Document:

exhibit10-195.htm

  

  Exhibit 10.195

  

 

 

CREDIT AGREEMENT

 

by and between

 

UNICOM, INC.

 

as Borrower

 

and

 

USBCDE SUB-CDE 74, LLC

 

as Lender

 

and

 

CHEROKEE NATION SUB-CDE II, LLC

 

as Lender

 

and

 

LBCDE SUB2 LLC

 

as Lender

 

and

 

WAVELAND SUB CDE XXII, LLC

 

as Lender

 

  

  

  

 

Dated as of October 3, 2012

 

  

  

  

	
ARTICLE I

	 
	
GENERAL TERMS

	 
	  	  	 	 	 
	
Section 1.01.

	
Terms Defined Above

	 	 	3	 
	
Section 1.02.

	
Certain Definitions

	 	 	3	 
	
Section 1.03.

	
Accounting Term

	 	 	12	 
	  	  	 	 	 	 
	
ARTICLE II

	 
	
THE CREDIT

	 
	  	  	 	 	 	 
	
Section 2.01.

	
Loan

	 	 	12	 
	
Section 2.02.

	
Disbursement Account

	 	 	12	 
	
Section 2.03.

	
Use of Proceeds

	 	 	13	 
	
Section 2.04.

	
Business Days

	 	 	13	 
	
Section 2.05.

	
Method of Payment

	 	 	13	 
	  	  	 	 	 	 
	
ARTICLE III

	 
	
SECURITY FOR THE INDEBTEDNESS

	 
	  	  	 	 	 	 
	
Section 3.01.

	
Security

	 	 	13	 
	  	  	 	 	 	 
	
ARTICLE IV

	 
	
REPRESENTATIONS AND WARRANTIES

	 
	  	  	 	 	 	 
	
Section 4.01.

	
Borrower’s Existence, Power and Authorization

	 	 	14	 
	
Section 4.02.

	
No Legal Bar or Resultant Lien

	 	 	14	 
	
Section 4.03.

	
Financial Condition; Solvency; Other Information

	 	 	14	 
	
Section 4.04.

	
Taxes and Governmental Charges

	 	 	15	 
	
Section 4.05.

	
Defaults

	 	 	15	 
	
Section 4.06.

	
Compliance With the Law

	 	 	15	 
	
Section 4.07.

	
ERISA

	 	 	15	 
	
Section 4.08.

	
Title to Property

	 	 	15	 
	
Section 4.09.

	
Environmental Matters

	 	 	15	 
	
Section 4.10.

	
Governmental Requirements

	 	 	16	 
	
Section 4.11.

	
Anti-Terrorism Laws.

	 	 	16	 
	
Section 4.12.

	
New Markets Tax Credit Program Representations and Warranties and Covenants

	 	 	17	 
	
Section 4.13.

	
Litigation

	 	 	21	 
	  	  	 	 	 	 
	
ARTICLE V

	 
	
AFFIRMATIVE COVENANTS

	 
	  	  	 	 	 	 
	
Section 5.01.

	
Performance of Obligations

	 	 	21	 
	
Section 5.02.

	
Financial Statements and Reports

	 	 	21	 
	
Section 5.03.

	
Taxes and Other Liens

	 	 	22	 
	
Section 5.04.

	
Maintenance of Borrower’s Existence; Ownership.

	 	 	22	 
	
Section 5.05.

	
Further Assurances

	 	 	22	 

  

 

  

	
Section 5.06.

	
Reimbursement of Expenses

	 	 	23	 
	
Section 5.07.

	
Insurance

	 	 	24	 
	
Section 5.08.

	
Accounts and Records

	 	 	24	 
	
Section 5.09.

	
Right of Inspection

	 	 	25	 
	
Section 5.10.

	
Notice of Certain Events

	 	 	25	 
	
Section 5.11.

	
ERISA Compliance

	 	 	25	 
	
Section 5.12.

	
Indemnification

	 	 	25	 
	
Section 5.13.

	
Compliance With Laws and Covenants.

	 	 	26	 
	
Section 5.14.

	
Environmental Compliance and Indemnity

	 	 	27	 
	
Section 5.15.

	
Construction Covenants

	 	 	28	 
	
Section 5.16.

	
Appraisal

	 	 	30	 
	
Section 5.17.

	
Accounts

	 	 	30	 
	
Section 5.18.

	
New Markets Tax Credit Program Affirmative Covenants

	 	 	30	 
	  	  	 	 	 	 
	
ARTICLE VI

	 
	
NEGATIVE COVENANTS

	 
	  	  	 	 	 	 
	
Section 6.01.

	
Debts, Guaranties and Other Obligations

	 	 	35	 
	
Section 6.02.

	
Liens

	 	 	35	 
	
Section 6.03.

	
Reserved

	 	 	35	 
	
Section 6.04.

	
Merger and Sale of Property

	 	 	35	 
	
Section 6.05.

	
ERISA Compliance

	 	 	35	 
	
Section 6.06.

	
Change of Control

	 	 	36	 
	  	  	 	 	 	 
	
ARTICLE VII

	 
	
CONDITIONS OF LENDING

	 
	  	  	 	 	 	 
	
Section 7.01.

	
Conditions of Loan Advance

	 	 	36	 
	
Section 7.02.

	
Disbursements

	 	 	37	 
	  	  	 	 	 	 
	
ARTICLE VIII

	 
	
DEFAULT

	 
	  	  	 	 	 	 
	
Section 8.01.

	
Events of Default

	 	 	38	 
	
Section 8.02.

	
Remedies

	 	 	40	 
	  	  	 	 	 	 
	
ARTICLE IX

	 
	
MISCELLANEOUS

	 
	  	  	 	 	 	 
	
Section 9.01.

	
Notices

	 	 	41	 
	
Section 9.02.

	
Entire Agreement.

	 	 	43	 
	
Section 9.03.

	
Renewal, Extension or Rearrangement

	 	 	43	 
	
Section 9.04.

	
Amendment

	 	 	43	 
	
Section 9.05.

	
Invalidity

	 	 	43	 
	
Section 9.06.

	
Survival of Agreements

	 	 	43	 
	
Section 9.07.

	
Waivers

	 	 	43	 
	
Section 9.08.

	
Cumulative Rights

	 	 	43	 

  

  

  

	
Section 9.09.

	
Time of the Essence

	 	 	43	 
	
Section 9.10.

	
Successors and Assigns; Participants

	 	 	44	 
	
Section 9.11.

	
Relationship Between the Parties

	 	 	45	 
	
Section 9.12.

	
Third-Party Beneficiaries

	 	 	45	 
	
Section 9.13.

	
[Reserved]

	 	 	45	 
	
Section 9.14.

	
Titles of Articles, Sections and Subsections

	 	 	45	 
	
Section 9.15.

	
Singular and Plural

	 	 	45	 
	
Section 9.16.

	
Governing Law

	 	 	46	 
	
Section 9.17.

	
Counterparts

	 	 	46	 
	
Section 9.18.

	
Waiver Of Jury Trial; Submission To Jurisdiction

	 	 	46	 
	
Section 9.19.

	
Publication

	 	 	46	 

 

EXHIBIT A ALTERNATIVE QUALIFIED PROJECTS EXHIBIT B CONSTRUCTION SCHEDULE

 

EXHIBIT C PROJECT SITE MAP

 

EXHIBIT D PROJECT BUDGET

 

EXHIBIT E DEBARMENT CERTIFICATE

 

EXHIBIT F COMPLIANCE CERTIFICATE

 

EXHIBIT G INSURANCE REQUIREMENTS EXHIBIT H QALICB CERTIFICATION

 

SCHEDULE I DEBT OF BORROWER

 

 

  

  

  

CREDIT AGREEMENT

 

THIS CREDIT AGREEMENT (together with all addenda, exhibits and schedules attached hereto, as originally executed and as hereafter amended or restated from time-to-time in writing, this “Agreement”), dated as of October 3, 2012, is made by and between UNICOM, INC., an Alaska corporation (“Borrower”), USBCDE SUB-CDE 74, LLC, a Missouri limited liability company (“USB 74”), LBCDE SUB2 LLC, a Delaware limited liability company (“LBC 2”), CHEROKEE NATION SUB-CDE II, LLC, an Oklahoma limited liability company (“CNB II”), and WAVELAND SUB CDE XXII, LLC, a Colorado limited liability company (“Waveland XXII”) (Waveland XXII, USB 74, CNB II and LBC 2, each a “Lender” and collectively referred to as the “Lenders”), who agree as follows.

 

WITNESSETH:

 

WHEREAS, Borrower currently engages in the business of providing terrestrial broadband services to rural communities in Alaska (the “Business”), and intends to construct and lease to Borrower Affiliates a high capacity terrestrial microwave network connecting the village of Shaktoolik to Kotzebue in order to provide long-term affordable broadband internet services in rural Northwestern Alaska communities (the “Project”); and

 

WHEREAS, the Borrower is expected to constitute a “qualified active low income community business” (as that term is defined in Section 45D of the Internal Revenue Code of 1986, as amended (the “Code”)) (a “QALICB”); and

 

WHEREAS, U.S. Bancorp Community Development Corporation, a Minnesota corporation (the “Investor”) has made or will make a net equity investment of approximately $17,536,350, consisting of a $15,381,600 net equity investment in Terra GCI 2 Investment Fund, LLC, a Missouri limited liability company (“Fund 1”), and a $2,154,750 net equity investment in Terra GCI 2-USB Investment Fund, LLC, a Missouri limited liability company (“Fund 2”, and collectively with Fund 1, the “Funds”); and

 

WHEREAS, GCI Inc., an Alaska corporation intends to make loans in the aggregate principal amount of $37,716,350 to the Funds (in such capacity, the “Fund Lender”), consisting of a loan in the principal amount of $33,301,900 to Fund 1 and a loan in the principal amount of $4,414,450 to Fund 2; and

 

WHEREAS, USBCDE, LLC, a Delaware limited liability company (the “USB Allocatee”), received a $100,000,000 “NMTC Allocation” (the “USB NMTC Allocation”) pursuant to that certain New Markets Tax Credit Program Allocation Agreement, effective as of May 11, 2011, as amended, by and among the USB Allocatee, USB 74, certain other subsidiary allocatees of the USB Allocatee, and the CDFI Fund (the “USB Allocation Agreement”); and

 

WHEREAS, the USB Allocatee has suballocated the aggregate amount of $6,500,000 of the USB NMTC Allocation to USB 74; and

WHEREAS, CNB Economic Development Company, LLC, an Oklahoma limited liability company (the “CNB Allocatee”), received a $60,000,000 “NMTC Allocation” (the “CNB NMTC Allocation”) pursuant to that certain New Markets Tax Credit Program Allocation Agreement, effective as of January 12, 2009, as amended, by and among the CNB Allocatee, CNB II, certain other subsidiary allocatees of the CNB Allocatee, and the CDFI Fund (the “CNB Allocation Agreement”); and

 

  

1

  

WHEREAS, the CNB Allocatee has suballocated $9,000,000 of the CNB NMTC Allocation to CNB II; and

 

WHEREAS, Lower Brule Community Development Enterprise, LLC, a Delaware limited liability company (the “LBC Allocatee”) received an $18,000,000 “NMTC Allocation” (the “LBC NMTC Allocation”) pursuant to that certain New Markets Tax Credit Program Allocation Agreement, effective as of May 11, 2011, as amended, by and among the LBC Allocatee, LBC 2, certain other subsidiary allocatees of the LBC Allocatee, and the CDFI Fund (the “LBC Allocation Agreement”); and

 

WHEREAS, the LBC Allocatee has suballocated $9,000,000 of the LBC NMTC Allocation to LBC 2; and

 

WHEREAS, Waveland Community Development, LLC, a Colorado limited liability company (the “Waveland Allocatee”), received a $85,000,000 “NMTC Allocation” (the “Waveland NMTC Allocation”) pursuant to that certain New Markets Tax Credit Program Allocation Agreement, effective as of April 23, 2012, as amended, by and among the Waveland Allocatee, Waveland XXII, certain other subsidiary allocatees of the Waveland Allocatee, and the CDFI Fund (the “Waveland Allocation Agreement”); and

 

WHEREAS, the Waveland Allocatee has suballocated $28,400,000 of the Waveland NMTC Allocation to Waveland XXII; and

 

WHEREAS, the Funds will make equity investments in the aggregate amount of $52,900,000 in the Lenders, which investments are each expected to constitute a “qualified equity investment” under Section 45D(b) of the Code (collectively referred to as the “Fund QEIs”); and

 

WHEREAS, the proceeds of the Fund QEIs will be used by the Lenders to pay certain fees, and to make the following loans (collectively, the “Loans”):

 

	
(a)  

	
by USB 74, in the amount of $4,414,450 to Borrower (the “USB 74 CDE A4 Loan”); and

 

	
(b)  

	
by USB 74, in the amount of $2,085,550 to Borrower (the “USB 74 CDE B4 Loan”); and

 

	
(c)  

	
by CNB II, in the amount of $6,018,731 to Borrower (the “CNB II CDE A3 Loan”); and

 

	
(d)  

	
by CNB II, in the amount of 2,351,269 to Borrower (the “CNB II CDE B3 Loan”); and

 

  

2

  

	
(e)  

	
by LBC 2, in the amount of $6,018,731 to Borrower (the “LBC 2 CDE A2 Loan”); and

 

	
(f)  

	
by LBC 2, in the amount of $2,720,269 to Borrower (the “LBC 2 CDE B2 Loan”); and

 

	
(g)  

	
by Waveland XXII, in the amount of $21,264,438 to Borrower (the “Waveland XXII CDE A1 Loan”); and

 

	
(h)  

	
by Waveland XXII, in the amount of $7,135,562 to Borrower (the “Waveland XXII CDE B1 Loan”); and

 

WHEREAS, Lenders have agreed to make the Loans to Borrower upon and subject to all of the terms, conditions, covenants and agreements of this Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE I

 

GENERAL TERMS

 

Section 1.01. Terms Defined Above. As used in this Agreement, the terms “Agreement,” “Borrower,” “USB 74,” “CNB II,” “LBC 2,” “Waveland XXII,” “Lender” and “Lenders” will have the meanings indicated in the preamble above.

 

Section 1.02. Certain Definitions. As used in this Agreement, the following terms will have the meanings indicated, unless the context otherwise requires:

 

“Affiliate(s)” means, with respect to a Person, any entity which, directly or indirectly, controls or is controlled by or is under common control with, such Person.

 

“Allocatee” means collectively the USB Allocatee, CNB Allocatee, LBC Allocatee, and the Waveland Allocatee.

 

“Allocation Agreement” means collectively, the USB Allocation Agreement, the CNB Allocation Agreement, the LBC Allocation Agreement, and the Waveland Allocation Agreement.

 

“Alternative Qualified Projects” means those certain projects described on Exhibit A attached to this Agreement, or such other projects as Lenders may approve in their discretion to be treated as Alternative Qualified Projects, which the Borrower may undertake in the event the Project is delayed or discontinued, as provided in Section 5.15(b) of this Agreement.

 

“Anti-Terrorism Laws” has the meaning set forth in Section 4.11.

 

 “Applicable Environmental Laws” has the meaning set forth in Section 4.09.

 

  

3

  

“Average Value” means the cost basis of Borrower’s owned property and the reasonable value of its leased property.

 

“B Loans” means the USB 74 CDE B4 Loan, the CNB II CDE B3 Loan, the LBC 2 CDE B2 Loan and the Waveland XXII CDE B1 Loan.

 

“Bank Account Pledge and Control Agreement” means that certain Bank Account Pledge and Control Agreement between Lenders and Borrower of even date herewith.

 

“Business” has the meaning set forth in the Recitals.

 

“Business Day” means a day other than a Saturday, Sunday or legal holiday for commercial banks in Alaska.

 

“CDFI Fund” means the Community Development Financial Institutions Fund of the United States Department of Treasury, or any successor agency charged with oversight responsibility for the New Markets Tax Credit Program.

“CERCLA” has the meaning set forth in Section 4.09.

 

“Change of Control”: any transfer of the beneficial ownership, directly or indirectly, of Capital Stock of the Borrower representing more than 50% of the voting power of the total outstanding Capital Stock of the Borrower, excluding any (i) sales or issuance of any Capital Stock that is publicly traded, (ii) transfers between or among GCI and its Affiliates, and (iii) mergers, consolidations, or other transactions involving all or substantially all of GCI and its Affiliates. “Capital Stock” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all similar ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.

 

“Closing Date” means the date of this Agreement.

 

“Closing Memorandum” means that certain Flow of Funds Memorandum among the Lenders, the Borrower, the Funds, the Allocatee, the Investor and the Fund Lender dated as of the date hereof.

 

“CNB Allocatee” has the meaning given in the Recitals.

 

“CNB Allocation Agreement” has the meaning given in the Recitals.

 

 “CNB II CDE A3 Loan” and “CNB II CDE B3 Loan” shall each have the meaning given in the Recitals.

 

“CNB NMTC Allocation” has the meaning given in the Recitals.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Collateral” means all of Borrower’s right, title and interest in the Disbursement Account.

 

  

4

  

“Collateral Documents” means, collectively, the Bank Account Pledge and Control Agreement, and such other documents between the Borrower and the Lenders with respect to the Collateral.

 

“Collectibles” means, as defined in Section 408(m) of the Code, (a) any work of art; (b) any rug or antique; (c) any metal or gem; (d) any stamp or coin; (e) any alcoholic beverage; or (f) any other tangible personal property specified by the IRS as collectibles, other than collectibles that are held primarily for sale to customers in the ordinary course of business. Certain coins and bullion are not Collectibles as provided in Section 408(m)(3) of the Code.

 

“Completion Guaranty” means that certain Completion Guaranty made by GCI Holdings for the benefit of Lenders dated as of the date hereof, together with any amendments, modifications, supplements, or restatements thereof.

 

“Completion” or “Completion of the Project” has the meaning set forth in Section 5.15(a) hereof.

 

“Compliance Period” shall mean the period beginning on the date hereof and ending on the date preceding the seventh anniversary of the last date the Funds make a QEI in any of the Lenders, and no later than the seventh anniversary of the advance of the Loans to the Borrower.

 

“Construction Contracts” shall mean, collectively, all construction contracts related to the construction of the Improvements, and the acquisition and installation of all equipment and other Property required for the Project between the Contractors and Borrower, including all amendments, modifications, restatements and supplements thereof and thereto.

 

“Construction Documents” means, collectively, the Construction Contracts, the Plans and Specifications, the Engineering Documents, all warranties and undertakings under the Construction Contracts, and all permits and licenses used in connection with the development of the Project.

 

“Construction Inspector” means Meridian Management, or such other construction inspector, to be engaged by the Disbursing Agent with respect to the construction of the Improvements, and the acquisition and installation of all equipment and other Property required for the Project, with the consent of the Lenders.

 

“Construction Manager” means UUI.

 

“Construction Schedule” means the schedule for permitting, site acquisition, component fabrication and purchase, construction of the Improvements, and acquisition and installation of all equipment and other Property required for the Project attached hereto as Exhibit B.

 

“Contractors” means collectively, the Construction Manager, construction contractors, transportation companies (sea lift, air freight, and helicopter lift), design consultants, project management contractors, and all other contractors that are parties to the Construction Contracts.

 

“Debt” will mean any and all amounts owing from time-to-time by Borrower to any Person, including any of the Lenders, direct or indirect, liquidated or contingent, now existing or hereafter arising under, (a) indebtedness for borrowed money; (b) unfunded portions of commitments for money to be borrowed by the Borrower; (c) the amounts of all standby and commercial letters of credit and bankers acceptances, matured or unmatured, issued on behalf of Borrower; and (d) guaranties by the Borrower of the obligations of any other Person described in clauses (a) through (c) above, whether direct or indirect, whether by agreement to purchase the obligations of any other Person or by agreement for the furnishing of funds to any other Person through the purchase or lease of goods, supplies or services (or by way of stock purchase, capital contribution, advance or loan) for the purpose of paying or discharging the obligations of any other Person, or otherwise.

 

  

5

  

“Default” means the occurrence of any of the events specified in Article VIII hereof, whether or not any requirement for notice or lapse of time or other condition precedent has been satisfied.

“Disbursement Account” means the account established in the Borrower’s name and held by U.S. Bank, which account shall be funded at closing by the advance of the Loan proceeds to Borrower in accordance with Section 2.02 hereof, and pledged to Lenders as security for the B Loans.

 

“Disbursing Agent” means Alaska Growth Capital BIDCO Inc., an Alaska corporation, in its capacity as the disbursing agent pursuant to this Agreement, and its successors and assigns.

 

“Disbursing Agreement” means that certain Construction and Disbursing Agreement of even date herewith by and among Lenders, Investor, and Disbursing Agent.

 

“Engineering Documents” means, collectively, all agreements between Borrower and Inspecting Engineer, all agreements between Borrower and any structural or civil engineer with respect to the Improvements, all agreements between Borrower and any mechanical/electrical engineer with respect to the Improvements, equipment and other Property required for the Project, and all agreements between Borrower and any soil engineer or environmental consultant with respect to the Project.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder from time-to-time.

 

“Event of Default” means the occurrence of any of the events specified in Article VIII hereof; provided that any requirement for notice or lapse of time or any other condition precedent has been satisfied.

 

“Executive Order” has the meaning set forth in Section 4.11.

 

“Financial Projections” means the financial projections prepared by Novogradac & Company LLP with respect to the Loans dated October 3, 2012, as amended from time to time.

 

“Funds” has the meaning given in the Recitals.

 

“Fund Lender” has the meaning given in the Recitals.

 

“Fund QEIs” has the meaning set forth in the Recitals.

 

  

6

  

“GCI” means General Communication, Inc., an Alaska corporation.

 

“GCI Holdings” means GCI Holdings, Inc., an Alaska corporation.

 

“Governmental Authority(ies)” means (a) any federal, state, county or municipal government, or any political subdivision thereof; (b) any governmental or quasi-governmental agency, authority, board, department, commission, instrumentality or public body; or (c) any court, administrative tribunal or public utility.

 

“Guarantor” means (i) GCI, in its capacity as guarantor of Borrower’s obligations pursuant to the Payment Guaranty, and (ii) GCI Holdings, in its capacity as guarantor of Borrower’s obligations pursuant to the Completion Guaranty.

 

“Guaranty Agreements” means collectively the Payment Guaranty and the Completion Guaranty.

“Improvements” means the improvements to be constructed on the Land in connection with the Project. The expected locations of the Improvements are as set forth on Exhibit C  attached hereto.

 

“Indebtedness” means, collectively, all of Borrower’s obligations under the Notes (including, without limitation, all unpaid principal of and accrued and unpaid interest and premiums, if any, on the Notes); all accrued and unpaid fees and all indebtedness, expenses, reimbursements and indemnities of Borrower to Lenders or any indemnified party under the Loan Documents; and any and all other present and future loans, extensions of credit, liabilities and/or obligations of every nature and kind whatsoever that Borrower may now and in the future owe to or incur in favor of Lenders pursuant to the Loan Documents, whether direct or indirect, or by way of assignment, and whether related or unrelated, committed or purely discretionary, absolute or contingent, voluntary or involuntary, determined or undetermined, liquidated or unliquidated, due or to become due, together with interest, costs, expenses, attorneys’ fees and other fees and charges owed by the Borrower under the Loan Documents.

 

“Inspecting Engineer” means Meridian Management, or its successor, in its capacity as the inspecting engineer for the Borrower.

 

“Intercreditor Agreement” means that certain Intercreditor Agreement among the Lenders dated as of the date hereof, as it may be amended, supplemented or restated from time to time.

 

“Investor” has the meaning set forth in the Recitals.

 

“IRS” means the Internal Revenue Service, or any successor thereto.

 

“Land” means those certain tracts of land owned, or to be leased, licensed or otherwise acquired by Borrower, on which the Improvements are or will be located, and on which the Business or the Project will be located.

 

“LBC Allocatee” has the meaning given in the Recitals.

 

  

7

  

“LBC Allocation Agreement” has the meaning given in the Recitals.

 

“LBC NMTC Allocation” has the meaning given in the Recitals.

 

“LBC 2 CDE A2 Loan” and “LBC 2 CDE B2 Loan” shall each have the meaning given in the Recitals.

 

“Lead CDE” means Waveland XXII, in its capacity as the Lead CDE pursuant to the Intercreditor Agreement, and its successors and assigns.

 

“Leases” means collectively, (i) the Lease Agreement between GCI Communication Corp. and the Borrower with respect to certain assets of the Business dated as of the Closing Date, (ii) the Lease Agreement between the Borrower and UUI, with respect to the Project in substantially the form provided to the Lenders on the Closing Date, (iii) the Lease Agreement between Borrower and GCI dated as of July 1, 2011 with respect to Deltanet facilities, (iv) the Lease Agreement between Borrower and GCI dated as of July 1, 2011 with respect to TERRA-NW facilities, and (v) any replacement lease with respect to the foregoing in substantially the same form between the Borrower and an Affiliate, each as may be amended, modified, restated or supplemented from time to time.

 

“Lien” means, as applied to the property of any Person, any interest in such property securing an obligation owed by, or a claim made against, the Person, whether such interest is based on jurisprudence, statute or contract, and including but not limited to (a) the lien or security interest arising from a mortgage, encumbrance, pledge, security agreement, conditional sale or trust receipt or a lease, consignment or bailment for security purposes; (b) any arrangement, express or implied, under which any property of such Person is transferred, sequestered or otherwise identified for the purpose of subjecting the same to the payment of any Debt or the performance of any other obligation in priority to the payment of the general unsecured creditors of such Person; or (c) any agreement to permit any financing statement to be filed against such Person under the Uniform Commercial Code of any Governmental Authority or its equivalent in any jurisdiction.

 

“Loan Documents” means this Agreement, including all exhibits hereto, the Notes, the Collateral Documents, the Guaranty Agreements, the Intercreditor Agreement, the Disbursing Agreement, and all other instruments and documents, now existing or hereafter existing, executed by Borrower or Guarantor, as applicable, in connection with the Loans, as amended or restated from time-to-time.

 

“Loans” means, collectively, the USB 74 CDE A4 Loan, USB 74 CDE B4 Loan, CNB II CDE A3 Loan, CNB II CDE B3 Loan, LBC 2 CDE A2 Loan, LBC 2 CDE B2 Loan, Waveland XXII CDE A1 Loan, and the Waveland XXII CDE B1 Loan.

 

“Low-Income Community” means any “low-income community” as defined in Section 45D(e) of the Code and the Treasury Regulations.

 

“Material Adverse Effect” means (a) with respect to any Person, a material adverse effect upon such Person’s business, assets, condition (financial or otherwise), results of operations or business prospects; and (b) with respect to Borrower, a material adverse effect upon Borrower’s ability to perform its obligations under the Loan Documents or upon the enforceability of such obligations against Borrower.

 

  

8

  

 

“New Markets Tax Credit” means the “new markets tax credit” allowed pursuant to Section 45D of the Code.

 

“New Markets Tax Credit Program” means the program of the IRS and the CDFI Fund related to the tax credits allowed pursuant to Section 45D of the Code.

 

“NMTC Allocation” means collectively the USB NMTC Allocation, CNB NMTC Allocation, LBC NMTC Allocation and the Waveland NMTC Allocation.

 

“NMTC Control” shall mean “control” as defined in Treas. Reg. Section 1.45D­1(d)(6)(ii)(B) as direct or indirect ownership (based on value) or control (based on voting or management rights) of more than fifty percent (50%) of the entity. For purposes of this definition, the term management rights means the power to influence the management policies or investment decisions of the entity.

“NMTC Law” means the New Markets Tax Credit Program requirements pursuant to Section 45D of the Code, the Treasury Regulations thereunder and official interpretations thereof, the Allocation Agreement, and the requirements of the CDFI Fund, all as they may be amended and supplemented from time to time.“

 

“Nonqualified Financial Property” means debt, stock, partnership interests, options, futures contracts, forward contracts, warrants, notional principal contracts, annuities, and other similar property as described in Treas. Reg. Section 1.45D-1(d)(4)(i)(E) and excludes reasonable amounts of working capital held in cash, cash equivalents or debt instruments with a term of 18 months or less, or accounts or notes receivable acquired in the ordinary course of trade or business for services rendered or from the sale of property.

 

“Note” or “Notes” means the promissory notes with respect to each of the Loans, as defined in Section 2.01, together with any amendments, modifications, supplements, restatements, refinancings, substitutions or renewals thereto or thereof.

 

“Payment Guaranty” means that certain Payment Guaranty made by GCI for the benefit of Lenders dated as of the date hereof, together with any amendments, modifications, supplements, or restatements thereof.

 

“Permitted Liens” means Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 5.03, Liens in favor of the Lenders with respect to the Collateral, Liens in favor of U.S. Bank and its affiliates with respect to the Collateral, and judgment and attachment Liens in respect of judgments that do not constitute an Event of Default under Section 8.01(h).

 

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

 

“Permitted Assignee” has the meaning set forth in Section 9.10(b).

 

  

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“Plan” means any plan subject to Title IV of ERISA and maintained by Borrower, or any such plan to which Borrower is required to contribute on behalf of its employees, if any.

 

“Plans and Specifications” shall mean those plans and specifications for the construction of the Improvements and the acquisition and installation of equipment and other Property required for the Project to be submitted to Lenders, upon request, including, without limitation, specifications for materials, and all amendments and modifications thereof.

 

“Project” has the meaning set forth in the Recitals unless replaced with an Alternative Qualified Project pursuant to Section 5.15(b), in which case, “Project” means such Alternative Qualified Project.

“Project Budget” means collectively, the budget provided by the Borrower for the construction of the Project consisting of a detailed line item cost breakdown of acquisition and construction costs (hard costs), equipment and installation costs, and all other related indirect development costs (soft costs), including working capital, construction period interest reserve and contingency and a schedule of values to be submitted to and approved by Lenders with respect to the Project in accordance with this Agreement, initially as set forth on Exhibit D.

 

“Project Census Tracts” means collectively (i) United States population census tract numbers 02180000100, 02290000400, 02050000100, 02050000300, 02270000100, 02290000400, 02070000100, 02188000100 and 41007950500 with respect to the Business, which census tracts are in a Low-Income Community, and (ii) United States population census tract numbers 02180000200, 02050000200, 02020002502 and 02188000200 with respect to the Business, which census tracts are not in a Low-Income Community.

 

“Project Costs” has the meaning set forth in Section 2.03.

 

“Property” means the Land (or the rights of the Borrower in and to the Land), the existing improvements on the Land (if any), the Improvements, and all equipment, systems, components, and other property to be installed on the Land as part of the Project and/or used on the Land in the conduct of the Business or the Project.

 

“QALICB” has the meaning given in the Recitals.

 

“QALICB Report” means the Independent Accountant’s Report on Applying Agreed-Upon Procedures issued by Novogradac & Company LLP dated October 3, 2012.

 

“QEI” means a “qualified equity investment” as such term is defined in Section 45D of the Code and the Treasury Regulations.

 

“QLICI” means a “qualified low-income community investment” as such term is defined in Section 45D of the Code and the Treasury Regulations.

 

“Qualified Business” means a qualified business as such term is defined in Treasury Regulation Section 1.45D-1(d)(5).

 

“RCRA” has the meaning set forth in Section 4.09.

 

  

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“Recapture Event” means any event or condition that causes or results in a disallowance or recapture of all or any portion of the New Markets Tax Credits pursuant to Section 45D(g) of the Code or the Treasury Regulations or guidance thereunder.

 

“Residential Rental Property” means as defined in Section 168(e)(2)(A) of the Code, any building or structure if eighty percent (80%) or more of the gross rental income from such building or structure for the taxable year is rental income from “dwelling units.” For such purpose, a “dwelling unit” means a house or apartment used to provide living accommodations in a building or structure, but does not include a unit in a hotel, motel, or other establishment more than one half (1/2) of the units in which are used on a transient basis. If any portion of the building or structure is occupied by the taxpayer, the gross rental income for such building or structure includes the rental value of the portion so occupied.

 

“Scheduled Completion Date” means, (i) with respect to the Project, on or before December 31, 2014, and (ii) with respect to an Alternative Qualified Project, the completion date approved by the Lenders.

 

“Solvent” means, when used with respect to any Person on a particular day, that on such date (a) the fair value of the property of such Person as a going concern is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such person; (b) the present fair salable value of the assets of such Person as a going concern is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person is able to realize upon its assets and pay or refinance its debts and other liabilities, contingent obligations and other commitments as they mature in the ordinary course of business; (d) such Person does not intend to, and does not believe that it will, incur debts and liabilities beyond such Person’s ability to pay or refinance as such debts and liabilities mature; and (e) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person is engaged. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all of the facts and circumstances existing at such time, represents the amount that can be reasonably expected to become an actual or matured liability.

 

“Tenant Qualified Business” means any trade or business of a tenant or subtenant of the Borrower except any trade or business consisting of Residential Rental Property, or the operation of any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, race track or other facility used for gambling, or any store the principal business of which is the sale of alcoholic beverages for consumption off premises.

 

“Treasury Regulations” means any temporary and/or final regulations promulgated from time to time under the Code.

 

“USB 74 CDE A4 Loan” and “USB 74 CDE B4 Loan” shall each have the meaning given in the Recitals.

 

“USB Allocatee” has the meaning given in the Recitals.

 

“USB Allocation Agreement” has the meaning given in the Recitals.

 

  

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“USB NMTC Allocation” has the meaning given in the Recitals.

 

“UUI” means United Utilities, Inc., an Alaska corporation.

 

“Waveland Allocatee” has the meaning given in the Recitals.

 

“Waveland Allocation Agreement” has the meaning given in the Recitals.

“Waveland NMTC Allocation” has the meaning given in the Recitals.

 

“Waveland XXII CDE A1 Loan” and “Waveland XXII CDE B1 Loan” shall each have the meaning given in the Recitals.

 

Section 1.03. Accounting Terms. Unless otherwise specified herein, all accounting terms used herein will be interpreted, all accounting determinations hereunder will be made, and all financial statements required to be delivered hereunder will be prepared in accordance with generally accepted accounting principles as in effect from time-to-time, on a basis consistent (except for changes approved by independent public accountants for Borrower or GCI) with the most recent audited financial statements of GCI provided however, that Borrower shall be permitted to depart from generally accepted accounting principles with respect to (i) the reporting of the asset acquisition described below in Section 2.03 and (ii) leases from Borrower to its Affiliates.

 

	
ARTICLE II

 

	
THE CREDIT

 

Section 2.01. Loans.

 

(a) Subject to and upon the terms and conditions contained in this Agreement, and relying on the representations and warranties contained in this Agreement, (i) USB 74 agrees to make the USB 74 CDE A4 Loan and the USB 74 CDE B4 Loan to the Borrower which shall be evidenced by the promissory notes in the principal amount of $4,414,450 and $2,085,550, respectively; (ii) CNB II agrees to make the CNB II CDE A3 Loan and the CNB II CDE B3 Loan to Borrower which shall be evidenced by the promissory notes in the principal amount of $6,018,731 and $2,351,269, respectively; (iii) LBC 2 agrees to make the LBC 2 CDE A2 Loan and the LBC 2 CDE B2 Loan to Borrower which shall be evidenced by the promissory notes in the principal amount of $6,018,731 and $2,720,269, respectively; and (iv) Waveland XXII agrees to make the Waveland XXII CDE A1 Loan and the Waveland XXII CDE B1 Loan to the Borrower which shall be evidenced by the promissory notes in the principal amount of $21,264,438 and $7,135,562, respectively (collectively, (i), (ii), (iii) and (iv) are referred to as the “Notes”).

 

(b) Borrower will pay interest, principal and all applicable fees and charges on the Loans as set forth in the Notes. As set forth in the Notes, Borrower may not prepay the Loans in full or in part prior to the seventh anniversary of the Closing Date.

 

Section 2.02. Disbursement Account. On the Closing Date, upon satisfaction of the closing conditions set forth in Section 7.01, the Lenders shall advance the Loan proceeds by deposit in the Disbursement Account, which account shall be in the name of Borrower and shall be the property of Borrower, using Borrower’s federal taxpayer identification number and held at U.S. Bank. Funds held in the Disbursement Account shall be disbursed solely to pay or reimburse the Borrower for Project Costs and to pay amounts due by Borrower pursuant to the Loan Documents in accordance with this Agreement and Appendix I. At closing of the Loans, funds will be disbursed from the Disbursement Account to pay or reimburse Project Costs as set forth in the Closing Memorandum, and the balance shall be held in the Disbursement Account to be disbursed in accordance with this Agreement and Appendix I. The Disbursement Account shall be pledged as security for the Loans to the Lenders pursuant to the Bank Account Pledge and Control Agreement.

  

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Section 2.03. Use of Proceeds. Unless otherwise approved by Lenders in their sole discretion, Borrower shall use the proceeds of the Loans solely to acquire the Land required for the Project, obtain all required reports, studies, permits, and approvals, arrange for the design, fabrication and/or purchase of all equipment and related components, construct or install the Improvements and equipment and other Property required for the Project, pay for all soft costs and expenses incurred in connection therewith as shown on the Project Budget, including but not limited to a payment to GCI Communication Corp. in the amount of $37,716,350 on the Closing Date for acquisition of certain assets, and pay the transaction costs in accordance with the Closing Memorandum (collectively, “Project Costs”). Further, after the disbursements made on the Closing Date, at least 50% of the proceeds of the Loans shall be applied exclusively to those portions of the Project that are located in those Project Census Tracts that constitute Low-Income Communities, and the Loan proceeds shall be expended no later than the Scheduled Completion Date. Notwithstanding the foregoing, all Loan proceeds, after the disbursements made on the Closing Date, shall be applied to Project Costs.  The Lenders hereby (a) consent to the purchase of assets by the Borrower from GCI Communication Corp. for $37,716,350 for more than book value and any deemed dividend resulting therefrom for accounting purposes, and (b) consent to cash distributions by the Borrower to its shareholder, as long as such cash distributions described in this clause (b) are not funded with Loan proceeds.

 

Section 2.04. Business Days. If the date for any payment hereunder falls on a day which is not a Business Day, then for all purposes of this Agreement the same will be deemed to have fallen on the next following Business Day, and such extension of time will in such case be included in the computation of payments of interest, fees or other charges, as the case may be.

 

Section 2.05. Method of Payment. All payments of the Loans shall be made, without setoff, deduction, or counterclaim, in immediately available funds to the Lenders at the Lender’s respective addresses specified from time-to-time by the Lenders by 1:00 pm (central time) on the date when due.

 

ARTICLE III

 

SECURITY FOR THE INDEBTEDNESS

 

  

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Section 3.01. Security. The B Loans shall be secured by the Disbursement Account pursuant to the Bank Account Pledge and Control Agreement.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES

 

In order to induce Lenders to enter into this Agreement, Borrower represents and warrants to Lenders (which representations and warranties will survive the extensions of credit under this Agreement) that:

Section 4.01. Borrower’s Existence, Power and Authorization. Borrower is a corporation duly organized, legally existing and in good standing under the laws of the State of Alaska and is duly qualified as a foreign company in all jurisdictions wherein the property it owns or the business it transacts make such qualification necessary. Borrower is duly authorized and empowered to execute, deliver and perform the Loan Documents to which it is a party. All action on the part of Borrower requisite for the due execution and delivery of the Loan Documents to which it is a party has been duly and effectively taken. Borrower’s execution, delivery and performance of the Loan Documents to which it is a party do not require the consent or approval of any other Person, including without limitation any Governmental Authority. Borrower has reviewed the Loan Documents to which it is a party with counsel for Borrower and has had the opportunity to discuss the provisions thereof with the Lenders prior to execution. The Loan Documents to which Borrower is a party constitute valid and binding obligations of Borrower enforceable in accordance with their terms (except that enforcement may be subject to any applicable bankruptcy, insolvency or applicable laws generally affecting the enforcement of creditors’ rights).

 

Section 4.02. No Legal Bar or Resultant Lien. The execution, delivery and performance of the Loan Documents to which Borrower is a party do not and will not violate (a) any provisions of Borrower’s articles of organization, bylaws or any other organizational documents; (b) any other material contract, indenture or agreement to which Borrower is a party or by which any of its property may be bound; or (c) any provision of law, regulation, order, injunction, judgment, decree or writ to which Borrower or any of its property is subject, except those violations that would not reasonably be expected to have a Material Adverse Effect. The Loan Documents to which Borrower is a party will not result in or require the creation or imposition of any Lien upon any property now owned or hereafter acquired by Borrower other than as contemplated by this Agreement.

 

Section 4.03. Financial Condition; Solvency; Other Information.

 

(a) All audited financial statements of GCI delivered to Lenders fairly present the financial position of GCI and its consolidated subsidiaries in all material respects as of the date of such statements. To the knowledge of Borrower, since the close of the period covered by the latest audited financial statements delivered to Lenders, no event has occurred (including, without limitation, any litigation or administrative proceedings) and no condition exists or, is threatened, which (i) would reasonably be expected to render Borrower or any Guarantor unable to perform its obligations under the Loan Documents, or (ii) would constitute a Material Adverse Effect, or (iii) would constitute a Default hereunder.

 

  

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(b) Borrower is Solvent and after consummation of the transactions contemplated by the Loan Documents (including the making of the Loans and the distributions contemplated herein), and after giving effect to all obligations incurred by Borrower in connection herewith, Borrower will be Solvent.

 

(c) All financial projections given to Lenders were prepared in good faith based on facts and circumstances existing at the time of preparation. No other information, exhibit or report (other than projections) furnished by Borrower or any of its Affiliates to Lenders in connection with the negotiation of this Agreement taken as a whole contains any material misstatement of fact or fails to state a material fact necessary to make the statements contained therein in light of the circumstances under which they were made, not materially misleading.

 

Section 4.04. Taxes and Governmental Charges. Borrower has filed all tax returns and reports required to be filed and has paid all taxes, assessments, fees and other governmental charges levied upon it or upon its property or income which are due and payable, including interest and penalties, or has provided adequate reserves for the payment thereof.

 

Section 4.05. Defaults. Borrower is not in default under any indenture, mortgage, deed of trust, agreement or other instrument to which Borrower is a party or by which it is bound, including without limitation the Construction Documents, which default would reasonably be expected to result in a Material Adverse Effect.

 

Section 4.06. Compliance With the Law. Borrower (a) is not in violation of any law, judgment, decree, order, ordinance, or governmental rule or regulation to which Borrower or any of its property is subject; and (b) has not failed to obtain any license, permit, franchise or other governmental authorization necessary to the ownership of any of its property or the conduct of the Business; in each case, which violation or failure could reasonably be anticipated to materially and adversely affect the business, prospects, profits, property or condition (financial or otherwise) of Borrower.

 

Section 4.07. ERISA. Borrower is in compliance in all material respects with the applicable provisions of ERISA with respect to any Plan, and no “reportable event,” as such term is defined in Section 4043 of ERISA, has occurred with respect to any Plan of Borrower, within the six fiscal years preceding the Closing Date.

 

Section 4.08. Title to Property. Borrower has good title to the Collateral, free of all Liens except those created in favor of the Lenders and those permitted by this Agreement. Furthermore, Borrower has not heretofore conveyed or granted a Lien on or agreed to convey or grant a Lien on any Collateral in any way, except in favor of Lenders and Permitted Liens. The Borrower has or will have such title or leasehold interest, or other rights, in and to the Land owned, leased or used by it as is necessary or desirable to the conduct of the Business and the Project, and valid and legal title or leasehold interest in and to all of its personal property, as is necessary or desirable to the conduct of the Business and the Project.

 

Section 4.09. Environmental Matters. The Borrower is not in material violation of or subject to any existing, pending, or threatened investigation or inquiry by any Governmental Authority or to any remedial obligations under any applicable laws pertaining to health or the environment (hereinafter, sometimes collectively called “Applicable Environmental Laws”), including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 (as amended, hereinafter called “CERCLA”), the Resource Conservation and Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980, the Solid Waste Disposal Act Amendments of 1980, and the Hazardous and Solid Waste Amendments of 1984 (as amended, hereinafter called “RCRA”). Borrower has not obtained and is not required to obtain any permits, licenses or similar authorizations to construct, occupy, operate or use any buildings, improvements, fixtures and equipment forming a part of the Property by reason of any Applicable Environmental Laws, except as shall be obtained by Borrower in material accordance with all Applicable Environmental Laws. No hazardous substances or solid wastes have been disposed of or otherwise released on the Property, and the use which Borrower makes and intends to make of the Property will not result in the disposal or other release of any hazardous substance or solid waste on or to the Property, except in material compliance with all Applicable Environmental Laws. The terms “hazardous substance” and “release” as used in this Agreement will have the meanings specified in CERCLA, and the terms “solid waste” and “disposal” (or “disposed”) will have the meanings specified in RCRA; provided, in the event that the laws of the State of Alaska establish a meaning for “hazardous substance,” “release,” “solid waste,” or “disposal” which is broader than that specified in either CERCLA or RCRA, such broader meaning will apply. No part of the Property related to the Project constitutes “wetlands,” as such term is defined by applicable federal law, and except as has been obtained or shall be obtained in accordance with applicable law, no permit is needed for construction of the Project from the U.S. Army Corps of Engineers or any other applicable federal or state agency.

  

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Section 4.10. Governmental Requirements. The Land and the Property will be acquired, developed, and utilized in material compliance with all current governmental requirements affecting such Land and the Property, including, without limitation, all current coastal zone protection, zoning and land use regulations, building codes and all restrictions and requirements imposed by applicable Governmental Authorities with respect to the acquisition of the Land, construction and acquisition and installation of the Improvements and other Property, and the contemplated use of the Improvements and other Property.

 

Section 4.11. Anti-Terrorism Laws.

 

(a) Neither Borrower nor any of its Affiliates is in material violation of any law relating to terrorism or money laundering (“Anti-Terrorism Laws”), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive Order”), and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 10-56. Neither Borrower nor any of its Affiliates is any of the following:

 

(i) a Person that is listed in the annex to the Executive Order;

 

(ii) a Person owned or controlled by or under common control with any Person that is listed in the annex to the Executive Order;

 

  

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(iii) a Person with which a commercial lender would generally be prohibited from dealing or otherwise engaging in a lending transaction by any Anti-Terrorism Law; or

 

(iv) a Person that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website or any replacement website or other replacement official publication of such list.

(b)Neither Borrower nor any of its Affiliates (i) intends or proposes to conduct any business or engage in making or receiving any contribution of funds, goods or services to or for the benefit of any person described in paragraph (a) above; (ii) intends or proposes to deal in, or otherwise engage in any transaction relating to any property or interests in property blocked pursuant to the Executive Order; or (iii) intends or proposes to engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or of avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

 

Section 4.12. New Markets Tax Credit Program Representations Warranties and Covenants. Lenders and Borrower believe that the Project will have a beneficial effect on economic development within the Low-Income Communities included in the Project Census Tracts. The Loans are intended to constitute QLICIs qualifying under the New Markets Tax Credit Program. The Lenders believe that the provision of private-sector capital investment as represented by the Loans on such terms will serve to stimulate economic opportunity and create jobs within the Low-Income Communities included in the Project Census Tracts. The Lenders have each received a sub-allocation of New Markets Tax Credits from the respective Allocatee. The availability of New Markets Tax Credits has enabled the Lenders to provide the Loans using terms and conditions that are flexible and non-conventional. To ensure compliance with the New Markets Tax Credit Program, Borrower agrees to make the representations, warranties, and covenants set forth in this Section 4.12 and in Section 5.18. The Lenders would not make the Loans without the representations, warranties and covenants set forth in this Agreement.

 

As of the date hereof, Borrower hereby represents and warrants to the Lenders, as follows that as of the date hereof:

 

(a) Borrower has provided the Lenders and the Investor with notice of all (i) defaults or failures of compliance with respect to any other financial, contractual or governmental obligation of Borrower, the Guarantor or the Project; (ii) IRS proceedings regarding the Project, the Guarantor or Borrower; (iii) litigation, criminal action or administrative proceedings against Borrower or Guarantor; or (iv) communications from any other lender or funding source for the Project, or the Secretary of State of Alaska or any other Person or governmental authority which is not in the ordinary course of business, in each case, that would reasonably be expected to result in a Material Adverse Effect;

 

(b) Borrower currently qualifies as a QALICB and has no information or knowledge tending to indicate that it might not satisfy all of the requirements of a QALICB;

 

(c) Assuming the Lenders are each a qualified community development entity under Section 45D of the Code, the Loans and each advance thereunder constitutes a QLICI.

 

  

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(d) With respect to the current taxable year of Borrower, at least fifty percent (50%) of the total gross income within the meaning of Treas. Reg. §1.45D-1(d)(4)(i)(A) of Borrower is derived from the active conduct of its trade or business within census tracts that constitute Low-Income Communities;

 

(e) With respect to the current taxable year of Borrower, at least forty percent (40%) of the use of the tangible property of Borrower (whether owned or leased) is within census tracts that constitute Low-Income Communities (for purposes of this representation, the percentage of tangible property owned or leased by Borrower during the taxable year in census tracts that constitute Low-Income Communities shall be determined based on a fraction (i) the numerator of which is the Average Value of the tangible property used by Borrower within census tracts that constitute Low-Income Communities, and (ii) the denominator of which is the Average Value of all of the tangible property owned or leased by Borrower and used by Borrower during the taxable year); provided, however, that if for the current taxable year Borrower has no employees, at least eighty-five percent (85%) of the use of the tangible property of Borrower (whether owned or leased) is within census tracts that constitute Low-Income Communities. The Financial Projections include (or the Borrower has otherwise provided to Lenders) a true, correct and complete list of tangible property owned or leased by Borrower. To the extent that any tangible property is used by the Borrower outside of census tracts that constitute Low-Income Communities, Borrower has provided the cost basis of all property owned by Borrower and the estimated value of any leased property and the basis of such estimate and the business hours of usage of Borrower's property within and without such census tracts. Borrower shall retain records of the foregoing throughout the term of the Loans;

 

(f) With respect to the current taxable year of Borrower, less than five percent (5%) of the average of the aggregate unadjusted basis of the property of Borrower is attributable to Nonqualified Financial Property. The Financial Projections include (or the Borrower has otherwise provided to Lenders) a true, correct, and complete listing of any Nonqualified Financial Property owned by Borrower, including therein, the unadjusted basis of such property and Borrower shall maintain records thereof throughout the term of the Loans;

 

(g) With respect to the current taxable year of Borrower, if Borrower has one or more employees providing services, at least fifty percent (50%) of the services performed for Borrower by its employees (or a Borrower Affiliate’s employees primarily engaged in providing services to Borrower) are within census tracts that constitute Low-Income Communities (for purposes of this representation, this percentage is determined based on a fraction (the numerator of which is the total amount paid by Borrower for employee services performed in census tracts that constitute Low-Income Communities during the taxable year, and the denominator of which is the total amount paid by Borrower for employee services during the taxable year). Borrower has provided a list of employees providing services to the Borrower, if any, including a general description of services provided, and if applicable compensation paid for services rendered within and without such census tracts;

 

(h) With respect to the current taxable year of Borrower, less than five percent (5%) of the average of the aggregate unadjusted basis of Borrower’s property is attributable to Collectibles;

 

(i) The Property is not used as Residential Rental Property. The trade or business of a tenant or a subtenant consists and shall consist solely of a Tenant Qualified Business;

 

  

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(j) Borrower is engaged solely in a Qualified Business;

 

(k) The Loans are not being made with respect to and no portion of the Project will constitute a “qualified low-income building,” as defined in Code Section 42(c)(2), and the Project will not be financed with low-income housing tax credits under Section 42 of the Code;

 

(l) The Borrower is a corporation and is not disregarded as separate from another entity for federal income tax purposes;

 

(m) To Borrower’s knowledge, there have been no irregularities or illegal acts that would have a material effect on the transactions contemplated by this Agreement, there has been no fraud involving management or employees who have significant roles in the internal control structure of the Borrower, fraud involving other employees that could have a material effect on the matters described in this Section 4.12, or communications from the CDFI Fund or other regulatory agencies concerning noncompliance with, or deficiencies in, financial reporting practices that could have a material effect on the matters described in this Section 4.12;

 

(n) The Borrower is not a bank, credit union or other financial institution;

 

(o) The current value of the Business is not less than the aggregate principal amount of the Loans, and Borrower has reasonable grounds to believe that the value and/or income generated by the Business and the Project will be sufficient to allow the Borrower to repay and/or refinance the outstanding principal and interest on the Loans as payments become due and at or prior to maturity;

 

(p) The Financial Projections were prepared in good faith based on assumptions believed by the Borrower to be reasonable at the time of their preparation and as of the date hereof;

 

(q) Borrower has not knowingly entered into this Agreement, or any other agreements or understandings (whether written or oral) with a principal purpose of entering into a transaction or series of transactions (i) to achieve a result that is inconsistent with NMTC Law, and/or (ii) to avoid or evade federal income tax;

 

(r) Borrower will treat the Loans as indebtedness for all purposes, and will not take any positions contrary to such treatment;

 

(s) The amount of reserves, receivables, assets and other items of working capital shown on the Financial Projections as owned by Borrower were established in good faith based on assumptions believed by the Borrower to be reasonable as of the Closing Date; Borrower does not have outstanding, nor is it committed to make, a loan with a term of eighteen (18) months to any Person; and Borrower does not have an ownership interest or an option to acquire an ownership interest of any kind in any Person;

 

(t) None of Borrower or the officers, directors, or principals of Borrower or any of its Affiliates is on the list of Specially Designated Nationals and Blocked Persons promulgated by the U.S. Treasury Department and located on the internet at http://www.treas.gov/offices/eotffc; http://treas.gov/ofac/t11sdn.pdf;

 

  

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(u) Each of Project Census Tract numbers 02180000100, 02290000400, 02050000100, 02050000300, 02270000100, 02290000400, 02070000100 and 41007950500 is a Low-Income Community that has the following criteria or programs: the census tracts are in a non-metropolitan area, and the median family income does not exceed 60% of statewide median family income;

 

(v) Borrower is currently generating revenues and specifically intends and expects to

 

generate a profit from the Business and the Project;

 

(w) Borrower reasonably expects to expend the proceeds of the Loans by December 31, 2014 on Project Costs;

 

(x) Borrower has stated in writing to Lenders the nature of its business and of the

 

goods or services provided, its primary sources of revenue and its primary expenditures, and such statement is not misleading in any material respect;

 

(y) Borrower has not taken or failed to take, and shall not take or fail to take, any

 

action which would result in Investor, either of the Funds, Lenders, or any of their Affiliates having NMTC Control of Borrower;

 

(z) Borrower has established separate bank accounts for Borrower, and does not and shall not commingle the assets of Borrower with any Person. Borrower’s assets are not listed as assets on the books and records of any other Person, except to the extent that such assets are consolidated with another Person’s assets for financial reporting purposes. Borrower does not and shall not possess or use any material assets of any other Person, and does not and shall not permit any other Person to possess or use its assets, unless in either case such assets are rented, leased, or otherwise provided for use pursuant to a lease or services agreement or similar agreement with such Person with payments not exceeding fair market value;

 

(aa) Borrower has no present plans or intentions to (i) change the nature of, or manner in which it conducts its business or operation in a manner that would affect Borrower’s continued compliance with the representations and warranties in this Section 4.12; (ii) move or expand its business to a new address except as contemplated as part of the Project; (iii) reduce the percentage of gross income derived from the active conduct of a Qualified Business within Low-Income Communities except as contemplated as part of the Project; (iv) change the percentage of employee services performed in Low-Income Communities except as contemplated as part of the Project; (v) reduce the percentage of use of tangible property in Low-Income Communities except as contemplated as part of the Project; (vi) maintain Collectibles not held primarily for sale in the ordinary course of business at 5% or more of the aggregate unadjusted cost bases of its assets; (vii) maintain Nonqualified Financial Property at 5% or more of the aggregate unadjusted cost bases of its assets; (viii) enter into leases with any tenant that engages in a trade or business other than a Tenant Qualified Business; or (ix) take any other action that would, in each case, cause to be untrue any of the other representations, warranties or covenants set out in this Agreement;

 

(bb) The Borrower expects that the representations made under this Section 4.12 will continue to be accurate during the entire term of this Agreement; and

 

  

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(cc) Neither Borrower nor any of its principals has been debarred, suspended, declared ineligible, or voluntarily excluded from participation in a covered transaction by any Federal department or agency, as such terms are defined in Executive Order 12549, nor is any such action pending or proposed. Borrower shall, simultaneously with execution and delivery of this Agreement, execute and deliver a certification regarding debarment, suspension, ineligibility and voluntary exclusion in the form attached hereto as Exhibit E to further evidence this representation and warranty. Borrower shall obtain such certifications from other participants in the Project to the extent reasonably required by Lenders to maintain compliance with NMTC Law.

 

(dd) Each of SNR Denton US LLP, Nixon Peabody LLP, Ginsberg Jacobs, LLC, and Mark D. Foster are hereby permitted to rely on the foregoing representations in the issuance of corporate, enforceability, federal income tax and other transaction opinions to Lenders, the Funds, and the Investor.

 

Section 4.13. Litigation. No litigation or proceedings are pending, or to the best of Borrower’s knowledge are threatened, against Borrower which could reasonably be expected to have a Material Adverse Effect on the ability of Borrower to perform its obligations under the Loan Documents. Without limiting the foregoing, there are no pending or, to Borrower’s best knowledge, threatened proceedings or actions to revoke, invalidate, rescind or modify any building or other permits heretofore issued with respect to the Property required for the Project.

 

ARTICLE V

 

AFFIRMATIVE COVENANTS

 

Unless Lenders’ prior written consent to the contrary is obtained, Borrower will at all times comply with the covenants contained in this Article V, from the date hereof and for so long as any part of the Indebtedness is outstanding.

 

Section 5.01. Performance of Obligations. Borrower will repay the Loans according to the reading, tenor and effect of the Loan Documents. Borrower will do and perform every act required of it by the Loan Documents at the time or times and in the manner specified.

 

Section 5.02. Financial Statements and Reports. Borrower will furnish, or cause to be furnished, to Lenders:

 

    (a) Annual Financial Statements. Beginning with the first fiscal year-end following the Closing Date, no later than one hundred twenty (120) days after the end of each fiscal year of GCI occurring during the term hereof, audited annual financial statements of GCI, as of the end of such fiscal year (including the income statement, balance sheet, shareholder’s equity, and statement of cash flows, along with accompanying footnotes) each prepared on a consolidated basis, audited by Grant Thornton LLP or other independent certified public accountants of nationally recognized standing, prepared in accordance with GAAP consistently applied and separate internally prepared unaudited schedules for the Borrower (balance sheet, income statement, statement of shareholder’s equity and statement of cash flows as of the end of and for such year) and certified by an officer of the Borrower substantially in the form attached as Item 1 of Exhibit F hereto.

  

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(b) Borrower’s Quarterly Financial Statements. Within 60 days after the end of each of the first three fiscal quarter periods of Borrower beginning with the quarter ending March 31, 2013, internally prepared unaudited balance sheet, income statements, and statements of cash flow, as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, and certified by an officer of Borrower substantially in the form attached as Item 1 of Exhibit F hereto.

 

(c) Compliance Certificates. Concurrently with the delivery of the financial statements under Sections 5.02(a) and 5.02(b), a compliance certificate substantially in the form attached as Exhibit F hereto.

 

(d) Other Information. Promptly upon the request of Lenders, such other information regarding the business and affairs and financial condition of Borrower and GCI and their Affiliates as the Lenders may reasonably request (other than shareholders of GCI and Persons that are Affiliates because of interests held by such shareholders).

 

All internally prepared unaudited balance sheets and other financial reports referred to in Sections 5.02(a) and 5.02(b) above will be in such detail as the Lenders may reasonably request, and all audited financial statements referred to in Section 5.02(a) above will conform to generally accepted accounting principles applied on a consistent basis, except only for such changes in accounting principles or practice with which the independent certified public accountants concur.

 

Section 5.03. Taxes and Other Liens. Borrower will pay and discharge (or bond over) promptly when due all taxes, assessments and governmental charges or levies imposed upon it or upon its income or upon the Property as well as all claims of any kind (including claims for labor, materials, supplies and rent) which, if unpaid, would have a Material Adverse Effect and might become a Lien upon any or all of the Property; provided, that Borrower will not be required to pay any such tax, assessment, charge, levy or claim if the amount, applicability or validity thereof will currently be contested in good faith by appropriate proceedings diligently conducted and if Borrower has set up reserves therefor adequate under generally accepted accounting principles, If requested by Lenders, Borrower will furnish Lenders with proof of payment acceptable to Lenders of all taxes, assessments, charges, levies or claims not later than the date on which penalties or Liens might attach thereto, or in the event that Borrower contests any such taxes, assessments, charges, levies or claims in accordance with this Section. If requested by Lenders, Borrower will furnish the Lenders with a reasonably detailed, written description of the contested matter and all actions taken by Borrower in connection with such contest.

 

Section 5.04. Maintenance of Borrower’s Existence; Ownership. Borrower will maintain its corporate existence and rights, and will maintain the Property in generally good and workable condition at all times and make all repairs, replacements, additions, betterments and improvements to the Property to the extent necessary so that any failure will not materially and adversely affect the operations of the Property.

 

Section 5.05. Further Assurances. Borrower will promptly (and in no event later than 30 days after written notice from the Lenders is received) cure any defects in the execution and delivery by the Borrower of the Loan Documents to which it is a party. Borrower, at its expense will promptly execute and deliver to the Lenders upon request all such other and further documents, agreements and instruments in compliance with or accomplishment of the covenants and agreements of Borrower in the Loan Documents, or to correct any omissions in the Loan Documents, or more fully state the security obligations set out herein or in any of the Loan Documents.

 

  

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Section 5.06. Reimbursement of Expenses. Borrower will pay all reasonable legal fees and out-of-pocket expenses incurred by the Lenders in connection with the preparation, negotiation, execution, delivery, filing, recording, administration and enforcement of the Loan Documents to which is a party, including but not limited to expenses incurred upon satisfaction, or modification of the Loans, or disposition of the Loans to the respective Funds. In addition, but not as a limitation, Borrower will pay:

 

(a) $15,000 on December 1st of each year, from December 1, 2012 through December 1, 2018, and $15,000 on October 3, 2019, to Waveland XXII for its accounting, audit and tax expenses each year;

 

(b) $13,551 December 1, 2012, $54,203 on December 1st of each year, from December 1, 2013 through December 1, 2018, and $40,652 on October 3, 2019 to LBC 2 for its asset management fees and audit and tax expenses in each of such years (but not thereafter);

 

(c) $15,438 on December 1 of 2012, $32,500 on December 1st of each of years 2013 through 2018, and $27,063 on October 3, 2019, to CNB II for its asset management fees and accounting, audit and tax expenses in each of such years;

 

(d) $8,200 on December 1 of 2012, $4,100 from December 1, 2013, through December 1, 2018, and $4,100 on October 3, 2019, to USB 74, for its accounting, audit and tax expenses each year;

 

(e) all taxes and recording expenses, including all intangible, registration and stamp taxes, if any;

 

(f) title insurance premiums, appraiser fees, environmental audit fees, insurance consultant fees, construction inspection fees and expenses;

 

(g) fees, if any, due to brokers in connection with the Property or this Agreement (other than any broker hired by or contracted for by any Lender);

 

(h) all reasonable legal fees and expenses, including, without limitation, Lenders’ and their direct and indirect members’ counsel’s fees and expenses for services performed and sums advanced or disbursed in connection with the transactions contemplated by this Agreement, plus reimbursement of all out of pocket expenses incurred in connection therewith;

 

(i) all fees incurred in connection with the delivery of the legal opinions required for purposes of closing the Loans;

 

  

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(j) all fees of accountants in connection with preparation of the Financial Projections and the QALICB Report;

 

(k) all fees and expenses incurred by Lenders in connection with the disbursement of the Loans;

 

(l) Borrower shall also pay or reimburse, at the request of Lenders, the bank charges, wiring fees, and limited liability company filing fees incurred by Lenders in connection with the Loans, including but not limited to the disbursement of Loan proceeds, and distributions to its members;

 

(m) Borrower will, upon request, promptly reimburse the Lenders for all amounts expended, advanced or incurred by the Lenders (or their direct or indirect members) after the occurrence of an Event of Default, to satisfy any obligation of Borrower under the Loan Documents, or any other agreement, document or instrument executed and delivered in connection herewith, or to protect the Property or business of Borrower or to collect the Loans, or to enforce the rights of the Lenders under the Loan Documents (other than disputes solely between or among the Lenders under the Intercreditor Agreement), which amounts will include all court costs, attorneys’ fees, fees of auditors and accountants, and investigation expenses reasonably incurred by the Lenders (or their direct or indirect members) in connection with any such matters, together with interest at the interest rate set forth in the Notes on each such amount from the date that the same is expended, advanced or incurred by Lenders (or their direct or indirect members) until the date of reimbursement to Lenders, as the case may be; and

 

(n) Borrower will pay within ten (10) Business Days after written notice thereof, any fees imposed by the U.S. Department of Treasury after the date hereof on any Lender or the Allocatee in connection with the Allocation Agreement; provided that such fees shall be prorated based on the amount suballocated with respect to the transactions evidenced by the applicable Loans to the total amount suballocated pursuant to the applicable Allocation Agreement at the time the fees are imposed. As of the date hereof, no such fees have been imposed.

 

(o) Borrower shall be responsible to pay to Lenders any Alaska state or local taxes or other charge, including but not limited to income, withholding or gross receipts tax (collectively, “state or local taxes”), imposed on Lenders as a result of the Loans, excluding any state or local taxes that when paid by Lenders are allowed as a credit against amounts otherwise due by Lenders’ members. As of the date hereof, Lenders are not aware of any such state or local taxes. Borrower shall pay such amounts to Lenders within thirty (30) days after notice from Lenders that the state or local taxes are due and payable. Upon receipt of such notice, Borrower may elect, at its expense, to contest payment of such charges with the appropriate taxing authority. In any event, Borrower shall pay such state and local taxes to Lenders no later than ten (10) Business Days prior to the latest date that such amounts may be paid by Lenders without interest or penalty, unless Borrower has obtained, on or before such date, written confirmation from the appropriate taxing authority that such amounts are not due and payable by Lenders.

 

(p) In the event that after the date hereof any governmental authority subjects any Lender to any new or additional charge, fee, withholding or tax of any kind with respect to the Loans or changes the method of taxation of the Loans or changes the reserve or deposit requirements applicable to the Loans, Borrower shall pay to such Lender such additional amounts as will compensate such Lender for such cost of lost income resulting therefrom as reasonably determined by such Lender (other than taxes based upon or measured by the income or profits of such Lender).

 

(q) Fees and expenses payable to Lenders pursuant to this Agreement and any other Loan Documents shall be payable by Borrower to Lenders in accordance with the applicable agreement (or upon demand, if no time for payment is specified), and, until paid, shall become part of the Indebtedness, and shall, unless timely paid, bear interest from the date incurred by Lenders at the interest rate set forth in the Notes, and shall be secured by the Collateral Documents even though such sums, when added to previous advances to Borrower, shall exceed the face amount of the Notes.

 

Section 5.07. Insurance. Borrower shall procure and maintain, or cause to be so procured and maintained, insurance policies as set forth in Exhibit G attached hereto. Borrower shall obtain liability insurance certificates from the Contractors, as reasonably required by the Lenders as a condition of the applicable draws, subject to Exhibit G.

 

Section 5.08. Accounts and Records. Borrower will keep books of record and accounts in which true and correct entries will be made as to all material matters of all dealings or transactions in relation to its business and activities, in accordance with generally accepted accounting principles, consistently applied except for changes in accounting principles or practices with which the independent certified public accountants for Borrower or GCI concur.

 

  

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Section 5.09. Right of Inspection. Borrower will permit any officer, employee or other representative of the Lenders to visit and inspect any of the property of Borrower (including the Property), examine the books of record and accounts of Borrower, take copies and extracts therefrom, and discuss the affairs, finances and accounts of Borrower with Borrower’s officers, accountants and auditors, all at such reasonable times and on reasonable notice and as often as the Lenders may reasonably desire, but no more than semi-annually (which limitation does not apply to the Disbursing Agent and its representatives), unless there is an Event of Default that has occurred and is continuing.

 

Section 5.10. Notice of Certain Events.

 

(a) Borrower will promptly notify the Lenders if Borrower learns of the occurrence of any event which constitutes a Default, together with a reasonably detailed, written statement by an authorized officer of Borrower of the steps being taken to cure the Default.

 

(b) Borrower shall promptly notify the Lenders of any change in location of Borrower’s principal place of business or the office where it keeps its records concerning accounts and contract rights.

 

(c) Borrower shall promptly notify the Lenders of any litigation or dispute threatened against or affecting Borrower or the Property which, if adversely determined, would have a material adverse effect upon the financial condition or business of Borrower. Lenders may (but shall not be obligated to), without prior notice to Borrower, commence, appear in, or defend any action or proceeding purporting to affect the Loans, or the respective rights and obligations of Lenders and Borrower pursuant to this Agreement. Lenders may (but shall not be obligated to) pay all necessary expenses, including reasonable attorneys’ fees and expenses incurred in connection with such proceedings or actions described in the preceding sentence, which Borrower agrees to repay to Lenders upon demand, subject to Section 5.06 hereof.

 

Section 5.11. ERISA Compliance. Borrower will comply with all of the applicable funding and other requirements of ERISA as such requirements relate to the Plans of Borrower, if any. Borrower will not at any time permit any Plan maintained by it to engage in any “prohibited transaction” as such term is defined in Section 4975 of the Code; incur any “accumulated funding deficiency” as such term is defined in Section 302 of ERISA; or terminate any such Plan in a manner which could result in the imposition of a lien or charge upon or encumbrance of the property of Borrower pursuant to ERISA.

 

Section 5.12. Indemnification.

 

(a)Borrower agrees to indemnify, protect, hold harmless and defend Lenders, their direct and indirect members, and affiliates and each of their respective directors, managers, officers, employees, lenders, representatives, consultants and attorneys (each, a “Covered Person”), from and against any and all losses, liabilities, suits, actions, obligations, fines, damages, judgments, penalties, claims, causes of action, charges, costs and expenses (including attorneys’ fees, disbursements and court costs prior to trial, at trial and on appeal) which may be imposed on, incurred or paid by, or asserted against a Covered Person by reason or on account of, or in connection with, (i) any misconduct of Borrower or any Default or Event of Default hereunder; (ii) any breach of any representation or covenant of Borrower in any of the Loan Documents; (iii) the acquisition, construction, reconstruction or alteration of the Property; (iv) any gross negligence of Borrower or any gross negligence or willful misconduct of any tenant, or any other occupant or invitee of the Property or any of their respective lenders, contractors, subcontractors, servants, directors, managers, officers, employees, licensees or invitees; (v) any accident, injury, death or damage to any person or property occurring in, on or about the Property or the Project or any street, drive, sidewalk, curb or passageway adjacent thereto, except to the extent that the same results directly from the willful misconduct or gross negligence of a Lender; (vi) any claim by a tenant pursuant to the terms of its lease, if any; (vii) any claim by any broker or lender of Borrower for the payment of a commission or fee by reason of the execution of this Agreement or the disbursement of the Loans; or (viii) any allegation or charge whatsoever of negligence, misfeasance, or nonfeasance of Lenders in whole or in part, pertaining to any defect in the Property, and particularly, any failure of Lenders or any lender, officer, employee or representative of Lenders, to note any defect in materials or workmanship or of physical conditions or failure to comply with the Plans and Specifications or any ordinances, statutes or other governmental requirements, or to call to the attention of any person whatsoever, or take any action, or to demand that any action be taken, with regard to any such defect or failure or lack of compliance. However, the foregoing indemnities shall not apply to any Covered Person to the extent the subject of the indemnification is caused by or arises solely and directly out of the gross negligence or willful misconduct of such Covered Person.

 

 

  

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(b)Any amount payable to a Covered Person under this Section 5.12 shall be due and payable upon demand therefor and receipt by Borrower of a statement setting forth in reasonable detail the amount claimed and the basis therefor. Borrower’s obligations under this Section 5.12 shall not be affected by the absence or unavailability of insurance covering the same or by the failure or refusal of any insurance carrier to perform any obligation on its part under any such policy of insurance. If any claim, action or proceeding is made or brought which is subject to the indemnity set forth in this Section 5.12, Borrower shall resist or defend against the same, in its own name or, if necessary, in the name of the applicable Covered Person, by attorneys for Borrower’s insurance carrier (if the same is covered by insurance) or otherwise by attorneys retained by Borrower. Notwithstanding the foregoing, the applicable Covered Person, in such Person’s discretion, unless it approves of the attorneys provided by Borrower or Borrower’s insurance carrier (which approval shall not be unreasonably withheld or delayed), may engage its own attorneys to resist or defend, or to assist therein, and Borrower shall pay, or, on demand, shall reimburse such Person for the payment of, all reasonable fees and disbursements of said attorneys. All obligations set forth in this Section 5.12 shall survive payment of the indebtedness secured hereby.

 

Section 5.13. Compliance with Laws and Covenants.

 

(a)Borrower will observe and comply with all laws, statutes, codes, acts, ordinances, orders, judgments, decrees, injunctions, rules, regulations, certificates, franchises, permits, licenses, authorizations, contracts, directions and requirements (including without limitation any of the foregoing relating to environmental standards or controls) of all Governmental Authorities applicable to Borrower or the Property, except any failure to observe or comply that would not reasonably be expected to have a Material Adverse Effect.

 

(b) Upon request of the Lenders, Borrower shall deliver to Lenders copies of all permits, licenses, authorizations, certifications, and/or contracts that are required to construct and operate the Improvements, and any extensions, renewals, re-issuances, modifications or amendments thereof.

 

  

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Section 5.14. Environmental Compliance and Indemnity.

 

(a) Borrower will not release (or permit the release of) any hazardous substance on the Property in material contravention of Applicable Environmental Laws. The terms “hazardous substances” and “release” will have the meanings defined in Section 4.09 hereof. In addition, Borrower will observe and comply with all Applicable Environmental Laws, in all material respects, including without limitation the removal from or under the Property constituting immovable property of any material amount of hazardous substances or solid wastes (as defined elsewhere in this Agreement). Borrower will give notice to the Lenders as soon as reasonably possible and in no event more than fifteen (15) days after it receives any compliance orders, environmental citations, or other notices from any Governmental Authority relating to any environmental condition relating to its properties or elsewhere for which it may have legal responsibility, with a full description thereof; Borrower agrees to take any and all reasonable steps and to perform any and all reasonable actions necessary or appropriate to promptly comply with any such citations, compliance orders or other Applicable Environmental Laws requiring it to remove, treat or dispose of such hazardous materials, wastes or conditions at the sole expense of Borrower and to provide Lenders with satisfactory evidence of such compliance; provided, that nothing contained herein will preclude Borrower from contesting any such compliance orders or citations if such contest is made in good faith, and appropriate reserves are established for the payment for the cost of compliance therewith. Notwithstanding the foregoing provisions, Borrower has informed the Lenders that it or its affiliated tenant intends to utilize in connection with routine business operational activities at the Property, commercial products generally available to the public or routinely used in Borrower’s business which contain varying degrees of hazardous substances that are permitted by Applicable Environmental Laws. The Lenders acknowledge such intended use and agree that such use shall not constitute a breach of the covenants and agreements set forth herein, provided such hazardous substances are used for their intended purpose in accordance with this Agreement and all Applicable Environmental Laws.

 

  

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(b) Borrower will defend, indemnify and hold Lenders, their direct and indirect members and affiliates, and their respective directors, officers, members, lenders and employees harmless from and against all claims, demands, causes of action, liabilities, losses, costs and expenses (including, without limitation, costs of suit, reasonable attorneys’ fees and fees of expert witnesses) arising from or in connection with (i) the presence on or under the Property of any hazardous substances or solid wastes (as defined elsewhere in this Agreement), or any releases or discharges of any hazardous substances or solid wastes on, under or from the Property; (ii) any activity carried on or undertaken on or off the Property, whether prior to or during the term of this Agreement, and whether by Borrower or any predecessor in title or any officers, employees, lender, contractors or subcontractors of Borrower or any predecessor in title, or any third persons at any time occupying or present on the Property, in connection with the handling, use, generation, manufacture, treatment, removal, storage, decontamination, clean up, transport or disposal of any hazardous substances or solid wastes at any time located or present on or under the Property; (iii) any breach of any environmental representation, warranty or covenant under the Loan Documents; or (iv) any loss sustained due to any portion of the Property being considered “wetlands,” as such term is defined by applicable federal law. The foregoing indemnity will further apply to any residual contamination on or under the Property, or affecting any natural resources, and to any contamination of any property or natural resources arising in connection with the generation, use, handling, storage, transport or disposal of any such hazardous substances or solid wastes not undertaken in accordance with Applicable Environmental Laws; provided, that such indemnity will not apply to any releases that occur following the date that the Property is transferred by Borrower solely as a result of the actions of any other Person other than Borrower. Without prejudice to the survival of any other agreements of Borrower hereunder, the provisions of this Section will survive the final payment of all Indebtedness and the termination of this Agreement and will continue thereafter in full force and effect.

 

Section 5.15. Construction Covenants. In addition to the covenants of Borrower otherwise set forth in this Agreement, Borrower hereby agrees that, so long as any part of the Indebtedness is outstanding, unless compliance shall have been waived in writing by Lenders, Borrower shall at all times comply with the following covenants:

 

(a) Commencement and Completion of Project. Borrower (i) has commenced and will hereafter cause to be prosecuted with diligence and continuity the permitting, site acquisition, component fabrication and purchase, construction of the Improvements, and the acquisition and installation of all equipment and other Property required for the Project, in accordance with the Construction Schedule, the Project Budget, and the Plans and Specifications; (ii) promptly correct or cause to be corrected any defect in the Property with respect to the Project, any material departure in the construction or installation of the Improvements and other Property with respect to the Project from the Plans and Specifications, governmental requirements, or any encroachment by any part of the Improvements or other Property with respect to the Project on any building line, easement, property line, or restricted area; (iii) cause the Project to be completed in good and workmanlike manner; and (iv) promptly notify Lenders of any lien filed by any Contractor, any subcontractor, supplier or laborer or of Borrower’s knowledge that any Contractor or any subcontractor, has failed to pay amounts due following the funding of any advance for the payment of same. Notwithstanding anything to the contrary in this Agreement, the Project or an Alternative Qualified Project shall not be deemed to have been fully completed in accordance with this Agreement (“Completion” or “Completion of the Project”) until all necessary certificates, licenses, consents and other approvals of Governmental Authorities have been issued or made with respect to the completion of the Project, the Alternative Qualified Project, if applicable, and the operation of the Project or Alternative Qualified Project, as applicable. Borrower will use its best reasonable efforts to complete the Project not later than the Scheduled Completion Date.

 

  

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(b) Construction Schedule and Budgets. Borrower shall promptly notify Lenders of (i) any modifications to the Construction Schedule which may cause any material delay in the expenditure of funds from the Disbursement Account or in the Scheduled Completion Date, or (ii) any material increase in the construction budget resulting from the construction bid process; provided that such notice shall not constitute a waiver by the Lenders of any requirements set forth in the Loan Documents. Upon the occurrence of any material delays that may cause Borrower not to be in compliance with any of its representations, warranties or covenants in Section 4.12 or Section 5.18 hereof or any material increase in the construction budget that would cause Borrower to have insufficient funding to complete the Project, if any proceeds remain in the Disbursement Account, Borrower shall designate one or more of the Alternative Qualified Project(s) to which proceeds in the Disbursement Account are to be applied (to the extent necessary to avoid or cure such non-compliance), and subject to (i) Lenders’ approval (not to be unreasonably withheld) of the plans and specifications, budget, and expenditure and completion timeline for such Alternative Qualified Project(s), (ii) receipt by Lenders of an agreed-upon procedures report similar in form to the QALICB Report, an update to the Financial Projections, and a legal opinion confirming that the application of funds to such Alternative Qualified Project(s) should not impair the status of the Loans as QLICIs, and (iii) execution by Borrower and Guarantor of such amendments or supplements to this Agreement and/or the other Loan Documents as Lenders may reasonably require to reflect the parties’ rights and obligations with respect to such Alternative Qualified Project(s), Lenders shall permit funds in the Disbursement Account (to the extent provided immediately above) to be used for costs and expenses related to such Alternative Qualified Project(s), in accordance with the plans and specifications, budget, and expenditure and completion timeline approved by Lenders. In the event that, following any such material delays or material increases, one or more Alternative Qualified Projects are not approved for funding in a manner and on a timeline that, in the judgment of Lenders, would avoid or cure such non­compliance with Borrower’s representations, warranties, or covenants in Section 4.12 or Section 5.18 hereof, such circumstance shall be deemed an Event of Default hereunder.

 

(c) Land. Borrower shall acquire rights to the Land as required to complete the Project and operate the Project thereon in accordance with all applicable governmental requirements for the useful life of the Project, and shall provide evidence thereof to Lenders, upon request.

 

(d) Plans and Specifications. The Plans and Specifications shall materially comply (and the Improvements and other Property with respect to the Project when constructed and installed in accordance with the Plans and Specifications, will comply) with all applicable federal, state and local laws, statutes, codes, ordinances, orders, rules, and regulations and interpretations thereof, including those relating to erosion control, land use and development, subdivision of property, environmental matters, zoning, fire safety, and structural, architectural or other features of buildings or other improvements to property or the uses thereof (including those regulating or requiring access or special facilities for disabled persons). The Plans and Specifications shall be delivered to the Construction Inspector as available and upon request, to the Disbursing Agent, the Investor, and/or the Lenders.

 

  

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(e) Improvements and Property. Neither the construction of the Improvements nor the installation or use of the Property with respect to the Project, nor the operation of the Project when the Project has been completed, will materially violate (a) any applicable federal, state or local law, statute, code, ordinance, order, rule, or any regulation and interpretation thereof; or (b) any building permits, restrictions or record, or any agreement affecting the Property with respect to the Project or any part thereof, including without limitation, the Construction Documents. Without limiting the foregoing, all authorizations, approvals, consents, licenses, permits, exemptions of, registrations and filings with, and reports to a Governmental Authority required to complete the Project in accordance with the Plans and Specifications and to operate the Project thereon have been or shall be obtained prior to the commencement of any work for which such Governmental Approval is required. All permits and licenses required for the use or operation of the Project which cannot be obtained until construction or installation of the Improvements or Property is completed can be obtained if the Improvements and Property are completed and installed in accordance with the Plans and Specifications.

 

Section 5.16. Appraisal. Lenders shall have the right to have the Borrower’s Property and/or the Borrower’s going concern value appraised at Borrower’s expense any time during the term of the Loans if (a) an Event of Default has occurred, (b) Borrower requests an extension or material modification of the Loans (including but not limited to any request to apply Loan proceeds to any Alternative Qualified Investment), or (c) any material damage or destruction of the Property occurs.

 

Section 5.17. Accounts. Borrower shall maintain the Disbursement Account with U.S. Bank, National Association.

 

Section 5.18. New Markets Tax Credit Program Affirmative Covenants. As of the date hereof and throughout the term of the Loans, Borrower hereby covenants to Lenders as follows:

 

(a) At the direction of the Lenders, the Borrower shall prepare and submit, as appropriate, to the Secretary of the Treasury or the IRS (or any other governmental authority designated for such purpose), on a timely basis, any and all annual reports, information returns and other certifications and information required to avoid any Recapture Event or the imposition of penalties or interest on the Lenders or any of its direct or indirect members for failure to comply with NMTC Law in connection with the Loans, the Project or any Alternative Qualified Project replacing the Project;

 

(b) Borrower shall provide such information and sign such documents as are necessary for the Lenders and their members to make timely, accurate and complete submissions of (i) federal and state income tax returns, (ii) reports to governmental agencies, and (iii) any other reports required to be delivered by the Lenders and their members, with respect to the Loans, the Project or any Alternative Qualified Project replacing the Project;

 

  

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(c) Borrower shall promptly provide Lenders and their members with notice of any (i) material default or failure of compliance with respect to any other financial, contractual or governmental obligation of Borrower or Guarantor; (ii) IRS proceeding regarding the Project, Guarantor, or Borrower; (iii) material litigation, criminal action or administrative proceeding against Borrower or Guarantor; or (iv) communication from any other lender or Governmental Authority received by Borrower or Guarantor which, in each case, is not in the ordinary course of business and which is reasonably expected to have a Material Adverse Effect;

 

(d) Borrower shall maintain its status as a QALICB and shall operate the Business and the Project in a manner that satisfies, and shall continue to satisfy, all restrictions applicable to the Business and the Project generating New Markets Tax Credits;

 

(e) With respect to the current taxable year and any taxable year during the term of the Loans, at least fifty percent (50%) of the total gross income within the meaning of Tres. Reg. §1.45D-1(d)(4)(i)(A) of Borrower will be derived from the active conduct of its trade or business within census tracts that constitute Low-Income Communities;

 

(f) With respect to the current taxable year and any taxable year during the term of the Loans, at least forty percent (40%) of the use of the tangible property of Borrower (whether owned or leased) will be within census tracts that constitute Low-Income Communities (for purposes of this representation, the percentage of tangible property owned or leased by Borrower during the taxable year in census tracts that constitute Low-Income Communities shall be determined based on a fraction (i) the numerator of which is the Average Value of the tangible property used by Borrower within census tracts that constitute Low-Income Communities, and (ii) the denominator of which is the Average Value of all of the tangible property owned or leased by Borrower and used by Borrower during the taxable year); provided, however, that for any taxable year in which Borrower has no employees, at least eighty-five percent (85%) of the use of the tangible property of Borrower (whether owned or leased) will be within census tracts that constitute Low-Income Communities. Borrower shall provide a true, correct and complete list of tangible property owned or leased by Borrower and a description of where such property is used by Borrower. To the extent that any tangible property is used outside of census tracts that constitute Low-Income Communities, Borrower shall provide, the cost basis of all property owned by Borrower and the estimated value of any leased property and the basis of such estimate and the business hours of usage of Borrower's property within and without such census tracts. Borrower shall retain records of the foregoing throughout the term of the Loans;

 

(g) With respect to the current taxable year and any taxable year during the term of the Loans, less than five percent (5%) of the average of the unadjusted basis of the property of Borrower shall be attributable to Nonqualified Financial Property. Borrower shall provide to Lenders a true, correct, and complete listing of any Nonqualified Financial Property owned by Borrower, including therein the unadjusted basis of such property, and shall maintain records thereof throughout the term of the Loans;

 

(h) Borrower reasonably anticipates that the proceeds of the Loans shall be disbursed for Project Costs by December 31, 2014);

 

  

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(i) With respect to the current taxable year and any taxable year during the term of the Loans in which Borrower has one or more employees providing services (or a Borrower Affiliate’s employees engaged primarily in providing services to Borrower), at least fifty percent (50%) of the services performed for Borrower by such employees will be within census tracts that constitute Low-Income Communities (for purposes of this representation, this percentage is determined based on a fraction, the numerator of which is the total amount paid by Borrower for employee services performed in census tracts that constitute Low-Income Communities during the taxable year, and the denominator of which is the total amount paid by Borrower for employee services during the taxable year). Borrower shall provide a list of employees providing services, including a general description of services provided, and if applicable compensation paid for services rendered within and without such census tracts;

 

(j) With respect to the current taxable year and any taxable year during the term of the Loans, less than five percent (5%) of the aggregate unadjusted basis of Borrower’s property shall be attributable to Collectibles;

 

(k) At no time during the term of the Loans shall any of the Property be used as, or converted into, Residential Rental Property;

 

(l) With respect to the current taxable year and any taxable year during the term of the Loans, Borrower shall engage solely in a Qualified Business;

 

(m) With respect to the current taxable year and any taxable year during the term of the Loans, the trade or business of a tenant or subtenant (if any) shall consist solely of a Tenant Qualified Business;

 

(n) No portion of the Loan Proceeds shall be used directly or indirectly with respect to a “qualified low-income building” as defined for purposes of Section 42 of the Code;

 

(o) Borrower shall not be a bank, credit union or other financial institution;

 

(p) Assuming that each Lender is a qualified community development entity under Section 45D of the Code, the Loans and each advance thereunder will constitute a QLICI;

 

(q) Borrower shall not enter into any transaction or series of transactions the principal purpose of which is to achieve a result that is inconsistent with the purposes of Code Section 45D or Treasury Regulation Section 1.45D-1(g)(1);

 

(r) Borrower shall not discontinue conducting business or change the nature of, or manner in which it conducts, its business in any way that would cause to be untrue any of the representations, warranties or covenants set out in this Section 5.18 and Section 4.12 of this Agreement;

 

(s) Borrower is and shall be classified as a corporation which is not disregarded as separate from another entity for federal income tax purposes;

 

(t) The Borrower shall continue to generate gross revenues;

 

  

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(u) All Loan proceeds shall be used solely for the acquisition, development, equipping, furnishing, leasing and operation of the Project and related transaction costs, unless otherwise approved by Lenders in accordance with this Agreement. Borrower will use one hundred percent (100%) of the proceeds of the Loans for the purposes described herein and, as of the Closing Date, reasonably anticipates that it will expend the proceeds of the Loans within fifteen (15) months of the Closing Date.

 

(v) The Borrower will treat the Loans as indebtedness for all purposes, and will not take any positions contrary to such treatment;

 

(w) Borrower shall provide all information, reports and statements reasonably requested by Lenders for purposes of Lenders’ reporting requirements pursuant to the Allocation Agreement to monitor compliance with Section 45D of the Code, and to measure the community benefit of the Loans within twenty (20) Business Days after request therefor, including but not limited to the following with respect to the Borrower:

 

(i) provide an estimate of the number of construction jobs involved in the development of the Project, including the jobs held by low-income persons or residents of Low-Income Communities to the extent the latter information is available, and a breakdown of the construction jobs based upon wages;

 

(ii) an estimate of the number of full-time equivalent jobs as of the date hereof, and the projected full-time equivalent jobs to be created or retained, and within forty-five (45) days of the close of each tax year, the jobs actually created or retained as a result of the financing, including an estimate of the number of permanent jobs held by low-income persons or residents of Low-Income Communities to the extent the latter information is available, and a breakdown of such jobs based on wages;

 

(iii) the number of households and businesses subscribing to broadband service that receive new or improved access and the number of educational, library, healthcare, and public safety providers receiving either new or improved access to broadband service; and

 

(iv) at closing of the Loans, the annual gross revenues of Borrower as of its fiscal year end prior to the closing, and within 120 days of the close of each tax year, the annual gross revenues of Borrower for each preceding tax year.

 

(x)Borrower shall promptly notify Lender of any noncompliance with this Section 5.18 (excluding clause (y));

 

(y) Borrower agrees to cooperate with Lenders by providing such other incidental information as may be reasonably requested by the Lenders for purposes of their communications and publicity regarding the Loans, provided that the failure of Borrower to provide information under this subsection shall not result in the imposition of any penalties on Borrower or an Event of Default or Default hereunder;

 

(z) Borrower agrees it will not, without Lenders’ prior written consent (which consent will not be unreasonably withheld), enter into, materially modify or terminate, the Leases, or any lease of a substantial portion of the Property, or any other lease, that in such case is reasonably expected to have a Material Adverse Effect, and in no event shall any leases, amendments or subleases be entered into that would adversely affect the Lenders’ compliance with the New Markets Tax Credit covenants contained in this Section 5.18; provided that the Lenders hereby approve (i) the Leases, (ii) replacement leases to a Borrower Affiliate in substantially the same form as the applicable Lease, and (iii) the assignment of any of the Leases to a Borrower Affiliate;

 

  

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(aa) Borrower shall not permit a change in control or ownership of interests in Borrower which would result in Investor or any Lender having NMTC Control of Borrower;

 

(bb) Borrower acknowledges and agrees that the Lenders may share all information pertaining to the Loans, Borrower and the Project with the CDFI Fund, the Investor, Lenders’ members, as permitted pursuant to Section 9.19 of this Agreement, or as required by law; provided that the parties shall not at any time disclose trade secrets or other proprietary information of the Borrower or its Affiliates;

 

(cc) Borrower shall promptly supply the Lenders with any reports, records, statements, documents or other information reasonably requested by the Lenders in connection with responding to any request by the CDFI Fund and the US Department of Treasury with respect to the Loans, the Project or any Alternative Qualified Project replacing the Project, including any request pursuant to Section 6.3 or Section 6.5 of the Allocation Agreement (e.g., financial and activity reports, records, statements, documents and other information for purposes of ensuring compliance with this Section 5.18) as may be required to comply with NMTC Law, with respect to the Loans, the Project or any Alternative Qualified Project replacing the Project, and shall promptly cooperate with the Lenders to enable the Lenders to comply with all of the requirements of the Allocation Agreement. In connection therewith, Borrower shall maintain records throughout the term of the Loans of:

 

(i) the activities and services performed by employees and the administration of their employment (including where their services are performed and, in instances where such employees also perform services for persons or entities other than Borrower, the allocation of their time between Borrower and any such other person or entity) that are sufficient to establish compliance with the requirements of this Section 5.18;

 

(ii) the average values and locations of tangible personal property of Borrower that are sufficient to establish compliance with the requirements of this Section 5.18; and

 

(iii) the unadjusted bases of the property of Borrower generally and in particular, any Collectibles and any Nonqualified Financial Property it may own, that are sufficient to establish compliance with the requirements of this Section 5.18;

 

(dd) Borrower shall collaborate with the Lenders with respect to the response to be made to any 90-day notice of noncompliance and ability to cure the provisions of this Section 5.18 provided by the CDFI Fund to the Lenders pursuant to Section 8.6 of the Allocation Agreement;

 

(ee) Borrower shall cooperate with the Lenders in seeking any waiver or extension sought by the Lenders with respect to a Recapture Event (regardless of whether or not Borrower has violated any covenants provided herein or failed to act as directed by the Lenders), pursuant to Treas. Reg. Section 1.45D-1(e)(5) and Rev. Proc. 2011-1, 20011-1 I.R.B. 1, as amended or supplemented;

 

  

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(ff)Borrower shall not by its action (including but not limited to a prepayment of the Loans during the Compliance Period) or inaction cause a Recapture Event;

 

(gg) Borrower shall agree to any modifications of the foregoing requirements reasonably required to maintain compliance with NMTC Law as determined by Lenders; provided that such modifications do not materially adversely impact the economic terms and conditions of the Loans or Borrower’s obligations hereunder in any material manner; and

 

(hh) Borrower shall provide the Lenders a QALICB compliance certification by February 28 of each fiscal year (or at such times as otherwise requested by Lenders) substantially in the form attached hereto as Exhibit H to confirm compliance with this Section 5.18.

 

(ii)           Each of Ginsberg Jacobs, LLC, Nixon Peabody LLP, Polsinelli Shughart PC, Mark D. Foster, Davis Wright Tremaine LLP and SNR Denton US LLP are hereby permitted to rely on the Borrower’s covenants contained herein in connection with the issuance of corporate, enforceability, federal income tax and other transaction opinions to the Funds, the Investor and the Lender.

 

 

ARTICLE VI

 

NEGATIVE COVENANTS

 

Unless the Lenders’ prior written consent to the contrary is obtained, Borrower will at all times comply with the covenants contained in this Article VI, from the date hereof and for so long as any part of the Indebtedness is outstanding.

 

Section 6.01. Debts, Guaranties and Other Obligations. Borrower will not incur, create, assume or in any manner become or be liable in respect of any Debt which would reasonably be expected to have a Material Adverse Effect on the Borrower, whether direct or contingent, except for: (a) the Indebtedness to Lenders under the Loan Documents; or (b) Debt previously disclosed to Lenders, set forth on Schedule 1 attached hereto.

 

Section 6.02. Liens. Borrower will not create, incur, assume or permit to exist any Lien on any of the Collateral now owned or hereafter acquired, except for: the pledge of the Collateral and any other Liens on the Collateral in favor of Lenders to secure the Indebtedness of Borrower to Lenders under the Loan Documents and Permitted Liens.

 

Section 6.03. Reserved.

 

Section 6.04. Merger and Sale of Property. Borrower will not acquire, merge with or consolidate with any Person (whether or not such acquisition, merger, or consolidation requires any capital expenditures on the part of Borrower). Borrower will not suffer or permit any amendment to Borrower’s organizational documents that would have a material adverse effect on Lenders. Borrower will not sell, assign, lease, exchange, transfer, convey or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of the Property to any Person, provided that the Lenders hereby consent to the Leases.

 

Section 6.05. ERISA Compliance. Borrower will not at any time permit any Plan maintained by it to engage in any “prohibited transaction” as such term is defined in Section 4975 of the Code; incur any “accumulated funding deficiency” as such term is defined in Section 302 of ERISA; or terminate any such Plan in a manner which could result in the imposition of a Lien on the property of Borrower pursuant to Section 4068 of ERISA.

 

  

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       Section 6.06. Change of Control. Borrower shall not permit a Change of Control to occur.

 

ARTICLE VII

 

CONDITIONS OF LENDING

 

Section 7.01. Conditions of Loan Advance. The obligation of the Lenders to close and fund the Loans is subject to the accuracy of each and every representation and warranty of Borrower contained in this Agreement, and to the receipt by the Lenders of the following on or before the Closing Date, all of which will be satisfactory in form and substance to the Lenders:

 

(a) Agreement. Duly executed counterpart of this Agreement signed by all the parties hereto;

 

(b) Notes. Duly executed Notes signed by Borrower;

 

(c) Loan Documents. Duly executed counterparts or originals of all of the Loan Documents signed by all parties thereto;

 

(d) Formation and Other Documents. (i) Articles of organization and bylaws of Borrower and Guarantor, together with all amendments, certified by the Alaska Secretary of State, together with a certificate of good standing as to Borrower and Guarantor from the Alaska Secretary of State; and (ii) Resolutions of Borrower and Guarantor authorizing the execution of the Loan Documents to which it is a party certified correct and complete by an authorized officer of Borrower or Guarantor, as applicable;

 

(e) Opinion of Counsel. One or more opinions of counsel to Borrower and Guarantor addressed to the Lenders, in form and substance acceptable to the Lenders;

 

(f) Qualified Equity Investment. The Funds will have closed and funded the Fund QEIs;

 

(g) Current Financial Statements. Audited financial statements for GCI with respect to fiscal year 2011;

 

(h) Construction Documents. Executed copies of all applicable Construction Documents, to the extent in effect as of the date hereof;

 

  

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(i) New Markets Tax Credits Program. Compliance and debarment certificates and all other instruments reasonably required by Lenders’ counsel;

 

(j) Insurance Policies. Insurance policies or certificates required by this Agreement;

 

(k) Project Budget. The detailed line item cost breakdown of land costs, construction costs (hard costs), equipment and installation costs, and all other related indirect development costs (soft costs), including working capital, construction period interest reserve and contingency and a schedule of values;

 

(l) Construction Schedule. The Construction Schedule from the date hereof through Completion of the Project;

 

(m) Plans and Specifications. Upon request of a Lender, current engineering drawings and specifications, including any revisions, amendments and addenda as required to complete the construction of the Improvements, and the installation of equipment and other Property with respect to the Project;

 

(n) Permits. Appropriate permits and such other licenses prerequisite to authorize the construction of the Project in accordance with the Plans and Specifications, the acquisition and installation of equipment and other Property with respect to the Project, and the operation of the Project thereon, to the extent issued as of the date hereof;

 

(o) Leases. The Leases; and

 

(p) Other. The satisfaction of all other applicable provisions under Article II hereof

 

and all other requirements and conditions reasonably imposed by Lender.

 

Section 7.02. Disbursements. Any and all disbursements from the Disbursement Account shall be made in accordance with the terms and conditions of the Disbursing Agreement.

 

 

  

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ARTICLE VIII

 

DEFAULT

 

Section 8.01. Events of Default. Any of the following events will be considered an “Event of Default” as that term is used herein.

 

(a) Payments Under the Notes. Borrower fails to make payment when due of any principal, interest or other payment obligation due on the Notes, or under the Loan Documents, and such failure remains more than five days after written notice of non-payment (which notice may be sent by ordinary mail, fax or e-mail) is given by the Lenders to Borrower.

 

(b) Representations and Warranties. Any representation or warranty made by Borrower or Guarantor contained in the Loan Documents proves to have been incorrect in any material respect as of the date thereof; or any representation, or certificate furnished or made to the Lenders by any Person (other than a Lender) under the Loan Documents proves to have been untrue in any material respect as of the date stated or certified, and such Default continues uncured for a period of 15 days after written notice of such Default (specifying the Default) is given by Lenders to the Borrower or Guarantor.

 

(c) Other Indebtedness to the Lenders. Borrower defaults in the payment of any amounts due to any of the Lenders relating to any Debt of Borrower to any of the Lenders (other than the Loans) in excess of $500,000, and any grace period applicable to such default has elapsed, and such Default continues uncured for a period of 15 days after written notice of such Default (specifying the Default) is given by the applicable Lender to Borrower.

 

(d) Other Debt to Another Lender. Borrower defaults in the payment of any amounts due to any Person (other than to a Lender) relating to any Debt of Borrower to any Person (other than a Lender), which Debt is in excess of $500,000 and any grace period applicable to such default has elapsed.

 

(e) Involuntary Bankruptcy or Receivership Proceedings. A receiver, conservator, liquidator or trustee of Borrower or Guarantor, or of any substantial portion of its property is appointed by order or decree of any court or agency or supervisory authority having jurisdiction; or an order for relief is entered against Borrower or Guarantor under the Federal Bankruptcy Code; or any material portion of any property of Borrower or Guarantor is sequestered by court order and such order remains in effect for more than 30 days after such party obtains knowledge thereof; or a petition is filed against Borrower or Guarantor under any state, reorganization, arrangement, insolvency, readjustment of debt, dissolution, liquidation or receivership law of any jurisdiction, whether now or hereafter in effect, and such petition is not dismissed within 60 days.

 

(f) Voluntary Petitions. Borrower or Guarantor files a case under the Federal Bankruptcy Code or seeks relief under any provision of any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction, whether now or hereafter in effect, or consents to the filing of any case or petition against it under any such law.

 

(g) Assignments for Benefit of Creditors. Borrower or Guarantor makes an assignment for the benefit of its creditors, or admits in writing its inability to pay its debts generally as they become due, or consents to the appointment of a receiver, trustee or liquidator of Borrower or Guarantor, or of all or any substantial part of Borrower’s or Guarantor’s property.

 

(h) Undischarged Judgments. Judgment for the payment of money in excess of $500,000 (which is not covered by insurance) is rendered by any Governmental Authority against Borrower, and Borrower does not discharge the same or provide for its discharge in accordance with its terms, or procure a stay of execution thereof within 30 days from the date of entry thereof, and within said 30-day period or such longer period during which execution of such judgment will have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal while providing such reserves therefor as may be required under generally accepted accounting principles, and such Default continues uncured for a period of 15 days after written notice of such Default (specifying the Default) is given by the Lenders to Borrower.

 

(i) Delay in Scheduled Completion Date. Work on the Project (or an Alternative Qualified Project) shall be substantially abandoned, or shall, by reason of Borrower’s fault, be discontinued for a period of more than sixty (60) days, or construction shall be delayed for any reason whatsoever to the extent that Completion of the Project (or an Alternative Qualified Project) cannot, in the reasonable judgment of Lenders, be accomplished on or before the applicable Scheduled Completion Date. If there is a delay that would otherwise result in an Event of Default under the foregoing provisions, then if (i) the Borrower proposes one or more Alternative Qualified Projects that would utilize the Loan funds prior to the Scheduled Completion Date and consistent with NMTC Program Requirements (as determined by Lenders in good faith, based on the advice of counsel) and provides all due diligence documentation for such Alternative Qualified Project(s) within thirty (30) days following written notice, and (ii) Lenders shall have approved such Alternative Qualified Project(s) (which approval shall not be unreasonably withheld) and Borrower and Guarantors shall have entered into any amendments to the Loan Documents (and any other transaction documents) reasonably required by Lenders to reflect the use of Loan proceeds to finance such Alternative Qualified Project(s) within sixty (60) days following such written notice, such delay shall not constitute an Event of Default hereunder.

 

  

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(j) Effectiveness of Documents. Any Loan Document shall, at any time, cease to be in full force and effect or shall be judicially declared null and void, or the validity or enforceability thereof shall be contested by Borrower or the Lenders shall cease to have a valid and perfected security interest having the priority contemplated thereunder in the Collateral described therein, other than by action or inaction of any Lender, if any of the foregoing shall remain unremedied for 10 days or more after receipt or notice thereof to Borrower from Lenders.

 

(k) Other Covenants. Borrower or Guarantor defaults in the observance or performance of any of the covenants or agreements contained in the Loan Documents, to be kept or performed by Borrower or Guarantor, as applicable (other than a default under the other Subsections of this Section 8.01), and such default continues unremedied for a period of 30 days after notice thereof being given by Lenders to Borrower or Guarantor, as applicable; provided, that if it is not reasonably feasible for Borrower or Guarantor to cure such default within 30 days, so long as Borrower or Guarantor has commenced efforts to cure within such 30-day period and is diligently pursuing efforts to cure, Borrower or Guarantor, shall have an additional 60 days in which to cure such default. Borrower’s and Guarantor’s rights to cure will be applicable only to curable defaults.

 

(l) Financial Condition. Borrower or Guarantor shall incur or permit to exist a change to its financial condition that has or would reasonably be expected to have a Material Adverse Effect upon its ability to perform its obligations under the Loan Documents.

 

 

  

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Section 8.02. Remedies. Upon the occurrence and during the continuation of any Event of Default, Lenders may, in their sole discretion, pursue any one or more of the following remedies concurrently or successively, it being the intent hereof that none of such remedies shall be to the exclusion of any other:

 

(a) take possession of the Collateral pursuant to the Collateral Documents;

 

(b) perform any or all of Borrower’s covenants and agreements hereunder, under any of the other Loan Documents, or under any lease or sublease;

 

(c) declare the entire indebtedness evidenced by the Notes, without demand or notice of any kind (which are hereby expressly waived) to be due and payable at once and, in such event, such indebtedness and obligations shall become immediately due and payable;

 

(d) set off any sum due to or incurred by Lenders against all deposits and credits of Borrower with, and any and all claims of Borrower against, Lenders. Such right shall exist whether or not Lenders shall have made any demand hereunder or under any other Loan Documents, whether or not said sums, or any part thereof, or deposits and credits held for the account of Borrower is or are matured or unmatured, and regardless of the existence or adequacy of any collateral, guaranty or any other security, right or remedy available to Lenders. Lenders agree that, as promptly as is reasonably possible after the exercise of any such setoff right, they shall notify Borrower of the exercise of such setoff right; provided, however, that the failure of Lenders to provide such notice shall not affect the validity of the exercise of such setoff rights. Nothing in this Agreement shall be deemed a waiver or prohibition of or restriction on Lenders to all rights of banker’s lien, setoff and counterclaim available pursuant to law; and

 

    (e) exercise any or all remedies specified herein and in the other Loan Documents, and/or exercise any other remedies which it may have therefor at law, in equity or under statute.

 

Any expense incurred by the Lenders, including but not limited to the Lead CDE pursuant to the Intercreditor Agreement, in the performance of any of the foregoing remedies, shall be deemed to be part of the Indebtedness of Borrower. Waveland XXII has been appointed to serve as Lead CDE and enforce remedies on behalf of the Lenders pursuant to the Intercreditor Agreement, unless and until a successor is appointed as the Lead CDE thereunder, with notice to the Borrower. The Lenders acknowledge and agree that the Guarantors and Borrower shall be entitled to rely on any communication received by them from the Lead CDE in connection with the exercise of any of the foregoing remedies and that neither the Guarantors nor Borrower shall have any obligation to confirm such authority with any Lender unless such Lender has notified the Guarantors and/or Borrower in writing to the contrary.

 

 

  

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ARTICLE IX

 

MISCELLANEOUS

 

Section 9.01. Notices. Any notice or demand which, by provision of this Agreement, is required or permitted to be given or served by Lender to or on Borrower will be in writing and will be deemed to have been sufficiently given and served for all purposes (if mailed) five Business Days after being deposited, postage prepaid, in the United States Mail, registered or certified mail, or (if delivered by express courier) one Business Day after being delivered to such courier, or (if delivered in person or by facsimile transmission) the same day as delivery with receipt confirmed, in each case addressed (until another address is given in writing by Borrower to Lender) as follows:

 

To Borrower:                                         Unicom, Inc.

c/o General Communication, Inc.

                   Corporate Counsel

2550 Denali Street, Suite 1000

                Anchorage, Alaska 99503

Facsimile: (907) 868-5676

 

If to USB 74:                                          c/o U.S. Bancorp Community Development Corporation

1307 Washington Avenue, Suite 300

St. Louis, Missouri 63103

Attention: Director of Asset Management-NMTC

Project Reference: #21513

Facsimile: (314) 335-2602

Email: usbcdc.nmtc&htc@usbank.com

 

	
with a copy to:

	
SNR Denton US LLP

	
  

	
233 South Wacker Drive, Suite 7800

	
  

	
Chicago, Illinois 60606-6404

	
  

	
Attention: Scott Lindquist, Esq.

	
  

	
Facsimile: (312) 876-7934

 

If to LBC 2:                                           LBCDE SUB2 LLC

c/o Lower Brule Community Development Enterprise, LLC

400 N. Washington Street, #106

Falls Church, VA 22046-3433

Attn: Joe Falkson

Facsimile: (703) 241-8548

 

	
with a copy to:

	
Nixon Peabody LLP

	
                                                               401 Ninth Street SW

	
                                                               Suite 900

	
                                                               Washington, DC 20004

	
  

	
Attention: Scott Sergio

	
  

	
Facsimile: (866) 947-3834

 

if to CNB II:                                           Cherokee Nation Sub-CDE II, LLC

c/o CNB Economic Development, LLC

777 West Cherokee Street

 

Catoosa, OK 74015

Attention: Shawn Slaton

Facsimile: (918) 266-8180

 

with a copy to:          Law Office of Mark D. Foster

4835 LBJ Freeway, Suite 424

Dallas, Texas 75244

Attention: Mark D. Foster

Facsimile: (214) 363-9551

 

  

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If to Waveland XXII:                           Waveland Community Development, LLC

c/o Waveland Ventures, LLC

825 N. Jefferson Street, Suite 300

Milwaukee, Wisconsin 53202

Attention: Paul Deslongchamps

Facsimile: (414) 291-5893

 

and to:            Waveland Community Development, LLC

515 Congress Avenue, Suite 1700

Austin, Texas 78701

Attention: Rick Hayes

Facsimile: (512) 322-9040

 

with a copy to:          Law Office of Mark D. Foster

4835 LBJ Freeway, Suite 424

Dallas, Texas 75244

Attention: Mark D. Foster

Facsimile: (214) 363-9551

If to any Lender,

with a copy to:                                      U.S. Bancorp Community Development Corp.

1307 Washington Ave., Ste. 300

St. Louis, MO 63103

Attention: Director of Asset Management - NMTC

Reference #21513

Facsimile: (314) 335-2602

Email: usbcdc.nmtc&htc@usbank.com

 

and to:                                                    SNR Denton US LLP

233 South Wacker Drive, Suite 7800

Chicago, Illinois 60606

Attention: Scott A. Lindquist, Esq.

Facsimile: (312) 876-7934

 

 

  

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Section 9.02. Entire Agreement. The Loan Documents now, or hereafter to be, executed set forth the entire agreement of Lenders and Borrower and supersede all prior written or oral understandings with respect thereto. This Agreement shall control in the event of any conflict in the terms and conditions hereof and of the other Loan Documents.

 

Section 9.03. Renewal, Extension or Rearrangement. All provisions of this Agreement relating to the Notes will apply with equal force and effect to each and all promissory note(s) hereinafter executed which in whole or in part represent a renewal, extension for any period, increase, decrease or rearrangement of any part of the Notes.

 

Section 9.04. Amendment. None of the Loan Documents may be changed, waived, discharged or terminated orally or in any manner other than by an instrument in writing signed by the party against whom enforcement of the change, waiver, discharge or termination is sought.

 

Section 9.05. Invalidity. In the event that any one or more of the provisions contained in the Loan Documents will, for any reason, be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability will not affect any other provision of the Loan Documents.

 

Section 9.06. Survival of Agreements. All representations and warranties of Borrower herein, and all covenants and agreements herein not fully performed before the effective date of this Agreement, will survive such date.

 

Section 9.07. Waivers. No course of dealing on the part of Lenders or their officers, direct or indirect members, or consultants, nor any failure or delay by Lenders with respect to exercising any of their rights, powers or privileges under the Loan Documents will operate as a waiver thereof.

 

Section 9.08. Cumulative Rights. The rights and remedies of Lenders under the Loan Documents will be cumulative, and the exercise or partial exercise of any such right or remedy will not preclude the exercise of any other right or remedy available to the Lenders under the Loan Documents or by law.

 

Section 9.09. Time of the Essence. Time will be deemed of the essence with respect to the performance of all of the terms, provisions and conditions on the part of Borrower and the Lenders to be performed hereunder.

 

 

  

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Section 9.10. Successors and Assigns; Participants.

 

(a) Subject to Section 9.10(b) and (d) below, all covenants and agreements contained by or on behalf of Borrower in the Loan Documents will bind its successors and assigns and will inure to the benefit of the Lenders and their respective successors and assigns.

 

(b) This Agreement is only for the benefit of the Lenders and for their Permitted Assignees (defined below). “Permitted Assignees” shall mean (i) the Funds and (ii) only upon and during the continuance of an Event of Default, subject to Section 9.10(d) below, such other Person or Persons as may from time-to-time become or be the holders of any of the Indebtedness, and this Agreement will be transferable and negotiable, with the same force and effect only to Permitted Assignees, it being understood that, upon the transfer or assignment by the Lenders of any of the Indebtedness to a Permitted Assignee, the legal holder of such Indebtedness which is a Permitted Assignee will have all of the rights granted to the Lenders under this Agreement.

 

(c) Subject to Section 9.10(d) below, Borrower hereby recognizes and agrees that the Lenders may, from time-to-time, one or more times, transfer all or any portion of the Indebtedness to one or more third parties; provided that such third parties are Permitted Assignees. Subject to Section 9.01(d) below, Borrower specifically (i) consents to all such transfers and assignments and waives any subsequent notice of and right to consent to any such transfers and assignments as may be provided under applicable Alaska law; (ii) agrees that the purchaser of a participation interest in the Indebtedness that is a Permitted Assignee will be considered as the absolute owner of a percentage interest of such Indebtedness and that such a purchaser will have all of the rights granted to the purchaser under any participation agreement governing the sale of such a participation interest; (iii) waives any right of offset that Borrower may have against such lender and/or any purchaser of such a participation interest in the Indebtedness that is a Permitted Assignee, and unconditionally agrees that either such lender or such a purchaser may enforce Borrower’s Indebtedness under this Agreement, irrespective of the failure or insolvency of such lender or any such purchaser; (iv) agrees that any purchaser of a participation interest in the Indebtedness that is a Permitted Assignee may exercise any and all rights of counter claim, setoff, banker’s lien and other liens with respect to any and all moneys owing to Borrower; and (v) agrees that, upon any transfer of all or any portion of the Indebtedness to a Permitted Assignee, such lender may transfer and deliver any and all collateral securing repayment of such Indebtedness to the transferee of such Indebtedness and such collateral will secure any and all of the Indebtedness in favor of such a transferee, and after any such transfer has taken place, such lender will be fully discharged from any and all future liability and responsibility to Borrower with respect to such collateral, and the transferee thereafter will be vested with all the powers, rights and duties with respect to such collateral.

 

(d) Notwithstanding anything to the contrary set forth herein, prior to a transfer of all or any portion of the Loans by any of the Lenders (excluding transfers to the Funds), the applicable Lenders shall first offer GCI, Inc., in writing, the right to purchase the Loans (the “Loan Purchase Offer”). The purchase price (“Purchase Price”) shall be equal to the consideration to be paid by the transferee. The written Loan Purchase Offer sent to GCI, Inc. (at the Borrower’s address set forth herein) shall set forth the calculation and supporting documentation of the Purchase Price as of the date of such Loan Purchase Offer. GCI, Inc. shall have fifteen (15) Business Days following receipt of a Lender’s Loan Purchase Offer in which to accept, in writing, the offer to purchase such Loans, and the loan documents evidencing or relating to such Loans. If GCI, Inc. fails to accept the Loan Purchase Offer in writing within such period, GCI, Inc. shall be deemed to have rejected the Loan Purchase Offer. If GCI, Inc. accepts the Loan Purchase Offer within such period, GCI, Inc. shall purchase such Loans (or shall cause one of its Affiliates to do so), and the loan documents evidencing or relating to such Loans, on the date which is fifteen (15) Business Days following such acceptance (the “Loan Purchase Date”). On the Loan Purchase Date, (i) the Lender shall assign to the GCI, Inc. (or its designated Affiliate) the promissory note(s) evidencing such Loans, and the loan documents evidencing or relating to such Loans, such assignment (the “Assignment”) to be in writing, in recordable form, and made without recourse, representation or warranty other than as to the amount of the then outstanding balance of such Loans, including accrued and unpaid interest, and the amount of all other monetary obligations then owing under such Loans, and the loan documents, (ii) the applicable Lenders shall deliver the original Note(s) and the loan documents evidencing or relating to such Loans to GCI, Inc. (or its designated Affiliate), and (iii) as a condition to the execution and delivery of the Assignment and the delivery of the promissory note(s) evidencing such Loans, and the loan documents evidencing or relating to such Loans to GCI, Inc. (or its designated Affiliate), GCI, Inc. (or its designated Affiliate) shall pay to Lender, in good funds by wire transfer, the Purchase Price.

 

 

  

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Section 9.11. Relationship Between the Parties. The relationship between Lenders, on the one hand, and Borrower, on the other, will be solely that of lender and borrower, and such relationship will not, under any circumstances whatsoever, be construed to be a joint venture, joint adventure, or partnership.

 

Section 9.12. Third-Party Beneficiaries. All obligations of the Lenders to make advances or approve disbursements of Loan proceeds hereunder are imposed solely and exclusively for the benefit of Borrower and its permitted assigns. All conditions to make Loans are imposed solely and exclusively for the benefit of the Lenders.  No other Person will have standing to require satisfaction of such condition or be entitled to assume that Lenders will refuse to make the advance in the absence of strict compliance with any or all conditions thereof, and no other Person will, under any circumstances, be deemed to be a beneficiary of such conditions, any or all of which may be freely waived, in whole or in part, by the Lenders at any time in its sole discretion.

 

Section 9.13. [Reserved].

 

Section 9.14. Titles of Articles, Sections and Subsections. All titles or headings to articles, sections, subsections or other divisions of this Agreement or the exhibits hereto are only for the convenience of the parties and will not be construed to have any effect or meaning with respect to the other content of such articles, sections, subsections or other divisions, such other content being controlling as to the agreement between the parties hereto.

 

Section 9.15. Singular and Plural. Words used herein in the singular, where the context so permits, will be deemed to include the plural and vice versa. The definitions of words in the singular herein will apply to such words when used in the plural where the context so permits and vice versa.

 

  

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Section 9.16. Governing Law. This Agreement is, and the Notes will be, contracts made under and will be construed in accordance with and governed by the laws of the United States of America and the State of Alaska.

 

Section 9.17. Counterparts. This Agreement may be executed in two or more counterparts, and it will not be necessary that the signatures of all parties hereto be contained on any one counterpart hereof; each counterpart will be deemed an original, but all of which together will constitute one and the same instrument.

 

Section 9.18. Waiver of Jury Trial; Submission To Jurisdiction.

 

(a) BORROWER AND LENDERS HEREBY WAIVE TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH BORROWER AND LENDERS MAY BE PARTIES, ARISING OUT OF OR IN ANY WAY PERTAINING TO THE NOTES, THE OTHER LOAN DOCUMENTS OR BORROWER’S PROPERTY. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY BORROWER AND LENDERS AND BORROWER AND LENDERS HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. BORROWER AND LENDER FURTHER REPRESENT THAT THEY HAVE BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF THEIR OWN FREE WILL, AND THAT THEY HAVE HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.

  

(b) BORROWER AND EACH LENDER HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE STATE COURTS OF ALASKA AND THE FEDERAL COURTS IN ALASKA, AND AGREES THAT ANY ACTION OR PROCEEDING ARISING OUT OF OR BROUGHT TO ENFORCE THE PROVISIONS OF THE LOAN DOCUMENTS MAY BE BROUGHT IN ANY COURT HAVING SUBJECT MATTER JURISDICTION.

 

Section 9.19. Publication. At the request of any of the Lenders or the Investor, the Borrower will include an acknowledgement of the Lenders’ and the Investor’s financing of the Project on the Project website. Borrower hereby gives the Lenders permission to publicize their participation in the financing of the Project; provided that the Lenders shall present to Borrower an advance copy of such material for its reasonable review and comment, and further provided that after the Borrower has approved a form of Project description to be used for publicity, including the text and photos, if any, such form (or a form substantially the same in all material respects, or a portion thereof) may be used for any such purpose without further approval. Subject to the foregoing approval requirements, Borrower hereby authorizes the Lenders to reproduce and display any media (including, without limitation, photographs and illustrations) of the Project submitted to the Lenders by Borrower. Borrower represents and warrants to the Lenders that Borrower has obtained any and all licenses and/or permissions necessary for Borrower’s and Lenders’ use of such media.

 

 

  46

  

  

IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be duly executed as of the date first above written.

 

BORROWER:

 

UNICOM, INC., an Alaska corporation

 

By:   /s/ Martin Cary                                                                 

Martin Cary, Vice President & General Manager, Marketing and Sales

 

[Lender signature pages follow]

 

 

  

  

  

USB 74:

 

USBCDE SUB-CDE 74, LLC, a Missouri limited liability company

 

By: USBCDE LLC,

       a Delaware limited liability company,

       its managing member

 

By: U.S. Bancorp Community Development

       Corporation, a Minnesota corporation

 

By:          /s/ Emily E. Rose               

Emily E. Rose, Officer

 

  

  

  

CNB II:

 

CHEROKEE NATION SUB-CDE II, LLC, an Oklahoma limited liability company

 

By: CNB Economic Development Company,

       LLC, an Oklahoma limited liability company,

       its managing member

 

By: Cherokee Nation Management Corporation,

       an Oklahoma corporation, its managing member

 

       By:  /s/ Shawn Slaton             

               Shawn Slaton, President

 

  

  

  

LBC 2:

 

LBCDE SUB2 LLC,

a Delaware limited liability company

 

By: Lower Brule Community Development Enterprise, LLC,

       a Delaware limited liability company,

       its managing member

 

      By:    /s/ Gavin Clarkson             

Gavin Clarkson, President

 

  

  

  

WAVELAND XXII:

 

WAVELAND SUB CDE XXII, LLC, a Colorado limited liability company

 

	
By: Waveland Community Development, LLC, a Colorado limited liability company, its managing member

 

By: Waveland Ventures, LLC, a Colorado

limited liability company, its

managing member

 

By:      /s/ Rick Hayes             

Rick Hayes, ManagerEXHIBIT 10.1

  

SECURITIES PURCHASE AGREEMENT

This Securities Purchase Agreement (this "Agreement"), dated as of October 2, 2012, by the Person (the "Purchaser") listed in column (1) on the Schedule of Purchasers attached hereto (the "Schedule of Purchasers") and Capitol Bancorp Ltd., a Michigan corporation (the "Company"), and its successors, including, as the context may require, on or after the Effective Date, as reorganized pursuant to the Bankruptcy Code.

Recitals

Whereas, on August 9, 2012, the Company and its affiliate Financial Commerce Corporation filed jointly a voluntary petition commencing a case (the "Case") under Chapter 11 of Title 11 of the United States Code (as amended and in effect from time to time, the "Bankruptcy Code") in the United States Bankruptcy Court for the Eastern District of Michigan (the "Bankruptcy Court");

Whereas, pursuant to the Plan and this Agreement, the Company intends to issue and sell to the Purchaser, and the Other Purchasers (as hereinafter defined) up to (a) an aggregate of three million five hundred thousand (3,500,000) shares of the Company's "Class B Common Stock", no par value per share (the "Class B Common"), representing forty-six and nine tenths percent (46.9%) of the outstanding voting securities of the reorganized Company, in exchange for an aggregate purchase price of seventy million dollars ($70,000,000); and (b) an aggregate of forty-five thousand (45,000) shares of the Company's non-voting "Series A Preferred Stock", no par value per share (the "Series A Preferred"; together with the Class B Common, the "Shares"), in exchange for an aggregate purchase price of forty-five million dollars ($45,000,000);

Whereas, pursuant to this Agreement, the Company is issuing and selling to Purchaser, and Purchaser is purchasing from the Company, thirty-five million dollars ($35,000,000) of Class B Common and fifteen million dollars ($15,000,000) of Series A Preferred, as set forth on the Schedule of Purchasers; and

Whereas, concurrently with the investment in the Shares contemplated herein, the Company has agreed to sell additional shares of Class B Common and Series A Preferred in private placements (the "Other Private Placements") to other investors (the "Other Purchasers") under separate securities purchase agreements (the "Other Securities Purchase Agreements") for an amount not to exceed $65,000,000 in the aggregate, with the closing of such transactions to occur simultaneously with the closing of this transaction.

Now, Therefore, in consideration of the premises and the mutual representations, warranties, covenants and agreements contained herein, the parties hereto agree as follows, in the case of the Company, subject to Bankruptcy Court approval of this Agreement:

Agreement

1.Definitions.  As used in this Agreement, when capitalized, the following terms shall have the meanings set forth below:

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2.            "Articles of Incorporation" means the Articles of Incorporation of the Company, as amended from time to time (including with respect to periods following the Effective Date, of the reorganized Company).

 

(a)            "Affiliate" means with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls or is controlled by or under common control or ownership with such specified Person.  For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract, relation to individuals or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing.

 

(b)            "APA" means the Asset Purchase Agreement of even date herewith between the Company and VS CB Asset Acquisition, LLC, a Delaware limited liability company.

 

(c)            "Board" means the board of directors of the Company (including, with respect to periods following the Effective Date, of the reorganized Company).

 

(d)            "Board Representatives" means the three (3) persons nominated by the Purchaser from time to time to be elected or appointed to the Board, subject to the provisions of Section 7(e) hereof.

 

(e)            "Business Day" means any day other than a Saturday, Sunday or a day on which banking institutions of the State of Michigan are authorized by Law or executive order to close.

 

(f)            "Bylaws" means the bylaws of the Company, as amended from time to time (including, with respect to periods following the Effective Date, the bylaws of the reorganized Company).

 

(g)            "Confirmation Order" means the order confirming the Plan.

 

(h)            "Contracts" means all contracts now owned or hereafter acquired by the Company, including all contracts, undertakings, or agreements in or under which the Company may now or hereafter have any right, title or interest.

 

(i)            "CRA" means the Community Reinvestment Act of 1977, as amended.

 

(j)            "Disclosure Statement" means the Confidential Out-of-Court Exchange Offering Memorandum and Solicitation of Consents and Disclosure Statement and Solicitation of Votes Related to an In-Court Standby Prepackaged Joint Plan of Reorganization dated June 22, 2012 (as it may be amended, modified or supplemented from time to time, including by Supplement No. 1 to the Disclosure Statement dated July 6, 2012) relating to the Plan.

 

(k)            "Effective Date" means the effective date of the Plan.

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(l)            "Environmental Laws" means any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances.

 

(m)            "Equity Securities" means (i) capital stock of, or other equity interests in, any Person; (ii) securities convertible into or exchangeable for shares of capital stock, voting securities or other equity interests in such Person; or (iii) options, warrants or other rights to acquire the securities described in clauses (i) and (ii), whether fixed or contingent, matured or unmatured, contractual, legal, equitable or otherwise.

 

(n)            "Exchange Act" means the Securities Exchange Act of 1934, as amended.

 

(o)            "Final Orders" means the final and non-appealable order confirming the Plan.

 

(p)            "Governmental Entity" means any government or political subdivision or department thereof, any governmental or regulatory body, commission, board, bureau, agency or instrumentality, or any court or arbitrator or alternative dispute resolution body, in each case whether federal, state, local or foreign.

 

(q)            "Hazardous Materials" means: (i) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, whether naturally occurring or manmade, that is hazardous, acutely hazardous, toxic, or words of similar import or regulatory effect under Environmental Laws; and (ii) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation, and polychlorinated biphenyls.

 

(r)            "Indebtedness" means, with respect to any Person, without duplication: (i) all obligations of such Person for borrowed money (including all accrued and unpaid interest and all prepayment penalties or premiums in respect thereof); (ii) all obligations of such Person to pay amounts evidenced by bonds, debentures, notes or similar instruments (including all accrued and unpaid interest and all prepayment penalties or premiums in respect thereof); (iii) all obligations of others, of the types set forth in clauses (i)-(ii) above that are secured by any Lien on property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, but only to the extent so secured; (iv) all unreimbursed reimbursement obligations of such Person under letters of credit issued for the account of such Person; (v) obligations of such Person under conditional sale, title retention or similar arrangements or other obligations, in each case, to pay the deferred purchase price for property or services, to the extent of the unpaid purchase price (other than trade payables and customary reservations or retentions of title under Contracts with suppliers, in each case, in the ordinary course of business); (vi) all net monetary obligations of such Person in respect of interest rate, equity and currency swap and other derivative transaction obligations; and (vii) all guarantees of or by such Person of any of the matters described in clauses (i)-(vi) above, to the extent of the maximum amount for which such Person may be liable pursuant to such guarantee.

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(s)            "Knowledge" means, with respect to the Company, the actual knowledge of Joseph D. Reid and Cristin K. Reid.

 

For purposes of this Agreement, Mr. Reid or Ms. Reid will be deemed to have actual  knowledge of a particular fact or other matter if:

(i)            that individual is actually aware of that fact or matter; or

(ii)            a prudent individual could be expected to discover or otherwise become aware of that fact or matter in the course of conducting a reasonably comprehensive investigation; or

(iii)            any individual who is serving, or who has at any time served, as a director or officer of the Company has, or at any time had, knowledge of that fact or other matter (as set forth in (i) and (ii) above).

(t)            "Law" means any law, treaty, statute, ordinance, code, principle of common law, rule or regulation of a Governmental Entity or judgment, decree, order, writ, award, injunction or determination of an arbitrator or court or other Governmental Entity.

 

(u)            "Lien" means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge, or preference, priority or other security interest or preferential arrangement of any kind or nature whatsoever intended for security (including any conditional sale or other title retention agreement, any easement, right of way or other encumbrance on title to real property, and any financing lease having substantially the same economic effect as any of the foregoing).

 

(v)            "Material Adverse Effect" means any event, fact, circumstance or occurrence that, individually or in the aggregate with any other event, fact, circumstance or occurrence, results or would reasonably be expected to result in a material adverse change in or a material adverse effect over a commercially reasonable period on the (i) financial condition, results of operations, business, operations, business assets or regulatory status of the Company and each Subsidiary, taken as a whole; (ii) legality, validity or enforceability of this Agreement, or (iii) ability on the part of the Company or the Purchaser to consummate the transactions contemplated by this Agreement and to perform in any material respect their obligations under this Agreement within the time frames provided for in this Agreement, except that any of the following, either alone or in combination, shall not be deemed a Material Adverse Effect: (A) effects resulting from or relating to the announcement or disclosure of the sale of the Shares or other transactions contemplated by this Agreement, or (B) effects caused by any event, occurrence or condition resulting from or relating to the taking of any action in accordance with this Agreement.  For the avoidance of doubt, an FDIC seizure or other FDIC-assisted takeover of any of the Company's Affiliate banks shall constitute a Material Adverse Effect.

 

(w)            "Permitted Liens" means (i) liens for taxes not yet due and payable, (ii) statutory liens which secure payments not yet due that arise, and are customarily discharged, in the ordinary course of business, and (iii) setoff rights under applicable Law.

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(x)            "Person" means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

 

(y)            "Plan" means the Amended and Restated Prepackaged Joint Plan of Reorganization dated June 22, 2012 (as it may be amended, modified or supplemented from time to time) proposed by the Company and Financial Commerce Corporation in connection with the Case.

 

(z)            "Postpetition" means, when used with respect to any indebtedness, agreement, instrument, claim, proceeding or other matter, indebtedness pursuant to any agreement or instrument first entered into or becoming effective, or claim, proceeding that first arose or was first instituted, or another matter that first occurred, after commencement of the Case.

 

(aa)            "Proceeding" means any legal action, suit, proceeding, claim or dispute.

 

(bb)            "Qualifying Ownership Interest" means five percent (5%) of the outstanding voting securities of the Company, as of the Closing Date.

 

(cc)            "Representatives" means, with respect to any Person, such Person's officers, directors, employees, agents, attorneys, accountants, consultants, equity financing partners or financial advisors or other Person associated with, or acting on behalf of, such Person.

 

(dd)            "Subsidiary" means any entity in which the Company, directly or indirectly, owns not less than five percent (5%) of the capital stock or holds a corresponding equity or similar interest.

 

(ee)            "Tax" (including, with correlative meaning, the term "Taxes") any and all domestic or foreign, federal, state, local or other taxes of any kind (together with any and all interest, penalties, additions to tax and additional amounts imposed with respect thereto) imposed by any Governmental Entity, including taxes on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, unemployment, social security, workers' compensation or net worth, and taxes in the nature of excise, withholding, ad valorem or value added or similar taxes.

(ff)            "Transaction Court Documents" means the Disclosure Statement and the Plan.

 

(gg)            "Transaction Documents" means this Agreement and the APA.

 

3.            Purchase and Sale of Common Stock.

 

(a)            Sale and Purchase.  Upon the terms and subject to the conditions set forth in this Agreement, and in reliance upon the representations and warranties hereinafter set forth, at the Closing (as hereinafter defined), the reorganized Company will issue, sell and deliver to the Purchaser, and the Purchaser will purchase from the reorganized Company, the number of

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(b)            shares of Class B Common set forth opposite the Purchaser's name in column (3) on the Schedule of Purchasers and the number of shares of Series A Preferred set forth opposite the Purchaser's name in column (4) on the Schedule of Purchasers.

 

(c)            Purchase Price. The purchase price for the Shares to be purchased by the Purchaser at the Closing shall be the amount set forth opposite the Purchaser's name in column (7) of the Schedule of Purchasers (the "Purchase Price"), which amount shall be equal to (i) twenty dollars ($20.00) per share multiplied by the number of shares of Class B Common purchased by the Purchaser (the "Class B Common Purchase Price") plus (ii) one thousand dollars ($1,000.00) per share multiplied by the number of shares of Series A Preferred purchased by the Purchaser (the "Series A Preferred Purchase Price").

(d)            Execution Deposit. Upon executing this Agreement, Purchaser shall remit a one hundred dollar ($100.00) deposit (the "Deposit") to the Company, which shall be put towards the Purchase Price at the Closing.

 

(e)            Purchase price allocation.  The Purchase Price for the Shares set forth in this Section 2 is the sole consideration for such Shares and the parties agree that, for all tax purposes, such purchase price shall be allocated in a manner consistent with Section 2(b) above.  Neither party shall take a position inconsistent with such purchase price allocation for any tax purposes.

 

4.            Closing and Deliveries.

 

(a)            Subject to the satisfaction or, if permissible, waiver of the conditions set forth in Sections 8, 9 and 10 hereof, the closing of the sale and purchase of the Shares pursuant to Section 2 hereof (the "Closing") shall take place at the offices of Honigman Miller Schwartz and Cohn LLP at 350 East Michigan Avenue, Suite 300, Kalamazoo, Michigan  49007 at 10:00 a.m., local time, on  the third (3rd) Business Day following the expiration of the Due Diligence Period, or at such other time and place as the parties may agree (the date on which the Closing occurs, the "Closing Date").

 

(b)            At the Closing, (i) the reorganized Company shall deliver to the Purchaser certificates representing the Shares to be purchased by, and sold to, the Purchaser pursuant to Section 2 hereof (registered in the name and in the denomination designated by the Purchaser at least two (2) Business Days prior to the Closing Date), together with the other documents and certificates to be delivered pursuant to Sections 8 and 9 hereof, and (ii) the Purchaser, in full payment for the Shares to be purchased by, and sold to, the Purchaser pursuant to Section 2 hereof, shall (A) pay to the reorganized Company the Purchase Price, (B) deliver to the reorganized Company the certificate required pursuant to Section 10(a) hereof and (C) deliver to the reorganized Company a fully completed and duly executed Investor Questionnaire, reasonably satisfactory to the reorganized Company in the form attached hereto as Exhibit A (the "Investor Questionnaire").  The Purchaser shall make payment hereunder in immediately available funds by wire transfer to the account or accounts designated by the Company, or by such other means as may be agreed between the Company and the Purchaser.

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(c)            Purchaser's Representations and Warranties.  The Purchaser hereby represents and warrants to the Company as follows:

 

(d)            Organization and Good Standing. The Purchaser is a corporation, partnership or limited liability company duly incorporated or organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization.

 

(e)            Authorization and Power.  The Purchaser has the requisite power and authority to enter into and perform its obligations under the Transaction Documents and to purchase the Shares being sold to the Purchaser hereunder.  The execution, delivery and performance of the Transaction Documents by the Purchaser and the consummation by the Purchaser of the transactions contemplated thereby have been, or will be at the closing, duly authorized by all necessary corporate, partnership or limited liability company action.

 

(f)            No Public Sale or Distribution.  The Purchaser is acquiring the Shares for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered or exempted under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "Securities Act"); provided, however, that by making the representations herein, the Purchaser does not agree to hold any of the Shares for any minimum or other specific term and reserves the right to dispose of the Shares at any time in accordance with or pursuant to a registration statement or an exemption under the Securities Act and/or pursuant to the applicable terms of this Agreement. The Purchaser is acquiring the Shares in the ordinary course of the Purchaser's business (which business may be being formed for the purpose of acquiring the Shares), and does not presently have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Shares to such Person.

 

(g)            Accredited Investor Status. The Purchaser represents and warrants that the Purchaser is an "accredited investor" within the meaning of Rule 501(a)(1), (2), (3), (7) or (8) of Regulation D ("Regulation D") promulgated by the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act and is, or at Closing will be, a "qualified purchaser" within the meaning of the Investment Company Act of 1940, as amended. Purchaser, to the extent that it is an entity formed for the specific purpose of purchasing the Shares, represents and warrants that, to the best of Purchaser's knowledge (after due inquiry), each equity owner of Purchaser is also an "accredited investor" within the meaning of Regulation D.  Nothing contained herein shall limit Purchaser's ability to change its ownership structure after the date hereof provided any such change does not result in Purchaser's breach of this Section 4(d).

 

(h)            Reliance on Exemptions.  The Purchaser understands that the Shares are being offered and sold to the Purchaser in reliance on specific exemptions from the registration requirements of U.S. federal and state securities Laws and that the Company is relying in part upon the truth and accuracy of, and the Purchaser's compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Purchaser set forth herein in order to determine the availability of such exemptions and the eligibility of the Purchaser to acquire the Shares. When completed, the information contained in the Investor Questionnaire completed by the Purchaser will be true, complete and correct.

7

(i)            Information and Exculpation.

 

(i)            The Purchaser has sufficient knowledge and experience in financial and business matters so as to be able to evaluate the risks and merits of its investment in the Company.

 

(ii)            The Purchaser agrees that the Purchaser will make the investment in the Company that is contemplated by this Agreement based on the results of the Purchaser's own due diligence investigation of the Company.

 

(j)            No Governmental Review. The Purchaser understands that, except for the Bankruptcy Court, no U.S. federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Shares or the fairness or suitability of the investment in the Shares, nor have such authorities passed upon or endorsed the merits of the offering of the Shares.

 

(k)            Transfer or Resale. The Purchaser understands that: (i) the Shares have not been and are not being registered under the Securities Act or any state securities Laws, and may not be offered for sale, sold, assigned or transferred unless (A) subsequently registered thereunder, (B) the Purchaser has delivered to the Company an opinion of counsel, in a form reasonably acceptable to the Company, or such other evidence reasonably satisfactory to the Company, to the effect that such Shares to be sold, assigned or transferred may be sold, assigned or transferred pursuant to an exemption from such registration, or (C) such Shares can be sold, assigned or transferred pursuant to Rule 144 or Rule 144A promulgated under the Securities Act, as amended, (or a successor rule thereto) (collectively, "Rule 144"); (ii) any sale of the Shares made in reliance on Rule 144 may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of the Shares under circumstances in which the seller (or the Person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the Securities Act) may require compliance with some other exemption under the Securities Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other Person is under any obligation to register the Shares under the Securities Act or any state securities Laws or to comply with the terms and conditions of any exemption thereunder. The Shares may be pledged in connection with a bona fide margin account or other loan or financing arrangement secured by the Shares and such pledge of the Shares shall not be deemed to be a transfer, sale or assignment of the Shares hereunder, and the Purchaser effecting a pledge of the Shares shall not be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement, including, without limitation, this Section 4(h); provided, however, that the Purchaser and its pledgees make such pledge in accordance with applicable Laws.  For so long as Purchaser holds a Qualifying Ownership Interest, the Company agrees to comply with the public information requirements of Rule 144.

 

(l)            Legends. Subject to the applicability of subsection (j) below, the Purchaser understands that, until such time as the Shares have been registered for resale under the Securities Act, the certificates or other instruments representing the Shares shall bear any legend as required by the "Blue Sky" Laws of any state and a restrictive legend in substantially

8

(m)            the following form (and a stop-transfer order may be placed against transfer of such stock certificates):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT, OR (B) AN OPINION OF COUNSEL, IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, OR SUCH OTHER EVIDENCE REASONABLY SATISFACTORY TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of the Shares upon which it is stamped, if, unless otherwise required by state securities Laws, (i) such Shares are registered for resale under the Securities Act, (ii) in connection with a sale, assignment or other transfer, such holder provides the Company with an opinion of counsel, which counsel and opinion are reasonably acceptable to the Company, or such other evidence reasonably satisfactory to the Company, to the effect that such sale, assignment or transfer of the Shares may be made without registration under the applicable requirements of the Securities Act, or (iii) such holder provides the Company with reasonable assurance that the Shares can be sold, assigned or transferred pursuant to Rule 144.

(n)            Validity; Enforcement. The Transaction Documents have been duly and validly authorized, executed and delivered on behalf of the Purchaser and shall constitute the legal, valid and binding obligations of the Purchaser enforceable against the Purchaser in accordance with the terms thereof, subject to bankruptcy, insolvency, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights generally and to general principles of equity.

 

(o)            No Conflicts.  The execution, delivery and performance by the Purchaser of the Transaction Documents and the consummation by the Purchaser of the transactions contemplated thereby will not (i) result in a violation of the organizational documents of the Purchaser; (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Purchaser is a party; or (iii) to the Purchaser's actual knowledge, result in a violation of any Law, rule, regulation, order, judgment or decree (including federal and state securities Laws) applicable to the Purchaser, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations which would not, individually or in the aggregate, reasonably be

9

(p)            expected to have a material adverse effect on the ability of the Purchaser to perform its obligations thereunder.

(q)            Intentionally omitted.

 

(r)            No Other Bank Investments. Except to the extent the Purchaser has expressly disclosed otherwise in the Investor Questionnaire (as it may be amended from time to time prior to Closing), the Purchaser does not, directly or indirectly, hold or control ten percent (10%) or more of a class of voting equity of a bank or thrift holding company or a depository institution (other than pursuant to an applicable exception for fiduciary holdings).

 

(s)            Residency. The Purchaser is a resident of that jurisdiction specified in the Investor Questionnaire and in column (2) of the Schedule of Purchasers.

 

(t)            No General Solicitation.  The Purchaser acknowledges that the Shares were not offered to the Purchaser by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature, including (i) any advertisement, article, notice or other communication published in any newspaper, magazine, website, or similar media, or broadcast over television or radio, or (ii) any seminar or meeting to which the Purchaser was invited by any of the foregoing means of communications.

 

(u)            Intentionally omitted.

 

(v)            Brokers. The Purchaser has no knowledge of any brokerage or finder's fees or commissions that are or will be payable by the Company or any of its Subsidiaries to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person or entity with respect to the transactions contemplated by this Agreement.

 

(w)            Additional Acknowledgement. The Purchaser acknowledges and accepts that the Company may offer its securities to other U.S. or non-U.S. investors upon substantially similar terms and conditions as the Shares being purchased pursuant to this Agreement as part of the Other Private Placements.

 

(x)            The Company is a Bank Holding Company. The Purchaser understands and acknowledges that: (i) the Company is a registered bank holding company under the Bank Holding Company Act of 1956, as amended (the "BHCA"), and as such the Company is subject to regulation by the Board of Governors of the Federal Reserve System (the "Federal Reserve"); and (ii) acquisitions of interests in bank holding companies are subject to the BHCA and the Federal Reserve's Change in Bank Control Act (the "CIBCA") and may be reviewed by the Federal Reserve to determine the circumstances under which such acquisitions of interests will result in the Purchaser becoming subject to the BHCA or subject to the notice filing requirements of the CIBCA.

 

(y)            No Prohibited Purchaser.  The Purchaser is not, nor is any Person or entity controlling, controlled by or under common control with the Purchaser, nor, to the knowledge of the Purchaser, any Person or entity having a beneficial interest in the Purchaser, nor, to the knowledge of the Purchaser, any other Person or entity on whose behalf the Purchaser is acting (including the Other Purchasers, if applicable): (i) a Person or entity listed

10

(z)            in the annex to Executive Order No. 13224 (2001) issued by the President of the United States (Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism); (ii) named on the List of Specially Designated Nationals and Blocked Persons maintained by the U.S. Office of Foreign Assets Control ("OFAC"); (iii) is a Designated National as defined in the Cuban Assets Control Regulations, 31 C.F.R. Part 515; (iv) a non-U.S. shell bank or is providing banking services indirectly to a non-U.S. shell bank; (v) a senior non-U.S. political figure or an immediate family member or close associate of such figure or an entity owned or controlled by such a figure; or (vi) otherwise prohibited from investing in the Company pursuant to applicable U.S. anti-money laundering, antiterrorist and asset control Laws, regulations, rules or orders (a Person in any such category being referred to herein as a "Prohibited Purchaser"). The Purchaser agrees to provide the Company, promptly upon request, all information that the Company reasonably deems necessary or appropriate to comply with applicable U.S. anti-money laundering, antiterrorist and asset control Laws, regulations, rules and orders. The Purchaser consents to the disclosure to regulators and Law enforcement authorities by the Company and its Affiliates and agents of such information about the Purchaser as the Company reasonably deems necessary or appropriate to comply with applicable U.S. anti-money laundering, antiterrorist and asset control Laws, regulations, rules and orders. If the Purchaser is a financial institution that is subject to the Bank Secrecy Act (31 U.S.C. Section 5311 et seq.) and its implementing regulations (collectively, the "Bank Secrecy Act"), the Purchaser represents that the Purchaser has met and will continue to meet all of its obligations under the Bank Secrecy Act. The Purchaser and the Purchaser's Affiliates acting on its behalf have in place policies and procedures reasonably designed to detect and report suspicious customer activity (including illegal activity). The Purchaser acknowledges that if, following the investment in the Shares by the Purchaser, the Company reasonably believes that the Purchaser is a Prohibited Purchaser or is otherwise engaged in illegal activity or refuses to provide promptly information that the Company requests to dispel such beliefs, the Company has the right or may be obligated to prohibit additional investments, segregate the assets constituting, and/or withhold or suspend distributions to the Purchaser in respect of, the investment in accordance with applicable regulations or immediately require the Purchaser to transfer the Shares. The Purchaser further acknowledges that the Purchaser will not have any claim against the Company or any of its Affiliates or agents for any form of damages as a result of any of the foregoing actions taken by the Company or any of its Affiliates or agents, and the Purchaser will not have any claim against the Company or any of its Affiliates or agents for any form of damages as a result of any of the foregoing actions taken in good faith and in accordance with applicable Laws and regulations by the Company or any of its Affiliates or agents.

 

(aa)            Intentionally omitted.

 

(bb)            Intentionally omitted.

 

5.            Representations and Warranties of the Company.  The Company  hereby represents and warrants as of the date of this Agreement to the Purchaser as set forth below, except as disclosed in the SEC Reports filed by the Company with, or furnished by the Company to, the SEC after January 1, 2011 and at least two (2) Business Days prior to the date of this Agreement, and publicly available as of the date of this Agreement.

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6.            Bankruptcy Court Orders.  The Company shall have complied in all respects with the terms of all orders of the Bankruptcy Court in respect of the transactions contemplated by this Agreement upon and after the entry of any such order.

 

(a)            Subsidiaries.  The Company has no direct or indirect Subsidiaries other than those Subsidiaries disclosed in the SEC Reports and has indicated therein which Subsidiaries would constitute a "significant subsidiary" of such Person within the meaning of Rule 1-02 of Regulation S-X of the SEC ("Company Significant Subsidiary"). The Company owns, directly or indirectly, all of the capital stock or other equity interests of each Subsidiary, free and clear of any and all Liens (other than Permitted Liens), and all the issued and outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued and are fully paid and non-assessable. There are no outstanding subscriptions, options, warrants, calls, commitments or agreements of any character whatsoever providing for the purchase or issuance of any Subsidiary's capital stock or any securities representing the right to purchase or otherwise receive any shares or other equity interests of such Subsidiary's capital stock.

 

(b)            Organization and Qualification.  The Company is duly registered as a bank holding company under the BHCA. The Company and each Subsidiary is an entity duly incorporated or otherwise organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation or default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. The Company and each Subsidiary is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not reasonably be expected to result in a Material Adverse Effect.

 

(c)            Authorization; Enforcement.  Upon the entry of the Confirmation Order, except as contemplated by and provided for under the Bankruptcy Code and, if applicable, subject to entry of the Confirmation Order, the Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents to which it is a party and the Other Securities Purchase Agreements.  The execution and delivery of the Transaction Documents to which it is a party and the Other Securities Purchase Agreements by the Company and the consummation by the Company of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company, the Board or the shareholders of the Company in connection therewith other than in connection with the Required Approvals (as hereinafter defined).  Each of the Transaction Documents to which the Company is a party and the Other Securities Purchase Agreements shall be duly executed and delivered by the Company and, except as otherwise provided herein, each such Transaction Document shall, when so executed, constitute a legal, valid and binding obligation of the Company enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights generally and to general principles of equity.

12

(d)            No Conflicts.  Upon the entry of the Confirmation Order, except as contemplated by and provided for under the Bankruptcy Code and, if applicable, subject to entry of the Confirmation Order, the execution, delivery and performance by the Company of the Transaction Documents to which it is a party and the Other Securities Purchase Agreements, the issuance and sale of the Shares and the consummation by the Company of the transactions contemplated hereby and the Other Securities Purchase Agreements do not and will not (i) conflict with or violate any provision of the Company's or any Subsidiary's certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary other than those in favor, or for the benefit, of the Purchaser, its successors and assigns, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any Law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities Laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected.

 

(e)            Filings, Consents and Approvals.  The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of this Agreement, other than: (i) approval by the Bankruptcy Court; (ii) such filings as are required to be made under the Securities Act, the Exchange Act, and applicable state securities Laws; and (iii) such consents, waivers, authorizations or orders, or such filings, as have been obtained or made or as may be required as it relates to the Purchaser (collectively, the "Required Approvals").

 

(f)            Capitalization.

 

(i)            Upon the Closing and after giving effect to the Confirmation Order, the Plan, the Other Private Placements and the transactions contemplated hereby (assuming the issuance of the maximum amount of the securities under the Plan), the authorized capital stock of the reorganized Company will consist solely of (A) One Hundred Ten Million (110,000,000) shares of common stock, no par value per share, (1) Five Million (5,000,000) shares of the Common Stock will be designated as Class A Common Stock, Seven Hundred Sixty-Seven Thousand Fifty (767,050) shares of which will be issued and outstanding, (2) One Hundred Million (100,000,000) shares of the Common Stock will be designated as Class B Common Stock, Three Million Eight Hundred Eighty-two Thousand Nine Hundred Fifty (3,882,950) shares of which will be issued and outstanding and (3) Two Million Five Hundred Thousand (2,500,000) shares of Common Stock shall be designated as Class C Redeemable Common Stock, all of which will be issued and outstanding and (B) Two Hundred Thousand (200,000) shares of Preferred Stock, no par value per share Seventy-Five Thousand (75,000) shares of which will be designated as "Fixed Rate Series A Cumulative Perpetual

13

(ii)            Preferred Stock", Forty-Five Thousand (45,000) shares of which will be issued and outstanding. Upon the Closing (after giving effect to the Confirmation Order, the Plan and the transactions contemplated hereby), the Shares shall be issued to the Purchaser.  The rights, preferences and privileges of the capital stock of the Company shall be as set forth in the Articles of Incorporation, as amended pursuant to the Plan and in effect upon the Closing, in the form reasonably approved by the Purchasers (such approval not to be unreasonably withheld, conditioned or delayed).

 

(iii)            Upon the Closing Date, all of the Shares to be issued and delivered to the Purchaser pursuant to the terms hereof shall have been duly authorized and validly issued, fully paid, nonassessable and not subject to preemptive or similar rights of third parties.

 

(iv)            Upon the Closing and after giving effect to the Confirmation Order and the Plan, (A) except for with respect to the Other Private Placements, there shall be no voting trusts, voting agreements, proxies, first refusal rights, first offer rights, co-sale rights, options, transfer restrictions or other agreements, instruments or understandings (whether oral, formal or informal) with respect to the voting, transfer or disposition of capital stock of the Company or any Subsidiary to which the Company or any Subsidiary is a party or by which it is bound, or, to the Knowledge of the Company, among or between any Persons other than the Company or any Subsidiary (as the case may be), except as set forth in this Agreement, and (B) except for the Other Private Placements and shares of common stock that are reserved for issuance under any management incentive plan (provided that such shares of common stock reserved under a management incentive plan shall not in any event exceed a percentage of authorized shares of common stock, calculated on a fully diluted basis, agreed to by the Purchaser and the Company), there will be no options, warrants, stock appreciation rights, restricted stock units, calls, commitments or agreements of any character to which the Company or any Subsidiary is a party, or by which the Company or any Subsidiary is bound, calling for the issuance of shares of capital stock or other Equity Securities of the Company or any Subsidiary or for settlement in cash based upon the value of any such Equity Securities, or other arrangement to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary is bound to acquire, at any time or under any circumstance, capital stock of the Company or any Subsidiary or any such Equity Securities.

 

(g)            Outstanding Indebtedness.  All outstanding Indebtedness of the Company is listed in the Plan.  The Company is not obligated, pursuant to any agreement or instrument applicable to the Company, to purchase any Equity Securities of, or make any other equity investment in, any Person.

 

(h)            SEC Reports.  The Company has timely filed all forms, reports, schedules, proxy statements, registration statements and other documents (including all exhibits thereto) required to be filed with the SEC since December 31, 2008, pursuant to the federal securities Laws and the SEC rules and regulations thereunder, together with all certifications required pursuant to the Sarbanes-Oxley Act of 2002 (as they have been amended since the time of their filing, and including the exhibits thereto, collectively, the "SEC Reports"). The SEC Reports (including, without limitation, any financial statements or schedules included or incorporated by reference therein) at the time they became effective, in the case of registration statements, or when filed and as amended, in the case of any other SEC Report, complied in all

14

(i)            material respects with the applicable requirements of the Securities Act and the Exchange Act, as the case may be, and the rules and regulations of the SEC under all of the foregoing.

 

(j)            Financial Statements. The consolidated balance sheets of the Company and each Subsidiary as of December 31, 2011 and related consolidated statements of income, shareholders' equity and cash flows for the three (3) years ended December 31, together with the notes thereto, certified by BDO USA LLP and included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2011, as filed with the SEC and as the same may have been amended prior to the date hereof (i) have been prepared from, and are in accordance with, the books and records of the Company and each Subsidiary; (ii) complied as to form, as of the date of filing with the SEC, in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto; (iii) have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") applied on a consistent basis; and (iv) present fairly in all material respects, in accordance with GAAP, the consolidated financial position of the Company and each Subsidiary at the dates set forth therein and the consolidated results of operations, changes in stockholders' equity and cash flows of the Company and each Subsidiary for the periods stated therein.

 

(k)            Disclosure Controls and Procedures. The Company has established and maintains disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) that are effective in all material respects to ensure that material information relating to the Company, including any Subsidiary, is made known to its chief executive officer and chief financial officer by others within those entities. The Company's certifying officers have evaluated the effectiveness of the Company's controls and procedures as of the end of the period covered by the most recently filed annual periodic report under the Exchange Act (such date, the "Evaluation Date"). The Company presented in its most recently filed annual periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no material changes in the Company's internal controls (as such term is defined in Item 307(b) of Regulation S-K under the Exchange Act) or, to the Company's Knowledge, in other factors that could affect the Company's internal controls.

 

(l)            Accounting Controls. The Company maintains a system of accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. None of the Company, any Subsidiary or, to the Company's Knowledge, any director, officer, employee, auditor, accountant or representative of the Company or any Subsidiary has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Company or any Subsidiary or their respective internal accounting controls, including any material complaint, allegation, assertion or

15

(m)            claim that the Company or any Subsidiary has engaged in questionable accounting or auditing practices.

 

(n)            Material Changes.  Since the date of the latest audited financial statements included within the SEC Reports, except in connection with the filing of the Case (or any other bankruptcy, insolvency or similar proceeding filed by any Subsidiary of the Company) or with any action approved by the Bankruptcy Court (or any other court in connection with any such other proceedings), (i) there has been no event, occurrence or development that has had or that would reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not materially altered its method of accounting, (iii) the Company has not declared or made any dividend or distribution of cash or other property to its shareholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock and (iv) the Company has not issued any Equity Securities to any officer, director or Affiliate, except pursuant to existing Company stock option or compensation plans.

 

(o)            Labor Relations.  No material labor dispute exists or, to the Knowledge of the Company, is imminent with respect to any of the employees of the Company, which would reasonably be expected to result in a Material Adverse Effect.

 

(p)            Compliance.  Neither the Company nor any Subsidiary: (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any judgment, decree or order of any court, arbitrator or governmental body or (iii) is or has been in violation of any statute, rule, ordinance or regulation of any governmental authority, including, without limitation, all foreign, federal, state and local Laws applicable to its business and all such Laws that affect the environment, except in each case to the extent permitted by the Bankruptcy Code.

 

(q)            Material Permits.  The Company and each Subsidiary possesses all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct its business as described in the SEC Reports and except where the failure to possess such permits is permitted by the Bankruptcy Code ("Material Permits"), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.

 

(r)            Patents and Trademarks.  The Company and each Subsidiary has, or has rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, trade secrets, inventions, copyrights, licenses and other intellectual property rights and similar rights necessary or material for use in connection with their respective businesses as described in the SEC Reports (collectively, the "Intellectual Property Rights"). None of, and neither the Company nor any Subsidiary has received a notice (written or otherwise) that any of, the Intellectual Property Rights has expired, terminated or been abandoned, or is expected to expire or terminate or be abandoned, within two (2) years from the date of this Agreement.  Neither the Company nor any Subsidiary has received, since the date of the latest audited

16

(s)            financial statements included within the SEC Reports, a written notice of a claim or otherwise has any Knowledge that the Intellectual Property Rights violate or infringe upon the rights of any Person. To the Knowledge of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights. The Company and each Subsidiary has taken reasonable security measures to protect the secrecy, confidentiality and value of all of its intellectual properties.

 

(t)            Transactions With Affiliates and Employees.

 

(i)            Except as set forth in the SEC Reports and for loans made in the ordinary course of business by Affiliates of the Company in compliance with any applicable Laws, neither Company nor any Subsidiary is a party to any transaction (including any loan or other credit accommodation but excluding deposits in the ordinary course of business) with any Affiliate, shareholder, director, or executive officer of Company or any Subsidiary, and all such transactions were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with persons who are not related to or Affiliates of Company or any Subsidiary.

 

(ii)            Except as set forth in the SEC Reports and for loans made in the ordinary course of business by Affiliates of the Company in compliance with any applicable Laws, as of the date hereof, no credit extension by Company or any Subsidiary to any Affiliate, shareholder, director, or executive officer of Company or any Subsidiary is presently in material default or, during the three-year period prior to the date of this Agreement, has been in material default or has been restructured, modified, or extended in order to avoid or cure a default.  As of the date hereof, principal and interest with respect to any such credit extension will, to the Knowledge of Company, be paid when due and the loan grade classification accorded such credit extension is appropriate.

 

(iii)            All agreements between the Company or any Subsidiary and any Affiliates, shareholders, directors or executive officers of Company or any Subsidiary comply, to the extent applicable.

 

(u)            Certain Fees.  Other than the fees payable to River Branch Capital, LLC, DelMorgan & Co., and/or Dresner Partners, no brokerage or finder's fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the Transaction Documents or the transactions contemplated thereby. The Purchaser shall not have any obligation with respect to any fees or with respect to any claims made by or on behalf of other Persons for fees of a type contemplated in this Section 5(s) that may be due from the Company in connection with the transactions contemplated by this Agreement.

 

(v)            Application of Takeover Protections.  The Company and the Board have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti‐takeover provision under the Articles of Incorporation or the Laws of its state of incorporation that is or could become applicable to the Purchaser or Other Purchaser solely as a

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(w)            result of the Company's issuance of the Shares and the Purchaser's ownership of the Shares or in connection with the Other Private Placements.

 

(x)            Regulatory Agreement. Except as described in the SEC Reports (each, a "Regulatory Agreement"), neither the Company nor any Subsidiary (i) has received, consented to, or entered into any notice, communication, memorandum, agreement or order of any applicable Governmental Entity directing, restricting or limiting, or purporting to direct, restrict or limit, in any manner the operations of the Company or (ii) is aware of any basis for any unresolved violation of any applicable Governmental Entity with respect to any Regulatory Agreement.

 

(y)            CRA Compliance.  The Company and each Subsidiary, as applicable, has received a rating of "Satisfactory" or better in its most recent examination or interim review with respect to the CRA. The Company does not have Knowledge of any facts or circumstances that would cause the Company or any Subsidiary: (i) to be deemed not to be in satisfactory compliance in any material respect with the CRA, and the regulations promulgated thereunder, or to be assigned a rating for CRA purposes by federal bank regulators of lower than "Satisfactory"; or (ii) to be deemed to be operating in violation in any material respect of the Bank Secrecy Act, the USA PATRIOT Act, any order issued with respect to anti-money laundering by the U.S. Department of the Treasury's Office of Foreign Assets Control, or any other applicable anti-money laundering statute, rule or regulation; or (iii) to be deemed not to be in satisfactory compliance in any material respect with the applicable privacy of customer information requirements contained in any federal and state privacy laws and regulations, including without limitation, in Title V of the Gramm-Leach-Bliley Act of 1999 and the regulations promulgated thereunder, as well as the provisions of the information security program adopted by the Company and each Subsidiary. To the Knowledge of the Company, no non-public customer information has been disclosed to or accessed by an unauthorized third party in a manner which would cause either the Company or any Subsidiary to undertake any remedial action. The Board or, where appropriate, any Subsidiary has adopted, and the Company and each such Subsidiary has implemented, an anti-money laundering program that contains adequate and appropriate customer identification verification procedures that comply with Section 326 of the USA PATRIOT Act and such anti-money laundering program meets the requirements in all material respects of Section 352 of the USA PATRIOT Act and the regulations thereunder, and the Company and each such Subsidiary has complied in all material respects with any requirements to file reports and other necessary documents as required by the USA PATRIOT Act and the regulations thereunder.

 

(z)            Loan Loss Reserves. Each of the reserve and allowances for possible loan losses and the carrying value for real estate owned which are shown on the financial statements of the Company included in the SEC Reports has been established in conformity with all applicable requirements, rules and policies of applicable Governmental Entities and complies with GAAP applied on a consistent basis to provide for possible losses on loans outstanding and real estate owned as of the date of such financial statements.

 

(aa)            Investment Company. Neither the Company nor any Subsidiary is an "investment company" within the meaning of the Investment Company Act of 1940, as amended.

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(bb)            No General Solicitation. Neither the Company nor any of its Affiliates nor any Person acting on its or their behalf, has engaged or will engage, in connection with the offering of the Shares or the Other Private Placements, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act.

 

(cc)            Contracts.

 

(i)            Except as disclosed in the SEC Reports, the Company is not a party or subject to any of the following: (A) any Contract, understanding or obligation with respect to severance, termination, retention or change in control, to pay liabilities or fringe benefits, with any present or former directors of the Board, officers or employees of the Company, or any such agreement, understanding or obligation, the assumption of which has been approved by the Bankruptcy Court or that is a Postpetition Contract; (B) any Contract providing for bonuses, pensions, options, deferred compensation, retirement payments, royalty payments, profit sharing or similar payment or benefit with respect to any present or former Representative of the Company, the assumption of which has been approved by the Bankruptcy Court or that is a Postpetition Contract; (C) any Contract under which the Company has created, incurred, assumed or guaranteed indebtedness for borrowed money or that is an outstanding guarantee, letter of comfort, letter of assurance, keepwell, letter of credit, performance bond, surety bond, indemnity agreement or other form of assurance or guarantee, the assumption of which has been approved by the Bankruptcy Court or that is a Postpetition Contract; and (D) any Contract required pursuant to Item 601 of Regulation S-K under the Securities Act to be filed as an exhibit to any SEC Report, which has not been so filed (each of the agreements described in clauses (A) through (D), a "Material Contract").

 

(ii)            The Company is not in material breach or material violation of, or in default under or with respect to, any Material Contract.

 

(iii)            As of the date of this Agreement, the Company is not a party to or bound by any non-competition Contract or other Contract the assumption of which has been approved by the Bankruptcy Court or that is a Postpetition Contract that (i) purports to limit in any material respect either the type of business in which the Company may engage or the manner or locations in which the Company may so engage in any business, or (ii) requires the disposition of any material assets or line of business of the Company outside of the ordinary course of business.

 

(iv)            A true and complete copy of each Material Contract to which the Company is a party has previously been delivered or made available to the Purchaser or will be made available to the Purchaser prior to the expiration date of the Due Diligence Period (as hereinafter defined) (subject to applicable confidentiality restrictions) and each such Contract is a valid and binding agreement of the Company, as the case may be, and is in full force and effect, except to the extent any has previously expired in accordance with its terms.

 

(v)            As of the date hereof, since the commencement of the Case, the Company has not rejected and failed to replace, on terms that are no less favorable to the Company, any Contract that is necessary to conduct the business of the Company in substantially the same manner as presently conducted and as proposed to be conducted

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(vi)            Exemption from Registration. The offering and issuance by the Company of the Shares pursuant to the Plan shall be exempt from registration pursuant to Section 4(2) of the Securities Act, Regulation D and Regulation S, as applicable; provided, that in connection with the use of such exemptions, the Company is relying on the truth and accuracy of the Purchaser's representations and warranties provided in Section 4 of this Agreement.

 

(dd)            Other Private Placements.  Concurrently with the execution and delivery of this Agreement, the Company has agreed to sell Shares of Class B Common and Series A Preferred in the Other Private Placements on terms and conditions that are substantially identical in all material respects to those set forth in this Agreement (except as approved by Purchaser in writing).

 

(ee)            Section 382(l)(5).  The transactions contemplated by this Agreement and the Case satisfy the requirements of Section 382(l)(5) of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the "Code").

 

(ff)            Properties.

 

(i)            The Company has previously delivered to Purchasers a list of all real property owned or leased by the Company or any Subsidiary, including REO Property ("Company Real Property"). The Company and each of its Subsidiaries has good and marketable title to all real property owned by it (including any property acquired in a judicial foreclosure proceeding or by way of a deed in lieu of foreclosure or similar transfer), in each case free and clear of any Liens except (i) liens for Taxes not yet due and payable and (ii) such easements, restrictions and encumbrances, if any, as are not material in character, amount or extent, and do not materially detract from the value, or materially interfere with the present use of the properties subject thereto or affected thereby.  Each lease pursuant to which the Company or any Subsidiary as lessee, leases real or personal property is valid and in full force and effect and neither the Company nor any Subsidiary, nor, to the Knowledge of Company, any other party to any such lease, is in default or in violation of any material provisions of any such lease. The Company has previously delivered to Purchaser a complete and correct copy of each such lease. All real property owned or leased by the Company or any Subsidiary are in all material respects in a good state of maintenance and repair (normal wear and tear excepted), conform with all applicable ordinances, regulations and zoning laws and are considered by the Company to be adequate for the current business of the Company and its Company Significant Subsidiaries. To the Knowledge of the Company, none of the buildings, structures or other improvements located on any real property owned or leased by the Company or any of its Company Significant Subsidiaries encroaches upon or over any adjoining parcel or real estate or any easement or right-of-way.

 

(ii)            The Company and each of its Company Significant Subsidiaries has good and marketable title to all tangible personal property owned by it, free and clear of all Liens except such Liens, if any, that are not material in character, amount or extent, and that do not materially detract from the value, or materially interfere with the present use of the properties subject thereto or affected thereby. With respect to personal property used in the business of the Company and its Company Significant Subsidiaries that is leased rather than owned, neither the

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(iii)            Company nor any of its Company Significant Subsidiaries is in default under the terms of any such lease.

 

(gg)            Environmental Matters.  To the Knowledge of Company and each Subsidiary is and has been in compliance with all terms and conditions of all applicable federal, state, and local Environmental Laws and permits thereunder, except for violations that, individually or in the aggregate, have not, and are not reasonably likely to have, a Material Adverse Effect.  Neither Company nor any Subsidiary (i) has received any written notice of any violation of, or inquiries regarding any violation of, any Environmental Laws, (ii) has generated, stored, or disposed of any materials designated as Hazardous Materials under the Environmental Laws, or (iii) is not subject to any claim or lien under any Environmental Laws.  To the Knowledge of Company, no release (as defined at CERCLA, 42 U.S.C. 9601(22), without regard for the exclusions therein mentioned) of Hazardous Materials has occurred at or from any real estate during the term of the ownership, lease or operation thereof by Company or any Subsidiary for which the Environmental Laws required or require notice to any third party, further investigation, or response action of any kind, and no condition exists at any real estate currently owned, leased or operated by Company or any Subsidiary for which the Environmental Laws required or require notice to any third party, further investigation, or response action of any kind.  Neither Company nor any Subsidiary has directed, controlled, overseen, or participated in, or has sought to direct, control, oversee, or participate in, the management of environmental matters of any borrower or any real estate in which Company or any Subsidiary holds or has held a security interest (a "Company Loan Property").  No asbestos or lead is now or has been contained in any Company Real Property or any Company Loan Property.  There are no underground storage tanks at any Company Real Property or Company Loan Property and no person or Entity has closed or removed any underground storage tanks from any Company Real Property or Company Loan Property.  No Company Real Property or Company Loan Property is, or has been, an industrial site or a landfill during its ownership, lease, operation, or loan with respect thereof or, to the Knowledge of Company, prior to such ownership, lease, operation or loan.  Company has furnished Purchaser true and complete copies of all environmental assessments, reports, studies and other similar documents or information in its possession or control relating to each Company Real Property and each Company Loan Property.

 

(hh)            Loan Matters.

 

(i)            All loans held by the Company or any or any Subsidiary were made in all material respects for good, valuable and adequate consideration in the ordinary course of the business, in accordance in all material respects with sound banking practices, and, to the Knowledge of the Company, are not subject to any defenses, setoffs or counterclaims, including without limitation any such as are afforded by usury or truth in lending laws, except as may be provided by bankruptcy, insolvency or similar laws or by general principles of equity. The notes or other evidences of indebtedness evidencing such loans and all forms of pledges, mortgages and other collateral documents and security agreements are, in all material respects, enforceable, valid, true and genuine and what they purport to be.

 

(ii)            Neither the terms of any loan, any of the documentation for any loan, the manner in which any loans have been administered and serviced, nor the Company's practices of approving or rejecting loan applications, violate in any material respect any federal,

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(iii)            state, or local law, rule or regulation applicable thereto, including, without limitation, the Truth In Lending Act,  Regulations O and Z of the Federal Reserve or any successor agency, the CRA, the Equal Credit Opportunity Act, and any state laws, rules and regulations relating to consumer protection, installment sales and usury.

 

(iv)            None of the agreements pursuant to which the Company or any Subsidiary has sold loans or pools of loans or participations in loans or pools of loans contains any obligation to repurchase such loans or interests therein solely on account of a payment default by the obligor on any such loan.

 

(v)            As requested by Purchaser, prior to the Closing, the Company will provide Purchaser with a list of all loans (A) that are contractually past due ninety (90) days or more in the payment of principal and/or interest, (B) that are on non-accrual status, (C) that are classified as "Watch", "Special Mention", "Substandard", "Doubtful", "Loss" or words of similar import, (D) where a reasonable doubt exists as to the timely future collectability of principal and/or interest, whether or not interest is still accruing or the loans are less than ninety (90) days past due, (E) where the interest rate terms have been reduced and/or the maturity dates have been extended subsequent to the origination of the loan due to concerns regarding the borrower's ability to pay in accordance with the loan's original terms, and (F) where a specific reserve allocation exists in connection therewith.

 

(ii)            Investment Securities; Derivatives.

 

(i)            Except for restrictions that exist for securities that are classified as "held to maturity," none of the investment securities held by the Company or any Subsidiary is subject to any restriction (contractual or statutory) that would materially impair the ability of the Person holding such investment freely to dispose of such investment at any time.

 

(ii)            Neither the Company nor any Subsidiary is a party to or has agreed to enter into an exchange-traded or over-the-counter equity, interest rate, foreign exchange or other swap, forward, future, option, cap, floor or collar or any other contract that is a derivative contract (including various combinations thereof) or owns securities that (A) are referred to generically as "structured notes," "high risk mortgage derivatives," "capped floating rate notes" or "capped floating rate mortgage derivatives" or (B) are likely to have changes in value as a result of interest or exchange rate changes that significantly exceed normal changes in value attributable to interest or exchange rate changes.

 

(jj)            Taxes.  The Company (i) has prepared and filed all foreign, federal and state income and all other Tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has paid all Taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith, with respect to which adequate reserves have been set aside on the books of the Company and (iii) has set aside on its books provisions reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply.

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(kk)            Litigation.  There is no Proceeding which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Shares or (ii) except as disclosed in the SEC Reports as of the date of this Agreement, is reasonably likely to have a Material Adverse Effect, individually or in the aggregate, if there were an unfavorable decision. Other than with respect to the pending dispute in the Circuit Court of Ingham County, State of Michigan, captioned G3 Properties, et. al. v. Capitol Bancorp Ltd., et al, which dispute is covered by the Company's insurance, neither the Company nor any Subsidiary, nor any director or officer thereof, is or has been the subject of any Proceeding involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the Knowledge of the Company, there is not pending or contemplated, any investigation by the SEC involving the Company or any current or former director or officer of the Company. The SEC has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any of its Subsidiaries under the Exchange Act or the Securities Act.

 

(ll)            Labor Matters.  No material labor dispute exists or, to the Knowledge of the Company, is imminent with respect to any of the employees of the Company or any Subsidiary which would have or reasonably be expected to have a Material Adverse Effect. None of the employees of the Company or any Subsidiary is a member of a union that relates to such employee's relationship with the Company, and neither the Company nor any of its Subsidiaries is a party to a collective bargaining agreement, and the Company and each Subsidiary believes that its relationship with its employees is good. To the Knowledge of the Company, no executive officer is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of a third party, and to the Knowledge of the Company, the continued employment of each such executive officer does not subject the Company or any Subsidiary to any liability with respect to any of the foregoing matters. The Company and the Subsidiaries are in compliance in all material respects with all U.S. federal, state, local and foreign laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, except where the failure to be in compliance would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(mm)            ERISA.  The Company and its Subsidiaries are in compliance in all material respects with all applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder (herein called "ERISA") and the Code applicable to employee benefit plans (as defined in ERISA). No "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Company would have any liability. The Company has not incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Code; and each "pension plan" for which the Company or any Subsidiary would have liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification.

 

(nn)            Disclosure.

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(oo)            No representation or warranty or other statement made by Company in this Agreement or otherwise in connection with the transactions contemplated by this Agreement contains any untrue statement or omits to state a material fact necessary to make any of them, in light of the circumstances in which it was made, not misleading.

 

(i)            The Company does not have Knowledge of any fact that has specific application to Company (other than general economic or industry conditions) and that may have Material Adverse Effect that has not been set forth in this Agreement or otherwise disclosed to Purchaser in writing.

 

7.Pre-Closing Covenants.

 

(a)            Conduct of Business.  Between the date hereof and the Closing Date, except as contemplated by and provided for under the Bankruptcy Code and, if applicable, subject to any relevant orders of the Bankruptcy Court, the Company shall operate and carry on the operations of its business in the ordinary course and substantially as operated as of the date of this Agreement; provided, however, the parties acknowledge and agree that the Company's ability to operate in the ordinary course is limited by (i) the utilization of cash flow from operations and restrictions on use of cash collateral pursuant to orders of the Bankruptcy Court, (ii) the fact that the business is being operated while in bankruptcy, and (iii) the Company's inability to control the conduct of contractual counterparties and other third parties, and such limitations may limit the Company's ability to operate in the ordinary course.

 

(b)            Bankruptcy Filings, Covenants and Agreements.

 

(i)            The Company shall use commercially reasonable efforts to: (A) obtain confirmation of the Plan and (B) cause the Effective Date to occur by no later than December 31, 2012.

 

(ii)            The Company shall use its (and shall cause their respective Subsidiaries to use) commercially reasonable efforts to take or cause to be taken all actions, and do or cause to be done all things, necessary, proper or advisable on its part under this Agreement and applicable Laws to consummate the transactions contemplated hereby, including preparing and filing all documentation to effect all necessary notices, reports and other filings and to obtain all consents, registrations, approvals, permits and authorizations necessary to be obtained from any third party and/or any Governmental Entity in order to consummate the transactions contemplated hereby in accordance with the timelines provided in this Agreement. Subject to applicable Laws, to the extent reasonably practicable, the parties shall provide copies in advance, and consult with each other on, all filings made with, or written materials submitted to, any Governmental Entity in connection with the transactions contemplated by the Transaction Documents. To the extent permitted by Law and reasonably practicable, the Company shall provide the Purchaser with any communications submitted to a Governmental Entity regarding material matters with respect to the transactions contemplated by this Agreement.

 

(iii)            The Company further covenant and agree, with respect to any threatened or pending preliminary or permanent injunction or other order, decree or ruling or statute, rule, regulation or executive order that would adversely affect the ability of the parties

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(iv)            hereto to consummate the transactions contemplated hereby, to use commercially reasonable efforts to prevent the entry, enactment or promulgation thereof, as the case may be.

 

(v)            Nothing in this Agreement shall obligate the Purchaser or any of its Affiliates to take any action, or agree, (i) to limit in any manner whatsoever or not to exercise any rights of ownership of any securities, or to divest, dispose of or hold separate any securities or all or a portion of their respective businesses, assets or properties or of the business, assets or properties of the Company, or (ii) to limit in any manner whatsoever the abilities of such entities (A) to conduct their respective businesses or own such assets or properties or to conduct the business or own the properties or assets of the Company or (B) to control their respective businesses or operations or the business or operations of the Company.

 

(c)            Most Favored Nation; Certain Other Purchasers Prohibited.  During the period from the date hereof though the Closing, the Company shall not enter into any additional, or modify any existing, agreements with any existing or future investors in the Company (including in connection with the Other Private Placements) that have the effect of establishing rights or otherwise benefiting such investor in a manner more favorable in any respect to such investor than the rights and benefits established in favor of the Purchaser under this Agreement, unless, in any such case, the Purchaser has been offered such rights and benefits (which the Purchaser may accept or reject in its sole discretion).  None of the Other Purchasers that are or become parties to the Other Private Placements shall currently be or previously have been engaged, directly or indirectly, in the adult entertainment industry, the gambling industry or the alcohol or tobacco industry.

 

(d)            Notice of Other Terminations. The Company shall promptly notify the Purchaser if any of the Other Securities Purchase Agreements are terminated.

 

(e)            No Shop.  During the period from the date hereof through the Closing or the termination of this Agreement in accordance with its terms, the Company shall not, and the Company shall not permit any of its Affiliates, directors, officers or employees to, and the Company shall use commercially reasonable efforts to cause its other representatives or agents (together with directors, officers, and employees, the "Company Representatives") not to, directly or indirectly, (i) discuss, encourage, negotiate, undertake, initiate, authorize, recommend, propose or enter into, whether as the proposed surviving, merged, acquiring or acquired corporation or otherwise, any transaction involving a merger, consolidation, business combination, recapitalization, purchase or disposition of any material amount of the assets of the Company or any material amount of the capital stock or other ownership interests of the Company (whether with respect to the outstanding capital stock of the Company or the issuance by the Company of capital stock) (other than in connection with this Agreement, the APA and the Other Private Placements) (an "Acquisition Transaction"), (ii) facilitate, encourage, solicit or initiate discussions, negotiations or submissions of proposals or offers in respect of an Acquisition Transaction, (iii) furnish or cause to be furnished, to any Person, any information concerning the business, operations, properties or assets of the Company in connection with an Acquisition Transaction, or (iv) otherwise cooperate in any way with, or assist or participate in, facilitate or encourage, any effort or attempt by any other Person to do or seek any of the foregoing. The Company shall notify the Purchaser orally and in writing promptly (but in no

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(f)            event later than one (1) Business Day) after receipt by the Company or any of the Company Representatives thereof of any proposal or offer from any Person to effect an Acquisition Transaction or any request for non-public information relating to the Company or for access to the properties, books or records of the Company by any Person in connection with an Acquisition Transaction.

 

(g)            Filings; Other Actions.

 

(i)            The Purchaser shall use its reasonable efforts to obtain all governmental, quasi-governmental, court or regulatory approvals, consents or statements of non-objection that, to its knowledge, are necessary to allow it to acquire the Shares, including any approvals, consents or statements of non-objection required by any state regulatory authorities and the Federal Reserve. The Purchaser agrees (i) that it will use its reasonable efforts to submit to the Federal Reserve (to the extent required) within thirty (30) days of the date hereof, (A) an application or notice under Section 3 and/or 4, as applicable, of the BHCA or a notice under the CIBCA, as applicable, to acquire the Shares (the approval of such application, an "Approval") and/or (B) a request for determination that it shall not be deemed to "control" the Company or any subsidiary of the Company for purposes of Sections 3 or 4 of the BHCA by reason of the purchase of the Shares or the consummation of the other transactions contemplated by this Agreement (a "Non-Control Determination"), and (ii) it will provide (and, if and as required by the Federal Reserve, will cause any of its general partners, managers, managing members or management companies or other controlling entities, as applicable, to provide) any passivity commitments required by the Federal Reserve in connection with its request to obtain such determination.  The determination of whether to seek Approval or a Non-Control Determination shall be at Purchaser's sole discretion.

 

(ii)            Each party agrees, upon request, to furnish the other party with all information concerning itself, its subsidiaries, Affiliates, directors, officers, partners and shareholders and such other matters as may be reasonably necessary or advisable in connection with any statement, filing, notice or application made by or on behalf of such other party or any of its subsidiaries to any Governmental Entity in connection with this Agreement.  Notwithstanding anything in this Section 6(f) or elsewhere in this Agreement to the contrary, (1) the Purchaser shall not be required to provide any materials to the Company that it deems private or confidential and (2) the Purchaser shall provide information only to the extent typically provided by the Purchaser to such governmental entities under the Purchaser's policies consistently applied and subject to such confidentiality requests as the Purchaser may reasonably seek.

 

8.            Additional Covenants.

 

(a)            Transaction Court Documents.

 

(i)            The Company shall provide to the Purchaser copies of all Transaction Court Documents and all motions, objections, pleadings, notices, proposed orders and other documents seeking the approval of any Transaction Court Document or which are primarily related to the Transaction Court Documents (collectively, the "Other Transaction Court Documents") as soon as reasonably practicable prior to filing the same with the

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(ii)            Bankruptcy Court and (ii) the Purchaser shall provide to the Company copies of all motions, objections, pleadings, notices, proposed orders and other documents that are to be filed by or on behalf of the Purchaser in the Case that are primarily related to the Transaction Court Documents as soon as reasonably practicable after filing the same with the Bankruptcy Court. If, after delivering the same to the Purchaser, the Company modifies any draft Transaction Court Document or any Other Transaction Court Document in any respect, including at the hearing scheduled to consider such Transaction Court Document or any Other Transaction Court Document (such hearing, the "Relevant Hearing"), the Company shall provide the modified version to the Purchaser as soon as reasonably practicable following such modification.

 

(iii)            With respect to drafts of Transaction Court Documents and Other Transaction Court Documents and motions seeking approval of the same and any modifications subsequently made to such drafts and delivered to the Purchaser pursuant hereto, the Purchaser shall raise with the Company in writing any objections that the Purchaser might have to such drafts or modifications as soon as reasonably practicable following receipt of such drafts or modifications, but in no event later than one (1) Business Day prior to the Relevant Hearing or the Company's intended date of filing the motion, as applicable; provided that if the Purchaser has not been given a reasonable amount of time to review and comment on such drafts or modifications, the Purchaser may object on the grounds of failure to provide sufficient time; provided further that if the Purchaser raises such an objection or if, after the conclusion of the Relevant Hearing, the Bankruptcy Court makes any modifications to a Transaction Court Document and Other Transaction Court Documents that were not discussed or described at the Relevant Hearing, the Purchaser shall have three (3) Business Days after the approval or entry of such Transaction Court Document and Other Transaction Court Documents to raise any objections to such modifications. So long as the Company complies with the requirements of this Section 7(a) regarding a given Transaction Court Document and Other Transaction Court Documents, unless the Purchaser timely raises an objection to such document as set forth herein (and such objection has not been resolved to the reasonable satisfaction of the Purchaser), such document shall be deemed to fulfill the condition precedent to the Purchaser's obligation to consummate the transactions contemplated hereby set forth in Section 8(b) hereof and the Purchaser shall be deemed to have waived in all respects any termination right with respect to such document. Regardless of whether or not the Purchaser raises any objection to a given Transaction Court Document and Other Transaction Court Documents or any modifications thereto in advance of the Relevant Hearing, the Purchaser shall be deemed to have waived in all respects any closing condition or termination right with respect to such document unless a Representative of the Purchaser, with decision-making authority, appears at the Relevant Hearing to provide final approval of such Transaction Court Document and Other Transaction Court Documents and any modifications thereto made at or prior to such hearing.

 

(b)            Form D and Blue Sky.  The Company agrees to file a Form D with respect to the Shares as required under Regulation D and to provide a copy thereof to the Purchaser upon request. The Company, on or before the Closing, shall take such action as the Company shall reasonably determine is necessary in order to obtain an exemption for or to qualify the Shares for sale to the Purchaser at the Closing pursuant to this Agreement under applicable securities or "Blue Sky" Laws of the states of the United States (or to obtain an exemption from such qualification), and shall provide evidence of any such action so taken upon

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(c)            the Purchaser's request. The Company shall make all filings and reports as it reasonably determines are necessary relating to the offer and sale of the Shares required under applicable securities or "Blue Sky" Laws of the states of the United States following the Closing; provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction.

 

(d)            Certain Fees and Expenses.  The Company shall pay its own expenses (including the fees and expenses of its attorneys) in connection with the preparation, negotiation, execution, and performance of this Agreement, the Transaction Documents and the transactions contemplated hereby and thereby, including all fees and expenses of agents, representatives, counsel, financial advisors, investment bankers and accountants.  The Company shall also pay all stamp or transfer taxes and other taxes (not including income or similar taxes) and duties levied in connection with the sale and issuance of the applicable Shares. In addition, Company shall pay or reimburse, or shall cause an affiliate or affiliates of Company to pay or to reimburse, Purchaser and any Affiliate of  Purchaser (including any direct or indirect equity owners of a Purchaser) and any Person now or hereafter acting in concert with Purchaser in connection with the transactions contemplated by this Agreement (an "Acting in Concert Person"), for all documented third party costs and expenses incurred by Purchaser or an Affiliate of Purchaser (including any direct or indirect equity owners of Purchaser) or any Acting in Concert Person pursuant to and/or in connection with the transactions contemplated by this Agreement (the "Purchaser Expenses") for or related to (1) due diligence efforts, (2) negotiations relating to this Agreement or the Transaction Documents (or any amendments or modifications to this Agreement or the Transaction Documents), (3) actions required of Purchaser pursuant to this Agreement (e.g., regulatory approvals) and (4) closing of the transactions contemplated by this Agreement. The Purchaser Expenses may include, without limitation, all costs and expenses of agents, counsel, consultants, financial advisors, investment bankers and accountants, and all costs and expenses for environmental reports, title commitments, property appraisals, property condition reports, title policies and filing fees. In addition, Company shall or shall cause an affiliate to Company to pay or to reimburse the purchaser under the APA for all "APA Purchaser Expenses" (as that term is defined in the APA).  As used herein, the term "Purchaser Expenses" means the Purchaser Expenses and the "APA Purchaser Expenses" (as that term is defined in the APA).

 

(e)            Confidential Information.  The Purchaser represents to the Company that, at all times during the Company's offering of the Shares, the Purchaser (i) has maintained in confidence all non-public information regarding the Company received by the Purchaser from the Company or its agents, including, without limitation, the existence of the transactions contemplated herein, (ii) has used all such non-public information only in connection with the evaluation of the transactions contemplated herein, and (iii) has not purchased or sold the Company's securities or any securities convertible or exchangeable for any of the Company's securities while in possession of such information, and that the Purchaser will continue to comply with (i), (ii) and (iii) above until such information (x) becomes generally available to the public other than through a violation of this provision by the Purchaser or its agents or (y) is required to be disclosed in legal proceedings (such as by deposition, interrogatory, request for documents, subpoena, civil investigation demand, filing with any governmental authority or similar process); provided, however, that before making any use or disclosure in reliance on (y)

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(f)            above, the Purchaser shall give the Company prior written notice specifying the circumstances giving rise thereto and will furnish only that portion of the non-public information which is legally required in the opinion of counsel to the Purchaser.

 

(g)            Board of Directors Matters.  Promptly after the Closing:

 

(i)            The  Board Representatives shall be nominated for election to the Board pursuant to a shareholder vote or appointment, as the case may be, for so long as Purchaser has a Qualifying Ownership Interest, subject to all legal and governance requirements and approvals regarding service and election or appointment as a director of the Company generally (including any required approvals of the Federal Reserve), and to the approval of the Company's Nominating/Corporate Governance Committee (the "Governance Committee") (such approval not to be unreasonably withheld, delayed or conditioned).

 

(ii)            Subject to Section 7(e)(i), upon the death, resignation, retirement, disqualification or removal from office as a member of the Board of Directors of any Board Representative, Purchaser shall have the right to nominate a replacement for such Board Representative, which nominee replacement shall satisfy all legal and governance requirements regarding service as a director of the Company and shall be reasonably acceptable to the Company.

 

(iii)            The Company hereby agrees that, from and after the Closing Date, for so long as Purchaser has a Qualifying Ownership Interest and does not have a Board Representative currently serving on the Board, the Company shall, subject to applicable law, invite a person designated by Purchaser (the "Board Observer") to attend meetings of the Board (including any meetings of the Governance Committee) in a nonvoting observer capacity.  The Board Observer shall not have any right to vote on any matter presented to the Board or any committee thereof.  The Company shall give the Board Observer written notice of each meeting of the Board at the same time and in the same manner as the members of the Board, shall provide the Board Observer with all written materials and other information given to members of the Board at the same time such materials and information are given to such members, and shall permit the Board Observer to attend as an observer at all meetings thereof, and in the event the Company proposes to take any action by written consent in lieu of a meeting, the Company shall give written notice thereof to the Board Observer prior to the effective date of such consent describing the nature and substance of such action and including the proposed text of such written consents; provided, however, that: (1) the Board Observer may be excluded, from executive sessions comprised solely of independent directors, by the Chairman of the Board (or, if applicable, the lead or presiding independent director) if, in the written advice of counsel, such exclusion is necessary in order for the Company to comply with applicable law, regulation or stock exchange listing standards (it being understood that it is not expected that the Board Observer would be excluded from routine executive sessions); (2) the Company and the Board shall have the right to withhold any information and to exclude the Board Observer from any meeting or portion thereof if doing so is, in the written advice of counsel, (x) necessary to protect the attorney-client privilege between such party and counsel, or (y) necessary to avoid a violation of fiduciary requirements under applicable law; and (3) the Purchaser shall cause the Board Observer to agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information provided to the Board Observer.  The Purchaser covenants and agrees to hold all

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(iv)            such information obtained from the Board Observer as provided in the prior sentence in confidence pursuant to Section 7(d) above.

 

(v)            The chairman of the Board shall (x) not be an executive officer of the Company, and (y) shall be appointed by the Governance Committee following an annual meeting of shareholders that is to occur within the ninety (90) days following the effectiveness of the Plan.

 

(vi)            The Company shall enter into a director indemnification agreement, in a form mutually agreed to between the Company and the Purchaser, with each Board Representative.

 

(vii)            For as long as a Board Representative is a member of the Board, the Company shall procure and maintain a director and officer insurance policy that is reasonably acceptable to the Purchaser covering each Board Representative.

 

(viii)            Notwithstanding anything in this Section 7(e) to the contrary, if the Purchaser no longer has a Qualifying Ownership Interest, (x) the Purchaser will have no further rights under this Section 7(e) and, at the written request of the Board, shall use all commercially reasonable efforts to cause any Board Representatives to resign from the Board as promptly as possible thereafter, and (y) the Company will no longer have any obligations under this Section 7(e).  The Purchaser shall promptly inform the Company if and when it ceases to hold a Qualifying Ownership Interest in the Company.

 

(h)            Limitation on Beneficial Ownership.  Except as provided herein, no Other Purchaser (and its Affiliates or any other Persons with which it is acting in concert or whose holdings would otherwise be required to be aggregated for purposes of the BHCA or the CIBCA) will be entitled to purchase a number of securities of the Company that would result in such Other Purchaser becoming, directly or indirectly, the beneficial owner (as determined under Rule 13d-3 under the Exchange Act) of more than 9.9% of the number of shares of Common Stock of the Company issued and outstanding (based on the number of outstanding shares as of the Closing Date).

 

(i)            Additional Securities Purchase Agreements.  The Company agrees to cause the Other Securities Purchase Agreements to include the following:

 

(i)             A representation that Other Purchaser has made an independent investment decision with respect to the transactions contemplated by the agreement and specifically is not making the investment decision based on the fact that any of the equity or asset purchasers involved in the Company's 2012 bankruptcy proceeding actually purchased equity or assets of the Company or in reliance on any discussions with or actions of any such equity or asset purchasers; and

 

(ii)            A representation that No Other Purchaser has been, or is currently engaged, in the adult entertainment industry, the gambling industry, or the alcohol or tobacco industry.

 

(iii)            The representations in Section 4 hereof.

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(iv)            Other Matters.

 

(v)            Before the Closing, the Company covenants to use its reasonable best efforts to cause the transactions contemplated by this Agreement and the Case to qualify under Section 382(l)(5) of the Code and (ii) avoid an "ownership change" as defined in Section 382(g) of the Code.  After the Closing and for so long as the Purchaser has a Qualifying Ownership Interest, the Company covenants to (i) maintain or cause to be maintained qualification of the transactions contemplated by this Agreement and the Case under Section 382(l)(5) of the Code and (ii) avoid an "ownership change" as defined in Section 382(g) of the Code during any time in which the Company is a "loss corporation" as defined in Section 382(k)(1) of the Code.

 

(vi)            Notwithstanding anything in this Agreement to the contrary, in the event of a breach of the covenant set forth in this Section 7(h) or a breach of the representation in Section 5(cc), other than, in either case, as a result of the act or failure to act on the part of Purchaser (and notwithstanding whether such breach would also constitute a breach of any other representation, warranty or covenant of the Company set forth herein), Purchaser's sole and exclusive remedy after the Closing shall be monetary damages in an amount to be determined pursuant to an independent appraisal of the dimunition in value of Purchaser's Shares in accordance with a valuation methodology to be determined and agreed upon by the parties prior to the expiration of the Due Diligence Period, provided, that Purchaser shall only be entitled to damages for the Shares owned by Purchaser at the time of such breach.

 

9.            Conditions to the Purchaser's and the Company's Obligations.  Both the obligation of the Purchaser to purchase the Shares, and the obligation of the Company to issue and sell the Shares, pursuant to Section 2 hereof at the Closing, are subject to satisfaction or waiver of each of the following conditions precedent:

 

(a)            Definitive Documents. The Transaction Documents shall have been executed by the parties thereto in the forms attached hereto (where applicable) or otherwise as agreed to by the Purchaser, the Company and the other parties thereto on or prior to the Effective Date, and approval by the Bankruptcy Court of the Transaction Documents shall have been obtained, as necessary. After the execution of the Transaction Documents by the parties thereto, such Transaction Documents shall not be modified without the Purchaser's and the Company's consent, and shall be in effect and the consummation of the transactions contemplated thereby shall not be stayed, and all conditions to the obligations of the parties under the Transaction Documents shall have been satisfied or effectively waived. All corporate and other proceedings to be taken by the Purchaser and the Company in connection with the Transaction Documents and the transactions contemplated thereby to be completed at the Closing and documents incident thereto shall have been completed in form and substance satisfactory to the Purchaser and the Company, and the Purchaser and the Company shall have received all such counterpart originals or certified or other copies of the Transaction Documents and such other documents as it may reasonably request.

 

(b)            Transaction Court Documents. Subject to Section 7(a), the Bankruptcy Court shall have confirmed the Plan, approved the Disclosure Statement and entered all orders included in the Transaction Court Documents and Other Transaction Court Documents, each of

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(c)            which orders shall not have been subsequently modified without the Purchaser's and the Company's prior written consent, reversed or vacated, and each such Transaction Court Document and Other Transaction Court Document shall be in effect and not be stayed.  The orders approving the Transaction Court Documents or relating to Purchaser's obligations under this Agreement shall be in form and substance acceptable to the Purchaser and be unmodified by the confirmation order and be Final Orders.  This condition may be affirmatively waived in writing by Purchaser, but is not subject to the silent waiver provisions contained in Section 7(a)(ii).

 

(d)            Effective Date. The Effective Date shall have occurred.

 

(e)            Closing of the APA.  The first Closing (as such term is defined in the APA) shall have occurred (or shall occur simultaneously with the Closing).

 

10.            Conditions to the Purchaser's Obligation.  The obligation of the Purchaser to purchase the Shares pursuant to Section 2 hereof is subject to satisfaction or waiver of each of the following conditions precedent:

 

(a)            Representations and Warranties; Covenants. The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the date of the Closing, with the same force and effect as if they had been made on and as of the Closing Date (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such specified date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company on or before the Closing Date. The Company shall have delivered to the Purchaser at the Closing a certificate dated the Closing Date and signed on behalf of an officer of the Company to the effect that the conditions set forth in this Section 9(a) have been satisfied.

 

(b)            Articles of Incorporation and Bylaws. The Articles of Incorporation and Bylaws, as provided for in the Plan, shall contain the terms contemplated hereby, and the Articles of Incorporation shall have been filed with and accepted by the Secretary of State of Michigan. As of the Closing Date, the Company shall have made available to the Purchaser a complete and correct copy of the Articles of Incorporation and the Bylaws, in full force and effect as of the Closing Date.

 

(c)            Litigation. There shall be no (i) threatened or pending Postpetition suit, action, investigation, inquiry or other proceeding by or before any court of competent jurisdiction (excluding the Case or any Proceedings thereunder, and any matter that represents a prepetition claim in the Case), or (ii) Proceedings instituted by any Governmental Entity that remain pending and seek to restrain, enjoin, prevent, delay, prohibit or otherwise make illegal the performance of any of the Transaction Documents.

 

(d)            Consents Under Agreements. The Company shall have obtained the consent or approval of each Person whose consent or approval shall be required under any Material Contract to which the Company or any of its Subsidiaries is a party in connection with the transactions contemplated by this Agreement, except for (i) Material Contracts as to which

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(e)            consent or approval is unnecessary under Section 365 of the Bankruptcy Code or (ii) Material Contracts with a party that received actual, written notice in the Case and failed to object to the treatment of such Contract thereunder prior to the Effective Date.

 

(f)            Confirmation Order. Subject to Section 7(a), the Confirmation Order shall have been entered by the Bankruptcy Court in form and substance reasonably acceptable to the Purchaser, shall be unstayed and, once entered, shall not have been modified without the Purchaser's prior written consent.

 

(g)            Consents and Approvals. The Company shall have received all approvals, clearances, consents and authorizations required to be obtained for the consummation of the transactions contemplated hereby, which approvals, clearances, consents and authorizations have not been stayed or vacated (the "Consents and Approvals"), which Consents and Approvals shall not contain any condition or restriction that, in the Purchaser's reasonable judgment, materially impairs the reorganized Company's ability to carry on its business as conducted on the date hereof or materially restricts any business activity of the Purchaser or the Company. All waiting periods imposed by applicable Law (including under the HSR Act, if applicable) in connection with the transactions contemplated by the Transaction Documents shall have expired or been terminated without any action having been taken by any court of competent jurisdiction restraining, preventing or imposing materially adverse conditions upon such transactions (which action remains in effect).

 

(h)            No Material Adverse Effect. Other than the Case, since January 1, 2012 to the date of this Agreement, no event, circumstance or matter has occurred or arisen that has had, or would reasonably be expected to have, a Material Adverse Effect.  From the date of this Agreement to the Closing Date, no event, circumstance or matter shall have occurred or arisen that has had, or would reasonably be expected to have, a Material Adverse Effect.

 

(i)            FDIC Waiver. The Company shall have applied for and received a waiver of liability from the Federal Deposit Insurance Corporation regarding any potential cross-guarantee liability that may be asserted against the Company or any of its Subsidiaries resulting from the failure of Commerce Bank of Southwest Florida, in form and substance satisfactory to the Purchaser.

 

(j)            Tax Opinion of Honigman Miller Schwartz and Cohn LLP.  On the basis of facts, representations and assumptions which shall be consistent with the state of facts existing on the Closing Date, the Purchaser shall have received an opinion from Honigman Miller Schwartz and Cohn LLP dated the Closing Date, substantially to the effect that on the basis of the facts, representations and assumptions set forth or referred to in such opinion the reorganization set forth in the Plan and described in the Disclosure Statement should qualify under Section 382(l)(5) of the Code.

 

(k)            Code of Ethics.  The Company shall have adopted a code of ethics, suitable for a company commonly sized, similarly complex and in the same industry, which includes a provision that precludes any of the Company's officers and directors from making any political contributions to persons running for any State office in the State of Michigan.

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(l)            Purchaser Approvals.  Purchaser shall have obtained any necessary Approval and/or Non-Control Determination pursuant to Section 6(f).

 

(m)            Purchaser Approval of the Plan and Final Order.  Purchaser shall have approved the Plan and the Final Orders.

 

(n)            Equity Raise.  The Company shall have consummated transactions pursuant to this Agreement and the Other Private Placements to sell, in the aggregate, One Hundred Million Dollars ($100,000,000) in Shares.

 

(o)            Compliance with Laws; No Adverse Action or Decision. Since the date hereof, (i) no Law shall have been promulgated, enacted or entered that restrains, enjoins, prevents, materially delays, prohibits or otherwise makes illegal the performance of any of the Transaction Documents with respect to the transactions contemplated thereby to be completed at the Closing; (ii) no preliminary or permanent injunction or other order by any Governmental Entity that restrains, enjoins, prevents, delays, prohibits or otherwise makes illegal the performance of any of the Transaction Documents shall have been issued and remain in effect, except for such injunctions that, if obtained, would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the reorganized Company; and (iii) no Governmental Entity shall have instituted any Proceeding that seeks to restrain, enjoin, prevent, delay, prohibit or otherwise make illegal the performance of any of the Transaction Documents, except for any Proceedings, which have a significant possibility of being brought to a conclusion which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the reorganized Company.

 

11.            Conditions to the Company's Obligation.  The obligation of the Company to issue and sell the Shares to the Purchaser pursuant to Section 2 hereof is subject to satisfaction or waiver of each of the following conditions precedent:

 

(a)            Representations and Warranties; Covenants. The representations and warranties of the Purchaser shall be true and correct in all material respects as of the date when made and as of the date of the Closing, with the same force and effect as if they had been made on and as of the Closing Date (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such specified date), and the Purchaser shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Purchaser on or before the Closing.  The Purchaser shall have delivered to the Company at the Closing a certificate dated the Closing Date and signed on behalf of the Purchaser or an officer of the Purchaser to the effect that the conditions set forth in this Section 10(a) have been satisfied.

 

(b)            Compliance with Laws; No Adverse Action or Decision. Since the date hereof, (i) no Law shall have been promulgated, enacted or entered that restrains, enjoins, prevents, materially delays, prohibits or otherwise makes illegal the performance of any of the Transaction Documents with respect to the transactions contemplated thereby to be completed at the Closing; (ii) no preliminary or permanent injunction or other order by any Governmental Entity that restrains, enjoins, prevents, delays, prohibits or otherwise makes illegal the

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(c)            performance of any of the Transaction Documents shall have been issued and remain in effect, except for such injunctions that, if obtained, would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the reorganized Company; and (iii) no Governmental Entity shall have instituted any Proceeding that seeks to restrain, enjoin, prevent, delay, prohibit or otherwise make illegal the performance of any of the Transaction Documents, except for any Proceedings, which have a significant possibility of being brought to a conclusion which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the reorganized Company.

 

(d)            Consents and Approvals. The Company shall have received the Consents and Approvals, which Consents and Approvals shall not contain any condition or restriction that materially impairs the reorganized Company's ability to carry on its business as conducted on the date hereof or materially restricts any business activity of the Purchaser or the Company. All waiting periods imposed by applicable Law (including under the HSR Act, if applicable) in connection with the transactions contemplated by the Transaction Documents shall have expired or been terminated without any action having been taken by any court of competent jurisdiction restraining, preventing or imposing materially adverse conditions upon such transactions (which action remains in effect).

 

(e)            Confirmation Order. The Confirmation Order shall have been entered by the Bankruptcy Court in form and substance reasonably acceptable to the Company, shall be unstayed and, once entered, shall not have been modified without the Company's prior written consent.

 

(f)            Certificate Confirming Materials Furnished.  The Company shall have received a certificate executed by the Purchaser acknowledging that the Purchaser has sought such accounting, legal and tax advice as the Purchaser has considered necessary to make an informed investment decision with respect to its acquisition of the Shares.

 

12.            Termination.

 

(a)            This Agreement may be terminated at any time prior to the Closing as follows, under the following conditions:

 

(i)            by mutual consent of the parties;

 

(ii)            by Purchaser if any condition in Section 8 or 9 has not been satisfied by the third (3rd) Business Day following the expiration of the Due Diligence Period or if satisfaction of such a condition by such date is or becomes impossible, and Purchaser has not waived such condition on or before such date;

 

(iii)            by Company if any condition in Section 8 or 10 has not been satisfied by the third (3rd) Business Day following the expiration of the Due Diligence Period or if satisfaction of such a condition by such date is or becomes impossible (other than, in either case, through the failure of Company to comply with its obligations under this Agreement or the APA), and Company has not waived such condition on or before such date;

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(iv)             by Purchaser, (x) if any representation or warranty made herein or in the APA for the benefit of Purchaser or the purchaser under the APA or in any certificate or document furnished to Purchaser or the purchaser under the APA pursuant to this Agreement or the APA is untrue in any material respect, or (y) the Company shall have defaulted in the performance of any obligation herein contained or contained in the APA, and, in either case, Purchaser has notified Company of the fact that a representation or warranty is untrue or of the default, and such untrue statement or default has remained uncured for a period of ten (10) days after such notice (and the Closing Date shall be extended to the last day of such period); or

 

(v)            by Company, if any representation or warranty made herein for the benefit of Company or in any certificate or document furnished to Company pursuant to this Agreement is untrue in any material respect or Purchaser shall have defaulted in any respect in the performance of any obligation herein contained, Company has notified Purchaser of the fact that a representation or warranty is untrue or of the default, and such untrue statement or default has remained uncured for a period of ten (10) days after such notice (and the Closing Date shall be extended to the last day of such period); or

 

(vi)            by either party if the Closing has not occurred by December 31, 2012, provided, however, that the right to terminate this Agreement under this Section 11(a)(vi) shall not be available to any party if the action or failure to act of such party or any of its Affiliates has been a principal cause of or resulted in the failure of the Closing to occur on or before such date;

 

(vii)             by either party if Purchaser is required to procure any regulatory approval or provide any notice to any Governmental Entity in order to consummate the transactions contemplated by this Agreement and Purchaser has not procured such approval or provided such notice by November 30, 2012; or

 

(viii)            by a party pursuant to any other provision of this Agreement that permits termination not previously identified in this Section, provided notice of such termination is made within the time periods set forth in each such provision.

 

(b)            If this Agreement is terminated (i) pursuant to Section 11(a)(i) or (vi), or (ii) pursuant to Section 11(a)(ii), (iii), (vii) or (viii) under circumstances other than those described in Section 11(c) below, the Deposit shall be returned to Purchaser and no party shall have any further obligation hereunder to any other party other than such obligations which expressly survive the termination of this Agreement.

 

(c)            If this Agreement is terminated: (i) by Purchaser pursuant to Section 11(a)(iv); (ii) by Purchaser pursuant to Section 11(a)(ii) because a condition to Closing set forth in Section 8 or 9 hereof is not met or is unsatisfied, in each case provided that the failure of such conditions to be met is not due to the failure of Purchaser to fulfill its obligations under this Agreement or such failure was not due to facts or circumstances under Purchaser's control; (iii) by the Company pursuant to Section 11(a)(iii) because a condition to Closing set forth in Section 8 or 10 hereof is not met or is unsatisfied, in each case provided that the failure of such conditions to be met is not due to the failure of Purchaser to fulfill its obligations under this Agreement or such failure was not due to facts or circumstances under Purchaser's control; (iv)

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(d)            by either party pursuant to Section 9.4(a)(vii) and the events giving rise to such termination are due to the failure of the Company to fulfill its obligations under this Agreement or the events giving rise to such termination are due to facts or circumstances under the Company's control; or (v) by a party pursuant to Section 11(a)(viii) provided that the events giving rise to such termination  were not due to the failure of Purchaser to fulfill its obligations under this Agreement or the events giving rise to such termination were not due to facts or circumstances under Purchaser's control, then, in each such case, the Purchaser shall be entitled to an amount equal to four percent (4%) of the sum of the Purchase Price and the purchase price under the APA (the "Termination Fee"), as liquidated damages and as Purchaser's sole remedy hereunder (it being agreed by the parties that Purchaser's damages for negotiating and entering into this Agreement are difficult to determine, and that the Termination Fee represents a fair and reasonable estimate of those damages); provided, however, (x) that in all events Purchaser shall have the right to claim damages after the Closing Date for a breach of any representation, warranty, term, provision, condition or covenant hereunder and/or seek indemnification pursuant to Section 13(n) below, and (y) any termination fee under the APA shall be included in, and not be in addition to, the Termination Fee.  Without limiting any obligation of Company to pay the Termination Fee, Purchaser shall only be obligated to return its due diligence materials (as hereinafter defined) after the Termination Fee is paid in full.

Notwithstanding anything in this Section 11(c) to the contrary, in no event shall the Company be liable to pay the Termination Fee if this Agreement is terminated  as a result of an FDIC seizure or other FDIC-assisted takeover of substantially all of the Company's Affiliate banks.

 

(e)            If this Agreement is terminated by Company pursuant to Section 11(a)(v), then Company shall be entitled to retain the Deposit plus Purchaser shall pay the Company the Purchaser Expenses paid by Company to Purchaser after the expiration of the Due Diligence Period and which expenses were first incurred after the expiration of the Due Diligence Period (the "Reimbursement Fee") as liquidated damages and as Company's sole remedy hereunder (it being agreed by the parties that Company's damages for negotiating and entering into this Agreement are difficult to determine, and that the Reimbursement Fee represents a fair and reasonable estimate of those damages); provided, however, that in all events if Closing occurs Company shall have the right to claim damages after the Closing Date for a breach of any representation, warranty, term, provision, condition or covenant hereunder and/or seek indemnification pursuant to Section 13(n) below.

 

(f)            Notwithstanding anything to the contrary contained in this Agreement, from the date of this Agreement until 5:00 p.m. Eastern Time on November 30, 2012 (the "Due Diligence Period"), Purchaser shall have the right to conduct such inspections, investigations, examinations and evaluations of the Company and the Shares as the Purchaser shall deem necessary (the "Due Diligence Investigation").  Company agrees to take all steps reasonably necessary to assist Purchaser in its Due Diligence Investigation, including, without limitation, providing to Purchaser copies of and access to all documents, instruments and agreements requested by Purchaser that are in Company's possession or control. Notwithstanding anything to the contrary contained in this Agreement, Purchaser may for any reason (or no reason) in its sole and absolute discretion elect to terminate this Agreement by notice to Company given on or before the expiration of the Due Diligence Period.  If Purchaser shall elect to terminate this

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(g)            Agreement pursuant to this Section 11(e), then (i) the Company may retain the Deposit, and the parties hereto shall thereafter have no further obligations under this Agreement, except for any obligations which expressly survive the termination hereof, and (ii) the Company agrees not to (and to cause its Affiliates not to) bring any Proceedings against the Purchaser relating to or arising from Purchaser's exercise of its termination rights under this Section 11(g).

 

(h)            Intentionally Omitted.

 

(i)            Notwithstanding any termination of this Agreement pursuant to this Section 11, the terms and provisions of Sections 7(c), 7(d), and 13 shall remain in full force and effect.

 

(j)            Notwithstanding any other provision of this Agreement or the APA, the Company prior to the Closing shall have the option at any time, for any reason or no reason, to terminate this Agreement or this Agreement and the APA, together, if it pays the Termination Fee and Purchaser Expenses to Purchaser in immediately available funds.

 

(k)            Notwithstanding the foregoing or anything to the contrary contained in this Agreement, under no circumstances will the execution of this Agreement, termination of this Agreement or any Closing under this Agreement affect the validity or enforceability of (i) that certain pre-negotiation agreement dated as of September 21, 2012 by and between the Company and TFM Management, LLC ("TFM"), (ii) that certain pre-negotiation agreement dated September 21, 2012 by and among TFM and certain of the Company's Affiliate banks, and (iii) that certain side letter agreement relating to expense reimbursement dated as of September 21, 2012 by and among TFM and certain of the Company's Affiliate banks.

 

13.      Registration Rights.

 

(a)            Registration.  Subject to the terms and conditions of this Agreement, the Company covenants and agrees that as promptly as practicable after the Closing Date (and in any event no later than the Registration Deadline), the Company shall have prepared and filed with the SEC a Shelf Registration Statement covering the resale of all Registrable Securities (or, if permitted by the rules of the SEC, otherwise designated an existing Shelf Registration Statement filed with the SEC to cover the Registrable Securities), and, to the extent the Shelf Registration Statement has not theretofore been declared effective, the Company shall use commercially reasonable efforts to cause such Shelf Registration Statement to be declared or become effective not later than the Effectiveness Deadline and to keep such Shelf Registration Statement continuously effective and in compliance with the Securities Act and usable for resale of such Registrable Securities for a period from the date of its initial effectiveness until such time as there are no Registrable Securities remaining (including by re-filing such Shelf Registration Statement (or a new Shelf Registration Statement) if the initial Shelf Registration Statement expires) (the "Effectiveness Period").  Notwithstanding the registration obligations set forth in this Section 12(a), in the event that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly (x) inform each of the Holders thereof and use its commercially reasonable efforts to file amendments to the initial Shelf Registration Statement as

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(b)            required by the SEC and/or (y) withdraw the initial Shelf Registration Statement and file a new Shelf Registration Statement, in either case covering the maximum number of Registrable Securities permitted to be registered by the SEC, on such form available to the Company to register for resale the Registrable Securities as a secondary offering; provided, however, that prior to filing such amendment or new Shelf Registration Statement, the Company shall be obligated to use its commercially reasonable efforts to advocate with the SEC for the registration of all of the Registrable Securities in accordance with the SEC Guidance, including Compliance and Disclosure Interpretation 612.09.  Notwithstanding any other provision of this Agreement and subject to the payment of Liquidated Damages in Section 12(k), if any SEC Guidance sets forth a limitation of the number of Registrable Securities or other securities permitted to be registered on a particular Shelf Registration Statement as a secondary offering (and notwithstanding that the Company used commercially reasonable efforts to advocate with the SEC for the registration of all or a greater number of Registrable Securities), the number of Registrable Securities or securities to be registered on such Shelf Registration Statement will be reduced as follows: first, the Company shall reduce or eliminate the securities to be included by any Person other than a Holder; second, the Company shall reduce or eliminate any securities to be included by any Affiliate (which shall not include the Purchaser or its Affiliate) of the Company; and third, the Company shall reduce the number of Registrable Securities to be included by all Holders on a pro rata basis based on the total number of unregistered Registrable Securities held by such Holders, subject to a determination by the SEC that certain Holders must be reduced before other Holders based on the number of Registrable Securities held by such Holders.  In the event the Company amends the initial Shelf Registration Statement or files a new Shelf Registration Statement, as the case may be, under clauses (x) or (y) above, the Company will use its commercially reasonable efforts to file with the SEC, as promptly as allowed by the SEC or SEC Guidance provided to the Company or to registrants of securities in general, one or more registration statements on such form available to the Company to register for resale those Registrable Securities that were not registered for resale on the initial Shelf Registration Statement, as amended, or the new Shelf Registration Statement.

 

No Holder shall be named as an "underwriter" in any registration statement without such Holder's prior written consent.

(i)            Any registration pursuant to this Section 12(a) shall be effected by means of a shelf registration under the Securities Act on Form S-1 (or, if the Company is then eligible, on Form S-3) (a "Shelf Registration Statement") in accordance with the methods and distribution set forth in the Shelf Registration Statement and Rule 415.  If the Purchaser or any other Holder of Registrable Securities to whom the registration rights conferred by this Agreement have been transferred in compliance with this Agreement intends to distribute any Registrable Securities by means of an underwritten offering, it shall promptly so advise the Company, and the Company shall take all reasonable steps to facilitate such distribution, including the actions required pursuant to Section 12(c); provided that the Company shall not be required to facilitate an underwritten offering of Registrable Securities unless the expected gross proceeds from such offering exceed One Million Dollars ($1,000,000.00).  The lead underwriters in any such distribution shall be selected by the holders of a majority of the Registrable Securities to be distributed and shall be reasonably acceptable to the Company.

(ii)            The Company shall not be required to effect a registration

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(including a resale of Registrable Securities from an effective Shelf Registration Statement) or an underwritten offering pursuant to this Section 12(a):

(A)            with respect to securities that are not Registrable Securities;

 

(B)            during any Scheduled Black-out Period, with respect to any resale of Registrable Securities from an effective Shelf Registration Statement by the Purchaser who, at such time, has appointed a Board Representative or Board Observer pursuant to Section 7(e); or

 

(C)            if the Company has notified the Purchaser and all other Holders that in the good faith judgment of the Board, it would be materially detrimental to the Company or its security holders for such registration or underwritten offering to be effected at such time, in which event the Company shall have the right to defer such registration or underwritten offering for a period of not more than forty-five (45) days after receipt of the request of the Purchaser or any other Holder; provided that such right to delay a registration or underwritten offering shall be exercised by the Company (1) only if the Company has generally exercised (or is concurrently exercising) similar black-out rights against all holders of similar securities that have registration rights, (2) not more than once in any twelve (12)-month period and (3) so long as the total number of days of any delays hereunder and the total number of days of any suspension under Section 12(d) do not exceed, in the aggregate, sixty (60) days in any twelve (12)-month period.

 

The Company shall provide the Purchaser written notice of any Scheduled Black-out Period, if applicable to the Purchaser, no later than seven (7) Business Days prior to the commencement of such Scheduled Black-out Period.

(iii)            After the Closing Date, whenever the Company proposes to register any of its equity securities, other than a registration pursuant to Section 12(a)(i), a Special Registration and the registration form to be filed may be used for the registration or qualification for distribution of Registrable Securities, the Company will give prompt written notice to the Purchaser and all other Holders of its intention to effect such a registration (but in no event less than fifteen (15) days prior to the anticipated filing date) and (subject to clause (v) below) will include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within ten (10) Business Days after the date of the Company's notice (a "Piggyback Registration").  Any such Person that has made such a written request may withdraw its Registrable Securities from such Piggyback Registration by giving written notice to the Company and the managing underwriter, if any, on or before the fifth (5th) day prior to the planned effective date of such Piggyback Registration.  The Company may terminate or withdraw any registration under this Section 12(a)(iii) prior to the effectiveness of such registration, whether or not the Purchaser or any other Holder has elected to include Registrable Securities in such registration.  "Special Registration" means the registration of (A) equity securities and/or options or other rights in respect thereof solely registered on Form S-4 or Form S-8 (or any successor form) or (B) shares of equity securities and/or options or other rights in respect thereof to be offered to directors, members of management, employees, consultants, customers, lenders or vendors of the Company or its Subsidiaries or in connection with dividend reinvestment plans.

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(iv)            If the registration referred to in Section 12(a)(iii) is proposed to be underwritten, the Company will so advise the Purchaser and all other Holders as a part of the written notice given pursuant to Section 12(a)(iii).  In such event, the right of the Purchaser and all other Holders to registration pursuant to this Section 12(a) will be conditioned upon such Persons' participation in such underwriting and the inclusion of such Persons' Registrable Securities in the underwriting, and each such Person will (together with the Company and the other Persons distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Company.  If any participating Person disapproves of the terms of the underwriting, such Person may elect to withdraw therefrom by written notice to the Company, the managing underwriter and the Purchaser.

(v)            The Company represents and warrants that it has not granted to any holder of its securities and agrees that it shall not grant "piggyback" registration rights to one or more third parties to include their securities in the Shelf Registration Statement or in an underwritten offering under the Shelf Registration Statement pursuant to Section 12(a)(i).  If a Piggyback Registration under Section 12(a)(iii) relates to an underwritten primary offering on behalf of the Company, and in either case the managing underwriters advise the Company that in their reasonable opinion the number of securities requested to be included in such offering exceeds the number which can be sold without adversely affecting the marketability of such offering (including an adverse effect on the per share offering price), the Company will include in such registration or prospectus only such number of securities that in the reasonable opinion of such underwriters can be sold without adversely affecting the marketability of the offering (including an adverse effect on the per share offering price), which securities will be so included in the following order of priority: (A) first, in the case of a Piggyback Registration under Section 12(a)(iii), the securities the Company proposes to sell; (B) second, Registrable Securities of the Purchaser and all other Holders who have requested registration of Registrable Securities pursuant to Section 12(a)(i) or 12(a)(iii), as applicable, pro rata on the basis of the aggregate number of such securities or shares owned by each such Person; and (C) third, any other securities of the Company that have been requested to be so included, subject to the terms of this Agreement.

(vi)            In the event that Form S-3 is not available for the registration of the resale of Registrable Securities under Section 12(a)(i), the Company shall (A) register the resale of the Registrable Securities on another appropriate form, including Form S-1 and (B) undertake to register the Registrable Securities on Form S-3 promptly after such form is available, provided that the Company shall maintain the effectiveness of the Shelf Registration Statement then in effect until such time as a Shelf Registration Statement on Form S-3 covering the Registrable Securities has been declared effective by the SEC.

(b)            Expenses of Registration.  All Registration Expenses incurred in connection with any registration, qualification or compliance hereunder shall be borne by the Company.  Without limiting the foregoing, the Company shall bear its internal expenses (including all salaries and expenses of its officers and employees performing legal, accounting or other duties) and expenses of any Person, including special experts, retained by the Company.  The Company shall also reimburse the Purchaser for the reasonable fees and disbursements of Holders' Counsel in an amount not to exceed Thirty Thousand Dollars ($30,000.00) per

41

registration.  All Selling Expenses incurred in connection with any registrations hereunder shall be borne by the Holders of the securities so registered pro rata on the basis of the aggregate offering or sale price of the securities so registered.

 

(c)            Obligations of the Company.  In addition, whenever required to effect the registration of any Registrable Securities or facilitate the distribution of Registrable Securities pursuant to an effective Shelf Registration Statement, the Company shall, as expeditiously as reasonably practicable:

(i)            By 9:30 a.m., New York City time, on the first (1st) Business Day after the effective date of a Shelf Registration Statement, file a final prospectus with the SEC as required by Rule 424(b) under the Securities Act.

(ii)            Provide to each Holder a copy of any disclosure regarding the plan of distribution or the selling Holder, in each case, with respect to such Holder, at least three (3) Business Days in advance of any filing with the SEC of any registration statement or any amendment or supplement thereto that amends such information.

(iii)            Prepare and file with the SEC a prospectus supplement with respect to a proposed offering of Registrable Securities pursuant to an effective registration statement, subject to this Section 12(c), and keep such registration statement effective or such prospectus supplement current until the securities described therein are no longer Registrable Securities.

(iv)            Prepare and file with the SEC such amendments and supplements to the applicable registration statement and the prospectus or prospectus supplement used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement.

(v)            Furnish to the Holders and any underwriters such number of copies of the applicable registration statement and each such amendment and supplement thereto (including in each case all exhibits) and of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned or to be distributed by them.

(vi)            Use its commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or "Blue Sky" Laws of such jurisdictions as shall be reasonably requested by the Holders or any managing underwriter(s), to keep such registration or qualification in effect for so long as such registration statement remains in effect, and to take any other action which may be reasonably necessary to enable any such Holder to consummate the disposition in such jurisdictions of the securities owned by such Holder; provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions.

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(vii)            Notify each Holder of Registrable Securities at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event which causes the applicable prospectus, as then in effect, to include an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing (which notice shall not contain any material non-public information).

(viii)            Within three (3) Business Days after any of the following events, give written notice to the Holders (which notice shall not contain any material non-public information):

(A)            when any registration statement filed pursuant to Section 12(a) or any amendment thereto has been filed with the SEC (except for any amendment effected by the filing of a document with the SEC pursuant to the Exchange Act) and when such registration statement or any post-effective amendment thereto has become effective;

(B)            upon notification of any request by the SEC for amendments or supplements to any registration statement or the prospectus included therein or for additional information;

(C)            upon notification of the issuance by the SEC of any stop order suspending the effectiveness of any registration statement or the initiation of any proceedings for that purpose;

(D)            upon receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Company's common stock for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and

(E)            upon notification of the happening of any event that requires the Company to make changes in any effective registration statement or the prospectus related to the registration statement in order to make the statements therein not misleading (which notice shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made).

(ix)            Use its commercially reasonable efforts to prevent the issuance or obtain the withdrawal of any order suspending the effectiveness of any registration statement referred to in Section 12(c)(viii)(C) at the earliest practicable time.

(x)            Upon the occurrence of any event contemplated by Section 12(c)(vii) or 12(c)(viii)(E), promptly prepare a post-effective amendment to such registration statement or a supplement to the related prospectus or file any other required document so that, as thereafter delivered to the Holders and any underwriters, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

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(xi)            Use commercially reasonable efforts to procure the cooperation of the Company's transfer agent in settling any offering or sale of Registrable Securities, including with respect to the transfer of physical stock certificates into book-entry form in accordance with any procedures reasonably requested by the Holders or any managing underwriter(s).

(d)            Suspension of Sales.  During any Scheduled Black-out Period (other than with respect to any resale of Registrable Securities from an effective Shelf Registration Statement if the Purchaser, at such time, has not appointed a Board Representative or Board Observer pursuant to this Agreement) and upon receipt of written notice from the Company that a registration statement, prospectus or prospectus supplement contains or may contain an untrue statement of a material fact or omits or may omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that circumstances exist that make inadvisable use of such registration statement, prospectus or prospectus supplement, each Holder of Registrable Securities shall forthwith discontinue disposition of Registrable Securities until termination of such Scheduled Black-out Period (if applicable) or until such Holder has received copies of a supplemented or amended prospectus or prospectus supplement, or until such Holder is advised in writing by the Company that the use of the prospectus and, if applicable, prospectus supplement may be resumed, and, if so directed by the Company, such Holder shall deliver to the Company (at the Company's expense) all copies, other than permanent file copies then in such Holder's possession, of the prospectus and, if applicable, prospectus supplement covering such Registrable Securities current at the time of receipt of such notice.  Excluding, to the extent applicable to the Purchaser, Scheduled Black-out Periods, the total number of days of any delays under Section 12(a)(ii) and the total number of days of any suspensions under this Section 12(d) shall not exceed, in the aggregate, sixty (60) days in any twelve (12)-month period (an "Allowable Suspension Period").

(e)            Termination of Registration Rights.  A Holder's registration rights as to any securities held by such Holder (and its Affiliate, partners, members and former members) shall not be available unless such securities are Registrable Securities.

(f)            Free Writing Prospectuses; Furnishing Information.

(i)            The Purchaser shall not use any "free writing prospectus" (as defined in Rule 405) in connection with the sale of Registrable Securities without the prior written consent of the Company.

(ii)            It shall be a condition precedent to the obligations of the Company with respect to the Purchaser and/or the selling Holders to take any action pursuant to Section 12(c) that the Purchaser and/or the selling Holders and the underwriters, if any, shall furnish to the Company such information regarding themselves, the Registrable Securities held by them and the intended method of disposition of such securities as shall be required to effect the registered offering of their Registrable Securities.

(g)            Indemnification.

(i)            The Company agrees to indemnify each Holder and, if a Holder is a Person other than an individual, such Holder's officers, directors, partners, employees, agents,

44

representatives and Affiliate, and each Person, if any, that controls a Holder within the meaning of the Securities Act (each, a "Holder Indemnitee"), against any and all losses, joint or several, arising out of or based upon any untrue statement or alleged untrue statement of material fact contained in any registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto or any documents incorporated therein by reference or contained in any "free writing prospectus" (as such term is defined in Rule 405) prepared by the Company or authorized by it in writing for use by such Holder (or any amendment or supplement thereto); or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided that the Company shall not be liable to such Holder Indemnitee in any such case to the extent that any such loss arises out of or is based upon (A) an untrue statement or omission of material fact made in such registration statement, including any such preliminary prospectus or final prospectus contained therein or any such amendments or supplements thereto or contained in any "free writing prospectus" (as such term is defined in Rule 405) prepared by the Company or authorized by it in writing for use by such Holder Indemnitee (or any amendment or supplement thereto), in reliance upon and in conformity with information regarding such Holder Indemnitee or its plan of distribution or ownership interests which was furnished in writing to the Company by such Holder Indemnitee expressly for use in connection with such registration statement, including any such preliminary prospectus or final prospectus contained therein or any such amendments or supplements thereto, or (B) offers or sales effected by or on behalf of such Holder Indemnitee "by means of" (as defined in Rule 159A) a "free writing prospectus" (as defined in Rule 405) that was not authorized in writing by the Company.

 

(ii)            In connection with any registration statement in which the Purchaser (or a Holder who assumes the obligations of the Purchaser in accordance with Section 12(h)) is participating, the Purchaser (or such Holder) agrees to indemnify the Company and its officers, directors, employees, agents, representatives and Affiliate (each, a "Company Indemnitee"), against any and all losses, joint or several, arising out of or based upon (A) an untrue statement or omission of a material fact made in any registration statement, including any such preliminary prospectus or final prospectus contained therein or any such amendments or supplements thereto or contained in any free writing prospectus (as such term is defined in Rule 405) prepared by the Company or authorized by it in writing for use by the Purchaser or such Holder (or any amendment or supplement thereto), in reliance upon and in conformity with information regarding the Purchaser or such Holder or its plan of distribution or ownership interests which was furnished in writing to the Company by the Purchaser or such Holder expressly for use in connection with such registration statement, including any such preliminary prospectus or final prospectus contained therein or any such amendments or supplements thereto, or (B) offers or sales effected by or on behalf of the Purchaser or such Holder "by means of" (as defined in Rule 159A) a "free writing prospectus" (as defined in Rule 405) that was not authorized in writing by the Company; provided that the obligation to indemnify shall be individual, not joint and several, for the Purchaser and each such Holder and shall be limited to the net amount of proceeds received by the Purchaser or such Holder from the sale of Registrable Securities pursuant to such registration statement.

(iii)            If the indemnification provided for in this Section 12(g) is unavailable to a Holder Indemnitee or Company Indemnitee (each, an "Indemnitee"),

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respectively, with respect to any losses or is insufficient to hold the Indemnitee harmless as contemplated therein, then the indemnifying party, in lieu of indemnifying such Indemnitee, shall contribute to the amount paid or payable by such Indemnitee as a result of such losses in such proportion as is appropriate to reflect the relative fault of the Indemnitee, on the one hand, and the indemnifying party, on the other hand, in connection with the statements or omissions which resulted in such losses as well as any other relevant equitable considerations.  The relative fault of the indemnifying party, on the one hand, and of the Indemnitee, on the other hand, shall be determined by reference to, among other factors, whether the untrue statement of a material fact or omission to state a material fact relates to information supplied by the indemnifying party or by the Indemnitee and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; the Company and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 12(g)(iii) were determined by  pro rata  allocation or by any other method of allocation that does not take account of the equitable considerations referred to in Section 12(g)(i) and 12(g)(ii).  Notwithstanding the provisions of this Section 12(g), no Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the net proceeds actually received by such Holder from the sale of the Registrable Securities subject to the proceeding exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  No Indemnitee guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from the indemnifying party if the indemnifying party was not guilty of such fraudulent misrepresentation.

 

(h)            Assignment of Registration Rights.  The rights of the Purchaser to registration of Registrable Securities pursuant to Section 12(a) may be assigned by the Purchaser to a transferee or assignee of Registrable Securities to which (i) there is transferred no less than the lesser of (A) One Million Dollars ($1,000,000.00) in Registrable Securities and (B) all Registrable Securities held by the Purchaser, and (ii) such transfer or assignment is permitted under the terms hereof; provided, however, that the transferee shall have agreed in writing for the benefit of the Company to be bound by all of the obligations of the Purchaser under Section 12 of this Agreement with respect to the transferred or assigned Registrable Securities, and provided further, that the transferor shall, within ten (10) days after such transfer, furnish to the Company written notice of the name and address of such transferee or assignee and the number and type of Registrable Securities that are being transferred or assigned.

(i)            Rule 144; Rule 144A Reporting.  With a view to making available to the Purchaser and each Holder the benefits of certain rules and regulations of the SEC which may permit the sale of the Registrable Securities to the public without registration, the Company agrees to use its commercially reasonable efforts to:

(i)            make and keep adequate and current public information available, as those terms are understood and defined in Rule 144(c)(1) or any similar or analogous rule promulgated under the Securities Act, at all times after the effective date of this Agreement;

(ii)            file with the SEC, in a timely manner, all reports and other documents required of the Company under the Exchange Act, and if at any time the Company is not required to file such reports, make available, upon the request of any Holder, such

46

information necessary to permit sales pursuant to Rule 144A (including the information required by Rule 144A(d)(4) and the Securities Act);

(iii)            so long as the Purchaser or a Holder owns any Registrable Securities, furnish to the Purchaser or such Holder forthwith upon request: a written statement by the Company as to its compliance with the reporting requirements of Rule 144 under the Securities Act and of the Exchange Act; a copy of the most recent annual or quarterly report of the Company; and such other reports and documents as the Purchaser or such Holder may reasonably request in availing itself of any rule or regulation of the SEC allowing it to sell any such securities without registration; and

(iv)            take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell Registrable Securities without registration under the Securities Act.

(j)            As used in this Section 12, the following terms shall have the following respective meanings:

(i)            "Effectiveness Deadline" means, with respect to the initial Shelf Registration Statement required to be filed pursuant to Section 12(a), the earlier of (A) the one hundred thirty-fifth (135th) calendar day following the Closing Date (or, if the Registration Deadline is extended a number of days beyond sixty (60) days by clause (B) of the definition of "Registration Deadline" below, then a number of days after the Closing Date equal to one hundred thirty-five (135) plus such number of days by which the Registration Deadline was extended beyond sixty (60)) and (B) the fifth (5th) Business Day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that such Shelf Registration Statement will not be "reviewed" or will not be subject to further review; provided that if the Effectiveness Deadline falls on a Saturday, Sunday or other day that the SEC is closed for business, the Effectiveness Deadline shall be extended to the next Business Day on which the SEC is open for business.

(ii)            "Holder" means the Purchaser and any other holder of Registrable Securities to whom the registration rights conferred by this Agreement have been transferred in compliance with Section 12(h) hereof.

(iii)            "Holders' Counsel" means one counsel for the selling Holders chosen by those Holders holding a majority interest in the Registrable Securities being registered.

(iv)            "Register", "registered", and "registration" shall refer to a registration effected by preparing and (A) filing a registration statement in compliance with the Securities Act and applicable rules and regulations thereunder, and the declaration or ordering of effectiveness of such registration statement or (B) filing a prospectus and/or prospectus supplement in respect of an appropriate effective registration statement pursuant to Rule 415 under the Securities Act.

(v)            "Registrable Securities" means (A) all Shares of the Class B Common acquired by the Purchaser hereunder and (B) any equity securities issued or issuable

47

directly or indirectly with respect to the Shares of the Class B Common referred to in the foregoing clause (A) by way of conversion, exercise or exchange thereof or stock dividend or stock split or in connection with a combination of shares, recapitalization, reclassification, merger, amalgamation, arrangement, consolidation or other reorganization, provided that, once issued, such securities will not be Registrable Securities when (1) they are sold pursuant to an effective registration statement under the Securities Act; (2) they shall have ceased to be outstanding; (3) with respect to any transferee of the Registrable Securities who is not an Affiliate of the Purchaser or a Holder, they shall be freely transferable pursuant to Rule 144 under the Securities Act in the hand of such transferee without any volume, holding period or other limitations (including no requirement for the Company to be in compliance with the current public information requirements under Rule 144(c)(1) (or Rule 144(i)(2), if applicable); or (4) they have been sold in a private transaction in which the transferor's rights under this Agreement are not assigned to the transferee of the securities.  No Registrable Securities may be registered under more than one registration statement at one time.

 

(vi)            "Registration Deadline" means, with respect to the initial Shelf Registration Statement required to be filed pursuant to Section 12(a), the later of (A) sixty (60) days after the Closing Date and (B) if audited financial statements for the year ended December 31, 2011, are required to be included in the initial filing of the initial Shelf Registration Statement pursuant to Rule 3-12 of Regulation S-X of the SEC, then two (2) Business Days after such audited financial statements are first available.

(vii)            "Registration Expenses" means all expenses incurred by the Company in effecting any registration pursuant to this Agreement (whether or not any registration or prospectus becomes effective or final) or otherwise complying with its obligations under this Section 12, including all registration, filing and listing fees (including filings made with the Financial Industry Regulatory Authority), printing expenses (including printing of prospectuses and certificates for the Registrable Securities), the Company's expenses for messenger and delivery services and telephone, fees and disbursements of counsel for the Company, "Blue Sky" fees and expenses, expenses incurred by the Company in connection with any "road show", and expenses of the Company's independent accountants in connection with any regular or special reviews or audits incident to or required by any such registration, but shall not include the compensation of regular employees of the Company, which shall be paid in any event by the Company, or Selling Expenses.

(viii)            "Rule 144", "Rule 144A", "Rule 158", "Rule 159A", "Rule 405" and "Rule 415" mean, in each case, such rule promulgated under the Securities Act (or any successor provision), as the same shall be amended from time to time.

(ix)            "Scheduled Black-out Period" means the period from and including the last day of a fiscal quarter of the Company to and including the Business Day after the day on which the Company publicly releases its earnings for such fiscal quarter.

(x)            "SEC Guidance" means (A) any publicly-available written or oral guidance, comments, requirements or requests of the SEC staff and (B) the Securities Act.

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(xi)            "Selling Expenses" means all discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities and fees and disbursements of counsel for any Holder, other than up to Thirty Thousand Dollars ($30,000.00) of fees and disbursements of Holders' Counsel, which shall be reimbursed by the Company pursuant to Section 12(b).

(k)            If:

(i)            the initial Shelf Registration Statement is not filed with the SEC on or prior to the Registration Deadline;

(ii)            the initial Shelf Registration Statement or any new Shelf Registration Statement required under Section 12(a) is not declared effective by the SEC (or otherwise does not become effective) for any reason on or prior to the Effectiveness Deadline;

(iii)            after its effective date, (A) such Shelf Registration Statement ceases for any reason (including by reason of a stop order or the Company's failure to update the Shelf Registration Statement), to remain continuously effective as to all Registrable Securities for which it is required to be effective or (B) the Holders are not permitted to utilize the prospectus therein to resell such Registrable Securities (in each case of (A) and (B), other than during an Allowable Suspension Period);

(iv)            a suspension period exceeds the length of an Allowable Suspension Period; or

(v)            after the date six (6) months following the Closing Date, and only in the event a registration statement is not effective or available to sell all Registrable Securities, the Company fails to file with the SEC any required reports under Section 13 or 15(d) of the Exchange Act such that it is not in compliance with Rule 144(c)(1) (or Rule 144(i)(2), if applicable), as a result of which the Holders who are not Affiliate are unable to sell Registrable Securities without restriction under Rule 144 (any such failure or breach in clauses (i) through (v) above being referred to as an "Event", and, for purposes of clauses (i), (ii), (iii) or (v) the date on which such Event occurs, or for purposes of clause (iv) the date on which such Allowable Suspension Period is exceeded, being referred to as an "Event Date" for purposes of this Section 12(k)), then in addition to any other rights the Purchaser or any other Holder may have hereunder or under applicable Law, on each such Event Date the Company shall pay to the Purchaser and each other Holder an amount in cash, as partial liquidated damages and not as a penalty ("Liquidated Damages"), equal to Thirty-Seven Thousand Five Hundred Dollars ($37,500.00).  The parties hereto agree that notwithstanding anything to the contrary in this Agreement, no Liquidated Damages shall be payable to the Purchaser if as of the relevant Event Date (x) the Purchaser has not appointed a Board Representative or Board Observer, (y) the Registrable Securities may be sold by the Purchaser without volume or manner of sale restrictions under Rule 144 under the Securities Act and (z) the Company is in compliance with the current public information requirements under Rule 144(c)(1) (or Rule 144(i)(2), if applicable), as reasonably determined by counsel to the Company.  The Effectiveness Deadline for a Shelf Registration Statement shall be extended without default or Liquidated Damages hereunder in the event that the Company's failure to obtain the effectiveness of the Shelf

49

Registration Statement on a timely basis results from the failure of the Purchaser to timely provide the Company with information requested by the Company and necessary to complete the Shelf Registration Statement in accordance with the requirements of the Securities Act (in which case the Effectiveness Deadline would be extended with respect to Registrable Securities held by the Purchaser or such other Holder, as applicable).

 

14.            Miscellaneous.

 

(a)            Survival. Unless this Agreement is terminated under Section 11, the representations and warranties of the Company contained in Section 5 shall survive the Closing Date for three (3) years, and the representations, warranties, agreements and  covenants set forth in Sections 4, 6, 7 and 13 shall survive the Closing Date indefinitely. The Purchaser shall be responsible only for its own representations, warranties, agreements and covenants hereunder.

 

(b)            Intentionally omitted.

 

(c)            Notices. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party) or electronic mail; or (iii) one Business Day after deposit with an overnight courier service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:

 

if to the Company:

 

Capitol Bancorp Ltd.

200 Washington Square North

Lansing, Michigan 48933

Telephone: (517) 487-6555

Facsimile:   (517) 374-2576

E-mail: jreid@capitolbancorp.com

Attention:   Joseph D. Reid, CEO

with a copy (for informational purposes only) to:

 

Honigman Miller Schwartz and Cohn LLP

350 East Michigan Avenue, Suite 300

Kalamazoo, Michigan 49007

Telephone: (269) 337-7702

Facsimile:  (269) 337-7703

E-mail: ptorrence@honigman.com

Attention: Phillip D. Torrence, Esq.

if to the Purchaser, to its address and facsimile number set forth in column (2) of the Schedule of Purchasers, with copies to the Purchaser's Representatives as set forth in column (2) of the Schedule of Purchasers;

50

or to such other address and/or facsimile number and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (x) given by the recipient of such notice, consent, waiver or other communication, (y) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission, or (z) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance with clause (i), (ii) or (iii) above, respectively.

(d)            Entire Agreement; Amendment.

 

(i)            Subject to Section 11(i), This Agreement and the other Transaction Documents set forth the entire agreement among the parties hereto with respect to the transactions contemplated by the Transaction Documents. No provision of this Agreement may be amended other than by an instrument in writing signed by the Company and the Purchaser. No provision hereof may be waived other than by an instrument in writing signed by the party against whom enforcement is sought.

(ii)            Notwithstanding anything to the contrary in this Agreement requiring any level of "efforts" or "cooperation" or otherwise by the Purchaser or the Company, neither the Purchaser nor the Company shall be obligated to agree to any amendment, modification, revision or waiver of this Agreement (or any portion or provision thereof).

 

(e)            Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to constitute an original, but all of which together shall constitute one and the same document.

 

(f)            Governing Law; Jurisdiction; Jury Trial. To the extent not governed by the Bankruptcy Code, this Agreement shall be governed by, and interpreted in accordance with, the Laws of the State of Michigan applicable to contracts made and to be performed in that State without reference to its conflict of laws rules. The parties hereto agree that the appropriate and exclusive forum for any disputes arising out of this Agreement shall be the Bankruptcy Court, or if such court will not hear any such suit, any federal or state court located in the State of Michigan, and the parties hereto irrevocably consent to the exclusive jurisdiction of such courts, and agree to comply with all requirements necessary to give such courts jurisdiction. The parties hereto further agree that the parties will not bring suit with respect to any disputes arising out of this Agreement in any jurisdiction other than the above specified courts except as expressly set forth below for the execution or enforcement of judgment. Each of the parties hereto irrevocably consents to the service of process in any action or proceeding hereunder by the mailing of copies thereof by registered or certified airmail, postage prepaid, to the address specified in Section 13(c) hereof. The foregoing shall not limit the rights of any party hereto to serve process in any other manner permitted by the Law or to obtain execution of judgment in any other jurisdiction. The parties further agree, to the extent permitted by Law, that final and non-appealable judgment against any of them in any action or proceeding contemplated above shall

51

(g)            be conclusive and may be enforced in any other jurisdiction within or outside the United States by suit on the judgment, a certified or exemplified copy of which shall be conclusive evidence of the fact and the amount of indebtedness. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

(h)            Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns. The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Purchaser.  The Purchaser may assign some or all of its rights hereunder without the consent of the Company, in which event such assignee shall be deemed to be the Purchaser hereunder with respect to such assigned rights; provided, however, that after Closing the rights under Section 7(h) shall not be assignable by Purchaser to any third party other than an Affiliate of Purchaser.

 

(i)            Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

 

(j)            Binding Effect. This Agreement shall not be binding upon the Company unless and until the Confirmation Order shall have been entered by the Bankruptcy Court.  This Agreement shall not be binding against either the Company or the Purchaser and shall have no legal effect whatsoever under any circumstances unless and until fully executed copies of this Agreement are delivered to each of the Company and the Purchaser.

 

(k)            Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

(l)            No Strict Construction.  The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

 

(m)            Intentionally omitted.

 

(n)            Independent Nature of the Purchaser's Obligations and Rights. The obligations of the Purchaser under this Agreement and the respective Other Purchasers under the Other Securities Purchase Agreements are several and not joint one another, and the Purchaser shall not be responsible in any way for the performance of the obligations of the Other Purchasers under the Other Securities Purchase Agreements and the Other Purchasers shall not be responsible in any way for the performance of the obligations of the Purchaser under this Agreement. Nothing contained in this Agreement or any Other Securities Purchase Agreements, and no action taken by the Purchaser pursuant hereto or any Other Purchaser pursuant to any

52

(o)            Other Securities Purchase Agreement, shall be deemed to constitute a partnership, an association, a joint venture or any other kind of entity among Purchaser and any Other Purchaser, or create a presumption that the Purchaser or any Other Purchaser is in any way acting in concert or as a group. The Company will not assert any such claim with respect to such obligations or the transactions contemplated by this Agreement and the Company acknowledges that the Purchaser is not acting in concert or as a group with respect to such obligations or the transactions contemplated hereby. The Company acknowledges and the Purchaser confirms that it has independently participated in the negotiation of the transactions contemplated hereby with the advice of its own counsel and advisors. The Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement, and its shall not be necessary for any Other Purchaser to be joined as an additional party in any proceeding for such purpose.

 

(p)            Additional Indemnification.

 

(i)            In addition to the indemnification obligations of the Company set forth in Section 12(g), the Company agrees to indemnify and hold harmless the Purchaser and its current and future Affiliates and their respective current and future officers, directors, shareholders, members, managers, employees, agents, advisors and other representatives, and any current or future direct or indirect equity owner of Purchaser, and any of their current or future Affiliates and any of their respective current or future officers, directors, shareholders, members, managers, employees, agents, advisors and other representatives, and any Person currently or in the future acting in concert with any of the foregoing, and all of such Persons'  successors and assigns, as well as, regardless of whether it falls within the list of persons or entities described above, the State of Michigan and its instrumentalities and any current or future elected officials, employees or agents thereof (the "State of Michigan") and The State of Michigan Retirement System ("Retirement System"), including, without limitation, the Michigan State Employees Retirement System, the Michigan State Police Retirement System, the Michigan Judges Retirement System and the Michigan Public School Employees Retirement System and any current or future trustees, employees or agents thereof (collectively, "Indemnified Parties"), from and against any and all actions, suits, claims, proceedings, costs, losses, liabilities, damages, expenses (including attorneys' fees and disbursements), amounts paid in settlement and other costs (collectively, "Losses") arising out of or resulting from  (i) any inaccuracy in or breach of the Company's representations or warranties contained in this Agreement, (ii) the Company's breach of agreements or covenants made by Company in this Agreement, (iii) any acts, omissions or alleged acts or omissions arising out of or based on the arrangement created by this Agreement and the activities of Company taken pursuant hereto, (iv) any Losses arising out of or resulting from any legal, administrative or other proceedings instituted or initiated by any Governmental Entity, shareholder of the Company or any other Person (other than the Purchaser and its Affiliates and the Company and the Company's subsidiaries) arising out of the transactions contemplated by this Agreement and/or the terms of the Shares (other than any Losses attributable to any willful misconduct or fraud on the part of the Purchaser), (v) any Losses resulting from a claim filed by any Other Purchaser (or any of their Affiliates) or by any other Person that is directly or indirectly based on a claim that the Person suffered Losses as a result of any act or failure to act of Purchaser or any Affiliate of the Purchaser or any person acting in concert with Purchaser or with any Affiliate of Purchaser in connection with or related to the transactions contemplated by this Agreement or the APA, or

53

(ii)            (vi) Losses related to any acts or failure to act by the Purchaser or any Affiliate of the Purchaser or any person acting in concert with Purchaser or with any Affiliate of Purchaser under the APA undertaken prior to the Closing with respect or related to any of the Offered Assets (as such term is defined in the APA)(other than any Losses attributable to any willful misconduct or fraud on the part of the Purchaser or its Affiliates).

 

(iii)            A party entitled to indemnification hereunder (each, an "Indemnified Party") shall give written notice to the party indemnifying it (the "Indemnifying Party") of any claim with respect to which it seeks indemnification promptly after the discovery by such Indemnified Party of any matters giving rise to a claim for indemnification; provided that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 13(n) unless and to the extent that the Indemnifying Party shall have been actually prejudiced by the failure of such Indemnified Party to so notify such party.  Such notice shall describe in reasonable detail such claim to the extent known by the Indemnified Party.  In case any such action, suit, claim or proceeding is brought against an Indemnified Party, the Indemnified Party shall be entitled to hire counsel, at the cost and expense of the Indemnifying Party, and to conduct the defense thereof; provided, however, that the Indemnifying Party shall only be liable for the legal fees and expenses of one (1) law firm for all Indemnified Parties, taken together with regard to any single action or group of related actions, upon agreement by the Indemnified Parties and the Indemnifying Parties.  If the Indemnifying Party assumes the defense of any claim, all Indemnified Parties shall thereafter deliver to the Indemnifying Party copies of all notices and documents (including court papers) received by the Indemnified Parties relating to the claim, and any Indemnified Party shall cooperate in the defense or prosecution of such claim.  Such cooperation shall include the retention and (upon the Indemnifying Party's request) the provision to the Indemnifying Party of records and information that are reasonably relevant to such claim, making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder.  The Indemnifying Party shall not be liable for any settlement of any action, suit, claim or proceeding effected without its written consent; provided, however, that the Indemnifying Party shall not unreasonably withhold, delay or condition its consent.  The Indemnifying Party further agrees that it will not, without the Indemnified Party's prior written consent, settle or compromise any claim or consent to entry of any judgment in respect thereof in any pending or threatened action, suit, claim or proceeding in respect of which indemnification has been sought hereunder unless such settlement or compromise (1) includes an unconditional release of such Indemnified Party from all liability arising out of such action, suit, claim or proceeding, (2) provides solely for the payment of money damages and not any injunctive or equitable relief or criminal penalties and (3) does not create any financial or other obligation on the part of an Indemnified Party which would not be indemnified in full by the Indemnifying Party.

 

(iv)            The indemnity provided for in this Section 13(n) shall not be the sole and exclusive remedy of the Indemnified Parties after the Closing for any inaccuracy of any of the representations and warranties contained in this Agreement or any other breach of any covenant or agreement contained in this Agreement.  No party to this Agreement (or any of its Affiliates) shall, in any event, be liable or otherwise responsible to any other party (or any of its Affiliates) for any punitive damages of such other party (or any of its Affiliates) arising out of or relating to this Agreement or the performance or breach hereof.

54

(v)            Securities Laws Disclosure; Publicity.  By 9:00 a.m., New York City time, on the first (1st) business day after the date of this Agreement, the Company shall issue one or more press releases or Current Reports on Form 8-K reasonably acceptable to the Purchaser disclosing all material terms of the transactions contemplated hereby and by the other Transaction Documents.  On or before 9:00 a.m., New York City time, on the fourth (4th) trading day immediately following the execution of this Agreement, the Company will file a Current Report on Form 8-K with the SEC describing the material terms of this Agreement and the other Transaction Documents (and including as exhibits to such Current Report on Form 8-K the material Transaction Documents).

Signatures on the Following Page

55

IN WITNESS WHEREOF, the Purchaser and the Company have caused its respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.

THE COMPANY:

Capitol Bancorp Ltd.

By:                                                                      

Name:                                                                      

Title:                                                                      

Signature Pages for the Purchaser Follows

Signature Page to Securities Purchase Agreement

IN WITNESS WHEREOF, the Purchaser and the Company have caused its respective signature page to this Securities Purchase Agreement to be duly executed as of the date first written above.

PURCHASER:

VS CB STOCK ACQUISITION, LLC

By:                                                                      

Name:            Gerald C. Timmis III

Title:            Authorized Person    

Signature Page to Securities Purchase Agreement

SCHEDULE OF PURCHASERS

	
(1)

Name

Tax ID No.

	
(2)

 

Contact Information

	
(3)

Class B Common Shares

	
(4)

Series A Preferred Shares

	
(5)

Class B Common Purchase Price

	
(6)

Series A Preferred Purchase Price

	
(7)

 

Purchase Price

	
VS CB STOCK ACQUISITION, LLC

 

Tax ID No.:

	
Gerald C. Timmis III

c/o TFM Management, LLC

260 East Brown St., Suite 250

Birmingham, MI  48009

phone: (248) 646-9200 x13

fax: (248) 646-3322

 email: gtimmis@valstonepartners.com

 

copy to:

Kenneth B. Abel, Esq.

Ober, Kaler, Grimes & Shriver

100 Light Street

Baltimore, MD 21202

Phone: 410-347-7394

Fax: 443-263-7594

 Email: kbabel@ober.com

	
1,750,000

	
15,000

	
$35,000,000

	
$15,000,000

	
$50,000,000

Schedule of Purchasers

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