Document:

Exhibit 10.1

UNITED STATES DEPARTMENT OF THE TREASURY

1500 Pennsylvania Avenue, NW

Washington, D.C. 20220

November 15, 2011

Ladies and Gentlemen:

Reference is made to that certain Letter Agreement incorporating the Securities Purchase Agreement — Standard Terms, dated as of January 9, 2009 (the “Acquired Company Securities Purchase Agreement”), by and between the United States Department of the Treasury (the “Investor”) and Crescent Financial Corporation (the “Acquired Company”).  Further detail regarding the Acquired Company Securities Purchase Agreement is set forth on Schedule A hereto.  Investor, the Acquired Company and Crescent Financial Bancshares, Inc. (the “Acquiror Company”) desire to set forth herein certain additional agreements as a result of the consummation of a merger transaction pursuant to an Agreement and Plan of Merger dated as of May 2, 2011 by and between Acquiror Company and Acquired Company, effective on the date hereof (the “Merger Transaction”).  This letter shall be referred to as the “Post-Merger Side Letter.”  Capitalized terms used but not defined herein shall have the meanings assigned to them in the Acquired Company Securities Purchase Agreement and the Certificate of Designations.

As a result of the Merger Transaction, the Acquiror Company has assumed the obligations and responsibilities of Acquired Company with respect to Investor.  Specifically:

1.           Concurrently herewith, the Acquiror Company is issuing a new series of preferred shares in exchange for the Acquired Company’s Designated Preferred Shares; and

2.           Pursuant to Section 4.3 of the Acquired Company Securities Purchase Agreement and effective as of the date hereof, Acquiror Company hereby expressly assumes the due and punctual performance and observance of each and every covenant, agreement, and condition of the Acquired Company Securities Purchase Agreement and all ancillary documents to be performed and observed by Acquired Company.

Additionally, the Acquiror Company acknowledges and agrees that:

1.           as of the date of this side letter agreement, dividends payable on the shares of Designated Preferred Stock have not been paid by Acquired Company for an aggregate of four quarterly Dividend Periods (the “Missed Dividends”); and

2.           for all purposes under the amended and restated certificate of incorporation of Acquiror Company, the Missed Dividends shall be included for purposes of determining the aggregate number of dividends payable on the shares of Designated Preferred Stock that have not been paid pursuant to Section 7(b) of Annex A to the amended and restated certificate of incorporation of Acquiror Company.

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United States Department of the Treasury

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In connection with the foregoing, with the exception of the Acquired Company Securities Purchase Agreement, Acquiror Company is issuing new documentation to Investor to reflect the investment that Investor initially made in the Acquired Company, including the following (all section references below are to the Acquired Company Securities Purchase Agreement, unless otherwise provided):

1.           an officer’s certificate regarding a bring down of the representations in the Acquired Company Securities Purchase Agreement as of the date hereof, per Section 1.2(d)(ii), with any exceptions to such representations noted on a disclosure schedule attached hereto;

2.           evidence the Acquiror Company filed a Certificate of Designations in connection with the New Preferred Shares (as defined below) issued to Investor as outlined in paragraph 6 below, per Section 1.2(d)(iii);

3.           an officer’s certificate regarding compliance with section 111(b) of the Emergency Economic Stabilization Act of 2008 as of the date hereof, per Section 1.2(d)(iv);

4.           waivers from Senior Executive Officers and others in accordance with the Emergency Economic Stabilization Act of 2008, as amended by the American Recovery and Reinvestment Act of 2009 (“ARRA”), releasing Investor from certain claims, dated as of the date hereof, per Section 1.2(d)(v);

5.           a legal opinion regarding the New Preferred Shares and New Warrant (as defined below), per Section 1.2(d)(vi);

6.           a certificate representing a number of a new series of preferred shares issued by the Acquiror Company to replace the Acquired Company’s Designated Preferred Shares (the “New Preferred Shares”);

7.           a warrant to purchase shares of common stock issued by the Acquiror Company to replace the Acquired Company’s warrant (the “New Warrant”);

8.           a side letter regarding compliance with ARRA; and

9.           a copy of the articles and bylaws of the Acquiror Company.

Acquiror Company hereby acknowledges receipt of each of the closing documents in connection with the initial Investor closing for Acquired Company, with the exception of the Acquired Company Securities Purchase Agreement.

This side letter agreement, the Acquired Company Securities Purchase Agreement and the above-listed documentation constitutes the entire agreement, and supersedes all other prior agreements, understandings, representations and warranties, both written and oral, between the parties with respect to the subject matter hereof.

 

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United States Department of the Treasury

Page 3

The parties hereto acknowledge that there would be no adequate remedy at law if the Acquiror Company fails to perform any of its obligations under this side letter agreement and that the Investor from time to time may be irreparably harmed by any such failure, and accordingly agree that the Investor, in addition to any other remedy to which it may be entitled at law or in equity, to the fullest extent permitted and enforceable under applicable law shall be entitled to compel specific performance of the obligations of the Acquiror Company under this side letter agreement in accordance with the terms and conditions of this side letter agreement.

This side letter agreement may be executed in counterparts, each of which shall be deemed an original and all of which shall together constitute one and the same instrument.  This side letter agreement shall be governed by and construed in accordance with the federal law of the United States if and to the extent such law is applicable, and otherwise in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such state.

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United States Department of the Treasury

Signature Page

In witness whereof, this side letter agreement has been duly executed by the authorized representatives of the parties hereto as of the date first above written.

	  	
CRESCENT FINANCIAL BANCSHARES, INC.

	  	  	  
	  	
By:

	
/s/ Michael G. Carlton

	  	Name:  	
Michael G. Carlton

	  	Title:  	
President

	  	  	  
	  	
CRESCENT FINANCIAL CORPORATION

	  	  	  
	  	
By:

	
/s/ Michael G. Carlton

	  	Name:  	
Michael G. Carlton

	  	Title:  	
President and Chief Executive Officer

	  	  	  
	  	
UNITED STATES DEPARTMENT OF THE TREASURY

	  	  	  
	  	
By:

	
/s/ Timothy G. Massad

	  	
Name: 

	
Timothy G. Massad

	  	
Title:

	
Assistant Secretary for Financial Stability

SIGNATURE PAGE TO MERGER TRANSACTION SIDE LETTER AGREEMENT

  

  

  

SCHEDULE A

General Information Regarding Acquired Company Initial Closing:

Acquired Company Name:  Crescent Financial Corporation

Date of Acquired Company Letter Agreement incorporating

 the Securities Purchase Agreement:  January 9, 2009

Corporate or other organizational form of the Acquired Company:  Corporation

Number and series of preferred stock issued to the

Investor at the Acquired Company Closing:  24,900 Shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A

Number of Acquired Company Initial Warrant Shares:  833,705

Terms of the Merger/Acquisition:

Effective Date of Merger/Acquisition:  November 15, 2011

Resultant Acquiror Securities:

Number of New Preferred Shares Issued to Investor by Acquiror Company

Post-Merger to Replace the Acquired Company’s Preferred Shares:  24,900 Shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series A

Par Value of Such New Preferred Shares:  no par value per share

Number of New Warrant Shares Issued to Investor by Acquiror Company

Post-Merger to Replace Initial Warrant Shares:  833,705

Par Value of Such New Warrant Shares:  $0.001 par value per shareExhibit 10.2

	
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ARRA Side Letter

United States Department of the Treasury

1500 Pennsylvania Avenue, NW

Washington, D.C. 20220

November 15, 2011

Ladies and Gentlemen:

Reference is made to that certain Letter Agreement incorporating the Securities Purchase Agreement – Standard Terms (the “Securities Purchase Agreement”), dated as of January 9, 2009, between Crescent Financial Corporation (the “Acquired Company”) and the United States Department of Treasury (“Investor”).  Capitalized terms used but not defined herein shall have the meanings assigned to them in the Securities Purchase Agreement.

 

The American Recovery and Reinvestment Act of 2009, as it may be amended from time to time (the “Act”), includes provisions relating to executive compensation and other matters that may be inconsistent with the Securities Purchase Agreement, the Warrant and the Certificate of Designation (the “Transaction Documents”).  Accordingly, Investor and Crescent Financial Bancshares, Inc. (the “Acquiror Company”) desire to confirm their understanding as follows:

 

1.           Notwithstanding anything in the Transaction Documents to the contrary, in the event that the Act or any rules or regulations promulgated thereunder are inconsistent with any of the terms of the Transaction Documents, the Act and such rules and regulations shall control.

 

2.           For the avoidance of doubt (and without limiting the generality of Paragraph 1):

 

(a)           the provisions of Section 111 of the Emergency Economic Stabilization Act of 2008 as implemented by the Interim Final Rule on TARP Standards for Compensation and Corporate Governance, 31 C.F.R. Part 30, as amended by the Act or otherwise from time to time (“EESA”), shall apply to the Acquiror Company;

 

(b)           the waiver to be delivered by each of the Acquiror Company’s Senior Executive Officers pursuant to Section 1.2(d)(v) of the Securities Purchase Agreement shall, in addition, be delivered by any additional highly compensated employees required by applicable rules or regulations under EESA;

 

(c)           the Acquiror Company’s chief executive officer and chief financial officer shall provide the written certification of compliance by the Acquiror Company with the requirements of Section 111 of EESA in the manner specified by Section 111(b)(4) thereunder or in any rules or regulations under EESA; and

 

(d)           the Acquiror Company shall be permitted to repay preferred shares, and when such preferred shares are repaid, the Investor shall liquidate warrants associated with such preferred shares, all in accordance with the Act and any rules and regulations thereunder.

 

  

  

  

 

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From and after the date hereof, each reference in the Securities Purchase Agreement to “this Agreement” or “this Securities Purchase Agreement” or words of like import shall mean and be a reference to the Agreement (as defined in the Securities Purchase Agreement) as amended by this letter agreement.

 

This letter agreement will be governed by and construed in accordance with the federal law of the United States if and to the extent such law is applicable, and otherwise in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State.

This letter agreement, the Securities Purchase Agreement, the Post-Merger Side Letter, the Warrant, the Certificate of Designation and any other documents executed by the parties at the Closing constitute the entire agreement of the parties with respect to the subject matter hereof.

Nothing in this letter agreement shall be deemed an admission by Investor as to the necessity of obtaining the consent of the Company in order to effect the changes to the Transaction Documents contemplated by this letter agreement, nor shall anything in this letter agreement be deemed to require Investor to obtain the consent of any other TARP recipient (as defined in the Act) participating in the Capital Purchase Program (the “CPP”) in order to effect changes to their documentation under the CPP.

This letter agreement may be executed in any number of separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement.  Executed signature pages to this letter agreement may be delivered by facsimile and such facsimiles will be deemed sufficient as if actual signature pages had been delivered.

 

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In witness whereof, the parties have duly executed this letter agreement as of the date first written above.

 

	  	
UNITED STATES DEPARTMENT OF

	  	
THE TREASURY

	  	  	  
	  	
By: 

	
/s/ Timothy G. Massad

	  	  	
Name: Timothy G. Massad

	  	  	
Title: Assistant Secretary for Financial Stability

	  	  	  
	  	
CRESCENT FINANCIAL BANCSHARES, INC.

	  	  	  
	  	
By:

	
/s/ Michael G. Carlton

	  	  	
Name:  Michael G. Carlton

	  	  	
Title:  President

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