**EXHIBIT 10.8 **

** **

**SUNTRUST BANK**

   
**BUSINESS LOAN AND  SECURITY AGREEMENT**

** ****Dated  As of**

** JUNE 8, 2001**

**Among**

**  **

**COMMUNITY  BANKSHARES, INC.,  EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST,**

 

**Steve Adams, J. Alton Wingate and  Elton Collins, not in their individual capacities, but solely as Trustees of  the Community Bankshares, Inc. Employee Stock Ownership Plan and Trust, and**

** **
 ** **
**SUNTRUST BANK**

** **

 

 

 

 
            
**BUSINESS LOAN  AND SECURITY AGREEMENT**

********THIS BUSINESS LOAN AND SECURITY AGREEMENT, dated as of June 8, 2001, by and  among COMMUNITY BANKSHARES, INC., a Georgia corporation (together with its  successors, the “**Borrower**”), COMMUNITY BANKSHARES, INC. Employee  Stock Ownership Plan and Trust (the “**Trust**”), a Trust created and  existing under that certain Employee Stock Ownership Plan and Trust Agreement  dated as of December 29, 1995, and effective as of January 1, 1995 (as the  same may be amended, supplemented, restated or otherwise modified and in  effect from time to time, the “**Trust Agreement**”), between the  Borrower and Steve Adams, J. Alton Wingate and Elton Collins, collectively as  trustee (together with any successor trustees under the Trust Agreement, and  forming a part of the COMMUNITY BANKSHARES, INC. EMPLOYEE STOCK OWNERSHIP PLAN  (the “**ESOP**”), and SUNTRUST BANK, a Georgia banking corporation  (together with endorsees, successors and assigns, the “**Bank**”).

 BACKGROUND

The Borrower desires to establish  with the Bank a credit facility providing for Advances in the maximum  principal amount of $2,000,000 that upon the Conversion Date shall convert to  a term loan.  The proceeds of such loan shall be used by the Borrower to  fund a loan to the Trust to finance the Trust’s acquisition of certain  currently issued shares of the common stock of the Borrower.  The Bank is  willing to establish the foregoing credit facilities on the terms and  conditions hereinafter set forth.

NOW, THEREFORE, in consideration of  the premises and the promises herein contained, and each intending to be  legally bound hereby, the parties agree as follows:

 ARTICLE I.   DEFINITIONS

SECTION 1.01.  Definitions.   The terms as defined in this Section 1.01 shall, for all purposes  of this Agreement and any amendment hereto (except as herein otherwise  expressly provided or unless the context otherwise requires), have the  meanings set forth herein (terms defined in the singular to have the same  meanings when used in the plural and viceversa):

“**Affiliate**” of any Person  means (i) any other Person which directly, or indirectly through one or more  intermediaries, controls such Person, (ii) any other Person which  directly, or indirectly through one or more intermediaries, is controlled by  or is under common control with such Person, or (iii) any other Person of  which such Person owns, directly or indirectly, 20% or more of the common  stock or equivalent equity interests.  As used herein, the term “control”  means possession, directly or indirectly, of the power to direct or cause the  direction of the management or policies of a Person, whether through the  ownership of voting securities, by contract or otherwise.
            
“**Bank Prime Rate**” means  that rate of interest announced by Bank from time to time as its “Prime Rate”.   Bank lends at rates above and below Bank Prime Rate, which is but one of  several rate basis used by Bank.

“**Borrower Stock**” means the shares of the Borrower’s common stock  to be purchased by the Trust from the Stockholders with the proceeds of the  ESOP Loan.

“**Capital Expenditures**”  means for any period the sum of all capital expenditures incurred during such  period by the Borrower and its Subsidiaries, as determined in accordance with  generally accepted accounting principles consistently applied.

“**Code**” means the Internal  Revenue Code of 1986, as amended, or any successor Federal tax code.

“**Collateral Assignment**”  means that certain Assignment of ESOP Note and Master Stock Pledge dated an  even date herewith by and between Borrower and Bank.

“**Commitment**” means that  certain commitment letter dated April 30, 2001.

“**Controlled Group**” means  all members of a controlled group of corporations and all trades or businesses  (whether or not incorporated) under common control which, together with the  Borrower, are treated as a single employer under Section 414 of the Code.

“**Debt**” of any Person means  at any date, without duplication, (i) all obligations of such Person for  borrowed money, (ii) all obligations of such Person evidenced by bonds,  debentures, notes or other similar instruments, (iii) all obligations of such  Person to pay the deferred purchase price of property or services, except  trade accounts payable arising in the ordinary course of business, (iv) all  obligations of such Person as lessee under capital leases, (v) all  obligations of such Person to reimburse any bank or other Person in respect of  amounts payable under a banker’s acceptance, (vi) all Redeemable Preferred  Stock of such Person (in the event such Person is a corporation), (vii) all  obligations of such Person to reimburse any bank or other Person in respect of  amounts paid under a letter of credit or similar instrument, (viii) all Debt  of others secured by a Lien on any asset of such Person, whether or not such  Debt is assumed by such Person, and (ix) all Debt of others Guaranteed by such  Person.

“**Default**” means any  condition or event which constitutes an Event of Default or which with the  giving of notice or lapse of time or both would, unless cured or waived,  become an Event of Default.

“**DOL**” means the United States Department of Labor and any successor  Federal agency having similar powers.

 “**Dollars**” or “**$**”  means dollars in lawful currency of the United States of America.

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“**Domestic Business Day**”  means any day except a Saturday, Sunday or other day on which commercial banks  in Georgia are authorized by law to close.

“**ERISA**” means the Employee  Retirement Income Security Act of 1974, as amended from time to time, or any  successor law, including any rules or regulations promulgated thereunder.   Any reference to any provision of ERISA shall also be deemed to be a reference  to any successor provision or provisions thereof.

“**ESOP Contribution**” means all tax deductible payments made to the  Trust for the purpose of enabling it to payoff the ESOP Loan, which are  ultimately used by the Trust to make payments under the ESOP Note (and, in  turn, used by the Borrower to make payments under the Note).

“**ESOP Loan**” means the loan evidenced by the ESOP Note.

“**ESOP Loan Agreement**” means that Loan and Security Agreement  between the Trust and Borrower, dated as of even date herewith, governing the  terms and conditions of the ESOP Loan, as such agreement shall be modified,  amended, supplemented, restated, extended, consolidated, renewed or replaced  and in effect from time to time.

“**ESOP Loan Documents**” shall mean the ESOP Loan Agreement, ESOP  Note, the ESOP Master Pledge Agreement, and any other document now or at any  time hereafter evidencing, relating to, securing or guaranteeing the ESOP  Note, as any of the same may be amended, restated, modified, replaced or  extended from time to time.

“**ESOP Note**” means collectively that term loan note of the Trust  payable to Borrower, dated as of an even date herewith, and all promissory  notes delivered in substitution or exchange therefor, in each case as the same  shall be modified, amended, supplemented, restated, extended, consolidated,  renewed or replaced and in effect from time to time.

“**ESOP Master Pledge Agreement**”  means that ESOP Master Stock Pledge Agreement, dated as of  an even date  herewith, given by the Trust to the Borrower, pursuant to which the Trust has  pledged to the Borrower, as security for the payment and performance of the  Trust’s obligations to the Borrower under the ESOP Loan, all of the Borrower  Stock, as such agreement shall be amended, supplemented, restated or otherwise  modified and in effect from time to time.

“**ESOP Transaction**” means the execution, delivery and performance by  the respective parties thereto of the ESOP Loan Documents, the borrowing of  the ESOP Loan by the Trust from the Borrower and the use by the Trust of the  proceeds of the ESOP Loan to finance such acquisition of the Borrower Stock  collectively from the Stockholders.

“**Event of Default**” shall  have the meaning assigned to such term in Section 7.01.

 “**Fiscal Year**” means  any fiscal year of the Borrower.

 

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“**Governmental Authority**” means any nation or government, any  federal, state, local or other political subdivision thereof and any entity  exercising executive, legislative, judicial, regulatory or administrative  functions of or pertaining to government, or any instrumentality of any of the  foregoing. The term “Governmental Authority” shall include, without  limitation, the IRS and the DOL.

“**Guarantee**” by any Person  means any obligation, contingent or otherwise, of such Person directly or  indirectly guaranteeing any Debt or other obligation of any other Person and,  without limiting the generality of the foregoing, any obligation, direct or  indirect, contingent or otherwise, of such Person (i) to secure, purchase  or pay (or advance or supply funds for the purchase or payment of) such Debt  or other obligation (whether arising by virtue of partnership arrangements, by  agreement to keep-well, to purchase assets, goods, securities or services, to  provide collateral security, to take-or-pay, or to maintain financial  statement conditions or otherwise) or (ii) entered into for the purpose  of assuring in any other manner the obligee of such Debt or other obligation  of the payment thereof or to protect such obligee against loss in respect  thereof (in whole or in part), provided that the term Guarantee shall  not include endorsements for collection or deposit in the ordinary course of  business.  The term “Guarantee” used as a verb has a corresponding  meaning.

“**Investment**” means any  investment in any Person, whether by means of purchase or acquisition of  obligations or securities of such Person, capital contribution to such Person,  loan or advance to such Person, making of a time deposit with such Person,  Guarantee or assumption of any obligation of such Person or otherwise, except  for ordinary banking transactions in the ordinary course of business.

“**IRS**” means the United States Internal Revenue Service and any  successor Federal agency having similar powers.

“**Lien**” means, with respect to any asset, any mortgage, lien,  pledge, charge, security interest or encumbrance of any kind in respect of  such asset.  For the purposes of this Agreement, the Borrower or any  Subsidiary shall be deemed to own subject to a Lien any asset which it has  acquired or holds subject to the interest of a vendor or lessor under any  conditional sale agreement, capital lease or other title retention agreement  relating to such asset.

“**Loan Documents**” means  this Agreement, the Note, the Collateral Assignment and any other document  evidencing or securing the Note.

“**Margin Stock**” means “**margin  stock**” as defined in Regulations T, U or X of the Board of Governors of  the Federal Reserve System, as in effect from time to time, together with all  official rulings and interpretations issued thereunder.

“**Multiemployer Plan**” shall  have the meaning set forth in Section 4001(a)(3) of ERISA.

“**Note**” shall mean Note A.

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“**Note A**” means that  certain promissory note dated an even date herewith made by Borrower in favor  of Bank in the original maximum principal amount of $2,000,000.

“**Obligations**” means all  indebtedness, obligations and liabilities to the Bank existing on the date of  this Agreement or arising thereafter, direct or indirect, joint or several,  absolute or contingent, matured or unmatured, liquidated or unliquidated,  secured or unsecured, arising by contract, operation of law or otherwise, of  the Borrower under this Agreement or any other Loan Document.

“**PBGC**” means the Pension  Benefit Guaranty Corporation or any entity succeeding to any or all of its  functions under ERISA.

“**Permitted Encumbrances**”  means:

(a)        Liens in favor of the Bank;

(b)        Liens for taxes or assessments or other governmental charges or  levies if not yet due and payable or, if due and payable, if they are being  contested in good faith by appropriate proceedings and for which appropriate  reserves are maintained;

(c)        Liens imposed by law, such as mechanics’ materialmen’s,  landlords’, warehousemen’s, and carriers’ Liens, securing obligations  incurred in the ordinary course of business which are not yet due and payable  or which are being contested in good faith by appropriate proceedings and for  which appropriate reserves have been established;

(d)        Liens under workers’ compensation, unemployment insurance,  Social Security, or similar legislation;

(e)        Liens, deposits, or pledges to secure the performance of bids,  tenders, contracts (other than contracts for the payment of money), leases  (permitted under the terms of this Agreement), public or statutory  obligations, surety, stay, appeal, indemnity, performance, or other similar  bonds, or other similar obligations arising in the ordinary course of business;

(f)        Judgment and other similar Liens arising in connection with  court proceedings, provided the execution or other enforcement of such Liens  is effectively stayed and the claims secured thereby are being actively  contested in good faith and by appropriate proceedings;

(g)        Easements, rights-of-way, restrictions, and other similar  encumbrances which, in the aggregate, do not materially interfere with the  occupation, use, and enjoyment by the Borrower or any Subsidiary of the  property or assets encumbered thereby in the normal course of its business or  materially impair the value of the property subject thereto;

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(h)        Liens incidental to the conduct of banking business, not  incurred in connection with the borrowing of money, arising out of  transactions in federal funds, repurchase agreements, interbank credit  facilities, bank deposits, or other obligations to customers or depositors of  the Borrower’s Subsidiaries.

(i)        Liens incurred in connection with the borrowing by a Subsidiary  from the Federal Reserve Bank, or the Federal Home Loan Bank, in the ordinary  course of business; and

(j)        Liens for purchase money security interests or Liens incurred in  connection with any conditional sale or other title retention agreement or  capital lease.

“**Person**” means any  individual, joint venture, corporation, company, voluntary association,  partnership, trust, joint stock company, unincorporated organization,  association, government, or any agency, instrumentality, or political  subdivision thereof, or any other form of entity or organization.

“**Plan**” means at any time  an employee pension benefit plan which is covered by Title IV of ERISA or  subject to the minimum funding standards under Section 412 of the Code  and is either (i) maintained by a member of the Controlled Group for employees  of any member of the Controlled Group or (ii) maintained pursuant to a  collective bargaining agreement or any other arrangement under which more than  one employer makes contributions and to which a member of the Controlled Group  is then making or accruing an obligation to make contributions or has within  the preceding five plan years made contributions.

“**Prior Loan Agreement**”  means that certain Amended and Restated Revolving Credit/Term Loan Agreement  by and between Borrower herein and Bank herein dated as of July 31, 2000,  together with all documentation delivered and collateral provided in  connection therewith and any modification or renewals thereof, the terms of  which are incorporated herein by this reference thereto.

“**Redeemable Preferred Stock**”  of any Person means any preferred stock issued by such Person which is at any  time either (i) mandatorily redeemable (by sinking fund or similar payments or  otherwise) or (ii) redeemable at the option of the holder thereof.

“**Reportable Event**” has the  meaning given such term in Section 4043(b) of Title V of ERISA.

“**Stockholders**” means collectively all Persons who may sell shares  of Borrower’s common stock to the Trust.

“**Subsidiary**” of a Person means any corporation or other entity of  which securities or other ownership interests having ordinary voting power to  elect a majority of the board of directors or other persons performing similar  functions are at the time directly or

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indirectly owned by such Person.   Unless otherwise indicated, all references herein to Subsidiaries refer to  Subsidiaries of the Borrower.

SECTION 1.02.  Accounting  Terms and Determinations. Unless otherwise specified herein, all terms of  an accounting character used herein shall be interpreted, all accounting  determinations hereunder shall be made, and all financial statements required  to be delivered hereunder shall be prepared in material accordance with  generally accepted accounting principles as in effect from time to time,  applied on a basis consistent (except for changes reasonably approved by Bank)  with the most recent audited financial statements of the Borrower and its  Subsidiaries delivered to the Bank.

SECTION 1.03.  References.   Except as otherwise expressly provided in this Agreement:  the words “**herein**,”  “**hereof**,” “hereunder” and other words of similar import refer  to this Agreement as a whole, including the Schedule hereto which is a part  hereof, and not to any particular Section, Article, paragraph or other  subdivision; the singular includes the plural and the plural includes the  singular; “**or**” is not exclusive; the words “**include**,”  “**includes**” and “**including**” are not limiting; a reference  to any agreement or other contract includes past and future permitted  supplements, amendments, modifications and restatements thereto or thereof; a  reference to an Article, Section, paragraph or other subdivision is a  reference to an Article, Section, paragraph or other subdivision of this  Agreement; a reference to any law includes any amendment or modification to  such law and any rules and regulations promulgated thereunder; a reference to  a Person includes its permitted successors and assigns; any right may be  exercised at any time and from time to time; and, except as otherwise  expressly provided therein, all obligations under any agreement or other  contract are continuing obligations throughout the term of such agreement or  contract.

ARTICLE II.  THE CREDITS

SECTION 2.01.  Commitment  to Lend.   The Bank agrees to lend to Borrower up to a maximum  of $2,000,000, in accordance with the terms of the Commitment and this  Agreement.  The Bank shall have no obligation to advance funds in excess  of such amount or on terms not otherwise provided in this Agreement. To the  extent of any conflict between the terms of the Commitment and the terms of  this Agreement, the terms of this Agreement shall govern.

SECTION 2.02.  Loan  Amount:  Up to a maximum of Two Million and 00/100 Dollars  ($2,000,000.00) (the “**Maximum Advance**”) to Borrower, solely for the  purposes of advances (each, an “**Advance**” and together, the “**Advances**”)  for the purchase by the Trust of Borrower Stock from the Stockholders.

Advances:   Advances shall be funded pursuant to this Paragraph and calculated pursuant to  an “**Advance Schedule**”, attached hereto as **Exhibit A-1**, and a  “**Requisition Form**,” attached hereto as **Exhibit A-2**.   The Advance Schedule and the Requisition Form shall be provided by the Bank  and completed by an authorized officer of Borrower.  All requests for an  Advance shall be supported by a corresponding pledge of the Borrower Stock  purchased with the proceeds of such Advance subject to that certain ESOP  Master Stock Pledge Agreement dated as of an even date herewith, a copy of  which is attached hereto as **Exhibit A-3**, which has

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been assigned to the  Bank in accordance with that certain Assignment of ESOP Note and Master Stock  Pledge dated as of an even date herewith, a copy of which is attached hereto  as **Exhibit A-4**.  In no event shall the sum of all Advances exceed  the Maximum Advance.

SECTION 2.03.  Interest  Rate.  The interest rate of the Note up to the Conversion Date (as  defined hereinbelow) shall be the Bank Prime Rate minus one percent  (1.0%), as more fully set forth in the Note.  The interest rate of the  Note on the Conversion Date and thereafter shall be a rate to be determined by  Borrower and Bank as of the Conversion Date.

SECTION 2.04.  Closing  Fee.  The customary closing fee has been waived by the Bank.

SECTION 2.05.  Optional  Prepayments.  The Borrower may prepay the Note, in whole or in part,  without penalty.  Any prepayment of principal on the Note shall first be  applied to any outstanding fees, penalties, expenses and interest owed to Bank  on any obligation of Borrower to Bank under the Loan Documents, and shall then  be applied against any installments of principal in their inverse order of  maturity.

SECTION 2.06.  Payment  and Conversion Provisions.  Prior to the Conversion Date, interest  only shall be due on the Note, payable quarterly on July 31, 2001; October 31,  2001; January 31, 2002; and April 30, 2002.  For purposes of this  Agreement, the “**Conversion Date**” shall be May 1, 2002.   Following the Conversion Date, the then current balance of the Note shall be  repaid according to a schedule of equal and fully amortizing quarterly  payments of principal plus accrued interest commencing on the last day of the  first calendar quarter following the Conversion Date (July 31, 2002), which  payment amount shall be set on the Conversion Date, with the number of  payments determined by calculating the number of calendar quarters remaining  between the Conversion Date and April 30, 2006. The entire principal balance  and all accrued but unpaid interest on the Note shall be due and payable on  June 30, 2006 if not sooner paid.

SECTION 2.07.  General  Provisions Concerning Payments.  All payments of Borrower shall be  made in Federal or other funds immediately available to the Bank at its office  in Atlanta, Georgia, not later than 1:00 p.m., Eastern time.  Funds  received after 1:00 p.m. shall be deemed to have been paid on the next  following Domestic Business Day.  Whenever any payment shall be due on a  day which is not a Domestic Business Day, the date for payment thereof shall  be extended to the next succeeding Domestic Business Day. 

SECTION 2.08.  Computation  of Interest. All interest due under this Note on or prior to the  Conversion Date shall be computed by applying the ratio of the annual interest  rate over a year of 360 days, multiplied by the outstanding principal balance  and multiplied by the actual number of days the principal balance is  outstanding.  All interest due under this Note after the Conversion Date  shall be computed by applying the ratio of the annual interest rate over a  year of 360 days, multiplied by the outstanding principal balance and  multiplied by the actual number of days the principal balance is  outstanding. 

SECTION 2.09.  INTENTIONALLY  DELETED

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SECTION 2.10.  Collateral  Assignment.  Borrower shall grant a first priority security interest  to the Bank pursuant to the Collateral Assignment in the (a) ESOP Note, (b)  the ESOP Loan Documents, and (c) all collateral securing the ESOP Note  including, without limitation, the Borrower’s Stock.  Any security  interest in the Borrower Stock, and any other collateral securing the ESOP  Note, shall be subject to the terms of the ESOP.

 ARTICLE III.   INTENTIONALLY  DELETED

ARTICLE IV.  CONDITIONS  TO BORROWING

SECTION 4.01.  The  obligation of the Bank hereunder is subject to the satisfaction of the  following conditions:

(a)        receipt by the Bank from the Borrower of a duly executed  counterpart of this Agreement signed by the Borrower and the Trustees on  behalf of the Trust;

(b)        receipt by the Bank of the duly executed Note;

(c)        receipt by the Bank of (i) an opinion of counsel for the  Borrower and (ii) an opinion of counsel for the Trustee, both in forms  acceptable to Bank covering such matters relating to the transactions  contemplated hereby as the Bank may reasonably request;

(d)        receipt by the Bank of all documents which the Bank may  reasonably request relating to the existence of the Borrower, the corporate  authority for and the validity of this Agreement, the Note and the other Loan  Documents, and any other matters relevant hereto, all in form and substance  satisfactory to the Bank, including without limitation a certificate of  incumbency of the Borrower, signed by the Secretary or an Assistant Secretary  of the Borrower, certifying as to the names, true signatures and incumbency of  the officer or officers of the Borrower authorized to execute and deliver the  Loan Documents, and certified copies of the following items:  (i) the  Borrower’s Articles of Incorporation, (ii) the Borrower’s Bylaws, (iii) a  certificate of the Secretary of State (or other appropriate office) of the  jurisdiction of the Borrower’s incorporation as to the good standing of the  Borrower as a corporation of such jurisdiction, and (iv) the action taken by  the Board of Directors of the Borrower authorizing the Borrower’s execution,  delivery and performance of this Agreement, the Note and the other Loan  Documents to which the Borrower is a party;

(e)        the Bank shall have received (i) the original fully executed  ESOP Loan Documents (ii) the Collateral Assignment, (iii) stock certificates  evidencing all of the shares of the Borrower Stock, registered in the name of  the Trust, together with stock powers duly executed in blank, (iv) a copy of  all documents related to the ESOP Transaction, each certified on such date,  (v) a copy of the action of the Trustees authorizing the borrowing of the ESOP  Loan thereunder, and (vi) the written legal opinion of each of the Borrower’s  counsel and the Trustee’s counsel concerning the due authorization,  execution, delivery and enforceability of the ESOP, the Trust Agreement, the  ESOP Loan Documents, and containing such other opinions as the Bank may  reasonably require.

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ARTICLE V.  REPRESENTATIONS  AND WARRANTIES

SECTION 5.01.  The  Borrower represents and warrants that:

(a)        Corporate Existence and Power.   The Borrower is a  corporation duly organized, validly existing and in good standing under the  laws of the jurisdiction of its incorporation, is duly qualified to transact  business in every jurisdiction where, by the nature of its business, such  qualification is necessary, and has all corporate powers and all governmental  licenses, authorizations, consents and approvals required to carry on its  business as now conducted, except where the failure to so qualify or obtain  such licenses, authorizations, consents and approvals would not have a  materially adverse effect.

(b)        Corporate and Governmental Authorization; Contravention.   The execution, delivery and performance by the Borrower of this Agreement, the  Note, the other Loan Documents and performance of Borrower in the ESOP  Transaction (i) are within the Borrower’s corporate powers,  (ii) have been duly authorized by all necessary corporate action,  (iii) require no action by or in respect of, or filing with, any  governmental body, agency or official, (iv) do not contravene, or  constitute a default under, any provision of applicable law or regulation or  of the certificate of incorporation or by-laws of the Borrower or of any  agreement, judgment, injunction, order, decree or other instrument binding  upon the Borrower or any of its Subsidiaries, and (v) do not result in  the creation or imposition of any Lien on any asset of the Borrower or any of  its Subsidiaries (other than Permitted Liens).

(c)        Binding Effect.   This Agreement constitutes a valid  and binding agreement of the Borrower enforceable in accordance with its  terms, and the Note and the other Loan Documents, when executed and delivered  in accordance with this Agreement, will constitute valid and binding  obligations of the Borrower enforceable in accordance with their respective  terms, provided that the enforceability hereof and thereof is subject  in each case to general principles of equity and to bankruptcy, insolvency and  similar laws affecting the enforcement of creditors’ rights generally.

(d)        Financial Information.  The balance sheets of the  Borrower and its Subsidiaries as of  December 31, 2000 and the related  statements of income, shareholders’ equity and cash flows for the past four  (4) Fiscal Years then ended, copies of which have been delivered to the Bank,  and the unaudited financial statements of the Borrower and its Subsidiaries  for the interim period ended March 31, 2001, copies of which have been  delivered to the Bank, fairly present, in material conformity with generally  accepted accounting principles, the financial position of the Borrower and its  Subsidiaries as of such dates and their consolidated results of operations and  cash flows for such periods stated.  Since March 31, 2001 there has been  no material adverse change in the business, financial position, results of  operations or prospects of the Borrower and its Subsidiaries.

(e)        Litigation.  There is no action, suit or proceeding  pending, or to the knowledge of the Borrower threatened, against or affecting  the Borrower or any of its Subsidiaries before any court or arbitrator or any  governmental body, agency or official which could materially adversely affect  the business, financial position or results of operations of the Borrower and  its Subsidiaries, or which in any manner draws into question the validity of,  or

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could impair the ability of the Borrower to perform its obligations under,  this Agreement, the Note or any of the other Loan Documents.

(f)        Compliance with ERISA.  The Borrower and each member  of the Controlled Group have fulfilled their obligations under the minimum  funding standards of ERISA and the Code with respect to each Plan and are in  compliance in all material respects with the presently applicable provisions  of ERISA and the Code, and have not incurred any liability to the PBGC or a  Plan under Title IV of ERISA.  Neither the Borrower nor any member of the  Controlled Group is or ever has been obligated to contribute to any  Multiemployer Plan.

(g)        Taxes.  There have been filed on behalf of the  Borrower and its Subsidiaries all Federal, state and local income, excise,  property and other tax returns which are required to be filed by them and all  taxes due pursuant to such returns or pursuant to any assessment received by  or on behalf of the Borrower or any Subsidiary have been paid, except where  the failure to so file or so pay could not reasonably be expected to have a  materially adverse effect.  The charges, accruals and reserves on the  books of the Borrower and its Subsidiaries in respect of taxes or other  governmental charges are, in the opinion of the Borrower, adequate. 

(h)        Subsidiaries.  Each of the Borrower’s Subsidiaries  is a corporation duly organized, validly existing and in good standing under  the laws of its jurisdiction of incorporation, and has all corporate powers  and all governmental licenses, authorizations, consents and approvals required  to carry on its business as now conducted, except where the failure to obtain  such licenses, authorizations, consents and approvals could not reasonably be  expected to have a materially adverse effect.

(i)        Not an Investment Company.   The Borrower is not an  “**investment company**” within the meaning of the Investment Company  Act of 1940, as amended.

(j)        Ownership of Property; Liens.   Each of the Borrower  and its Subsidiaries has title to its properties sufficient for the conduct of  its business, and none of such property is subject to any Lien except for  Permitted Encumbrances.

(k)        No Default.  Neither the Borrower nor any of its  Subsidiaries is in default under or with respect to any agreement, instrument  or undertaking to which it is a party or by which it or any of its property is  bound which will be materially adverse to the business, operations, property  or financial or other condition of the Borrower and its Subsidiaries, or which  will materially adversely affect the ability of the Borrower to perform its  obligations under the Loan Documents.  No Default has occurred and is  continuing.

(l)        Full Disclosure.  All information heretofore  furnished by the Borrower to the Bank for purposes of or in connection with  this Agreement or any transaction contemplated hereby is, and all such  information hereafter furnished by the Borrower to the Bank will be, true,  accurate and complete in every material respect or based on reasonable  estimates on the date as of which such information is stated or  certified.  The Borrower has disclosed to the Bank in writing any and all  facts which materially and adversely affect or in the reasonable opinion of  the Borrower, may affect, the business, operations, prospects or condition,  financial or otherwise, of 

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 the Borrower and its Subsidiaries  or the  ability of the Borrower to perform its obligations under this Agreement.

(m)        ESOP Documents. The Borrower has delivered to the Bank a  true and complete copy of the ESOP, the Trust Agreement, and the most recent  IRS determination letter, including, without limitation, all modifications and  supplements thereto, as in effect on the date of this Agreement, and the ESOP  and the Trust Agreement are in full force and effect and no term or condition  of any thereof has been amended, modified or waived. 

(n)vESOP Loan Documents.  The Borrower has delivered to  the Bank a true and complete copy of the ESOP Loan Documents, including,  without limitation, all modifications and supplements thereto, as in effect on  the date of this Agreement, and the ESOP Loan Documents are in full force and  effect and no term or condition of any thereof has been amended, modified or  waived. 

(o)        ESOP Adoption and Qualification. The ESOP has been duly  adopted and is in full force and effect and constitutes a qualified plan under  Section 401(a) of the Code, and the ESOP is an “**employee stock  ownership plan**” as defined in Section 4975(e)(7) of the Code and  the regulations promulgated thereunder.

(p)        Continued Qualification of ESOP. The ESOP will continue  to so constitute a qualified plan and the ESOP will continue to be an employee  stock ownership plan.

(q)        Trust. The Trust is, and will continue to be, exempt from  Federal income taxation under Section 501(a) of the Code and the Trust  holds and will continue to hold the assets of the ESOP.

(r)        ERISA Requirements. The Borrower has complied, and the  Trust and the ESOP materially comply, in all respects with the requirements of  ERISA and the Code and the regulations under each thereof as from time to time  in effect applicable to the Borrower, the Trust and the ESOP.

(s)        Employer Securities. The Borrower Stock constitutes “**employer  securities**” within the meaning of Section 409(l) of the Code.

(t)        Exempt Loan. The indebtedness of the Trust under the ESOP  Loan Documents qualifies for the exemptions set forth in  Section 408(b)(3) of ERISA and Section 4975(d)(3) of the Code (and  the regulations promulgated under each thereof).

(u)        No Prohibited Transaction.  Neither the ESOP Loan  nor the consummation of the ESOP Transaction constitutes or results in, and  neither will constitute or result in, a non-exempt “**prohibited  transaction**” as defined in Section 406 of ERISA or  Section 4975(c) of the Code.

(v)        Purchase of Borrower Stock.  The purchase of the  Borrower Stock by the Trust with the proceeds of the ESOP Loan, and the  holding of the Borrower Stock in the ESOP after such purchase, do not  constitute or result in a “**prohibited transaction**” as defined in  Section 406 of ERISA or Section 4975(c) of the Code (taking into  account the provisions of 

12
            
 Section 408(b) of ERISA and  Section 4975(d) of the Code) nor did or will such purchase materially  violate any other applicable law, rule or regulation, including without  limitation ERISA, any state or federal securities or other laws and general  principles of common law and equity applicable to trusts and the actions of  trustees.

(w)        No ERISA Violation. The execution, delivery and  performance by the Trustees, as Trustees under the Trust Agreement and on  behalf of the Trust, of this Agreement, the ESOP Loan Documents to which the  Trust is a party and the Stock Purchase Agreement do not materially violate  any provision of ERISA or the Code.

(x)        Use of Proceeds of ESOP Loan. No portion of the proceeds  of the ESOP Loan have been or will be used, unless otherwise provided by the  ESOP or applicable law, for any purpose other than for the acquisition of, and  the payment of the purchase price for the Borrower Stock.

(y)        Intellectual Properties. The Borrower possesses all  necessary patents, licenses, trademarks, trademark rights, trade names, trade  name rights and copyrights to conduct its business as now conducted, without  known conflict with any patent, license, trademark, trade name, or copyright  of any other person.

(z)        Solvency.  The Borrower and each Subsidiary are  solvent and will not be rendered insolvent by the transactions contemplated by  this Agreement. For purposes hereof, “**solvent**” means that a Person  (i) does not have unreasonably small capital to carry on its business as now  conducted and as presently proposed to be conducted, (ii) is able to pay its  debts as they become due in the ordinary course of business,  and (iii)  has assets with a present fair saleable value greater than its total stated  liabilities and identified contingent liabilities, including any amounts  necessary to satisfy preferential rights of shareholders.

(aa)      Prior Loan Agreement.  Borrower certifies that the  representations and warranties made by Borrower in the Prior Loan Agreement  are true and complete on and as of the date hereof, except to the extent that  any such representations and warranties refer to a specific prior date.

 

ARTICLE VI.  COVENANTS

SECTION 6.01.  The  Borrower agrees that, so long as any amount payable under this Agreement  remains unpaid:

(a)        Information.  The Borrower will deliver to the Bank:

(1)         as soon as available and in any event within one hundred eighty  (180) days after the end of each Fiscal Year, a valuation report with respect  to the assets within the Trust prepared by an independent appraiser for the  ESOP and in form reasonably satisfactory to the Bank; 

(2)        such information, statements, reports, letters, certificates and  notices as are required in Section 5.10 of the Prior Loan Agreement;

13
            
(3)        as soon as practicable and in any event within thirty (30) days  after any officer of the Borrower obtains knowledge of (i) the occurrence of  any event or condition which constitutes a Reportable Event with respect to  any Plan, other than a Reportable Event as to which the PBGC has by regulation  waived the requirement to notify it within 30 days, (ii) any transaction which  constitutes a “**prohibited transaction**,” as such term is defined in  Section 4975 of the Code, in connection with any Plan or any trust  created thereunder, (iii) the issuance of any notice of any complete or  partial withdrawal liability under Title IV of ERISA with respect to any Plan,  or (iv) the issuance of any notice from the PBGC under Title IV of ERISA of  any intent to terminate or appoint a trustee to administer any Plan, a written  notice specifying the nature thereof, what action the Borrower has taken, are  taking or propose to take with respect thereto, and, when known, any action  taken or threatened by the PBGC or the IRS with respect thereto, and, in the  case of any notice described in this paragraph (3), furnish to the Bank a copy  of such notice;

(b)        Maintenance of Records.  The Borrower will keep, and  will cause each Subsidiary to keep, adequate records and books of account, in  which complete entries will be made in accordance with generally accepted  accounting principles consistently applied, reflecting all financial  transactions of Borrower and its Subsidiaries.

(c) -  (g)       INTENTIONALLY DELETED

(h)       Capital Expenditures.  Neither the Borrower nor the Borrower’s bank Subsidiaries will make any  expenditures for fixed or capital assets if, after giving effect thereto, the  aggregate of all such expenditures made by the Borrower or any bank Subsidiary  would exceed FOUR MILLION AND NO/100THS DOLLARS ($4,000,000.00) during any  Fiscal Year.  Bank may, in its sole discretion, approve in writing  exceptions to this restriction.

(i)       INTENTIONALLY DELETED

(j)       INTENTIONALLY DELETED

(k)       Negative Pledge.   Neither the Borrower nor any Subsidiary will create, assume or suffer to exist  any Lien on the collateral securing the Loan Documents and the ESOP Loan  Documents, except for Permitted Encumbrances.

(l)       Maintenance of  Existence.  The Borrower shall, and shall cause each Subsidiary to,  maintain its corporate existence and carry on its business in substantially  the same manner and in substantially the same fields as such business is now  carried on and maintained.

(m)       Dissolution.  Neither the  Borrower nor any of its Subsidiaries shall suffer or permit dissolution or  liquidation either in whole or in part or redeem or retire any shares of its  own stock or that of any Subsidiary, except as required by the terms of the  ESOP.

(n)       Consolidations, Mergers and  Sales of Assets.  The Borrower will not, nor will it permit any  Subsidiary to, consolidate or merge with or into, or sell, lease or otherwise  transfer all or any substantial part of its assets to, any other Person, or  discontinue or eliminate

14
            
any business line or segment without the consent of  Bank, which consent shall not be unreasonably withheld or delayed. 

(o)       Use of Proceeds.  No  portion of the proceeds of the Note will be used by the Borrower (i) in  connection with any tender offer for, or other acquisition of, stock of any  corporation with a view towards obtaining control of such other corporation,  (ii) directly or indirectly, for the purpose, whether immediate,  incidental or ultimate, of purchasing or carrying any Margin Stock, or  (iii) for any purpose in violation of any applicable law or regulation.

(p)       Compliance with Laws; Payment  of Taxes.  The Borrower will, and will cause each of its Subsidiaries  and each member of the Controlled Group to, comply in all material respects  with applicable laws (including but not limited to ERISA), regulations and  similar requirements of governmental authorities (including but not limited to  PBGC), except where the necessity of such compliance is being contested in  good faith through appropriate proceedings.  The Borrower will, and will  cause each of its Subsidiaries to, pay promptly when due all taxes,  assessments, governmental charges, claims for labor, supplies, rent and other  obligations which, if unpaid, might become a lien against the property of the  Borrower or any Subsidiary, except liabilities being contested in good faith  and against which, if requested by the Bank, the Borrower will set up reserves  satisfactory to the Bank.  Borrower agrees that, in the event the ESOP  fails to retain the common stock of Borrower purchased by it with the proceeds  of the ESOP Loan for a period of three (3) years from the date of purchase and  there is, thereby, an obligation to pay an excise tax as set forth in Section  4978 of the Code, unless exempted under Section 4978(d) of the Code, or any  other tax, penalty or expense, Borrower will pay any such tax, penalty or  expense prior to the imposition of any lien or encumbrance.

(q)        Insurance.  The  Borrower will maintain, and will cause each of its Subsidiaries to maintain  (either in the name of the Borrower or in such Subsidiary’s own name), with  financially sound and reputable insurance companies, insurance on all its  property and liability insurance, including without limitation, professional  liability insurance in at least such amounts and against at least such risks  as are usually insured against in the same general area by companies of  established repute engaged in the same or similar business.

(r)       Change in Fiscal Year.   The Borrower will not change its Fiscal Year without the consent of the Bank,  which consent shall not be unreasonably withheld.

(s)        Maintenance of Property.  The Borrower shall, and shall cause each Subsidiary to, maintain all of its  material properties and assets in reasonably good condition, repair and  working order, ordinary wear and tear excepted, except for assets no longer  used or useful in the Borrower’s business.

(t)       Indebtedness.  Neither the Borrower nor any Subsidiary shall be liable, directly or  indirectly, contingently or otherwise, in respect of any Debt except: (i) the  Debt incurred or permitted under this Agreement or the Prior Loan Agreement,  as same may be modified or amended from time to time, (ii) the indebtedness  disclosed by the financial statements referred to in  Section 5.01(d),above; and (iii) Debt of a Subsidiary to the Federal  Reserve Bank or the Federal Home Loan Bank.

15
            
(u)       Conduct of Business. The  Borrower shall not make any material (as reasonably determined by the Bank)  change in the manner in which the business of the Borrower is conducted.

(v)       ESOP and Trust Related  Matters. The Borrower agrees that it shall: (i) do or cause to be done all  things reasonably necessary to preserve and keep in force and effect the Trust’s  existence; (ii) continue to satisfy or cause to be satisfied all material  requirements for the Trust’s qualification under Section 401(a) of the  Code, the Trust’s tax-exempt status under Section 501(a) of the Code,  the treatment of the ESOP as an employee stock ownership plan under  Section 4975(e)(7) of the Code, and the exemption of the  ESOP Loan  and the ESOP Transaction from the prohibited transaction provisions of  Section 4975 of the Code or of Section 406(a) or Section 406(b)  of ERISA; (iii) cause the Borrower Stock to constitute at all times “**employer  securities**” within the meaning of Section 409(l) of the Code; (iv)  from time to time take any and all reasonably necessary actions to ensure  material compliance (A) of the ESOP and the Trust with all applicable laws,  rules, regulations (including without limitation all applicable provisions of  ERISA and the Code), and (B) of the Borrower, the ESOP and the Trust with the  provisions of the ESOP and the Trust Agreement; (v) make such amendments to  the ESOP and the Trust Agreement as may be required by the IRS or the DOL to  secure and preserve the tax qualification of the ESOP and the Trust, and the  prohibited transaction exemptions applicable to the ESOP Loan, and to promptly  furnish to the Bank copies of any such documents; (vi) not terminate the ESOP;  (vii) from time to time, as reasonably requested by the Bank, furnish to the  Bank such books, records and other documents relating to the Trust or the ESOP  as the Bank shall specify and permit the Bank to make copies and extracts from  such books, records, and other documents, and discuss with any representative  of the Borrower the affairs of the Trust and the ESOP; and (ix) make  contributions to the ESOP and the Trust in amounts at least sufficient  (subject to, and in accordance with, the terms of the ESOP) to enable the  Trust to make all payments of the principal of and interest on the ESOP Loan  as and when such payments shall become due.

(w)        Amendments to Documents. The  Borrower shall not permit any material amendment, restatement or other  modification to any of the ESOP Documents, except as required by the DOL or  the IRS or any applicable statute, regulation or ruling, without the prior  written consent of the Bank, such consent not to be unreasonably withheld.

(x)        Special Covenants Regarding  Uses of Moneys*.* The Borrower further agrees that, so long as the  Bank has any obligation to lend hereunder and until the Loan, all interest  thereon and all other Obligations have been finally and indefeasibly paid in  full, (a) it shall designate adequate cash contributions and dividends made by  it to the Trust for use by the Trust (subject to, and in accordance with, the  terms of the ESOP) for the repayment to the Borrower of the ESOP Loan except  to the extent otherwise consented to by the Bank in writing; and (b) the  Borrower shall promptly apply any and all moneys received by it from the Trust  to the repayment to the Bank of the Loan in such order as the Bank may elect.

(y)        Change in Ownership and  Management.  The Borrower shall not cause or permit or suffer to  exist any material change in the ownership, the board of directors, or the

16
            
  executive management of the Borrower from that which exists on the date of  this Agreement unless approved by the Bank, which consent shall not  unreasonably withheld or delayed.

(z)       Prior Loan Agreement.   The Borrower shall remain in compliance with all of the covenants (including,  without limitation, the affirmative covenants, negative covenants, and  financial covenants) contained in the Prior Loan Agreement, as amended.

SECTION 6.02.  General  Covenants of the Trust. The Trust agrees that, until the ESOP Loan is paid  in full, (a) the Trust will agree, from time to time, to any amendments to the  Trust Agreement and the ESOP that may be requested by the IRS as a condition  to maintaining a determination letter to the effect that the ESOP meets the  requirements for qualification under Sections 401(a) and 4975 of the Code, and  to any other amendments reasonably necessary to meet such requirements; (b)  the Trust will perform its obligations hereunder and under the ESOP in good  faith and in material compliance with all applicable provisions of the Code  and ERISA including, without limitation Section 4975 of the Code; (c) the  Trust will promptly give notice in writing to the Bank upon learning of any  proceeding, notice or action by the DOL or the IRS relating to any potential  assertion by either such agency that any material violation of ERISA or the  Code may have occurred in connection with the administration or operation of  the Trust or the ESOP or any part of the ESOP Transaction; and (d) within five  business days after the Trust becomes aware of the occurrence of any Default  or Event of Default, the Trust shall give written notice thereof to the Bank  setting forth the details thereof and the action that the Trust is taking or  proposes to take with respect thereto.

ARTICLE VII.  DEFAULTS

SECTION 7.01.  Events  of Default.  The occurrence of any one or more of the following  events shall constitute an Event of Default by the Borrower under this  Agreement:

(a)        the Borrower shall fail to pay any payment of principal,  interest or other amount payable hereunder, under any other Loan Document, or  under any other agreement between Borrower or any Subsidiary and Bank when the  same becomes due subject to any applicable cure periods; or

(b)        the Borrower shall fail to observe or perform in any material  respect any covenant contained in Sections 6.01(h)-(o), inclusive, and  6.01(t)-(z), inclusive; or

(c)        the Borrower or the Trust shall fail to observe or perform in  any material respect any covenant or agreement contained in this Agreement  (other than those covered by clause (a) or (b) above) for thirty (30) days  after the earlier of (i) the first day on which a responsible officer of the  Borrower has knowledge of such failure, or (ii) written notice thereof has  been given to the Borrower by the Bank; or

(d)        any representation, warranty or certification made or deemed  made by the Borrower, the Trust or any other Person in this Agreement or any  of the other Loan Documents or ESOP Loan Documents or which his contained in  any certificate, document, opinion or financial statement or other statement  furnished at any time or in connection with any Loan 

17
            
 Document, shall prove to  have been incorrect, incomplete or misleading in any material respect on or as  of the date made or deemed made; or

(e)        the Borrower or any Subsidiary shall fail to make any payment in  respect of Debt in a principal amount in excess of TWO HUNDRED FIFTY THOUSAND  AN NO/100THS DOLLARS ($250,000.00) outstanding (other than the Note) when due  or within any applicable grace period or shall be deemed in default (whether  for non-payment or otherwise) under any other agreement with Bank (including,  without limitation, the Prior Loan Agreement); or

(f)        any event or condition shall occur which results in the  acceleration of the maturity of Debt in a principal amount in excess of TWO  HUNDRED FIFTY THOUSAND AND NO/100THS DOLLARS ($250,000.00) outstanding of the  Borrower or any Subsidiary or the purchase of such Debt by the Borrower (or  its designee) or such Subsidiary (or its designee) prior to the scheduled  maturity thereof or enables (or, with the giving of notice or lapse of time or  both, would enable) the holders of such Debt or any Person acting on such  holders’ behalf to accelerate the maturity thereof or require the purchase  thereof by the Borrower (or its designee) or such Subsidiary (or its designee)  prior to the scheduled maturity thereof, without regard to whether such  holders or other Person shall have exercised or waived their right to do so;  or

(g)        the Borrower or any Subsidiary shall commence a voluntary case  or other proceeding seeking liquidation, reorganization or other relief with  respect to itself or its debts under any bankruptcy, insolvency or other  similar law now or hereafter in effect or seeking the appointment of a  trustee, receiver, liquidator, custodian or other similar official of it or  any substantial part of its property, or shall consent to any such relief or  to the appointment of or taking possession by any such official in an  involuntary case or other proceeding commenced against it, or shall make a  general assignment for the benefit of creditors, or shall fail generally to  pay its debts as they become due, or shall take any corporate action to  authorize any of the foregoing; or

(h)        an involuntary case or other proceeding shall be commenced  against the Borrower or any Subsidiary seeking liquidation, reorganization or  other relief with respect to it or its debts under any bankruptcy, insolvency  or other similar law now or hereafter in effect or seeking the appointment of  a trustee, receiver, liquidator, custodian or other similar official of it or  any substantial part of its property, and such involuntary case or other  proceeding shall remain undismissed and unstayed for a period of sixty (60)  days; or an order for relief shall be entered against the Trust, the Borrower  or any Subsidiary under the federal bankruptcy laws as now or hereafter in  effect; or

(i)        the Borrower or any member  of the Controlled Group shall fail to  pay when due any material amount which it shall have become liable to pay to  the PBGC or to a Plan under Title IV of ERISA; or the PBGC shall institute  proceedings under Title IV of ERISA to terminate or to cause a trustee to  be appointed to administer any such Plan or Plans or a proceeding shall be  instituted by a fiduciary of any such Plan or Plans to enforce  Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have  been dismissed within 30 days thereafter; or a condition shall exist by reason  of which the PBGC would be entitled to obtain a decree adjudicating that any  such Plan or Plans must be terminated; or the Borrower or any other 

18
            
 member of  the Controlled Group shall enter into, contribute or be obligated to  contribute to, terminate or incur any withdrawal liability with respect to, a  Multiemployer Plan; or

(j)        one or more judgments or orders for the payment of money in an  aggregate amount in excess of $1,000,000 shall be rendered against the  Borrower or any Subsidiary and such judgment or order shall continue  unsatisfied and unstayed for a period of  thirty (30) days, unless such  judgment or order shall be fully covered by insurance; or

(k)        a federal tax lien shall be filed against the Borrower under  Section 6323 of the Code or a lien of the PBGC shall be filed against the  Borrower under Section 4068 of ERISA and in either case such lien shall  remain undischarged for a period of  twenty-five (25) days after the  date of filing; or

(l)        (i)  Subsequent to the date hereof, any Person or two or more  Persons acting in concert shall have acquired, in a single transaction or  series of transactions, beneficial ownership (within the meaning of  Rule 13d-3 of the Securities and Exchange Commission under the Securities  Exchange Act of 1934) of (A) thirty percent (30%) or more of the outstanding  voting stock of the Borrower, exclusive of Borrower Stock and other voting  stock of the Borrower, if any, beneficially owned by the Trust, or (B) shares  of outstanding convertible preferred stock, if any, of the Borrower sufficient  in number such that conversion of such shares of convertible preferred stock  into voting stock of the Borrower would result in such “person” or “group”  of persons holding (in the aggregate, considering any other voting stock of  the Borrower then held by such “person” or “group” of persons) thirty  percent (30%) or more of the outstanding voting stock of the Borrower,  exclusive of Borrower Stock and other voting stock of the Borrower, if any,  beneficially owned by the Trust; or (ii) as of any date a majority of the  Board of Directors of the Borrower consists of individuals who were not either  (A) directors of the Borrower as of the corresponding date of the previous  year, (B) selected or nominated to become directors by the Board of  Directors of the Borrower of which a majority consisted of individuals  described in clause (A) of this Section 7.01(l), or (C) selected or  nominated to become directors by the Board of Directors of the Borrower of  which a majority consisted of individuals described in clauses (A) and (B) of  this Section 7.01(l); or

(m)        if any of the Trust’s obligations under the ESOP Loan  Documents cease to be in full force and effect, or if the Trust shall contest,  or repudiate or deny in writing the validity or enforceability of any of its  obligations under any of the ESOP Loan Documents.

SECTION 7.02.  Remedies  on Default.  Upon the occurrence and during the continuance of an  Event of Default, the Bank may, in its sole discretion, (a) by notice to the  Borrower, declare the Note (together with accrued interest thereon) to be  immediately due and payable without presentment, demand, protest or other  notice of any kind, all of which are hereby waived by the Borrower; provided  that if any Event of Default specified in clause (g) or (h) above occurs with  respect to the Borrower, without any notice to the Borrower or any other act  by the Bank, the Note (together with accrued interest thereon) and fees shall  become immediately due and payable without presentment, demand, protest or  other notice of any kind, all of which are hereby waived by the Borrower, and  (b) pursue  all remedies available to it by contract, at law or in  equity, including, without limitation, all remedies available to it under the  Prior Loan Agreement, it being expressly agreed that all collateral securing  the Prior Loan Agreement shall

19
            
secure this Agreement.  Notwithstanding  any provision herein to the contrary, the Bank shall not require the Borrower  to undertake any action in violation of the terms of the ESOP.

SECTION 7.03.  Security  Interest; Offset.  In addition to, and not in limitation of, all  rights of offset that the Bank or other holder of the Note may have under  applicable law, the Borrower hereby grants to the Bank and its successors and  assigns, as security for the full and punctual payment and performance of the  obligations to pay to the Bank the principal, interest and other amounts due  hereunder or pursuant to any Loan Document, a continuing lien on and security  interest in all deposits and other sums credited by or due from the Bank to  the Borrower or subject to withdrawal by the Borrower; and regardless of the  adequacy of any collateral or other means of obtaining repayment of the  Obligations, the Bank may, at any time after the occurrence of an Event of  Default and without notice to the Borrower, set off the whole or any portion  or portions of any or all such deposits and other sums against the amounts  owing under this Agreement and the Note, whether or not any other Person or  Persons could also withdraw money therefrom.

ARTICLE VIII.  MISCELLANEOUS

SECTION 8.01.  Notices.   All notices, requests and other communications to any party hereunder shall be  in writing (including facsimile transmission or similar writing) and shall be  given to such party at its address or facsimile number set forth below or such  other address or facsimile number as such party may hereafter specify for the  purpose by notice to the other party:
 (a)If to the Borrower:
 

 

Community Bankshares, Inc.

 

 

448 N. Main Street

 

 

Cornelia, Georgia         30531-9853

 

 

Attention:  Harry        Stephens, Executive Vice President and

 

 

             Chief Financial Officer

 

 

 

 

 

And

 

 

 

 

 

Community Bankshares, Inc.

 

 

Employee Stock Ownership Plan        and Trust

 

 

448 N. Main Street

 

 

Cornelia, Georgia         30531-9853

 

 

Attention:  Steve Adams,        S. Alton Wingate and Elton Collins, Trustees

 

 

 

 

 

With a copy to:

 

 

 

 

 

Kilpatrick Stockton LLP

 

 

Suite 2800

 

 

1100 Peachtree Street

 

 

Atlanta, Georgia  30309

 

 

Attention:  F. Sheffield        Hale, Esq.

 

20
            
 

 

 
 (b)If to the Bank:
 

 

SunTrust Bank

 

 

25 Park Place, N.E.

 

 

Mail Code:  121

 

 

Atlanta, Georgia         30303-2900

 

 

Attention:  Financial        Institutions Group

 

 

 

 

 

With a copy to:

 

 

 

 

 

Womble Carlyle Sandridge &        Rice , PLLC

 

 

One Atlantic Center, Suite 3500

 

 

1201 West Peachtree Street

 

 

Atlanta, Georgia  30309

 

 

Attention:  G. Leighton        Stradtman, Esq.

Each such notice, request or other  communication shall be effective (i)  if given by mail, two (2) days  after such communication is deposited in the mails with first class postage  prepaid, addressed as aforesaid or (ii) if given by any other means, when  delivered at the address specified in this Section.

SECTION 8.02.   No  Waivers.  No failure or delay by the Bank in exercising any right,  power or privilege hereunder or under the Note shall operate as a waiver  thereof nor shall any single or partial exercise thereof preclude any other or  further exercise thereof or the exercise of any other right, power or  privilege.  The rights and remedies herein provided shall be cumulative  and not exclusive of any rights or remedies provided by law.  All rights  of the Bank under this Agreement shall remain in effect notwithstanding the  fact that no indebtedness of Borrower to the Bank may be outstanding at any  particular time or that the Maximum Advance amount may be exceeded.

SECTION 8.03.  Expenses;  Documentary Taxes.  The Borrower shall pay (i) all out-of-pocket  expenses of the Bank, including reasonable fees and disbursements of counsel  for the Bank actually incurred, in connection with the preparation of this  Agreement and the other Loan Documents, any waiver or consent hereunder or any  amendment hereof or any actual or alleged Default hereunder and (ii) if an  Event of Default occurs, all out-of-pocket expenses incurred by the Bank,  including reasonable fees and disbursements of counsel actually incurred, in  connection with such Event of Default and collection and other enforcement  proceedings resulting therefrom, including out-of-pocket expenses incurred in  enforcing this Agreement and the other Loan Documents.  The Borrower  shall indemnify the Bank against any transfer taxes, documentary taxes,  assessments or charges made by any Governmental Authority by reason of the  execution and delivery of this Agreement or the other Loan Documents.  In  addition, the Borrower agrees to indemnify the Bank, each affiliate of the  Bank and all of their respective directors, officers, employees and agents  (each an “**Indemnified Party**”) from, and hold each Indemnified Party  harmless from and against, any and all losses, costs, charges, expenses  (including, without limitation, reasonable attorney’s fees and expenses of  litigation or preparation therefor actually incurred, whether or not such  Indemnified Party is a party thereto), claims, demands, suits, damages,  penalties, taxes, fines, levies and assessments that may be

21
            
asserted or  imposed against, or suffered or incurred by, such Indemnified Party as a  direct or indirect result of:

(a)        Loan Agreement; Loan Documents; ESOP Loan. The  negotiation, preparation, execution or performance of this Agreement, the ESOP  Transaction or any other Loan Document or any transaction contemplated herein  or therein, any breach or violation of this Agreement, the Note, the other  Loan Documents, the ESOP Loan Documents or the direct or indirect use or  application, or proposed use or application, of the proceeds of the Loan or  the ESOP Loan;

(b)        Environmental Laws. Any violation or alleged violation of  any environmental laws, rules or regulations, the past, present or future  operations of the Borrower or any Subsidiary or their respective predecessors  in interest, or the past, present or future environmental, health or safety  condition of any property owned or operated by the Borrower or any Subsidiary  or its predecessors in interest or any actual or threatened release of any  hazardous or other material regulated under any such environmental laws, rules  or regulations;

(c)        Representations and Warranties. Any representation or  warranty of the Trust, the Trustees, or the Borrower in this Agreement, any  other Loan Document or any ESOP Loan Document being untrue or inaccurate in  any material respect;

(d)        Obligations. The failure by the Borrower or the Trust to  observe, perform or comply with any of its covenants, undertakings or  obligations set forth in this Agreement, any other Loan Document or any ESOP  Loan Document;

(e)        Exempt Loan. Failure of the ESOP Loan to qualify for the  exemption under 4975(d)(3) of the Code from the prohibited transaction tax  imposed by Section 4975(a) of the Code or for the exemption from the  prohibited transaction provisions of Section 4975(c) of the Code or of  Section 406(a) or 406(b) of ERISA; and/or

(f)        ESOP Transaction. Any claim of whatever nature against  the Bank arising from the administration of the ESOP or the Trust or any  assets thereof, or relating in any manner to this Agreement, any other Loan  Document, the Loan or the ESOP Transaction, asserted by any participant or  beneficiary of the ESOP or the Trust or by any shareholder of the Borrower,  which loss or expense under this paragraph (f) occurs after a judicial  determination or governmental directive, provided that, in the case of this  paragraph (f), the Bank shall be indemnified for costs and attorneys’ fees  incurred by the Bank prior to and irrespective of the occurrence of such  judicial determination or governmental directive;

provided that the Borrower shall  have no obligation to indemnify an Indemnified Party hereunder in respect of  the foregoing to the extent the same shall arise directly from the gross  negligence or willful misconduct of such Indemnified Party. The obligations of  the Borrower under this Section shall survive, and shall continue to be  enforceable notwithstanding, the termination of this Agreement and the payment  in full or cancellation of the Obligations.

SECTION 8.04.  Amendments  and Waivers.  Any provision of this Agreement, the Note or any other  Loan Documents may be amended or waived if, but only if, such amendment or  waiver is in writing and is signed by the Borrower and the Bank.

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SECTION 8.05.  Successors  and Assigns.  The provisions of this Agreement shall be binding upon  and inure to the benefit of the parties hereto and their respective successors  and assigns; provided that neither the Trust nor the Borrower may assign or  otherwise transfer any of its rights under this Agreement.  The Bank may  at any time assign to one or more banks or financial institutions all, or a  proportionate part of all, of its rights and obligations under this Agreement  and the Note, and such assignee shall assume all such rights and obligations  and such assignee shall for all purposes be a Bank party to this Agreement and  shall have all the rights and obligations of a Bank under this Agreement to  the same extent as if it were an original party hereto, and the Bank shall be  released from its obligations hereunder to a corresponding extent, and no  further consent or action by the Borrower or the Bank shall be required.   Upon the consummation of any transfer to an assignee pursuant to this Section  8.05, the Bank and the Borrower shall make appropriate arrangements so  that, if required, a new Note is issued to such assignee.  Subject to the  provisions of Section 8.06, the Borrower authorizes the Bank to  disclose to any assignee or other transferee or prospective transferee, any  and all financial information in the Bank’s possession concerning the  Borrower which has been delivered to the Bank by the Borrower pursuant to this  Agreement or which has been delivered to the Bank by the Borrower in  connection with the Bank’s credit evaluation prior to entering into this  Agreement.

SECTION 8.06.  Confidentiality.   The Bank agrees to exercise its best efforts to keep any information delivered  or made available by the Borrower to it which is clearly indicated to be  confidential information, confidential from any one other than persons  employed or retained by the Bank who are or are expected to become engaged in  evaluating, approving, structuring or administering the Loan Documents; provided,  however, that nothing herein shall prevent the Bank from disclosing  such information (i) upon the order of any court or administrative agency,  (ii) upon the request or demand of any regulatory agency or Governmental  Authority having jurisdiction over the Bank, (iii) which has been publicly  disclosed, (iv) to the extent reasonably required in connection with any  litigation to which the Bank or their respective Affiliates may be a party,  (v) to the extent reasonably required in connection with the exercise of any  remedy hereunder, (vi) to the Bank’s legal counsel and independent auditors  and (vii) to any actual or proposed assignee or other transferee of all or  part of its rights hereunder which has agreed in writing to be bound by the  provisions of this Section.

SECTION 8.07.  Interest  Limitation.  Notwithstanding any other term of this Agreement, the  Note or any other Loan Document, the maximum amount of interest which may be  charged to or collected from any person liable hereunder or under the Note by  the Bank shall be absolutely limited to, and shall in no event exceed, the  maximum amount or interest which could lawfully be charged or collected under  applicable law (including, to the extent applicable, the provisions of  Section 5197 of the Revised Statutes of the United States of America, as  amended, 12 U.S.C. '85, as amended),  so that the maximum of all amounts constituting interest under applicable law,  howsoever computed, shall never exceed as to any Person liable therefor such  lawful maximum, and any term of this Agreement, the Note or any other Loan  Document which could be construed as providing for interest in excess of such  lawful maximum shall be and hereby is made expressly subject to and modified  by the provisions of this paragraph.

SECTION 8.08.  Governing  Law.  This Agreement and the Note shall be construed in accordance  with and governed by the law of Georgia.  This Agreement and the Note are  intended to be effective as instruments executed under seal.

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SECTION 8.09.  Counterparts.   This Agreement may be signed in any number of counterparts, each of which  shall be an original, with the same effect as if the signatures thereto and  hereto were upon the same instrument.

SECTION 8.10.  Consent  to Jurisdiction.  The Borrower (a) submits to personal jurisdiction  in Georgia, the courts thereof and the United States District Courts sitting  therein, for the enforcement of this Agreement, the Note and the other Loan  Documents, (b) waives any and all personal rights under the law of any  jurisdiction to object on any basis (including, without limitation,  inconvenience of forum) to jurisdiction or venue within Georgia for the  purpose of litigation to enforce this Agreement, the Note or the other Loan  Documents, and (c) agrees that service of process may be made upon it in the  manner prescribed in Section 8.01 for the giving of notice to the  Borrower.  Nothing herein contained, however, shall prevent the Bank from  bringing any action or exercising any rights against any security and against  the Borrower personally, and against any assets of the Borrower, within any  other state or  jurisdiction.

SECTION 8.11.  Severability.   If any provisions of this Agreement shall be held invalid under any applicable  laws, such invalidity shall not affect any other provision of this Agreement  that can be given effect without the invalid provision, and, to this end, the  provisions hereof are severable.

SECTION 8.12.  Captions.   Captions in this Agreement are for the convenience of reference only and shall  not affect the meaning or interpretation of the provisions hereof.

SECTION 8.13.  Time  of Essence.  Time is of the essence of this Agreement and the other  Loan Documents.

IN WITNESS WHEREOF, the party below  has caused this Agreement to be executed  under seal as of the year and  day first above written.

 

 

**BORROWER:**

 

 

 

COMMUNITY BANKSHARES, INC., a        Georgia corporation

 

 

ATTEST:

 

 

By:

 

Name: 

Name:

Title:  

Title:

                   [CORPORATE SEAL]

 

 

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IN WITNESS WHEREOF, the party below  has caused this Agreement to be executed under seal as of the year and day  first above written.

 

 

**TRUST:**

 

 

 

COMMUNITY BANKSHARES, INC.        EMPLOYEE

 

STOCK OWNERSHIP PLAN AND TRUST

 

 

 

By Its Trustee:

 

 

 

 

 

    By:                                                                                   (Seal)

 

 

    Name:

 

 

               Not in his individual capacity, but

 

               solely as Trustee of the Community

 

               Bankshares, Inc. Employee Stock

 

               Ownership Plan and Trust

** **

 

 

 

 

 

 

** **

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IN WITNESS WHEREOF, the party below  has caused this Agreement to be executed under seal as of the year and day  first above written.

** **

 

**BANK:**

 

 

 

SUNTRUST BANK

 

 

 

 

By:

 

Name:

Title:

            

 

[BANK SEAL]
 

 

 

 

 

 

 

 

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**EXHIBIT A-1**

 ADVANCE SCHEDULE

 Advance Schedule to be determined by  Borrower.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
            
**EXHIBIT A-2**

REQUISITION FORM

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
            
**EXHIBIT A-3**

COPY OF ESOP MASTER  STOCK PLEDGE AGREEMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
            
**EXHIBIT A-4**

COPY OF ASSIGNMENT OF  ESOP NOTE AND MASTER STOCK PLEDGE AGREEMENT