Branch Development Agreement

EXHIBIT 10.20


BRANCH DEVELOPMENT AGREEMENT


This Branch Development Agreement (the "Agreement") is made as of this 19th day of August, 2002, by and among CapitalBank, a South Carolina banking corporation (the "Bank"), and Nuevo Latino Investment Company, L.L.C., a South Carolina limited liability company ("NLIC").


Preliminary Statement


NLIC has pursued the development of a de novo bank in Greenville, South Carolina to serve the Hispanic population. It is understood that NLIC has recently determined to modify its development plans to accommodate the synergies and other advantages of the Bank, with the assistance of NLIC, developing a bank branch or branches to be owned by the Bank to serve the Hispanic population (the "Branch"), all as more fully set forth herein.


NOW, THEREFORE, in consideration of these premises and the mutual covenants hereafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:


Statement of Agreement


1. Structure and Location. The Branch or Branches will be wholly-owned by the Bank and, unless the parties hereto mutually agree otherwise, the initial Branch will be located at 2520 Wade Hampton Blvd, Greenville, South Carolina 29615 (the "Premises"). Hereafter in this Agreement any reference to "the Branch" shall be deemed to refer to the initial Branch and to any subsequent Branch opened by the Bank to service primarily the Hispanic community in South Carolina, and the provisions of this Agreement shall apply to any such subsequent Branch.


2. Development. Each of the parties has agreed to cooperate in all aspects of the development of the initial Branch and any subsequent Branches and to exercise their good faith and best efforts to accomplish the goals contemplated by this Agreement. Notwithstanding the forgoing, the division of responsibilities related to the organization and formation of the Branch shall be as follows:


A. The Bank shall be responsible for the legal and accounting aspects of completing the organization of the Branch and all state and federal regulatory approvals, but NLIC, prior to the opening of the Branch, shall be consulted and have opportunity for input and comment on all major issues related thereto.


THIS AGREEMENT IS SUBJECT TO ARBITRATION PURSUANT TO THE SOUTH
CAROLINA UNIFORM ARBITRATION ACT, AS MODIFIED HEREIN.


B. NLIC shall be responsible for the leasing of the Premises related to the proposed operation of the Branch, but the Bank shall have opportunity for input and comment and shall have approval over the selection of such property and all material documents and issues related thereto. The proposed lease (the "Lease") shall be for a term of not less than three (3) years and shall expressly permit NLIC to sublease the Premises to the Bank.


C. NLIC shall assist the Bank in developing a marketing plan for the Branch and shall, as soon as reasonably possible, provide a list of potential Hispanic employees to staff the Branch.


D. The Bank shall procure and provide professional bank consulting services to assist with the formation of the Branch and all state and federal regulatory approvals.


E. The Bank shall use its commercially reasonable best efforts to provide signage, products, services, pricing and collateral materials that will support an aggressive growth strategy for the Branch.


F. The Bank shall provide all regulatory, operational, training and marketing support for the Branch.


3. Execution and Delivery of Certain Documents.


A. By NLIC. Simultaneously with the execution and delivery of this Agreement, NLIC will execute and deliver to the Bank, or cause to be executed and delivered to the Bank, each of the following:


1. Employment Agreement. An employment agreement by
and between Sonnia Aristizabal ("Aristizabal") and the Bank,
substantially in the form attached hereto as Exhibit A (the "Employment
Agreement"). Aristizabal shall be employed as a banking officer of the
Bank, and her duties shall include assisting the Bank with the
formation of the Branch. Upon the opening of the Branch, Aristizabal
shall serve as the branch manager of the Branch, all in accordance with
and subject to the Employment Agreement.


2. Sublease. NLIC shall sublease the Premises to the
Bank pursuant to a sublease substantially in the form attached hereto
as Exhibit B (the "Sublease").


3. Non-Competition Covenants. Each of the following
affiliates of NLIC shall execute and deliver to the Bank, a
non-competition covenant substantially in the form attached hereto as
Exhibit C: Juan Castellanos, Fernando Zambrando, Maria Jose Lehman,
Cristina Schleifer, W. Walt Wilkins III, Jim G. Callaway, John T.
"Buddy" Mills, Jr., James L. Rogers and Miguel Banda.


B. By the Bank. Simultaneously with the execution and delivery of this Agreement, the Bank shall execute and deliver each of the following:


1. Employment Agreement. The Employment Agreement
shall be executed by the Bank and delivered to Aristizabal.


2. Sublease. The Sublease shall be executed by the
Bank and delivered to NLIC.


4. Allocation of Expenses.


A. Expenses Paid By Bank.


1. Legal and Accounting Fees of the Bank. The Bank
shall be responsible for, and shall advance, all legal and accounting
fees incurred by the Bank (i) which are associated with the regulatory
approval of opening the Branch, or (ii) in connection with the
transactions contemplated herein.


2. Employee Expenses. The Bank shall be responsible
for, and shall advance, all salary, FICA, perquisites and fringe
benefits to Aristizabal as set forth in the Employment Agreement.


3. Certain Improvements to Premises. As soon as
practical after the execution and delivery of the Sublease, the Bank,
at the Bank's expense, shall repair or replace the computers,
terminals, telephone system, ATM and signage serving the Branch. The
Bank hereby agrees to consider all outside contractors to perform such
improvements on a bid for service basis giving favorable consideration
to Hispanic owned contractors whenever possible; provided however, the
parties hereto acknowledge and agree that the selection of such
contractor(s) shall be in the sole discretion of the Bank.


4. General Expenses. All costs and expenses, other
than the costs and expenses to be paid by NLIC as set forth in Section
4(B) hereof, incurred by the Bank in connection with the formation of
the Branch, including but not limited to professional bank consulting
fees, the acquisition or leasing of personal property and equipment as
contemplated herein, FDIC and other federal regulatory filing fees, and
state filing fees, shall be the responsibility of, and advanced by, the
Bank.


B. Expenses Paid By NLIC. NLIC shall advance the costs and expenses related to the following:


1. Premises. All costs and expenses related to the
leasing of the Premises.


2. Certain Improvements to Premises. As soon as
practical after the execution and delivery of the Sublease, NLIC, at
NLIC's expense, shall (i) repair or


replace the teller counter, vault doors, safety deposit boxes and other
bank equipment serving the Branch not expressly set forth in Section
4(A)(3) above, (ii) carpet, paint and wallpaper the Branch, and (iii)
provide furniture and furnishings to the Branch (collectively the "NLIC
Improvements'). All NLIC Improvements shall be of good quality and
shall require the prior approval of the Bank which shall not be
unreasonably withheld.


3. Legal and Accounting Fees of NLIC. All costs and
expenses incurred by NLIC and its affiliates in connection with the
transactions contemplated by this Agreement, including but not limited
to legal and other professional fees related to the internal affairs of
NLIC and its members and other affiliates, shall be the responsibility
of, and advanced by, NLIC.


5. Management Decisions. Notwithstanding anything contained herein to the contrary, it is understood and agreed that the Bank shall have the sole and exclusive right of management over the Branch, including without limitation, the determination of the professional standards to be observed, the determination of the products and services to be offered, the determination of the fees to be charged, and the determination of the office hours to be maintained. In addition to the foregoing, the parties hereto agree that Bank shall have sole discretion to hire, terminate and discipline all employees serving the Branch. The Bank, in its sole discretion, may require any or all potential employees of the Branch, as a condition of employment, to execute non-competition and confidentiality covenants. Any such non-competition and confidentiality covenants shall not, however, proscribe or in any way inhibit the right of any employees of the Branch to become employed by the de novo bank to be created by NLIC when NLIC exercises the Option referenced in Section 13 of this Agreement.


6. Professional Standards. NLIC acknowledges and agrees that NLIC and its agents will at all times faithfully adhere to the principles and ethics of the banking profession, and will carefully avoid any and all personal or professional acts, habits and usages which might injure in any way, directly or indirectly, the Bank's or Community Capital Corporation's ("CCC") professional reputations or that of any employee of the Bank or CCC, or which might otherwise be detrimental to any interest of the Bank or CCC.


7. Advisory Committee.


A. Upon the organization of the Branch, the Bank agrees to organize an advisory committee to advise the Bank in managing, operating, marketing and developing the Branch (the "Advisory Committee").


B. Each member of the Advisory Committee shall be given notice by the Bank of all meetings of the Advisory Committee which shall meet from time to time.


C. The decisions of the Advisory Committee shall not be binding upon the Bank. Each member of the Advisory Committee shall not be deemed to be a fiduciary of the Bank for any purpose and shall not have authority to approve or incur any liability or obligation in the name, or on behalf, of the Bank.


D. The number of members of the Advisory Committee shall be determined from time to time by the Bank and appointed by the Bank in its sole discretion. The initial members of the Advisory Committee shall be Juan Castellanos, Fernando Zambrando, Maria Jose Lehman, Cristina Schleifer, W. Walt Wilkins III, Jim G. Callaway, John T. "Buddy" Mills, Jr., James L. Rogers, Sonnia Aristizabal and Miguel Banda. Notwithstanding the foregoing, the Bank shall not appoint any individual: (i) who does not agree to serve on the Advisory Committee, (ii) who is prohibited by federal or state law, rule, or regulation from serving on the board of directors of a bank or the subsidiary of a publicly held company, (iii) who has violated this Agreement, (iv) who is not approved by the Board of Directors of the Bank, and (v) who has not executed and delivered to the Bank a non-competition and confidentiality agreement, the form and content of which shall be approved by the Bank from time to time.


8. Lock-Up. In consideration for the incurring of costs and expenses by the Bank for the transactions contemplated herein, for a period commencing the date hereof and ending on the third anniversary of the date the branch to be located at 2520 Wade Hampton Blvd., Greenville, SC begins operations to the public as a branch bank of the Bank (the "Third Anniversary"), NLIC agrees not to participate directly or indirectly in any activity related to the formation of a new financial institution, or the affiliation with or expansion of an existing financial institution, in Greenville and/or Spartanburg Counties, South Carolina other than the Branch contemplated herein or a modification thereof which is to be wholly-owned by the Bank. Notwithstanding the foregoing, upon (i) the lawful exercise by NLIC of the Option as defined in Section 13 below, and (ii) the execution and delivery to the Bank of the Purchase and Assumption Agreement as defined in Section 13 below, the parties hereto acknowledge and agree that NLIC may participate directly or indirectly in the formation of a new financial institution to be headquartered and located in Greenville County, South Carolina (the "New Bank"). NLIC has carefully read and considered the provisions of this Section, and, having done so, agrees that the restrictions set forth in this Section are fair and reasonable and are reasonably required for the protection of the interests of the Bank. NLIC acknowledges that NLIC's services hereunder are of a special and unusual character with a unique value to the Bank, the loss of which cannot adequately be compensated by damages in an action at law. In the event of a breach or threatened breach by NLIC of any of the provisions of this Section, the Bank in addition to and not in limitation of, any other rights, remedies, or damages available under this Agreement, shall be entitled to a permanent injunction in order to prevent or restrain any such breach by the breaching party or such party's members, partners, agents, representatives, servants, employers, employees, consulting clients, and/or any and all persons directly or indirectly acting for or with NLIC.


9. Publicity and Confidentiality. All press releases and public announcements about the Branch and any other activities contemplated by this Agreement require the prior written approval of the Bank after consultation with securities counsel for the Bank and CCC. NLIC (i) will abide by any disclosure and confidentiality guidelines to be provided from time to time by the Bank and its counsel, (ii) will not make any disclosures that are harmful to the development of the Branch unless legally required to do so, and (iii) will not make any disclosure respecting any matters contemplated in this Agreement that will adversely affect the Bank's and CCC's respective compliance with federal or state securities laws. Neither NLIC nor any member or manager of NLIC will trade in any of CCC's stock when in possession of material non-public information respecting the Bank, CCC or the Branch.


10. Termination. This Agreement shall terminate upon the written consent of the Bank and NLIC.


11. Legal Compliance. This Agreement constitutes neither an offer to sell, nor a solicitation of an offer to buy, securities of any kind whatsoever. Each of NLIC and the Bank represent and warrant to the other party hereto that execution and performance of this Agreement and the transactions contemplated herein will not violate any contract, commitment, or other legal requirement binding upon such party.


12. Regulatory Approval. The parties hereto acknowledge that the transactions contemplated herein are subject to, and conditioned upon, the approval of the applicable state and federal regulators.


13. Option to Purchase Branch. Bank hereby grants to NLIC the exclusive and irrevocable option (the "Option") to purchase the Branch from the Bank subject to the following terms:


A. Term. Provided NLIC has not breached this Agreement, the Option hereby granted may be exercised by NLIC in full at any time on or before the Third Anniversary. If this Option to purchase the Branch has not been lawfully exercised on or before the Third Anniversary, all of the rights of NLIC under this Section 13 shall expire and terminate.


B. Exercise of Option. The Option hereby granted may be exercised by written notice delivered by NLIC to the Bank in accordance with Section 22 herein (the "Exercise Notice").


C. Execution of Purchase and Assumption Agreement. Upon the exercise by NLIC of this Option to purchase the Branch, NLIC and the Bank shall use their best efforts to negotiate and execute a purchase and assumption agreement substantially in the form attached hereto as Exhibit D (the "Purchase and Assumption Agreement") as soon as reasonably practicable. Unless the Bank agrees otherwise, the third party to the Purchase and Assumption Agreement shall be a de novo financial institution in organization to be headquartered in Greenville County, South Carolina, at least 20% of whose capital stock is directly or indirectly owned by NLIC or the members of NLIC. In the event the Purchase and Assumption Agreement is not executed and delivered to the parties thereto before 5:00 P.M. on the tenth business day following receipt by the Bank of the Exercise Notice, unless the Bank determines otherwise, such Exercise Notice shall be deemed null and void and of no effect and all of the rights of NLIC under this Section 13 shall expire and terminate.


D. Delivery of Regulatory Applications. Notwithstanding anything contained herein, the Bank shall not be required to execute the Purchase and Assumption Agreement unless and until delivery by NLIC to the Bank of drafts of all applicable regulatory applications in substantially completed form. The parties hereto acknowledge that the transactions contemplated in the Purchase and Assumption Agreement are subject to, and conditioned upon, the approval of the applicable state and federal regulators.


E. Purchase Price. The parties acknowledge that the purchase price for the Branch shall be determined in accordance with Article 3 of the Purchase and Assumption Agreement.


F. Closing. The sale contemplated by the Option will be consummated in accordance with the terms and conditions set forth in the Purchase and Assumption Agreement.


G. Survival. NLIC's exercise of this Option shall not in any manner impair or effect each parties' obligations under this Agreement, and all applicable provisions of this Agreement shall continue to apply until the closing of the transactions contemplated in the Purchase and Assumption Agreement.


H. Specific Performance. The parties shall be entitled to seek and obtain specific performance of this Option or such other relief in equity or at law as may be available.


I. No Assignment. NLIC may not assign its rights under this Section 13 to any person or entity without the Bank's prior written consent, which may be withheld for any or no reason.


J. Non-competition by Bank. The Bank agrees that following the closing of the sale contemplated by the Option referenced in this Section 13, the Bank, its successors and assigns, will not market financial services to the Hispanic community located within the counties of Greenville or Spartanburg, SC, nor shall the Bank solicit or attempt to retain any employees of the Branch or of the New Bank. Nothing in this clause J shall prohibit the Bank or its related entities from providing or marketing financial services to the public at large, even if Hispanic members of the general population also coincidentally make use of those services, as long as the principal marketing focus of the Bank's efforts are directed to the general public and not specifically to the Hispanic population. This clause J shall remain effective until the earlier of (i) two (2) years following the date of the closing of the sale contemplated by the Option referenced in this Section 13, or (ii) the acquisition of the Bank by another financial institution which as of the date of such acquisition is marketing financial services specifically targeted to the Hispanic community located within the counties of Greenville or Spartanburg, SC. The Bank hereby acknowledges that a violation of this clause J would lead to irreparable damage to NLIC. Accordingly, this clause J shall be enforced by any and all legal and equitable remedies available, including without limitation specific performance and injunctive relief, without the need for showing irreparable damage on the part of NLIC. This clause J shall survive termination of this Agreement.


14. Members of NLIC. NLIC hereby represents and warrants that as of the date hereof, Juan Castellanos, Fernando Zambrando, Maria Jose Lehman, Cristina Schleifer, W. Walt Wilkins III, John T. "Buddy" Mills, Jr., James L. Rogers, Sonnia Aristizabal, Miguel Banda, and First Base Ventures, L.L.C., a South Carolina limited liability company, are all of the members of NLIC.


15. Modifications. This Agreement can only be modified by a written agreement duly signed by the Bank and NLIC. Moreover, in order to avoid uncertainty, ambiguity and


misunderstandings in their relationships, the parties hereto covenant and agree not to enter into any oral agreement or understanding inconsistent or in conflict with this Agreement; and the parties hereto further covenant and agree that any oral communication allegedly or purportedly constituting such an agreement or understanding shall be absolutely null, void and without effect.


16. Waiver. Any waiver by a party of any breach or any term or condition hereof shall be effective only if in writing and such writing shall not be deemed to be a waiver of any subsequent or other breach, term or condition of this Agreement.


17. Relationship of the Parties. Nothing herein shall be deemed to create any partnership or joint venture relationship between the parties. No party shall make any representation or statement (whether oral or written) to any person or entity inconsistent with this Section.


18. Third Parties. The provisions of this Agreement are not intended to be for the benefit of any third parties, and no third party shall be deemed to have any privity of contract with any of the parties hereto by virtue of this Agreement.


19. Assignments. Neither this Agreement nor any rights hereunder may be assigned or otherwise transferred by a party, except the Bank may assign this Agreement to any corporation controlled by or under common control with the Bank, or in connection with the sale of all or substantially all of the assets of the Bank.


20. Cumulative Remedies. All rights and remedies of a party hereunder shall be cumulative and in addition to such rights and remedies as may be available to a party at law or equity.


21. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior or contemporaneous written or oral agreements and representations between the parties with respect thereto, including but not limited to the Memorandum dated June 17, 2002.


22. Notices. Any notice, request, approval, consent, demand or other communication shall be effective upon the first to occur of the following: (i) upon receipt by the party to whom such notice, request, approval, consent, demand or other communication is being given; or (ii) three (3) business days after being duly deposited in the United States mail, registered or certified, return receipt requested, and addressed as follows:


Bank: CapitalBank
1402-C Highway 72
Post Office Box 218
Greenwood, SC 29649
Attn: William G. Stevens


NLIC: Nuevo Latino Investment Company, L.L.C.
c/o Leatherwood Walker Todd & Mann, P.C.
Post Office Box 87
Greenville, South Carolina 29602
Attn: James L. Rogers, Jr.


The parties hereto may change their respective addresses by notice in writing given to the other party to this Agreement.


23. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.


24. Governing Law. The construction and interpretation of this Agreement shall at all times and in all respects be governed by the laws of the State of South Carolina.


25. Venue and Jurisdiction. Subject to Section 26 below, the parties hereto hereby (i) agree that any litigation, action or proceeding arising out of or relating to this Agreement may be instituted in a state or federal court in the State of South Carolina, (ii) waive any objection which it might have now or hereafter to any such litigation, action or proceeding based upon improper venue or inconvenient forum, and (iii) irrevocably submit to the jurisdiction of such courts in any such litigation, action or proceeding.


26. Arbitration. If a dispute, controversy or claim (whether based upon contract, tort, statute, common law or otherwise) (collectively a "Dispute") arises from or relates directly or indirectly to the subject matter hereof, and if the Dispute cannot be settled through direct discussions, the parties hereto shall first endeavor to resolve the Dispute by participating in a mediation administered by the American Arbitration Association (the "AAA") under its Commercial Mediation Rules before resorting to arbitration. Thereafter, any unresolved Dispute shall be settled by binding arbitration administered by the AAA in accordance with its Commercial Arbitration Rules and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction. The arbitration proceedings shall be conducted in Columbia, South Carolina on an expedited basis before a neutral arbitrator who is a member of the Bar of the State of South Carolina, and has been actively engaged in the practice of law for at least fifteen (15) years, specializing in commercial transactions with substantial experience in the subject matter of this Agreement. Unless otherwise deemed appropriate by the arbitrator, the prevailing party in any such arbitration proceeding shall be entitled to an award of all reasonable out of pocket costs and expenses (including attorneys' and arbitrators' fees) related to the arbitration.


27. No Inference Against Author. No provision of this Agreement shall be interpreted against any party because such party or its legal representative drafted such provision.


28. Captions and Headings/Usage. The captions and headings are inserted in this Agreement for convenience only, and in no event be deemed to define, limit or describe the scope or intent of this Agreement, or of any provision hereof, nor in any way affect the


interpretation of this Agreement. All pronouns and defined terms appearing herein shall be deemed to include both the singular and plural, and to refer to all genders, unless the context clearly requires otherwise.


29. Counterparts. This Agreement may be executed simultaneously in several counterparts, each of which shall be deemed an original but which together shall constitute ...