




	 	 	 	 	 	 	 	 	 	 	 
	MIDWEST BANC HOLDINGS, INC.	 	 	 	M&I MARSHALL & ILSLEY BANK	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 	 	 
	Name/Title:

	 	 

	 	 
	 	Name/Title:
	 	 

	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Name/Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 






7