Document:

exv4w2

EXHIBIT
4.2

AGREEMENT AND AMENDMENT

TO AMENDED AND RESTATED CREDIT AGREEMENT

(January 31, 2007)

          THIS AGREEMENT AND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this
“Amendment”), dated as of January 31, 2007 (the “Effective Date”), is made and
entered into by and among THE MEN’S WEARHOUSE, INC., a corporation organized under the laws of the
State of Texas (the “Revolving Borrower”); MOORES THE SUIT PEOPLE INC., a corporation
organized under the laws of the Province of New Brunswick, Canada (“MSP”); GOLDEN BRAND
CLOTHING (CANADA) LTD., a corporation organized under the laws of the Province of New Brunswick,
Canada (together with MSP, collectively, the “Term Borrowers” and individually, a “Term
Borrower”); the financial institutions whose names appear on the signature pages hereto
(collectively, the “Lenders” and individually, a “Lender”); JPMORGAN CHASE BANK,
N.A., as Administrative Agent (in such capacity, the “Administrative Agent”); and JPMORGAN
CHASE BANK, N.A., TORONTO BRANCH, as Canadian Agent (in such capacity, the “Canadian
Agent”). The Revolving Borrower, the Term Borrowers, the Lenders, the Administrative Agent and
the Canadian Agent are herein collectively called the “Parties”. This Amendment is joined
in by each Guarantor and each Pledgor for the purposes expressed herein.

Preliminary Statements

     1. The Parties are party to an Amended and Restated Credit Agreement dated as of December 21,
2005 (the “Credit Agreement”). Unless defined herein, terms used herein which are defined
in the Credit Agreement shall have the meanings therein ascribed to them.

     2. Pursuant to the Credit Agreement, certain Subsidiaries of the Revolving Borrower executed
and delivered to the Secured Parties (as defined therein) a Revolving Guaranty Agreement, the
Revolving Borrower as Term Guarantor executed and delivered to the Secured Parties (as defined
therein) a Term Guaranty Agreement, and certain Subsidiaries of the Revolving Borrower executed and
delivered to the Administrative Agent on behalf of the Secured Parties (as defined therein) a
Pledge and Security Agreement.

     3. The Revolving Borrower has asked the Lenders to extend the Revolving Maturity Date and to
increase the Total Revolving Commitment (without, however, reducing the Revolving Borrower’s
ability to cause an increase in the Total Revolving Commitment pursuant to and upon the terms
stated in Section 4.9 of the Credit Agreement). The Lenders are willing to extend the
Revolving Maturity Date and to increase the Total Revolving Commitment, all upon the terms and
conditions set forth in this Amendment.

 

 

Agreements

     NOW, THEREFORE, in consideration of the premises and for other good and valuable
consideration, the receipt and sufficiency of which are acknowledged by the Parties, the Parties
agree as follows:

     1. Amendment and Addition of Definitions. 

     (a) The definition of “Revolving Maturity Date” set forth in Section 1.1 of the Credit
Agreement is hereby amended to provide in its entirety as follows:

          ““Revolving Maturity Date” means February 11, 2012.”

     (b) The definition of “Total Revolving Commitment” set forth in Section 1.1 of the
Credit Agreement is hereby amended to provide in its entirety as follows:

          ““Total Revolving Commitment” means, at any time, the sum of the Revolving
Commitments of all Revolving Lenders at such time. The amount of the Total Revolving
Commitment as of the effective date of the First Amendment is $200,000,000. The amount of
each Revolving Lender’s Revolving Commitment as of the date of the First Amendment is set
forth on Schedule 1.1(a).”

     (c) There is hereby added to Section 1.1 of the Credit Agreement the following
definition:

          ““First Amendment” means that certain Agreement and Amendment to First Amended
and Restated Credit Agreement dated as of January 31, 2007, by and among the Borrowers, the
Lenders signatory thereto, the Administrative Agent, and the Canadian Agent, and joined in
by the Guarantors and the Pledgors.”

     (d) Schedule 1.1(a) to the Credit Agreement is hereby amended to conform to
Schedule 1.1(a) of this Amendment.

     2. No Impairment. Nothing in this Amendment is intended to or shall be construed to
limit, impair or diminish any right or obligation of the Revolving Borrower under Section
4.9 of the Credit Agreement.

     3. Conditions Precedent. This Amendment shall be effective as of the date set forth
above, subject to the satisfaction, in a manner satisfactory to the Administrative Agent, of each
of the following conditions precedent:

     (a) Documents and Certificates. The Administrative Agent shall have received the
following, in each case in form, scope and substance satisfactory to the Administrative Agent:

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          (1) this Amendment, duly executed by the Borrowers, the Guarantors, the Pledgors, the
Lenders, the Administrative Agent, and the Canadian Agent;

          (2) a certificate of each Loan Party, dated as of the Effective Date and executed by
its Secretary or Assistant Secretary, certifying, inter alia, (A) Articles of Incorporation
and Bylaws (or equivalent corporate documents), as amended and in effect, of such Loan
Party; (B) resolutions duly adopted by the Board of Directors, members or other body of such
Loan Party authorizing the transactions contemplated by this Amendment, and (C) the
incumbency and specimen signatures of the officers of such Loan Party executing this
Amendment on its behalf;

          (3) such documents and certificates as the Administrative Agent may reasonably request
relating to the organization, existence and good standing of each Loan Party, and any other
legal matters relating to the Loan Parties, this Amendment, or the other Loan Documents;

          (4) a certificate dated the Effective Date executed by a Responsible Officer of the
Revolving Borrower certifying that, to the best of such Responsible Officer’s knowledge, (i)
since the end of Fiscal Year 2005 there has not occurred a material adverse change in the
business, property, operation or condition (financial or otherwise) of the Revolving
Borrower and its Subsidiaries, taken as a whole, (ii) the Revolving Borrower and the
Restricted Subsidiaries are, in all material respects, in compliance with all existing
financial obligations, (iii) no Default or Event of Default has occurred and is continuing,
(iv) the representations and warranties of the Revolving Borrower and each Restricted
Subsidiary contained in the Loan Documents (other than those representations and warranties
limited by their terms to a specific date, in which case they shall be true and correct as
of such date) are true and correct on and as of the Effective Date, (v) the Revolving
Borrower has no Material Restricted Subsidiary that has not executed and delivered to the
Secured Parties the Revolving Guaranty Agreement, and (vi) the Revolving Borrower has no
Material Restricted Subsidiary all of the Capital Stock in which (other than the total
issued and outstanding Foreign Subsidiary Voting Stock of a Foreign Subsidiary, as to which
no more than 65% is required to be pledged) has not been pledged to the Administrative Agent
for the equal and ratable benefit of the Secured Parties pursuant to the Pledge Agreement;

          (5) a duly executed promissory note, in the amount of such Lender’s new Revolving
Commitment, for the account of each Lender that requested a promissory note prior to the
Effective Date; and

          (6) any other documents reasonably requested by Administrative Agent on or before the
Effective Date.

     (b) Approvals. Each Loan Party shall have obtained all governmental and third party
approvals necessary or, in the reasonable judgment of the Administrative Agent, advisable to be

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obtained by such Loan Party in connection with such Loan Party’s execution and delivery of
this Amendment.

     (c) Compliance with Law. No Law shall prohibit the transactions contemplated by this
Amendment. No order, judgment or decree of any Governmental Authority, and no action, suit,
investigation or proceeding pending or, to the knowledge of the Revolving Borrower, threatened in
any court or before any arbitrator or Governmental Authority that purports to affect the Revolving
Borrower or any Restricted Subsidiary shall exist that could reasonably be expected to have a
Material Adverse Effect.

     (d) Payment of Fees and Expenses. The Administrative Agent shall have received
payment of all fees and expenses (to the extent invoiced) required to be paid by the Borrowers
hereunder or under the Credit Agreement, including the reasonable fees and expenses of counsel for
the Administrative Agent in connection with the negotiation and closing of this Amendment.

     The Administrative Agent shall notify the Borrowers and the Lenders of the Effective Date, and
such notice shall be conclusive and binding.

     4. Financial Statements. The Revolving Borrower has furnished the Lenders with (a) its
audited consolidated financial statements for the Fiscal Year 2005 and (b) its unaudited
consolidated financial statements for the fiscal quarters ended April 29, 2006, July 29, 2006, and
October 28, 2006, certified by its chief financial officer, including balance sheets, income
statements and cash flow statements. The financial statements described above have been prepared
in conformity with GAAP, subject to year-end audit adjustments and the absence of footnotes in the
case of the financial statements referred to in clause (b) above. The financial statements
described above fairly present the consolidated financial condition of the Revolving Borrower and
its Subsidiaries and the results of their operations as of the dates and for the periods indicated.
As of the Effective Date, there has been no event since January 28, 2006, which could reasonably
be expected to have a Material Adverse Effect. As of the Effective Date, there exist no material
contingent liabilities or obligations, unusual long-term commitments or unrealized losses of the
Revolving Borrower or any Subsidiary which are not fully disclosed in the financial statements
described above or disclosed by the Revolving Borrower to the Administrative Agent in writing.

     5. Litigation. As of the Effective Date, there is no action, suit or proceeding pending
(or, to the best knowledge of the Revolving Borrower, threatened) against the Revolving Borrower or
any Subsidiary before any court, administrative agency or arbitrator (i) which could reasonably be
expected to have a Material Adverse Effect or (ii) that involves any of the Loan Documents or the
Transactions.

     6. Representations True; No Default. The Revolving Borrower represents and warrants
that (a) the representations and warranties of the Revolving Borrower and each Restricted
Subsidiary contained in the Loan Documents (other than those representations and warranties limited
by their terms to a specific date, in which case they shall be true and correct as
of such date) are true and correct on and as of the Effective Date and (b) as of the Effective
Date of this Amendment, no Default or Event of Default has occurred and is continuing.

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     7. Ratification. The Credit Agreement, as hereby amended, and the other Loan
Documents are in all respects ratified and confirmed and are, and shall continue to be, in full
force and effect. The Borrowers, each Guarantor and each Pledgor hereby agree and acknowledge that
all of their respective liabilities and obligations under the Credit Agreement, the other Loan
Documents, or otherwise, remain in full force and effect as of the date of this Amendment and after
giving effect to it.

     8. Definitions and References. Unless otherwise defined herein, terms used herein
which are defined in the Credit Agreement or in the other Loan Documents shall have the meanings
therein ascribed to them. The term “Agreement” as used in the Credit Agreement and the term
“Credit Agreement” as used in the other Loan Documents or any other instrument, document or writing
furnished to the Administrative Agent, the Canadian Agent, or any Lender by or on behalf of any
Loan Party shall mean the Credit Agreement as hereby amended.

     9. Expenses. Each Borrower agrees to pay within fifteen (15) days after demand all
reasonable costs and expenses (including reasonable counsel’s fees) incurred in connection with the
preparation, reproduction, execution and delivery of this Amendment and with respect to advising
the Administrative Agent as to its rights and responsibilities under the Credit Agreement, as
hereby amended. In addition, the Borrowers shall pay all costs and expenses of the Administrative
Agent and each Secured Party (including counsel’s fees) in connection with the enforcement of this
Amendment.

     10. Severability. Should any clause, sentence, paragraph or section of this
Amendment, or of the Credit Agreement as amended by this Amendment, be judicially declared to be
invalid, unenforceable or void, such decision shall not have the effect of invalidating or voiding
the remainder of this Amendment or of the Credit Agreement, and the Parties agree that the part or
parts of this Amendment or of the Credit Agreement as amended by this Amendment so held to be
invalid, unenforceable or void will be deemed to have been stricken herefrom and therefrom and the
remainder will have the same force and effectiveness as if such part or parts had never been
included herein.

     11. Miscellaneous. This Amendment (a) may be modified, amended or waived only in the
manner prescribed by the Credit Agreement; (b) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK AND THE UNITED STATES OF AMERICA; (c) embodies the entire
agreement and understanding among the Parties, the Guarantors and the Pledgors with respect to the
subject matter hereof and supersedes all prior agreements, consents and understandings relating to
such subject matter, and (d) is a Loan Document.

     12. Survival of Representations, Warranties and Covenants. All representations,
warranties and covenants contained herein or made in writing by the Revolving Borrower and the
Restricted Subsidiaries in connection herewith shall survive the execution and delivery of this
Amendment and will bind and inure to the benefit of the respective successors and permitted
assigns of the Parties, whether so expressed or not. No investigation at any time made by or
on

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behalf of the Lenders shall diminish the Lenders’ right to rely on such representations,
warranties and covenants.

     13. Counterparts. This Amendment may be executed in several counterparts, and by the
Parties, the Guarantors and the Pledgors on separate counterparts, and each counterpart, when so
executed and delivered, shall constitute an original instrument, and all such separate counterparts
shall constitute but one and the same instrument. Delivery of an executed counterpart of a
signature page to any Loan Document by facsimile or internet transmission shall be as effective as
delivery of an original, manually executed counterpart thereof.

     14. Descriptive Headings. The section headings in this Amendment have been inserted
for convenience only and shall be given no substantive meaning or significance whatsoever in
construing the terms and provisions of this Amendment.

     15. Provisions Incorporated by Reference. The provisions of Article 11 and of
Sections 13.1, 13.5, 13.10, 13.12 through 13.16, and 13.18 through 13.21 of the
Credit Agreement are incorporated into this Amendment by this reference and shall be applicable to
this Amendment and the matters addressed in it as if set forth herein in full.

     16. Confirmation of Revolving Guaranty Agreement and Pledge and Security Agreement.

     (a) Each of the Guarantors and each of the Pledgors hereby (i) consents to the execution and
delivery by the Borrowers of this Amendment and (ii) acknowledges that without such consent and
confirmation, the Secured Parties would not agree to this Amendment.

     (b) Each Revolving Guarantor hereby confirms that, notwithstanding the changes made by this
Amendment, the Revolving Guaranty Agreement dated as of December 21, 2005, applies and shall
continue to apply to the Credit Agreement, as amended by this Amendment, and all Obligations of the
Revolving Borrower now or hereafter existing (except as otherwise limited by the Revolving Guaranty
Agreement).

     (c) The Term Guarantor hereby confirms that, notwithstanding the changes made by this
Amendment, the Term Guaranty Agreement dated as of December 21, 2005, applies and shall continue to
apply to the Credit Agreement, as amended by this Amendment, and all Obligations of the Term
Borrowers now or hereafter existing.

     (d) Each Pledgor hereby (i) pledges to the Administrative Agent, for the equal and ratable
benefit of the Secured Parties, and hereby grants to the Administrative Agent, for the equal and
ratable benefit of the Secured Parties, a security interest in, and a lien on, the Pledged
Collateral to secure the Obligations of the Revolving Borrower and the Restricted Subsidiaries as
the same may be modified and increased pursuant to this Amendment, and (ii) confirms that,
notwithstanding the changes made by this Amendment, the Pledge and Security Agreement dated as of
December 21, 2005, which such Pledgor executed in favor of the Secured Parties under the

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Credit Agreement, secures and shall continue to secure all Obligations of the Revolving
Borrower and the Restricted Subsidiaries under the Loan Documents.

7

 

     THIS AMENDMENT REPRESENTS THE FINAL AGREEMENT AMONG THE PARTIES, THE GUARANTORS AND THE
PLEDGORS AS TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS AMONG THE PARTIES.

     IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed by their respective
duly authorized officers.

	 	 	 	 	 
	 	THE MEN’S WEARHOUSE, INC., as Revolving Borrower

 	 
	 	By:  	/s/ Neill P. Davis
 	 
	 	 	Name:  	Neill P. Davis 	 
	 	 	Title:  	Executive Vice President, Chief Financial

Officer, Treasurer and Principal Financial Officer 	 
	 
	 	MOORES THE SUIT PEOPLE INC., as Term Borrower

 	 
	 	By:  	/s/ Neill P. Davis
 	 
	 	 	Name:  	Neill P. Davis 	 
	 	 	Title:  	Treasurer 	 
	 
	 	GOLDEN BRAND CLOTHING (CANADA) LTD., as Term Borrower

 	 
	 	By:  	/s/ Neill P. Davis
 	 
	 	 	Name:  	Neill P. Davis 	 
	 	 	Title:  	Treasurer 	 
	 

8

 

     Each Guarantor and each Pledgor signs below to agree as provided in Section 16 of
this Amendment.

	 	 	 	 	 
	 	THE MEN’S WEARHOUSE, INC.,

as Pledgor and Term Guarantor

 	 
	 	By:  	/s/ Neill P. Davis
 	 
	 	 	Name:  	Neill P. Davis 	 
	 	 	Title:  	Executive Vice President, Chief Financial
Officer, Treasurer and Principal Financial Officer 	 
	 

 

 

	 	 	 	 	 
	 	TMW MARKETING COMPANY, INC.

as Pledgor and as Revolving Guarantor

 	 
	 	By:  	/s/ Claudia Pruitt
 	 
	 	 	Name:  	Claudia Pruitt 	 
	 	 	Title:  	Vice President and Treasurer 	 
	 

 

 

	 	 	 	 	 
	 	TMW MERCHANTS LLC,

as Pledgor and as Revolving Guarantor

 	 
	 	By:  	/s/ Neill P. Davis
 	 
	 	 	Name:  	Neill P. Davis 	 
	 	 	Title:  	Vice President, Treasurer and Chief Financial
Officer 	 
	 

 

 

	 	 	 	 	 
	 	MOORES RETAIL GROUP INC.,

as Pledgor

 	 
	 	By:  	/s/ Neill P. Davis
 	 
	 	 	Name:  	Neill P. Davis 	 
	 	 	Title:  	Treasurer 	 
	 

 

 

	 	 	 	 	 
	 	TMW PURCHASING LLC,

as Revolving Guarantor

 	 
	 	By:  	/s/ Neill P. Davis
 	 
	 	 	Name:  	Neill P. Davis 	 
	 	 	Title:  	Vice President, Treasurer and Chief Financial
Officer 	 
	 

 

 

	 	 	 	 	 
	 	K&G MEN’S COMPANY INC.,

as Revolving Guarantor

 	 
	 	By:  	/s/ Neill P. Davis
 	 
	 	 	Name:  	Neill P. Davis 	 
	 	 	Title:  	Treasurer 	 
	 

 

 

	 	 	 	 	 
	 	JPMORGAN CHASE BANK, N.A., as 

Administrative Agent and as Revolving Lender

 	 
	 	By:  	/s/ H. David Jones
 	 
	 	 	Name:  	H. David Jones 	 
	 	 	Title:  	Senior Vice President 	 
	 

 

 

	 	 	 	 	 
	 	WACHOVIA BANK, NATIONAL ASSOCIATION, as Revolving Lender

 	 
	 	By:  	/s/ Mark S. Supple
 	 
	 	 	Name:  	Mark S. Supple 	 
	 	 	Title:  	Vice President 	 
	 

 

 

	 	 	 	 	 
	 	BANK OF AMERICA, N.A., as Revolving Lender

 	 
	 	By:  	/s/ Brian D. Corum
 	 
	 	 	Name:  	Brian D. Corum 	 
	 	 	Title:  	Senior Vice President 	 
	 

 

 

	 	 	 	 	 
	 	BANK OF AMERICA, N.A. (CANADA BRANCH), as Term Lender

 	 
	 	By:  	/s/ Medina Sales de Andrade
 	 
	 	 	Name:  	Medina Sales de Andrade 	 
	 	 	Title:  	Vice President 	 
	 

 

 

	 	 	 	 	 
	 	NATIONAL CITY BANK, as Revolving Lender

 	 
	 	By:  	/s/ Michael J. Durbin
 	 
	 	 	Name:  	Michael J. Durbin 	 
	 	 	Title:  	Senior Vice President 	 
	 

 

 

	 	 	 	 	 
	 	NATIONAL CITY BANK, as Term Lender

 	 
	 	By:  	/s/ Michael J. Durbin
 	 
	 	 	Name:  	Michael J. Durbin 	 
	 	 	Title:  	Senior Vice President 	 
	 

 

 

	 	 	 	 	 
	 	U.S. BANK NATIONAL ASSOCIATION, as Revolving Lender

 	 
	 	By:  	/s/ Veronica Morrissette
 	 
	 	 	Name:  	Veronica Morrissette 	 
	 	 	Title:  	Vice President 	 
	 

 

 

	 	 	 	 	 
	 	U.S. BANK NATIONAL ASSOCIATION, CANADA BRANCH, as Term Lender

 	 
	 	By:  	/s/ Kevin Jephcott
 	 
	 	 	Name:  	Kevin Jephcott 	 
	 	 	Title:  	Principal Officer 	 
	 

 

 

	 	 	 	 	 
	 	THE BANK OF NOVA SCOTIA, as Revolving Lender

 	 
	 	By:  	/s/ Richard Hawthorne
 	 
	 	 	Name:  	Richard Hawthorne 	 
	 	 	Title:  	Director 	 
	 

 

 

	 	 	 	 	 
	 	THE BANK OF NOVA SCOTIA, as Term Lender

 	 
	 	By:  	/s/ Richard Hawthorne
 	 
	 	 	Name:  	Richard Hawthorne 	 
	 	 	Title:  	Director 	 
	 

 

 

	 	 	 	 	 
	 	UNION BANK OF CALIFORNIA, N.A., as Revolving Lender

 	 
	 	By:  	/s/ Henry G. Montgomery
 	 
	 	 	Name:  	Henry G. Montgomery 	 
	 	 	Title:  	Vice President 	 
	 

 

 

	 	 	 	 	 
	 	UNION BANK OF CALIFORNIA, CANADA BRANCH, as Term Lender

 	 
	 	By:  	/s/ Henry G. Montgomery
 	 
	 	 	Name:  	Henry G. Montgomery 	 
	 	 	Title:  	Vice President 	 
	 

 

 

	 	 	 	 	 
	 	WELLS FARGO BANK, N.A., as Revolving Lender

 	 
	 	By:  	/s/ Steve Melton
 	 
	 	 	Name:  	Steve Melton 	 
	 	 	Title:  	Vice President 	 
	 

 

 

	 	 	 	 	 
	 	WELLS FARGO FINANCIAL CORPORATION CANADA, as Term Lender

 	 
	 	By:  	/s/ Nick Scarfo
 	 
	 	 	Name:  	Nick Scarfo 	 
	 	 	Title:  	Vice President 	 
	 

 

 

	 	 	 	 	 
	 	BANK OF TEXAS, N.A., as Revolving Lender

 	 
	 	By:  	/s/ Marian Livingston
 	 
	 	 	Name:  	Marian Livingston 	 
	 	 	Title:  	Vice President 	 
	 

 

 

Schedule 1.1(a)

to

Agreement and Amendment to Amended and Restated Credit Agreement

dated as of January 31, 2007

	 	 	 	 	 	 	 	 	 
	Institution	 	Allocation	 	Percent of Total
	JPMorgan Chase Bank, N.A.
	 	$	30,000,000	 	 	 	15.0	%
	Wachovia Bank, National Association
	 	 	30,000,000	 	 	 	15.0	%
	Bank of America, N.A.
	 	 	25,000,000	 	 	 	12.5	%
	Wells Fargo Bank, N.A.
	 	 	22,500,000	 	 	 	11.3	%
	National City Bank
	 	 	20,000,000	 	 	 	10.0	%
	US Bank, National Association
	 	 	20,000,000	 	 	 	10.0	%
	Union Bank of California, N.A.
	 	 	17,500,000	 	 	 	8.8	%
	The Bank of Nova Scotia
	 	 	17,500,000	 	 	 	8.8	%
	Bank of Texas, N.A.
	 	 	17,500,000	 	 	 	8.8	%
	 	 	 
	Total:
	 	$	200,000,000	 	 	 	100.0	%exv10w1

Exhibit 10.1

FEDERAL DEPOSIT INSURANCE CORPORATION

WASHINGTON, D.C.

AND

STATE OF MICHIGAN

OFFICE OF FINANCIAL AND INSURANCE REGULATION

LANSING, MICHIGAN

	 	 	 	 	 

	 	 	 	 	 
	 

	)	 	 	 
	In the Matter of

	)	 	 	CONSENT ORDER
	 

	)	 	 	 
	 

	)	 	 	 
	COMMUNITY SHORES BANK

	)	 	 	 
	MUSKEGON, MICHIGAN

	)	 	 	FDIC-10-397b
	 

	)	 	 	 
	 

	)	 	 	 
	(STATE CHARTERED

	)	 	 	 
	INSURED NONMEMBER BANK)

	)	 	 	 
	 

	)	 	 	 
	 	 	 	 	 

     Community Shores Bank, Muskegon, Michigan (“Bank”), having been advised of its right to a
NOTICE OF CHARGES AND OF HEARING detailing the unsafe or unsound banking practices alleged to have
been committed by the Bank, and of its right to a hearing on the charges under section 8(b) of the
Federal Deposit Insurance Act (“Act”), 12 U.S.C. § 1818(b), and under section 2304 of the Banking
Code of 1999, Mich. Comp Laws § 487.12304, regarding hearings before the Office of Financial and
Insurance Regulation for the State of Michigan (“OFIR”), and having waived those rights, entered
into a STIPULATION TO THE ISSUANCE OF A CONSENT ORDER (“STIPULATION”) with representatives of the

1

 

Federal Deposit Insurance Corporation (“FDIC”) and the OFIR dated August 25th, 2010,
whereby, solely for the purpose of this proceeding and without admitting or denying the charges of
unsafe or unsound banking practices relating to capital, asset quality, and earnings, the Bank
consented to the issuance of a CONSENT ORDER (“ORDER”) by the FDIC and OFIR.

     The FDIC and the OFIR considered the matter and decided to accept the STIPULATION.

     Having determined that the requirements for issuance of an order under 12 U.S.C. § 1818(b),
and Mich. Comp Laws § 487.12304 have been satisfied, the FDIC and the OFIR HEREBY ORDER, that the
Bank, its institution-affiliated parties, as that term is defined in section 3(u) of the Act, 12
U.S.C. § 1813(u), and its successors and assigns, take affirmative action as follows:

MANAGEMENT

     1. (a) Within one hundred twenty (120) days from the effective date of this ORDER, the Bank
shall have and retain qualified management. Management shall be provided the necessary written
authority to implement the provisions of this ORDER. The qualifications of management shall be
assessed on its ability to:

	 	(i)	 	Comply with the requirements of this ORDER;
	 
	 	(ii)	 	Operate the Bank in a safe and sound manner;

2

 

	 
	 	(iii)	 	Comply with applicable laws, rules, and
regulations; and
	 
	 	(iv)	 	Restore all aspects of the Bank to a safe and
sound condition, including capital adequacy, asset quality, management
effectiveness, earnings, liquidity, and sensitivity to interest rate
risk.

     (b) During the life of this ORDER, prior to the addition of any individual to the board of
directors or the employment of any individual as a senior executive officer, the Bank shall request
and obtain the written approval of the Regional Director of the FDIC’s Chicago Regional Office
(“Regional Director”) and the OFIR’s Chief Deputy Commissioner (“Chief Deputy Commissioner”). For
purposes of this ORDER, “senior executive officer” is defined as in section 32 of the Act (“section
32”), 12 U.S.C. § 1831(i), and section 303.101(b) of the FDIC Rules and Regulations, 12 C.F.R. §
303.101(b).

MANAGEMENT PLAN

     2. (a) Within thirty (30) days from the effective date of this ORDER, the Bank shall retain an
independent third party acceptable to the Regional Director and Chief Deputy Commissioner, who will
develop a written analysis and assessment of the Bank’s management needs (“Management Study”) for
the

3

 

purpose of providing qualified management for the Bank.

     (b) The Bank shall provide the Regional Director and Chief Deputy Commissioner with a copy of
the proposed engagement letter or contract with the independent third party for review.

     (c) The Management Study shall be developed within ninety (90) days from the effective date of
this ORDER. The Management Study shall include, at a minimum:

	 	(i)	 	Identification of both the type and number of
senior executive officer positions needed to properly manage and
supervise the affairs of the Bank;
	 
	 	(ii)	 	Evaluation of all senior executive officers to
determine whether these individuals possess the ability, experience and
other qualifications required to perform present and anticipated duties,
including adherence to the Bank’s established policies and practices, and
restoration and maintenance of the Bank in a safe and sound condition;
	 
	 	(iii)	 	A plan, if necessary, to recruit and hire any
additional or replacement personnel with the requisite ability,
experience and other qualifications to fill those senior executive
officer positions identified by this paragraph of this ORDER.

4

 

          (d) The plan required by this paragraph shall be submitted to the Regional Director and Chief
Deputy Commissioner for review and comment. Within thirty (30) days of receipt of any comments
from the Regional Director or Chief Deputy Commissioner, the Bank shall incorporate any changes
required by the Regional Director or Chief Deputy Commissioner and thereafter adopt, implement, and
adhere to the plan.

BOARD PARTICIPATION

     3. (a) As of the effective date of this ORDER, the board of directors shall continue its
participation in the affairs of the Bank, assuming full responsibility for the approval of sound
policies and objectives and for the supervision of all of the Bank’s activities, consistent with
the role and expertise commonly expected for directors of Banks of comparable size. This
participation shall include meetings to be held no less frequently than monthly at which, at a
minimum, the following areas shall be reviewed and approved: reports of income and expenses; new,
overdue, renewal, insider, charged off, and recovered loans; investment activity; adoption or
modification of operating policies; individual committee reports; audit reports; internal control
reviews including management’s responses; and compliance with this ORDER. Board minutes shall
document these reviews and approvals, including the names of any dissenting directors.

5

 

          (b) Within fifteen (15) days from the effective date of this ORDER, the Bank’s board of
directors shall have in place a program that will provide for monitoring of the Bank’s compliance
with this ORDER.

          (c) Following the required date of compliance with subparagraph (a) above, the Bank’s board of
directors shall review the Bank’s compliance with this ORDER and record its review in the minutes
of each regularly scheduled monthly board of directors’ meeting.

LOSS CHARGE-OFF

     4. As of the effective date of this Order, the Bank shall charge off from its books and
records any asset classified “Loss” in the Report of Examination dated March 1, 2010 (“ROE”) that
has not been previously collected or charged off, and shall further charge off any loan classified
“Loss” at subsequent examinations or visitations during the life of this Order within ten (10) days
of receipt of the report.

PROHIBITION OF ADDITIONAL LOANS TO CLASSIFIED BORROWERS

     5. (a) As of the effective date of this ORDER, the Bank shall not extend, directly or
indirectly, any additional credit to, or for the benefit of, any borrower who is already obligated
in any manner to the Bank on any extensions of credit (including any portion thereof) that has been
charged off the books of the

6

 

Bank or classified “Loss” in the ROE, so long as such credit remains uncollected.

          (b) As of the effective date of this ORDER, the Bank shall not extend, directly or indirectly,
any additional credit to, or for the benefit of, any borrower whose loan or other credit has been
classified “Substandard”, “Doubtful”, or is listed for Special Mention in the ROE, and is
uncollected unless the Bank’s board of directors, or its designated committee, has adopted, prior
to such extension of credit, a detailed written statement giving the reasons why such extension of
credit is in the best interest of the Bank. A copy of the statement shall be incorporated in the
minutes of the applicable meeting of the board of directors or its designated committee. A copy of
the statement shall be placed in the appropriate loan file.

     REDUCTION OF DELINQUENCIES AND CLASSIFIED ASSETS

     6. (a) Within ninety (90) days from the effective date of this ORDER, the Bank shall implement
and adhere to, a written plan to reduce the Bank’s risk position in each asset in excess of
$250,000 which is more than ninety (90) days delinquent or classified “Substandard” in the ROE.
Each action plan shall include, but not be limited to, provisions which:

	 	(i)	 	Prohibit an extension of credit for the payment of
interest, unless the Board, or its designated committee, provides, in

7

 

	 	 	 	writing, a detailed explanation of why the extension is in the best
interest of the Bank;
	 
	 	(ii)	 	Provide for review of the current financial
condition of each delinquent or classified borrower, including a review
of borrower cash flow and collateral value;
	 
	 	(iii)	 	Delineate areas of responsibility for loan
officers;
	 
	 	(iv)	 	Establish dollar levels to which the Bank shall
reduce delinquencies and classified assets within 6 and 12 months from
the effective date of this ORDER; and
	 
	 	(v)	 	Provide for the submission of monthly written
progress reports to the Bank’s board of directors, or its designated
committee, for review and notation in minutes of the meetings of the
board of directors or its designated committee.

     (b) As used in this paragraph, “reduce” means to: (1) collect; (2) charge off; (3) sell; or
(4) improve the quality of such assets so as to warrant removal of any adverse classification by
the FDIC and the OFIR.

     (c) A copy of each action plan required by this paragraph

8

 

shall be submitted to the Regional Director and Chief Deputy Commissioner.

     (d) While this ORDER remains in effect, each action plan shall be revised to include assets of
$250,000 or more which become more than ninety (90) days delinquent after the effective date of
this ORDER or are adversely classified at any subsequent examinations.

LENDING AND COLLECTION POLICIES

     7. Within sixty (60) days from the effective date of this ORDER, the Bank shall adopt and
implement a floor plan lending policy to address the recommendations in the ROE, and shall improve
specific procedures for valuing loans and other real estate that are collateralized by residential
plat developments. Copies of the policies and procedural revisions thereto required by this
paragraph shall be submitted to the Regional Director and Chief Deputy Commissioner.

CAPITAL

     8. (a) Within ninety (90) days from the effective date of this ORDER, the Bank shall have and
maintain its level of Tier 1 capital as a percentage of its total assets (“capital ratio”) at a
minimum of eight and one half (8.5%) percent and its level of qualifying total capital as a
percentage of risk-weighted assets (“total risk based capital ratio”) at a minimum of eleven (11%)
percent. For purposes of this ORDER, Tier 1

9

 

capital, qualifying total capital, total assets, and risk-weighted assets shall be calculated
in accordance with Part 325 of the FDIC Rules and Regulations (“Part 325”), 12 C.F.R. Part 325.

     (b) If, while this ORDER is in effect, the Bank increases capital by the sale of new
securities, the board of directors of the Bank shall adopt and implement a plan for the sale of
such additional securities, including the voting of any shares owned or proxies held by or
controlled by them in favor of said plan. Should the implementation of the plan involve public
distribution of Bank securities, including a distribution limited only to the Bank’s existing
shareholders, the Bank shall prepare detailed offering materials fully describing the securities
being offered, including an accurate description of the financial condition of the Bank and the
circumstances giving rise to the offering, and other material disclosures necessary to comply with
Federal securities laws. Prior to the implementation of the plan and, in any event, not less than
20 days prior to the dissemination of such materials, the materials used in the sale of the
securities shall be submitted to the FDIC Registration and Disclosure Section, 550 17th Street,
N.W., Washington, D.C. 20429 and to the Commissioner, Office of Financial and Insurance Regulation
for the State of Michigan, 611 Ottawa Street, Lansing, Michigan 48933, for their review.

10

 

Any changes requested to be made in the materials by the FDIC or the OFIR shall be made prior to
their dissemination.

          (c) In complying with the provisions of this paragraph, the Bank shall provide to any
subscriber and/or purchaser of Bank securities written notice of any planned or existing
development or other changes which are materially different from the information reflected in any
offering materials used in connection with the sale of Bank securities. The written notice
required by this paragraph shall be furnished within ten (10) calendar days of the date any
material development or change was planned or occurred, whichever is earlier, and shall be
furnished to every purchaser and/or subscriber of the Bank’s original offering materials.

DIVIDEND RESTRICTION

     9. As of the effective date of this ORDER, the Bank shall not declare or pay any dividend
without the prior written consent of the Regional Director and Chief Deputy Commissioner.

PROFIT PLAN AND BUDGET

     10. (a) Within ninety (90) days from the effective date of this ORDER, the Bank shall adopt,
implement, and adhere to a written profit plan and a realistic, comprehensive budget for all
categories of income and expense for calendar year 2011. The plan required by this paragraph shall
contain formal goals and strategies, consistent with sound banking practices, to

11

 

reduce discretionary expenses and to improve the Bank’s overall earnings, and shall contain a
description of the operating assumptions that form the basis for major projected income and expense
components, and identify the major areas in, and means by which, earnings will be improved.

     (b) At each monthly board meeting following completion of the profit plan and budget required
by this paragraph, the Bank’s board of directors shall evaluate the Bank’s actual performance in
relation to the plan and budget, record the results of the evaluation, and note any actions taken
by the Bank in the minutes of the board of directors’ meeting at which such evaluation is
undertaken.

     (c) A written profit plan and budget shall be prepared for each calendar year for which this
ORDER is in effect.

     (d) Copies of the plans and budgets required by this paragraph shall be submitted to the
Regional Director and Chief Deputy Commissioner.

ALLOWANCE FOR LOANS AND LEASE LOSSES

     11. (a) After the effective date of this ORDER, and prior to the submission of all Reports of
Condition and Income required by the FDIC, the board of directors of the Bank shall review the
adequacy of the Bank’s ALLL, provide for an adequate ALLL, and accurately report the same. The
minutes of the board meeting at which such review is undertaken shall indicate the

12

 

findings of the review, the amount of increase in the ALLL recommended, if any, and the basis
for determination of the amount of ALLL provided. In making these determinations, the board of
directors shall consider the FFIEC Instructions for the Reports of Condition and Income and any
analysis of the Bank’s ALLL provided by the FDIC or OFIR.

          (b) ALLL entries required by this paragraph shall be made prior to any capital determinations
required by this ORDER.

LIQUIDITY PLAN

     12. Within ninety (90) days of the effective date of this ORDER, the Bank shall adopt a
written contingency funding plan (“Liquidity Plan”). The Liquidity Plan shall identify sources of
liquid assets to meet the Bank’s contingency funding needs over time horizons of six (6) months,
twelve (12) months, and eighteen (18) months. At a minimum, the Liquidity Plan shall be prepared
in conformance with the Liquidity Risk Management Guidance found at FIL-84-2008 and include
provisions to address the issues identified in the ROE. The plan required by this paragraph shall
be submitted to the Regional Director and Chief Deputy Commissioner for review.

REDUCTION OF BROKERED DEPOSITS

     13. Within sixty (60) days, the Bank will formulate and submit to the Regional Director and
Chief Deputy Commissioner for review a written plan to reduce the Bank’s reliance on

13

 

brokered deposits as defined in Part 337 of the FDIC Rules and Regulations. Such plan shall
detail the volume and maturities of the Bank’s existing brokered deposits. The plan shall include,
but not be limited to:

	 	(i)	 	Target dollar levels for each quarter over the
next eight (8) quarters;
	 
	 	(ii)	 	Specific strategies for funding the existing
brokered deposits as they mature; and
	 
	 	(iii)	 	Provision for the submission of monthly
written progress reports to the Bank’s board of directors for review
and notation in the minutes of the board of directors’ meetings.

STRATEGIC PLAN

     14. (a) Within ninety (90) days from the effective date of this ORDER, the Bank shall
formulate, adopt, and implement a realistic, comprehensive strategic plan. The plan required by
this paragraph shall contain an assessment of the Bank’s current financial condition and market
area, and a description of the operating assumptions that form the basis for major projected income
and expense components. The written strategic plan shall address, at a minimum:

14

 

	 	(i)	 	Strategies for pricing policies and asset/liability management; and

	 	(ii)	 	Financial goals, including pro forma statements for
asset growth, capital adequacy, and earnings.

          (b) Within thirty (30) days from the end of each calendar quarter following the effective date
of this ORDER, the Bank’s board of directors shall evaluate the Bank’s actual performance in
relation to the strategic plan required by this paragraph and record the results of the evaluation,
and any actions taken by the Bank, in the minutes of the board of directors’ meeting at which such
evaluation is undertaken.

          (c) The strategic plan required by this ORDER shall be revised thirty (30) days prior to the
end of each calendar year during which this ORDER is in effect. Thereafter the Bank shall approve
the revised plan, which approval shall be recorded in the minutes of a board of directors’ meeting,
and the Bank shall implement and adhere to the revised plan.

          (d) Copies of the plan and revisions thereto required by this paragraph shall be submitted to
the Regional Director and the Chief Deputy Commissioner for review.

NOTIFICATION TO SHAREHOLDER

     15. Within thirty (30) days from the effective date of this ORDER, the Bank shall send a copy
of this ORDER, or otherwise furnish a description of this ORDER, to its parent

15

 

holding company. The description shall fully describe the ORDER in all material aspects.

PROGRESS REPORTS

     16. Within thirty (30) days from the end of each calendar quarter following the effective date
of this ORDER, the Bank shall furnish to the Regional Director and Chief Deputy Commissioner
written progress reports approved by the board of directors, or its designated committee, detailing
the actions taken to secure compliance with the ORDER and the results thereof.

     The effective date of this ORDER shall be the date of issuance by the FDIC and the OFIR.

     The provisions of this ORDER shall be binding upon the Bank, its institution-affiliated
parties, and any successors and assigns thereof.

16

 

     The provisions of this ORDER shall remain effective and enforceable except to the extent
that, and until such time as, any provision has been modified, terminated, suspended, or set aside
by the FDIC and the OFIR.

     Pursuant to delegated authority.

     Dated: September 2, 2010.

	 	 	 	 	 

	/s/ M. Anthony Lowe

	 	 	 	/s/ Stephen R. Hilker
	 

	 	 	 	 
	M. Anthony Lowe

	 	 	 	Stephen R. Hilker
	Regional Director

	 	 	 	Chief Deputy Commissioner
	Chicago Regional Office

	 	 	 	Office of Financial and
	Federal Deposit Insurance

	 	 	 	Insurance Regulation for the
	Corporation

	 	 	 	State of Michigan

17

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