Exhibit 10.1

 

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 Loan Agreement

 

Borrowers:RW HOLDINGS NNN REIT, INC., a Maryland corporation

 

RICH UNCLES NNN LP, LLC, a Delaware limited liability company

 

RICH UNCLES NNN OPERATING PARTNERSHIP, LP, a Delaware limited partnership

 

Address:3090 Bristol Street, Suite 550,

Costa Mesa, CA 92626

 

Date:April 30, 2019

 

THIS LOAN AGREEMENT is entered into on the above date between Pacific Mercantile
Bank (“Lender”), whose address is 949 South Coast Drive, 3rd Floor, Costa Mesa,
CA 92626, and the borrower(s) named above (jointly and severally, the
“Borrower”), whose chief executive office is located at the above address
(“Borrower’s Address”). The Schedule to this Agreement (the “Schedule”) shall
for all purposes be deemed to be a part of this Agreement, and the same is an
integral part of this Agreement. (Definitions of certain terms used in this
Agreement are set forth in Section 8 below.) This Agreement amends, restates,
replaces and supersedes, in their entirety, that certain Business Loan Agreement
dated February 20, 2018 between Lender and Borrower and that certain Promissory
Note dated February 20, 2018 by Borrower in favor of Lender (collectively, the
“Prior Loan Agreement”). This Agreement does not constitute a novation of the
Prior Loan Agreement but, rather, an amendment and continuation thereof. Without
limitation on the generality of the foregoing, Borrower and Lender acknowledge
and agree that Loans (or loans) and Advances (or advances) (as those terms are
used in the Prior Loan Agreement) made by Lender pursuant to the Prior Loan
Agreement shall be deemed “Loans” hereunder.

 

1.       LOANS.

 

1.1 Loans. Lender will make loans to Borrower (the “Loans”) as described, and in
amounts not to exceed the limits shown (the “Credit Limit”), on the Schedule,
subject to the provisions of this Agreement and subject to deduction of such
Reserves as Lender deems proper from time to time in its Good Faith Business
Judgment.

 

1.2 Interest. All Loans and all other monetary Obligations shall bear interest
at the interest rate shown on the Schedule. Accrued interest shall be payable
monthly for each month on the first day of the following month, and shall be
debited to Borrower’s Deposit Account maintained with the Lender designated by
Borrower (or as selected by Lender in the absence of such a designation).
Borrower shall at all times maintain sufficient funds in said Deposit Account to
enable payment of all interest and other sums to be so paid to Lender by such
debit.

 

1.3 Overadvances. If at any time or for any reason the total of all outstanding
Loans and all other monetary Obligations exceeds the Credit Limit (an
“Overadvance”), Borrower shall immediately pay the amount of the excess to
Lender, without notice or demand. Without limiting Borrower's obligation to
repay to Lender the amount of any Overadvance, Borrower agrees to pay Lender
interest on the outstanding amount of any Overadvance, on demand, at the Default
Rate.

 

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Pacific Mercantile Bank Loan Agreement

 

1.4 Fees. Borrower shall pay Lender the fees shown on the Schedule, which are in
addition to all interest and other sums payable to Lender and are not
refundable.

 

1.5 Loan Requests. To obtain a Loan, Borrower shall make a request to Lender, as
further described in the Schedule. Lender may rely on any request for a Loan
given by a person whom Lender believes is an Authorized Person (as set forth on
the Schedule), and Borrower will indemnify Lender for any loss Lender suffers as
a result of that reliance.

 

1.6 Conditions. The making of the first disbursement of any Loan is subject to
the satisfaction of the following conditions precedent, which Borrower agrees to
satisfy within two Business Days after the date hereof: (i) [Intentionally
Omitted], (ii) all documents relating to this Agreement have been executed and
delivered, (iii) Lender has confirmed to its satisfaction that there has been no
Material Adverse Change since the date of the last financial statements provided
to Lender prior to the date hereof, (iv) [Intentionally Omitted], (v) no Default
or Event of Default has occurred and is continuing, and (vi) all other matters
relating to the Loans have been completed to Lender’s satisfaction.

 

2. [Intentionally Omitted].

 

3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.

 

In order to induce Lender to enter into this Agreement and to make Loans,
Borrower represents and warrants to Lender as follows, and Borrower covenants
that the following representations will continue to be true in all material
respects (except to the extent that such representation or warranty relates to a
particular date), and that Borrower will at all times comply with all of the
following covenants, throughout the term of this Agreement and until all
Obligations have been paid and performed in full:

 

3.1 Corporate Existence and Authority. Borrower is, and will continue to be,
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization. Borrower is and will continue
to be qualified and licensed to do business in all jurisdictions in which any
failure to do so would reasonably be expected to result in liability on the part
of Borrower in excess of $10,000. The execution, delivery and performance by
Borrower of this Agreement, and all other documents contemplated hereby (i) have
been duly and validly authorized, (ii) are not subject to any consents, which
have not been obtained, (iii) are enforceable against Borrower in accordance
with their terms (except as enforcement may be limited by equitable principles
and by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to creditors' rights generally), and (iv) do not violate Borrower’s
articles or certificate of incorporation, or Borrower’s by-laws, or any law or
any material agreement or instrument, which is binding upon Borrower or its
property, and (v) do not constitute grounds for acceleration of any indebtedness
or obligations in excess of $50,000 in the aggregate, under any agreement or
instrument which is binding upon Borrower or its property.

 

3.2 Name; Trade Names and Styles. As of the date hereof, the name of Borrower
set forth in the heading to this Agreement is its correct name. Listed in the
Schedule are all prior names of Borrower and all of Borrower’s present and prior
trade names, as of the date hereof. Borrower shall give Lender 30 days' prior
written notice before changing its name or doing business under any other name.
Borrower has complied, and will in the future comply, in all material respects,
with all laws relating to the conduct of business under a fictitious business
name.

 

3.3 Place of Business. As of the date hereof, the address set forth in the
heading to this Agreement is Borrower's chief executive office. In addition, as
of the date hereof, Borrower has places of business only at the locations set
forth in the Schedule. Borrower will give Lender at least 30 days prior written
notice before opening any additional place of business or changing its chief
executive office, except that Borrower may maintain sales offices in the
ordinary course of business at which not more than a total of $50,000 fair
market value of equipment and inventory is located.

 

3.4 Negative Pledge; Deposit Accounts.

 

(a) Borrower’s assets now are and will remain free and clear of any and all
Liens and adverse claims, except for Permitted Liens.

 

(b) Borrower has set forth in the Schedule all of Borrower’s Deposit Accounts as
of the date hereof.

 

3.5 Notification of Loss. Borrower will immediately advise Lender in writing of
any loss or damage to any of its assets exceeding $100,000.

 

3.6 Books and Records. Borrower has maintained and will maintain at Borrower’s
Address books and records, which are complete and accurate in all material
respects, and comprise an accounting system in accordance with GAAP.

 

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Pacific Mercantile Bank Loan Agreement

 

3.7 Financial Condition, Statements and Reports. All financial statements now or
in the future delivered to Lender have been, and will be, prepared in conformity
with GAAP, and now and in the future will fairly present the results of
operations and financial condition of Borrower, in accordance with GAAP, at the
times and for the periods therein stated (except for non-compliance with FAS
123R in monthly financial statements, and, in the case of interim financial
statements, for the lack of footnotes and subject to year-end adjustments).
Between the last date covered by any such statement provided to Lender and the
date hereof, there has been no Material Adverse Change.

 

3.8 Tax Returns and Payments; Pension Contributions. Borrower has timely filed,
and will timely file, all required tax returns and reports, and Borrower has
timely paid, and will timely pay, all foreign, federal, state and local taxes,
assessments, deposits and contributions now or in the future owed by Borrower.
Borrower may, however, defer payment of any contested taxes, provided that
Borrower (i) in good faith contests Borrower's obligation to pay the taxes by
appropriate proceedings promptly and diligently instituted and conducted, (ii)
notifies Lender in writing of the commencement of, and any material development
in, the proceedings, and (iii) posts bonds or takes any other steps required to
keep the contested taxes from becoming a Lien upon any of Borrower’s assets.
Borrower is unaware of any claims or adjustments proposed for any of Borrower's
prior tax years which could result in additional taxes becoming due and payable
by Borrower. Borrower has paid, and shall continue to pay all amounts necessary
to fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could
reasonably be expected to result in any liability of Borrower, including any
liability to the Pension Benefit Guaranty Corporation or its successors or any
other governmental agency. Borrower shall concurrently execute and deliver to
Lender an IRS Form 8821, Tax Information Authorization, and Borrower shall
maintain the same in full force and effect throughout the term of this
Agreement.

 

3.9 Compliance with Law.

 

(a) Borrower has, to the best of its knowledge, complied, and will in the future
comply, in all material respects, with all provisions of all foreign, federal,
state and local laws and regulations applicable to Borrower, including, but not
limited to, those relating to Borrower's ownership of real or personal property,
the conduct and licensing of Borrower's business, and all environmental matters,
except where the failure to do so would not reasonably be expected to result in
liability on the part of Borrower in excess of $100,000. Borrower has obtained
all consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower’s business as currently conducted,
except where the failure to do so would not reasonably be expected to result in
liability on the part of Borrower in excess of $100,000.

 

(b) Borrower is not in violation and shall not violate any of the country or
list based economic and trade sanctions administered and enforced by OFAC or as
otherwise published from time to time. Neither Borrower, nor to the knowledge of
Borrower, any director, officer, employee, agent, affiliate or representative
thereof, (i) is a Sanctioned Person or a Sanctioned Entity, (ii) has its assets
located in a Sanctioned Entity, (iii) derives revenues from investments in, or
transactions with a Sanctioned Person or a Sanctioned Entity or (iv) is owned or
controlled by a Sanctioned Entity or a Sanctioned Person.

 

(c) Borrower is in compliance with, and will continue to comply with, all
applicable Anti-Terrorism Laws. Borrower does not deal in, or otherwise engage
in any transaction relating to, any property or interests in property blocked
pursuant to any OFAC Sanctions Programs. Borrower is not any of the following
(each a “Blocked Person”): (i) a Person that is prohibited pursuant to any of
the OFAC Sanctions Programs, including a Person named on OFAC’s list of
Specially Designated Nationals and Blocked Persons; (ii) a Person that is owned
or controlled by, or that owns or controls any Person described in (i) above; or
(iii) a Person with which Lender is prohibited from dealing or otherwise
engaging in any transaction by any Anti-Terrorism Law. No part of the proceeds
of the Loans will be used, directly or indirectly, for any payments to any
government official or employee, political party, official of a political party,
candidate for political office, or anyone else acting in an official capacity,
in order to obtain, retain or direct business or obtain any improper advantage,
in violation of the United States Foreign Corrupt Practices Act of 1977, as
amended.

 

(d) Borrower shall not (i) conduct any business or engage in any transaction or
dealing with any Blocked Person, including the making or receiving any
contribution of funds, goods or services to or for the benefit of any Blocked
Person, (ii) deal in, or otherwise engage in any transaction relating to, any
property or interests in property blocked pursuant to the Executive Order No.
13224, (iii) engage in or conspire to engage in any transaction that evades or
avoids, or has the purpose of evading or avoiding, or attempts to violate, any
of the prohibitions set forth in the Executive Order No. 13224, the USA PATRIOT
Act, or any other Anti-Terrorism Law, and the Borrower shall deliver to Lender
any certification or other evidence requested from time to time by Lender in its
sole discretion, confirming Borrower’s compliance with this Section, (iv) become
(including by virtue of being owned or controlled by a Blocked Person), own or
control a Blocked Person or any Person that is the target of sanctions imposed
by the United Nations or the European Union including the making or receiving
any contribution of funds, goods or services to or for the benefit of any
Blocked Person, or (v) engage in any business or activity in violation of the
Trading with the Enemy Act.

 

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Pacific Mercantile Bank Loan Agreement

 

3.10 Litigation. Except for the SEC investigation described in Note 9 of Notes
to Financial Statements of Borrower’s Quarterly Report on Form 10-Q for the
quarter ended September 30, 2018, as of the date hereof, there is no claim,
suit, litigation, proceeding or investigation pending or, to Borrower’s
knowledge, threatened against or affecting Borrower in any court or before any
governmental agency (or any basis therefor known to Borrower) involving any
claim against Borrower of more than $50,000. Borrower will promptly inform
Lender in writing of any claim, proceeding, litigation or investigation in the
future threatened or instituted against Borrower involving any claim against
Borrower of more than $50,000.

 

3.11 Use of Proceeds. The proceeds of each Loan shall be used solely for
Borrower’s business operations, including acquisitions of real estate properties
and working capital. Borrower is not purchasing or carrying any “margin stock”
(as defined in Regulation U of the Board of Governors of the Federal Reserve
System) and no part of the proceeds of any Loan will be used to purchase or
carry any “margin stock” or to extend credit to others for the purpose of
purchasing or carrying any “margin stock.”

 

3.12 Solvency, Payment of Debts. Borrower is able to pay its debts (including
trade debts) as they mature; the fair saleable value of Borrower’s assets
(including goodwill minus disposition costs) exceeds the fair value of its
liabilities; and Borrower is not left with unreasonably small capital after the
transactions contemplated by this Agreement.

 

4. [INTENTIONALLY OMITTED].

 

5. ADDITIONAL DUTIES OF BORROWER.

 

5.1 Financial and Other Covenants. Borrower shall at all times comply with the
financial and other covenants set forth in the Schedule.

 

5.2 Insurance. Borrower shall, at all times insure its tangible assets and carry
such other business insurance, with insurers reasonably acceptable to Lender, as
may be legally required, are reasonable and are customary and in accordance with
standard practices for Borrower’s industry and locations. At Lender’s request,
Borrower shall provide evidence of such insurance to Lender. If Borrower fails
to provide or pay for any insurance, Lender may, but is not obligated to, obtain
the same at Borrower's expense.

 

5.3 Reports. Borrower, at its expense, shall provide Lender with the written
reports set forth in the Schedule, and such other written reports with respect
to Borrower as Lender shall from time to time specify in its Good Faith Business
Judgment.

 

5.4 Access to Assets, Books and Records. At reasonable times, and on one
Business Day’s notice, Lender, or its agents, shall have the right to inspect
Borrower’s assets, and the right to audit and copy Borrower's books and records.
The foregoing inspections and audits shall be at Borrower’s expense and the
charge therefor shall be Lender’s then current standard charge for the same,
plus reasonable out-of-pocket expenses (including without limitation any
additional costs and expenses of outside auditors retained by Lender).

 

5.5 Negative Covenants. Except as may be permitted in the Schedule, Borrower
shall not, without Lender's prior written consent (which shall be a matter of
its Good Faith Business Judgment), do any of the following:

 

(i) merge or consolidate with another corporation or entity, except that a
Borrower may merge into another Borrower with ten Business Days prior written
notice to Lender;

 

(ii) acquire any assets, except in the ordinary course of business;

 

(iii) enter into any other transaction outside the ordinary course of business;

 

(iv) sell or transfer any assets, except for (A) the sale of finished inventory
in the ordinary course of Borrower's business, (B) the sale of obsolete
equipment in the ordinary course of business, in an amount not more than $50,000
in any fiscal year, and (C) non-exclusive licenses of intellectual property in
the ordinary course of business;

 

(v) store any assets with any warehouseman or other third party, unless there is
in place an agreement by such warehouseman or other third party in favor of
Lender in such form as Lender shall specify in its Good Faith Business Judgment;

 

(vi) [intentionally omitted];

 

(vii) make any loans of any money or other assets or any other Investments,
other than Permitted Investments;

 

(viii) create, incur, assume or permit to be outstanding any Indebtedness other
than Permitted Indebtedness;

 

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Pacific Mercantile Bank Loan Agreement

 

(ix) guarantee or otherwise become liable with respect to the obligations of
another party or entity, except for (i) guaranties or indemnities by Borrower of
the obligations of a Single-Purpose Subsidiary to its mortgage lender limited to
(a) damages or loss suffered by such mortgage lender arising from certain
customary “carve out” obligations, including without limitation, the gross
negligence or fraud of such Single-Purpose Subsidiary, commission of waste,
mechanics’ liens, breach of environmental representations, warranties  and
covenants pertaining to hazardous substances, failure to apply rental income to
the operation of the mortgaged property, failure to pay property taxes or
failure to maintain required insurance, and (b) repayment of the mortgage loan
if there is an unpermitted change of ownership of any part of the real property
owned by the Single-Purpose Subsidiary securing the mortgage loan or in the
ownership of the Single-Purpose Subsidiary, if there is a bankruptcy of the
Single-Purpose Subsidiary, or if such mortgage lender’s right to recourse to the
mortgaged property is prejudiced by Borrower, the Single-Purpose Subsidiary, or
any other party liable for the mortgaged loan, and (ii) customary environmental
indemnity agreements by Borrower in favor of a mortgage lender to a
Single-Purpose Subsidiary pertaining to the mortgaged property;

 

(x) [intentionally omitted];

 

(xi) redeem, retire, purchase or otherwise acquire, directly or indirectly, any
of Borrower's stock or other equity securities;

 

(xii) engage, directly or indirectly, in any business other than the businesses
currently engaged in by Borrower or reasonably related thereto, or become an
“investment company” within the meaning of the Investment Company Act of 1940;

 

(xiii) directly or indirectly enter into, or permit to exist, any material
transaction with any Affiliate of Borrower, except for transactions that are in
the ordinary course of Borrower’s business, and are on fair and reasonable terms
that are no less favorable to Borrower than would be obtained in an arm’s length
transaction with a non-affiliated Person; or

 

(xiv) reincorporate or reorganize in another state;

 

(xv) change its fiscal year;

 

(xvi) create a Subsidiary except for Single-Purpose Subsidiaries (as defined in
the Schedule) created in the ordinary course of business;

 

(xvii) dissolve or elect to dissolve, except that a Borrower which is a
wholly-owned Subsidiary of another Borrower may dissolve, with ten Business Day
prior written notice to the Lender, if all of its assets are distributed to the
Borrower which owns 100% of its stock; or

 

(xviii) agree to do any of the foregoing, unless such agreement provides that it
is subject to the prior written consent of Lender.

 

Transactions permitted by the foregoing provisions of this Section are only
permitted if no Default or Event of Default has occurred and is continuing, or
would occur as a result of such transaction.

 

5.6 Litigation Cooperation. Should any third-party suit or proceeding be
instituted by or against Lender relating to Borrower, Borrower shall, without
expense to Lender, make available Borrower and its officers, employees and
agents and Borrower's books and records, to the extent that Lender may deem them
reasonably necessary in order to prosecute or defend any such suit or
proceeding.

 

5.7 Notification of Changes. Borrower will give Lender written notice of any
change in its executive officers within ten days after the date of such change.

 

5.8 [Intentionally Omitted].

 

5.9 [Intentionally Omitted].

 

5.10 Further Assurances. Borrower agrees, at its expense, on request by Lender,
to execute all documents and take all actions, as Lender, may, in its Good Faith
Business Judgment, deem necessary or useful in order to fully consummate the
transactions contemplated by this Agreement.

 

6. TERM.

 

6.1 Maturity Date. This Agreement shall continue in effect until the maturity
date set forth on the Schedule (the “Maturity Date”), subject to Sections 6.2
and 6.3 below.

 

6.2 Early Termination. This Agreement may be terminated prior to the Maturity
Date as follows: (i) by Borrower, effective 20 days after written notice of
termination is given to Lender; or (ii) by Lender at any time after the
occurrence and during the continuance of an Event of Default, without notice,
effective immediately.

 

6.3 Payment of Obligations. On the Maturity Date or on any earlier effective
date of termination, Borrower shall pay and perform in full all Obligations,
whether evidenced by installment notes or otherwise, and whether or not all or
any part of such Obligations are otherwise then due and payable. Notwithstanding
any termination of this Agreement, all of the terms and provisions of this
Agreement shall continue in full force and effect until all Obligations have
been paid and performed in full; provided that Lender may, in its sole
discretion, refuse to make any further Loans after termination. No termination
shall in any way affect or impair any right or remedy of Lender, nor shall any
such termination relieve Borrower of any Obligation to Lender, until all of the
Obligations have been paid and performed in full.

 

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Pacific Mercantile Bank Loan Agreement

 

7. EVENTS OF DEFAULT AND REMEDIES.

 

7.1 Events of Default. The occurrence of any of the following events shall
constitute an “Event of Default” under this Agreement, and Borrower shall give
Lender immediate written notice thereof:

 

(a) Any warranty, representation, statement, report or certificate made or
delivered to Lender by Borrower or any of Borrower's officers, employees or
agents, now or in the future, shall be untrue or misleading in a material
respect when made or deemed to be made; or

 

(b) Borrower shall fail to pay when due any Loan or any interest thereon or any
other monetary Obligation; or

 

(c) the total Loans and other Obligations outstanding at any time shall exceed
the Credit Limit; or

 

(d) Borrower shall fail to comply with any non-monetary Obligation (i) which by
its nature cannot be cured or (ii) which by its nature can be cured but is
similar to an Obligation with respect to which Lender has given Borrower notice
of failure of compliance within the preceding 12 months; or

 

(e) Borrower shall fail to perform any other non-monetary Obligation, and as to
any such failure that can be cured, shall fail to cure such failure within 10
Business Days after Borrower receives notice thereof or any officer of Borrower
becomes aware thereof; provided, however, that if such failure cannot by its
nature be cured within the 10 Business Days period or cannot after diligent
attempts by Borrower be cured within such 10 Business Days period, and such
failure is likely to be cured within a reasonable time, then Borrower shall have
an additional reasonable period (which shall not in any case exceed 60 days) to
attempt to cure such failure, and within such reasonable time period the failure
to have cured such failure shall not be deemed an Event of Default but no Loans
will be made; or

 

(f) any material assets of Borrower become subject to any Lien (other than a
Permitted Lien) which is not cured within ten Business Days after the occurrence
of the same; or

 

(g) any material assets are attached, seized, subjected to a writ or distress
warrant, or is levied upon, and such attachment, seizure, writ or distress
warrant or levy has not been removed, discharged or rescinded within ten
Business Days, or if Borrower is enjoined, restrained, or in any way prevented
by court order from continuing to conduct all or any material part of its
business affairs, or if a judgment or other claim becomes a Lien on any of
Borrower’s assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower’s assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency;

 

(h) any default or event of default occurs under any obligation secured by a
Permitted Lien, which is not cured within any applicable cure period or waived
in writing by the holder of the Permitted Lien; or

 

(i) a default or event of default shall occur under any documents or agreements
evidencing or relating to any Permitted Indebtedness which is not cured within
any applicable cure period.

 

(j) Borrower breaches any material contract or obligation, which has resulted or
may reasonably be expected to result in a Material Adverse Change; or

 

(k) a final, judgment or judgments for the payment of money in an amount,
individually or in the aggregate, of at least $250,000 shall be rendered against
Borrower, and the same remain unsatisfied and unstayed for a period of 10
Business Days or more; or

 

(l) Dissolution, termination of existence, temporary or permanent suspension of
business, insolvency or business failure of Borrower; or appointment of a
receiver, trustee or custodian, for all or any part of the property of,
assignment for the benefit of creditors by, or the commencement of any
Insolvency Proceeding by Borrower; or

 

(m) the commencement of any Insolvency Proceeding against Borrower or any
Guarantor, which is not cured by the dismissal thereof within 45 days after the
date commenced; or

 

(n) revocation or termination of, or limitation or denial of liability upon, or
default under, any guaranty of the Obligations or any attempt to do any of the
foregoing, or commencement of any Insolvency Proceeding by any Guarantor, or
death of any Guarantor; or

 

(o) revocation or termination of, or limitation or denial of liability upon, or
default under, any pledge of any certificate of deposit, securities or other
property or asset of any kind pledged by any third party to secure any or all of
the Obligations, or any attempt to do any of the foregoing, or commencement of
any Insolvency Proceeding by or against any such third party; or

 

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Pacific Mercantile Bank Loan Agreement

 

(p) Borrower makes any payment on account of any Subordinated Debt, other than
as permitted in the applicable subordination agreement, or if any Person who has
subordinated such indebtedness or obligations terminates or in any way limits
its subordination agreement; or

 

(q) a Change in Control shall occur; or

 

(r) an Event of Default shall occur under any agreement to which any one or more
of the following are parties with or in favor of Lender: BrixInvest, LLC; or

 

(s) Borrower shall generally not pay its debts as they become due, or Borrower
shall conceal, remove or transfer any part of its property, with intent to
hinder, delay or defraud its creditors, or make or suffer any transfer of any of
its property which may be fraudulent under any bankruptcy, fraudulent conveyance
or similar law; or

 

(t) Any director, officer, or owner of 20% or more of the issued and outstanding
common stock of Borrower is indicted for a felony offense under state or federal
law and, as to a director or an officer, such director or officer is not
terminated by Borrower within thirty (30) days after Borrower has actual
knowledge of such indictment, or Borrower hires an officer or has a director who
has been convicted of any such felony offense, or a Person becomes an owner of
at least 20% of the issued and outstanding common stock of Borrower who has been
convicted of any such felony offense; or

 

(u) a Material Adverse Change shall occur.

 

Lender may cease making any Loans hereunder during any of the above cure
periods, and thereafter if an Event of Default has occurred and is continuing.

 

7.2 Remedies. Upon the occurrence and during the continuance of any Event of
Default, and at any time thereafter, Lender, at its option, and without notice
or demand of any kind (all of which are hereby expressly waived by Borrower),
may do any one or more of the following: (a) Cease making Loans or otherwise
extending credit to Borrower under this Agreement or any other Loan Document;
(b) Accelerate and declare all or any part of the Obligations to be immediately
due, payable, and performable, notwithstanding any deferred or installment
payments allowed by any instrument evidencing or relating to any Obligation
(except that all Obligations shall be automatically accelerated and due and
payable upon the commencement of any Insolvency Proceeding by Borrower or any
Event of Default under Section 7.1(m)); (c) demand and receive possession of any
of Borrower's federal and state income tax returns and the books and records
utilized in the preparation thereof or referring thereto; (d) set off any of the
Obligations against any general, special or other Deposit Accounts of Borrower
maintained with Lender; and (e) exercise any and all rights and remedies of
Borrower, whether by contract, law, equity or otherwise. All reasonable
attorneys' fees, expenses, costs, liabilities and obligations incurred by Lender
with respect to the foregoing shall be added to and become part of the
Obligations, shall be due on demand, and shall bear interest at a rate equal to
the highest interest rate applicable to any of the Obligations. Without limiting
any of Lender's rights and remedies, from and after the occurrence and during
the continuance of any Event of Default, the interest rate applicable to the
Obligations shall be increased by an additional six percent per annum (the
“Default Rate”).

 

7.3 [Intentionally Omitted].

 

7.4 [Intentionally Omitted].

 

7.5 Power of Attorney. Upon the occurrence and during the continuance of any
Event of Default, without limiting Lender’s other rights and remedies, Borrower
grants to Lender an irrevocable power of attorney coupled with an interest,
authorizing and permitting Lender (acting through any of its employees,
attorneys or agents) at any time, at its option, but without obligation, with or
without notice to Borrower, and at Borrower's expense, to do any or all of the
following, in Borrower's name or otherwise, but Lender agrees that if it
exercises any right hereunder, it will do so in good faith and in a commercially
reasonable manner: (a) pay any sums required on account of Borrower's taxes or
to secure the release of any Liens therefor, or both; (b) instruct any third
party having custody or control of any books or records belonging to, or
relating to, Borrower to give Lender the same rights of access and other rights
with respect thereto as Lender has under this Agreement; and (c) take any action
or pay any sum required of Borrower pursuant to this Agreement and any other
Loan Documents. Any and all reasonable sums paid and any and all reasonable
costs, expenses, liabilities, obligations and attorneys' fees incurred by Lender
with respect to the foregoing shall be added to and become part of the
Obligations, shall be payable on demand, and shall bear interest at a rate equal
to the highest interest rate applicable to any of the Obligations. In no event
shall Lender's rights under the foregoing power of attorney or any of Lender's
other rights under this Agreement be deemed to indicate that Lender is in
control of the business, management or properties of Borrower.

 

7.6 [Intentionally Omitted].

 

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Pacific Mercantile Bank Loan Agreement

 

7.7 Remedies Cumulative. In addition to the rights and remedies set forth in
this Agreement, Lender shall have all the other rights and remedies accorded a
creditor or other contracting party under under all applicable laws, and under
any other instrument or agreement now or in the future entered into between
Lender and Borrower, and all of such rights and remedies are cumulative and none
is exclusive. Exercise or partial exercise by Lender of one or more of its
rights or remedies shall not be deemed an election, nor bar Lender from
subsequent exercise or partial exercise of any other rights or remedies. The
failure or delay of Lender to exercise any rights or remedies shall not operate
as a waiver thereof, but all rights and remedies shall continue in full force
and effect until all of the Obligations have been fully paid and performed.

 

8. Definitions. As used in this Agreement, the following terms have the
following meanings:

 

“Affiliate” means, with respect to any Person, a relative, partner, shareholder,
director, officer, or employee of such Person, or any parent or subsidiary of
such Person, or any Person controlling, controlled by or under common control
with such Person.

 

“this Agreement”, “the Loan Agreement” and “this Loan Agreement” mean
collectively to this Loan Agreement and the Schedule and all exhibits and
schedules thereto, as the same may be modified, amended or restated from time to
time by a written agreement signed by Borrower and Lender.

 

“Anti-Terrorism Laws” means (i) the Money Laundering Control Act of 1986 (i.e.,
18 U.S.C. §§ 1956 and 1957), (ii) the Bank Secrecy Act, as amended by the USA
PATRIOT Act, (iii) the laws, regulations and Executive Orders administered by
the United States Department of the Treasury’s Office of Foreign Assets Control
(“OFAC”), (iv) the Comprehensive Iran Sanctions, Accountability, and Divestment
Act of 2010 and implementing regulations by the United States Department of the
Treasury, (v) the Proceeds of Crime (Money Laundering) and Terrorist Financing
Act (Canada), (vi) any law enacted in the United States, Canada or any other
jurisdiction in which any Borrower or any of its Subsidiaries operate
prohibiting or directed against terrorist activities or the financing of
terrorist activities (e.g., 18 U.S.C. §§ 2339A and 2339B), (vii) the foreign
asset control regulations of the United States Treasury Department (31 CFR,
Subtitle B, Chapter V, as amended) and any enabling legislation or executive
order relating thereto, or (viii) any similar laws relating to terrorism or
money laundering enacted in the United States, Canada or any other jurisdictions
in which Borrower or any of its Subsidiaries operate, as any of the foregoing
laws may from time to time be amended, renewed, extended, or replaced and all
other legal requirements of any Governmental Authority governing, addressing,
relating to, or attempting to eliminate, terrorist acts and acts of war and any
regulations promulgated pursuant thereto.

 

“BrixInvest LSA” means the Loan and Security Agreement dated on or about April
30, 2019 between Lender and BrixInvest, LLC, as amended, modified or restated.

 

“Business Day” means a day on which Lender is open for business other than
Saturday, Sunday or Federal holiday.

 

“Change in Control” means: (i) Parent shall cease to own 100% of the outstanding
stock of Rich Uncles NNN LP, LLC without the prior written consent of Lender; or
(ii) Parent and Rich Uncles NNN LP, LLC shall cease to own a combined 100% of
the outstanding stock of Rich Uncles NNN Operating Partnership, LP without the
prior written consent of Lender; or (iii) a transaction other than a bona fide
equity financing or series of financings on terms and from investors reasonably
acceptable to Lender in which any “person” or “group” (within the meaning of
Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934), directly or indirectly, of a sufficient number of shares of all
classes of stock then outstanding of Borrower ordinarily entitled to vote in the
election of directors, empowering such “person” or “group” to elect a majority
of the Board of Directors of Borrower, who did not have such power before such
transaction.

 

“Code” means the Uniform Commercial Code as adopted and in effect in the State
of California from time to time.

 

“Compliance Certificates” has the meaning set forth in Section 6 of the
Schedule.

 

“Contingent Obligation” means, as applied to any Person, any direct or indirect
liability, contingent or otherwise, of that Person with respect to (i) any
indebtedness, lease, dividend, letter of credit or other obligation of another,
including, without limitation, any such obligation directly or indirectly
guaranteed, endorsed, co-made or discounted or sold with recourse by that
Person, or in respect of which that Person is otherwise directly or indirectly
liable; (ii) any obligations with respect to undrawn letters of credit,
corporate credit cards or merchant services issued for the account of that
Person; and (iii) all obligations arising under any interest rate, currency or
commodity swap agreement, interest rate cap agreement, interest rate collar
agreement, or other agreement or arrangement designated to protect a Person
against fluctuation in interest rates, currency exchange rates or commodity
prices; provided, however, that the term “Contingent Obligation” shall not
include endorsements for collection or deposit in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determined amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as
determined by such Person in good faith; provided, however, that such amount
shall not in any event exceed the maximum amount of the obligations under the
guarantee or other support arrangement.

 

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Pacific Mercantile Bank Loan Agreement

 

“continuing” and “during the continuance of” when used with reference to a
Default or Event of Default means that the Default or Event of Default has
occurred and has not been either waived in writing by Lender or cured within any
applicable cure period.

 

“Default” means any event which with notice or passage of time or both, would
constitute an Event of Default.

 

“Default Rate” has the meaning set forth in Section 7.2 above.

 

“Deposit Accounts” means all present and future “deposit accounts” as defined in
the Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation all general and special bank
accounts, demand accounts, checking accounts, savings accounts and certificates
of deposit.

 

“Event of Default” means any of the events set forth in Section 7.1 of this
Agreement.

 

“GAAP” means generally accepted accounting principles consistently applied, as
in effect from time to time in the United States.

 

“Good Faith Business Judgment” means Lender’s business judgment, exercised
honestly and in good faith and not arbitrarily.

 

“Guarantor” means any Person who has guaranteed, or in the future guarantees,
any of the Obligations.

 

“including” means including (but not limited to).

 

“Indebtedness” means (a) all indebtedness created, assumed or incurred in any
manner by Borrower representing money borrowed (including by the issuance of
debt securities, notes, bonds debentures or similar instruments), (b) all
indebtedness for the deferred purchase price of property or services, (c) the
Obligations, (d) obligations and liabilities of any Person secured by a Lien or
claim on property owned by Borrower, even though Borrower has not assumed or
become liable therefor, (e) obligations and liabilities created or arising under
any capital lease or conditional sales contract or other title retention
agreement with respect to property used or acquired by Borrower, even though the
rights and remedies of the lessor, seller or lender are limited to repossession
or otherwise limited; (f) all obligations of Borrower on or with respect to
letters of credit, bankers’ acceptances and other similar extensions of credit
whether or not representing obligations for borrowed money; and (g) the amount
of any Contingent Obligations.

 

“Insolvency Proceeding” means any proceeding commenced by or against any Person
or entity under any provision of the United States Bankruptcy Code, as amended,
or under any other state, federal or other bankruptcy or insolvency law, now or
hereafter in effect, including assignments for the benefit of creditors, formal
or informal moratoria, compositions, extension generally with its creditors, or
proceedings seeking reorganization, arrangement, readjustment of debt,
dissolution or liquidation, or other relief.

 

“Investment” means any beneficial ownership interest in any Person (including
stock, securities, partnership interest, limited liability company interest, or
other interests), and any loan, advance or capital contribution to any Person,
including the creation or capital contribution to a wholly-owned or
partially-owned subsidiary)

 

“Lien” means any mortgage, lien, deed of trust, charge, pledge, security
interest or other encumbrance.

 

“Loan Documents” means, collectively, this Agreement and all other present and
future documents, instruments and agreements between Lender and Borrower,
including, but not limited to those relating to this Agreement, and all
amendments and modifications thereto and replacements therefor.

 

“Material Adverse Change” means a material adverse effect on (i) the operations,
business, prospects or financial condition of Borrower, (ii) the ability of
Borrower to repay the Obligations or otherwise perform its obligations under the
Loan Documents, or (iii) Borrower’s interest in, or the value of, Borrower’s
assets.

 

“Obligations” means all present and future Loans, advances, debts, liabilities,
obligations, guaranties, covenants, duties and indebtedness at any time owing by
Borrower to Lender, whether arising under this Agreement, or any note or other
instrument or document, or otherwise, whether arising from an extension of
credit, opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by Lender in
Borrower's debts owing to others, and any interest and other obligations that
accrue after the commencement of an Insolvency Proceeding), absolute or
contingent, due or to become due, including, without limitation, all interest,
charges, expenses, fees, attorney's fees, expert witness fees, audit fees,
letter of credit fees, collateral monitoring fees, closing fees, facility fees,
termination fees, minimum interest charges and any other sums chargeable to
Borrower under this Agreement or under any other Loan Documents.

 

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Pacific Mercantile Bank Loan Agreement

 

“Overadvance” is defined in Section 1.3.

 

“Parent” means RW Holdings NNN REIT, Inc.

 

“Payment” means all checks, wire transfers and other items of payment received
by Lender (including payment of the Obligations in full) for credit to
Borrower’s outstanding Loans.

 

“Permitted Indebtedness” means:

 

(i) the Obligations;

 

(ii) Subordinated Debt;

 

(iii) Indebtedness existing on the date hereof in a total principal amount not
in excess of $100,000;

 

(iv) trade payables incurred in the ordinary course of business;

 

(v) Indebtedness incurred as a result of endorsing negotiable instruments
received in the ordinary course of business;

 

(vi) capitalized leases and purchase money Indebtedness secured by Permitted
Liens in an aggregate amount not exceeding $250,000 at any time outstanding,
provided the amount of such capitalized leases and purchase money Indebtedness
do not exceed, at the time they were incurred, the lesser of the cost or fair
market value of the property so leased or financed with such Indebtedness;

 

(vii) extensions, refinancings, modifications, amendments and restatements of
any items of Permitted Indebtedness in clauses (iii) through (vi) above,
provided that the principal amount thereof is not increased and the terms
thereof are not modified to impose more burdensome terms upon Borrower.

 

“Permitted Investments” means:

 

(i) Marketable direct obligations issued or unconditionally guaranteed by the
United States of America or any agency or any State thereof maturing within one
year from the date of acquisition thereof, commercial paper maturing no more
than one year from the date of creation thereof and currently having rating of
at least A-2 or P-2 from either Standard & Poor’s Corporation or Moody’s
Investors Service, Lender’s certificates of deposit maturing no more than one
year from the date of investment therein, and Lender’s money market accounts;
Investments in regular deposit or checking accounts held with Lender or subject
to a control agreement in favor of Lender;

 

(ii) Investments of a Borrower in another Borrower;

 

(iii) Investments (including debt obligations) received in connection with the
bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of Borrower’s business; and

 

(iv) ownership interests of Borrower in Single-Purpose Subsidiaries (as defined
in the Schedule) obtained in the ordinary course of business.

 

“Permitted Liens” means the following:

 

(i) purchase money security interests in specific items of equipment;

 

(ii) leases of specific items of equipment;

 

(iii) Liens for taxes not yet payable;

 

(iv) Liens arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default;

 

(v) security interests being terminated substantially concurrently with this
Agreement;

 

(vi) Liens incurred on deposits made in the ordinary course of business in
connection with workers compensation, unemployment insurance, social security
and other like laws or to secure the performance of statutory obligations, in an
aggregate amount not exceeding $50,000 at any time;

 

(vii) Liens of mechanics, materialmen, workers, repairmen, fillers and common
carriers arising by operation of law for amounts that are not yet due and
payable or which are being contested in good faith by Borrower by appropriate
proceedings, in an aggregate amount not exceeding $25,000 at any time; and

 

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Pacific Mercantile Bank Loan Agreement

 

(viii) deposits or pledges of cash to secure leases arising in the ordinary
course of business, in an aggregate amount not exceeding $50,000 at any time.

 

“Person” means any individual, sole proprietorship, partnership, joint venture,
limited liability company, trust, unincorporated organization, association,
corporation, government, or any agency or political division thereof, or any
other entity.

 

“Prime Rate” means the variable rate of interest per annum, shown as the “prime
rate” or “bank prime rate”, as published in the Wall Street Journal. If for any
reason the Wall Street Journal does not publish a “prime rate” or “bank prime
rate”, then the “Prime Rate” shall be such rate as Lender shall select in its
Good Faith Business Judgment from time to time, which is reasonably comparable
to the “prime rate” or “bank prime rate”, as published in the Wall Street
Journal.

 

“REIT Portfolio Debt Default” means any default or event of default under any
documents or agreements evidencing or relating to any Indebtedness for borrowed
money owed by any Subsidiary of Rich Uncles NNN Operating Partnership, LP.

 

“Reserves” means, as of any date of determination, such amounts as Lender may
from time to time establish and revise in its Good Faith Business Judgment,
reducing the amount of Loans, and other financial accommodations which would
otherwise be available to Borrower under the lending formulas provided in the
Schedule: (a) to reflect events, conditions, contingencies or risks which, as
determined by Lender in its Good Faith Business Judgment, do or may adversely
affect the assets, business or prospects of Borrower or any Guarantor; or (b) to
reflect Lender's good faith belief that any asset or financial information
furnished by or on behalf of Borrower or any Guarantor to Lender is or may have
been incomplete, inaccurate or misleading in any material respect; or (c) in
respect of any state of facts which Lender determines in good faith constitutes
an Event of Default or may, with notice or passage of time or both, constitute
an Event of Default.

 

“Sanctioned Entity” means (a) a country or a government of a country, (b) an
agency of the government of a country, (c) an organization directly or
indirectly controlled by a country or its government, or (d) a Person resident
in or determined to be resident in a country, in each case, that is subject to a
country sanctions program administered and enforced by OFAC.

 

“Sanctioned Person” means a Person named on the OFAC-maintained list of
“Specially Designated Nationals” (as defined by OFAC).

 

“Subordinated Debt” means unsecured Indebtedness which is on terms acceptable to
Lender in its Good Faith Business Judgment, and which is subordinated to the
Obligations pursuant to a Subordination Agreement in such form as Lender shall
specify in its Good Faith Business Judgment.

 

“Subsidiary” means, with respect to any Person, a Person of which more than 50%
of the voting stock or other equity interests is owned or controlled, directly
or indirectly, by such Person or one or more Affiliates of such Person.

 

“Trigger Event” has the meaning set forth in Section 8 of the Schedule hereto.

 

“USA PATRIOT Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001,
Public Law 107-56, as the same has been, or shall hereafter be, renewed,
extended, amended or replaced.

 

“Wirta Guarantors” means, collectively, Guarantors Raymond E. Wirta and the
Wirta Family Trust dated July 5, 1985, as amended August 15, 2006 and April 22,
2016.

 

Other Terms. All accounting terms used in this Agreement, unless otherwise
indicated, shall have the meanings given to such terms in accordance with GAAP,
consistently applied. All other terms contained in this Agreement, unless
otherwise indicated, shall have the meanings provided by the Code, to the extent
such terms are defined therein.

 

9. GENERAL PROVISIONS.

 

9.1 Application of Payments. All payments with respect to the Obligations may be
applied, and in Lender's Good Faith Business Judgment reversed and re-applied,
to the Obligations, in such order and manner as Lender shall determine in its
Good Faith Business Judgment. Lender shall not be required to credit Borrower's
account for the amount of any item of payment which is unsatisfactory to Lender
in its Good Faith Business Judgment, and Lender may charge Borrower's loan
account for the amount of any item of payment which is returned to Lender
unpaid. In computing interest on the Obligations, all Payments will be deemed
received when received in immediately available funds, and if such immediately
available funds are received after 1:00 PM Pacific Time on any day, they shall
be deemed received on the next Business Day.

 

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Pacific Mercantile Bank Loan Agreement

 

9.2 Increased Costs and Reduced Return. If Lender shall have determined that the
adoption or implementation of, or any change in, any law, rule, treaty or
regulation, or any policy, guideline or directive of, or any change in, the
interpretation or administration thereof by, any court, central bank or other
administrative or governmental authority, or compliance by Lender with any
directive of, or guideline from, any central bank or other Governmental
Authority or the introduction of, or change in, any accounting principles
applicable to Lender (whether or not having the force of law) shall (i) subject
the Lender to any tax, duty or other charge with respect to this Agreement or
any Loan made hereunder, or change the basis of taxation of payments to Lender
of any amounts payable hereunder (except for taxes on the overall net income of
Lender), (ii) impose, modify or deem applicable any reserve, special deposit or
similar requirement against any Loan, or against assets of or held by, or
deposits with or for the account of, or credit extended by, Lender, or
(iii) impose on Lender any other condition regarding this Agreement or any Loan,
and the result of any event referred to in clauses (i), (ii) or (iii) above
shall be to increase the cost to Lender of making any Loan, or agreeing to make
any Loan or to reduce any amount received or receivable by Lender, then, upon
demand by Lender, the Borrower shall pay to Lender such additional amounts as
will compensate the Lender for such increased costs or reductions in amount. All
amounts payable under this Section shall bear interest from the date of demand
by the Lender until payment in full to the Lender at the highest interest rate
applicable to the Obligations. A certificate of the Lender claiming compensation
under this Section, specifying the event herein above described and the nature
of such event shall be submitted by the Lender to the Borrower, setting forth
the additional amount due and an explanation of the calculation thereof, and the
Lender's reasons for invoking the provisions of this Section, and the same shall
be final and conclusive absent manifest error.

 

9.3 Charges to Accounts. Lender may, in its discretion, require that Borrower
pay monetary Obligations in cash to Lender, or charge them to Borrower’s Loan
account (in which event they will bear interest at the same rate applicable to
the Loans), or any of Borrower’s Deposit Accounts maintained with Lender.

 

9.4 Monthly Accountings. Lender may provide Borrower monthly with an account of
advances, charges, expenses and payments made pursuant to this Agreement. Such
account shall be deemed correct, accurate and binding on Borrower and an account
stated (except for reverses and reapplications of payments made and corrections
of errors discovered by Lender), unless Borrower notifies Lender in writing to
the contrary within 60 days after such account is rendered, describing the
nature of any alleged errors or omissions.

 

9.5 Notices. All notices to be given under this Agreement shall be in writing
and shall be given either personally or by reputable private delivery service
(including commercial overnight courier such as FedEx, GSO or UPS) or by Express
Mail or by United States certified mail return receipt requested, addressed (i)
to Borrower at the address shown in the heading to this Agreement, or (ii) to
Lender at the address shown in the heading to this Agreement, or (iii) for
either party at any other address designated in writing by one party to the
other party. All notices shall be deemed to have been given upon delivery in the
case of notices personally delivered, or at the expiration of one Business Day
following delivery to the overnight private delivery service, or two Business
Days following the deposit thereof in the Express Mail or United States
certified mail, with postage prepaid.

 

9.6 Severability. Should any provision of this Agreement be held by any court of
competent jurisdiction to be void or unenforceable, such defect shall not affect
the remainder of this Agreement, which shall continue in full force and effect.

 

9.7 Integration. This Agreement and such other written agreements, documents and
instruments as may be executed in connection herewith are the final, entire and
complete agreement between Borrower and Lender and supersede all prior and
contemporaneous negotiations and oral representations and agreements, all of
which are merged and integrated in this Agreement. There are no oral
understandings, representations or agreements between the parties which are not
set forth in this Agreement or in other written agreements signed by the parties
in connection herewith.

 

9.8 Waivers; Indemnity. The failure of Lender at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other Loan Document shall not waive or diminish any right of Lender later to
demand and receive strict compliance therewith. Any waiver of any default shall
not waive or affect any other default, whether prior or subsequent, and whether
or not similar. None of the provisions of this Agreement or any other Loan
Document shall be deemed to have been waived by any act or knowledge of Lender
or its agents or employees, but only by a specific written waiver signed by an
authorized officer of Lender and delivered to Borrower. Borrower waives the
benefit of all statutes of limitations relating to any of the Obligations or
this Agreement or any other Loan Document, and Borrower waives demand, protest,
notice of protest and notice of default or dishonor, notice of payment and
nonpayment, release, compromise, settlement, extension or renewal of any
commercial paper, instrument, account, general intangible, document or guaranty
at any time held by Lender on which Borrower is or may in any way be liable, and
notice of any action taken by Lender, unless expressly required by this
Agreement. Borrower hereby agrees to indemnify Lender and its affiliates,
subsidiaries, parent, directors, officers, employees, agents, and attorneys, and
to hold them harmless from and against any and all claims, debts, liabilities,
demands, obligations, actions, causes of action, penalties, costs and expenses
(including reasonable attorneys' fees), of every kind, which they may sustain or
incur based upon or arising out of any of the Obligations, or any relationship
or agreement between Lender and Borrower, or any other matter, relating to
Borrower or the Obligations; provided that this indemnity shall not extend to
damages proximately caused by the indemnitee’s own gross negligence or willful
misconduct. Notwithstanding any provision in this Agreement to the contrary, the
indemnity agreement set forth in this Section shall survive any termination of
this Agreement and shall for all purposes continue in full force and effect.

 

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Pacific Mercantile Bank Loan Agreement

 

9.9 Liability. NEITHER LENDER NOR ANY OF ITS AFFILIATES, SUBSIDIARIES,
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR ATTORNEYS SHALL BE LIABLE FOR ANY
CLAIMS, DEMANDS, LOSSES OR DAMAGES, OF ANY KIND WHATSOEVER, MADE, CLAIMED,
INCURRED OR SUFFERED BY BORROWER OR ANY OTHER PARTY THROUGH THE ORDINARY
NEGLIGENCE OF LENDER, OR ITS PARENT OR ANY OF ITS AFFILIATES, SUBSIDIARIES,
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR ATTORNEYS, BUT NOTHING HEREIN SHALL
RELIEVE LENDER FROM LIABILITY FOR ITS OWN GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. NEITHER LENDER NOR ANY OF ITS AFFILIATES, SUBSIDIARIES, DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS OR ATTORNEYS SHALL BE RESPONSIBLE OR LIABLE TO
BORROWER OR TO ANY OTHER PARTY FOR ANY INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES OR LOST PROFITS WHICH MAY BE ALLEGED AS A RESULT OF ANY
FINANCIAL ACCOMMODATION HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS
AGREEMENT OR AS A RESULT OF ANY OTHER ACT, OMISSION OR TRANSACTION.

 

9.10 Amendment. The terms and provisions of this Agreement may not be waived or
amended, except in a writing executed by Borrower and a duly authorized officer
of Lender.

 

9.11 Time of Essence. Time is of the essence in the performance by Borrower of
each and every obligation under this Agreement.

 

9.12 Attorneys Fees and Costs. Borrower shall reimburse Lender for all
reasonable attorneys' and consultant’s fees (including without limitation those
of Lender’s outside counsel and in-house counsel, and whether incurred before,
during or after an Insolvency Proceeding), and all filing, recording, search,
title insurance, appraisal, audit, and other reasonable costs incurred by
Lender, pursuant to, or in connection with, or relating to this Agreement
(whether or not a lawsuit is filed), including, but not limited to, any
reasonable attorneys' fees and costs Lender incurs in order to do the following:
prepare and negotiate this Agreement and all present and future documents
relating to this Agreement; obtain legal advice in connection with this
Agreement or Borrower; enforce, or seek to enforce, any of its rights; commence,
intervene in, or defend any action or proceeding; initiate any complaint to be
relieved of any automatic stay in bankruptcy; file or prosecute any probate
claim, bankruptcy claim, third-party claim, or other claim; examine, audit,
copy, and inspect any of Borrower’s assets or any of Borrower's books and
records; protect, obtain possession of, lease, dispose of, or otherwise enforce
Lender’s security interest in, collateral (if any); and otherwise represent
Lender in any litigation relating to Borrower. If either Lender or Borrower
files any lawsuit against the other predicated on a breach of this Agreement,
the prevailing party in such action shall be entitled to recover its reasonable
costs and attorneys' fees, including (but not limited to) reasonable attorneys'
fees and costs incurred in the enforcement of, execution upon or defense of any
order, decree, award or judgment from the non-prevailing party. All attorneys'
fees and costs to which Lender may be entitled pursuant to this Paragraph shall
immediately become part of Borrower's Obligations, shall be due on demand, and
shall bear interest at a rate equal to the highest interest rate applicable to
any of the Obligations.

 

9.13 Benefit of Agreement. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs,
beneficiaries and representatives of Borrower and Lender; provided, however,
that Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of Lender, and any prohibited assignment shall
be void. No consent by Lender to any assignment shall release Borrower from its
liability for the Obligations.

 

9.14 Joint and Several Liability. If Borrower consists of more than one Person,
their liability shall be joint and several, and the compromise of any claim
with, or the release of, any Borrower shall not constitute a compromise with, or
a release of, any other Borrower.

 

9.15 Limitation of Actions. Any claim or cause of action by Borrower against
Lender, its directors, officers, employees, agents, accountants or attorneys,
based upon, arising from, or relating to this Loan Agreement, or any other Loan
Document, or any other transaction contemplated hereby or thereby or relating
hereto or thereto, or any other matter, cause or thing whatsoever, occurred,
done, omitted or suffered to be done by Lender, its directors, officers,
employees, agents, accountants or attorneys, shall be barred unless asserted by
Borrower by the commencement of an action or proceeding in a court of competent
jurisdiction by the filing of a complaint within one year after the first act,
occurrence or omission upon which such claim or cause of action, or any part
thereof, is based, and the service of a summons and complaint on an officer of
Lender, or on any other person authorized to accept service on behalf of Lender,
within thirty (30) days thereafter. Borrower agrees that such one-year period is
a reasonable and sufficient time for Borrower to investigate and act upon any
such claim or cause of action. The one-year period provided herein shall not be
waived, tolled, or extended except by the written consent of Lender in its sole
discretion. This provision shall survive any termination of this Loan Agreement
or any other Loan Document.

 

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Pacific Mercantile Bank Loan Agreement

 

9.16 Section Headings; Construction; Signing. Section headings are only used in
this Agreement for convenience. Borrower and Lender acknowledge that the
headings may not describe completely the subject matter of the applicable
section, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. This Agreement has
been fully reviewed and negotiated between the parties and no uncertainty or
ambiguity in any term or provision of this Agreement shall be construed strictly
against Lender or Borrower under any rule of construction or otherwise. This
Agreement may be executed and delivered by exchanging original signed
counterparts, or signed counterparts by facsimile, pdf or other electronic
means, or a combination of the foregoing, and this Agreement shall be fully
effective if so executed and delivered.

 

9.17 Public Announcement. Borrower hereby agrees that Lender may make a public
announcement of the transactions contemplated by this Agreement, and may
publicize the same in marketing materials, newspapers and other publications,
and otherwise, and in connection therewith may use the Borrower’s name,
tradenames and logos.

 

9.18 Confidentiality. Lender agrees to use the same degree of care that it
exercises with respect to its own proprietary information, to maintain the
confidentiality of any and all proprietary, trade secret or confidential
information provided to or received by Lender from the Borrower, which indicates
that it is confidential or would reasonably be understood to be confidential,
including business plans and forecasts, non-public financial information,
confidential or secret processes, formulae, devices and contractual information,
customer lists, and employee relation matters, provided that Lender may disclose
such information to its officers, directors, employees, attorneys, accountants,
affiliates, participants, prospective participants, assignees and prospective
assignees, and such other Persons to whom Lender shall at any time be required
to make such disclosure in accordance with applicable law, and provided, that
the foregoing provisions shall not apply to disclosures made by Lender in its
Good Faith Business Judgment in connection with the enforcement of its rights or
remedies after an Event of Default. The confidentiality agreement in this
Section supersedes any prior confidentiality agreement of Lender relating to
Borrower.

 

9.19 PATRIOT Act Notice. Lender hereby notifies Borrower that pursuant to the
requirements of the USA PATRIOT Act, it is required to obtain, verify and record
information that identifies Borrower and each of its Subsidiaries, which
information includes the names and addresses of each Borrower and each of its
Subsidiaries and other information that will allow it to identify Borrower and
each of its Subsidiaries in accordance with the USA PATRIOT Act.

 

9.20 Governing Law; Jurisdiction; Venue. This Agreement and all acts,
transactions, disputes and controversies arising hereunder or relating hereto,
and all rights and obligations of the parties shall be governed by, and
construed in accordance with, the internal laws (and not the conflict of laws
rules) of the State of California. All disputes, controversies, claims, actions
and other proceedings involving, directly or indirectly, any matter in any way
arising out of, related to, or connected with, this Agreement or the
relationship between Borrower and Lender, and any and all other claims of
Borrower against Lender of any kind, shall be brought only in a court located in
Orange County, California, and each party consents to the jurisdiction of an
such court and the referee referred to in Section 9.21 below, and waives any and
all rights the party may have to object to the jurisdiction of any such court,
or to transfer or change the venue of any such action or proceeding, including,
without limitation, any objection to venue or request for change in venue based
on the doctrine of forum non conveniens; provided that, notwithstanding the
foregoing, nothing herein shall limit the right of Lender to bring proceedings
against Borrower in the courts of any other jurisdiction. Borrower consents to
service of process in any action or proceeding brought against it by Lender, by
personal delivery, or by mail addressed as set forth in this Agreement or by any
other method permitted by law.

 

9.21 Dispute Resolution. Any controversy, dispute or claim between the parties
based upon, arising out of, or in any way relating to: (i) this Agreement or any
supplement or amendment thereto; or (ii) any other present or future instrument
or agreement between the parties hereto; or (iii) any breach, conduct, acts or
omissions of any of the parties hereto or any of their respective directors,
officers, employees, agents, attorneys or any other person affiliated with or
representing any of the parties hereto; in each of the foregoing cases, whether
sounding in contract or tort or otherwise (a “Dispute”) shall be resolved
exclusively by judicial reference in accordance with Sections 638 et seq. of the
California Code of Civil Procedure (“CCP”) and Rules 3.900 et seq. of the
California Rules of Court (“CRC”), subject to the following terms and
conditions. (All references in this section to provisions of the CCP and/or CRC
shall be deemed to include any and all successor provisions.)

 

(a) The reference shall be a consensual general reference pursuant to CCP
Sections 638 and 644(a). Unless the parties otherwise agree in writing, the
reference shall be to a single referee. The referee shall be a retired Judge of
the Los Angeles County or Orange County Superior Court (“Superior Court”) or a
retired Justice of the California Court of Appeal or California Supreme Court.
Nothing in this section shall be construed to limit the right of Lender, pending
or after the appointment of the referee, to seek and obtain provisional relief
from the Superior Court or such referee, or any other court in a jurisdiction in
which any collateral is located or having jurisdiction over any collateral,
including without limitation, writ of attachment, writ of possession,
appointment of a receiver, temporary restraining order and/or preliminary
injunction, or other “provisional remedy” (as such term is defined in CCP
Section 1281.8).

 

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Pacific Mercantile Bank Loan Agreement

 

(b) Within fifteen (15) days after a party gives written notice in accordance
with this Agreement to all other parties to a Dispute that the Dispute exists,
all parties to the Dispute shall attempt to agree on the individual to be
appointed as referee. If the parties are unable to agree on the individual to be
appointed as referee, the referee shall be appointed, upon noticed motion or ex
parte application by any party, by the Superior Court in accordance with CCP
Section 640, subject to all rights of the parties to challenge or object to the
appointment, including without limitation the right to peremptory challenge
under CCP Section 170.6. If the referee (or any successor referee) appointed by
the Superior Court is unable, or at any time becomes unable, to serve as referee
in the Dispute, the Superior Court shall appoint a new referee as agreed to by
the parties or, if the parties cannot agree, in accordance with CCP Section 640,
which new referee shall then have the same powers, and be subject to the same
terms and conditions, as the predecessor referee.

 

(c) Venue for all proceedings before the referee, and for any Superior Court
proceeding for the appointment of the referee, shall be exclusively within the
County of Orange, State of California. The referee shall have the exclusive
power to determine whether a Dispute is subject to judicial reference pursuant
to this section. Trial, and all proceedings and hearings on dispositive motions,
conducted before the referee shall be conducted in the presence of, and shall be
transcribed by, a court reporter, unless otherwise agreed in writing by all
parties to the proceeding. The referee shall issue a written statement of
decision, which shall be subject to objections of the parties pursuant to CRC
Rule 3.1590 as if the statement of decision were issued by the Superior Court.
The referee’s powers include, in addition to those set forth in CCP Sections
638, et seq., and CRC Rules 3.900 et seq., (i) the power to grant provisional
relief, including without limitation, writ of attachment, writ of possession,
appointment of a receiver, temporary restraining order and/or preliminary
injunction, or other “provisional remedy” (as such term is defined in CCP
Section 1281.8), and (ii) the power to hear and resolve all post-trial matters
in connection with the Dispute that would otherwise be determined by the
Superior Court, including without limitation motions for new trial,
reconsideration, to vacate judgment, to stay execution or enforcement, to tax
costs, and/or for attorneys’ fees. The parties shall, subject to the referee's
power to award costs to the prevailing party, bear equally the costs of the
reference proceeding, including without limitation the fees and costs of the
referee and the court reporter.

 

(d) The parties acknowledge and agree that (i) the referee alone shall determine
all issues of fact and/or law in the Dispute, without a jury (subject, however,
to the right of a party, pending or after the appointment of the referee, to
seek and obtain provisional relief from the Superior Court or such referee,
including without limitation, writ of attachment, writ of possession,
appointment of a receiver, temporary restraining order and/or preliminary
injunction, or other “provisional remedy” (as such term is defined in CCP
Section 1281.8)), (ii) the referee does not have the power to empanel a jury,
(iii) the Superior Court shall enter judgment on the decision of the referee
pursuant to CCP Section 644(a) as if the decision were issued by the Superior
Court, (iv) the decision of the referee shall not be subject to review by the
Superior Court, and (v) the decision of the referee, once entered as a judgment
by the Superior Court, shall be binding, final and conclusive, shall have the
full force and effect of a judgment of the Superior Court, and shall be subject
to appeal to the same extent as a judgment of the Superior Court.

 

9.22 Multiple Borrowers; Suretyship Waivers.

 

(a) Borrowers' Agent. Each Borrower hereby irrevocably appoints each other
Borrower, as the agent, attorney-in-fact and legal representative of all
Borrowers for all purposes, including requesting disbursement of Loans and
receiving account statements and other notices and communications to Borrowers
(or any of them) from Lender. Lender may rely, and shall be fully protected in
relying, on any request for a Loan, disbursement instruction, report,
information or any other notice or communication made or given by any Borrower,
whether in its own name, as Borrowers' agent, or on behalf of one or more
Borrowers, and Lender shall not have any obligation to make any inquiry or
request any confirmation from or on behalf of any other Borrower as to the
binding effect on it of any such request, instruction, report, information,
other notice or communication, nor shall the joint and several character of
Borrowers' obligations hereunder be affected thereby.

 

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Pacific Mercantile Bank Loan Agreement

 

(b) Waivers. Each Borrower hereby waives: (i) any right to require Lender to
institute suit against, or to exhaust its rights and remedies against, any other
Borrower or any other person, or to proceed against any property of any kind
which secures all or any part of the Obligations, or to exercise any right of
offset or other right with respect to any reserves, credits or deposit accounts
held by or maintained with Lender or any indebtedness of Lender to any other
Borrower, or to exercise any other right or power, or pursue any other remedy
Lender may have; (ii) any defense arising by reason of any disability or other
defense of any other Borrower or any Guarantor or any endorser, co-maker or
other person, or by reason of the cessation from any cause whatsoever of any
liability of any other Borrower or any Guarantor or any endorser, co-maker or
other person, with respect to all or any part of the Obligations, or by reason
of any act or omission of Lender or others which directly or indirectly results
in the discharge or release of any other Borrower or any Guarantor or any other
person or any Obligations or any security therefor, whether by operation of law
or otherwise; (iii) any defense arising by reason of any failure of Lender to
obtain, perfect, maintain or keep in force any Lien on, any property of any
Borrower or any other person; (iv) any defense based upon or arising out of any
bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
liquidation or dissolution proceeding commenced by or against any other Borrower
or any Guarantor or any endorser, co-maker or other person, including without
limitation any discharge of, or bar against collecting, any of the Obligations
(including without limitation any interest thereon), in or as a result of any
such proceeding. Until all of the Obligations have been paid, performed, and
discharged in full, nothing shall discharge or satisfy the liability of Borrower
hereunder except the full performance and payment of all of the Obligations. If
any claim is ever made upon Lender for repayment or recovery of any amount or
amounts received by Lender in payment of or on account of any of the
Obligations, because of any claim that any such payment constituted a
preferential transfer or fraudulent conveyance, or for any other reason
whatsoever, and Lender repays all or part of said amount by reason of any
judgment, decree or order of any court or administrative body having
jurisdiction over Lender or any of its property, or by reason of any settlement
or compromise of any such claim effected by Lender with any such claimant
(including without limitation any other Borrower), then and in any such event,
Borrower agrees that any such judgment, decree, order, settlement and compromise
shall be binding upon Borrower, notwithstanding any revocation or release of
this Agreement or the cancellation of any note or other instrument evidencing
any of the Obligations, or any release of any of the Obligations, and the
Borrower shall be and remain liable to Lender under this Agreement for the
amount so repaid or recovered, to the same extent as if such amount had never
originally been received by Lender, and the provisions of this sentence shall
survive, and continue in effect, notwithstanding any revocation or release of
this Agreement. Each Borrower hereby expressly and unconditionally waives all
rights of subrogation, reimbursement and indemnity of every kind against any
other Borrower, and all rights of recourse to any assets or property of any
other Borrower, and all rights to any collateral or security held for the
payment and performance of any Obligations, including (but not limited to) any
of the foregoing rights which Borrower may have under any present or future
document or agreement with any other Borrower or other person, and including
(but not limited to) any of the foregoing rights which Borrower may have under
any equitable doctrine of subrogation, implied contract, or unjust enrichment,
or any other equitable or legal doctrine. Each Borrower further hereby waives
any other rights and defenses that are or may become available to the Borrower
by reason of California Civil Code Sections 2787 to 2855 (inclusive), 2899, and
3433, as now in effect or hereafter amended, and under all other similar
statutes and rules now or hereafter in effect.

 

(c) Consents. Each Borrower hereby consents and agrees that, without notice to
or by Borrower and without affecting or impairing in any way the obligations or
liability of Borrower hereunder, Lender may, from time to time before or after
revocation of this Agreement, do any one or more of the following in Lender's
sole and absolute discretion: (i) accept partial payments of, compromise or
settle, renew, extend the time for the payment, discharge, or performance of,
refuse to enforce, and release all or any parties to, any or all of the
Obligations; (ii) grant any other indulgence to any Borrower or any other person
in respect of any or all of the Obligations or any other matter; (iii) accept,
release, waive, surrender, enforce, exchange, modify, impair, or extend the time
for the performance, discharge, or payment of, any and all property of any kind
securing any or all of the Obligations or any guaranty of any or all of the
Obligations, or on which Lender at any time may have a Lien, or refuse to
enforce its rights or make any compromise or settlement or agreement therefor in
respect of any or all of such property; (iv) substitute or add, or take any
action or omit to take any action which results in the release of, any one or
more other Borrowers or any endorsers or Guarantors of all or any part of the
Obligations, including, without limitation one or more parties to this
Agreement, regardless of any destruction or impairment of any right of
contribution or other right of Borrower; (v) apply any sums received from any
other Borrower, any Guarantor, endorser, or co-signer, or from the disposition
of any collateral or security, to any indebtedness whatsoever owing from such
person or secured by such collateral or security, in such manner and order as
Lender determines in its sole discretion, and regardless of whether such
indebtedness is part of the Obligations, is secured, or is due and payable.
Borrower consents and agrees that Lender shall be under no obligation to marshal
any assets in favor of Borrower, or against or in payment of any or all of the
Obligations. Borrower further consents and agrees that Lender shall have no
duties or responsibilities whatsoever with respect to any property securing any
or all of the Obligations. Without limiting the generality of the foregoing,
Lender shall have no obligation to monitor, verify, audit, examine, or obtain or
maintain any insurance with respect to, any property securing any or all of the
Obligations.

 

(d) Foreclosure of Trust Deeds. Each Borrower waives all rights and defenses
that the Borrower may have because any other Borrower's Obligations are secured
by real property. This means, among other things: (1) Lender may collect from
the Borrower without first foreclosing on any real or personal property
collateral pledged by the other Borrower; and (2) If Lender forecloses on any
real property collateral pledged by another Borrower: (A) The amount of the
Obligations may be reduced only by the price for which that collateral is sold
at the foreclosure sale, even if the collateral is worth more than the sale
price; and (B) Lender may collect from the Borrower even if Lender, by
foreclosing on the real property collateral, has destroyed any right the
Borrower may have to collect from the other Borrower. This is an unconditional
and irrevocable waiver of any rights and defenses the Borrower may have because
any other Borrower's Obligations are secured by real property. These rights and
defenses include, but are not limited to, any rights or defenses based upon
Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure. Each
Borrower waives all rights and defenses arising out of an election of remedies
by Lender, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for a guaranteed obligation, has destroyed
the Borrower's rights of subrogation and reimbursement against another Borrower
or any other person by the operation of Section 580d of the California Code of
Civil Procedure or otherwise.

 

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Pacific Mercantile Bank Loan Agreement

 

(e) Independent Liability. Each Borrower hereby agrees that one or more
successive or concurrent actions may be brought hereon against Borrower, in the
same action in which any other Borrower may be sued or in separate actions, as
often as deemed advisable by Lender. Each Borrower is fully aware of the
financial condition of each other Borrower and is executing and delivering this
Agreement based solely upon its own independent investigation of all matters
pertinent hereto, and Borrower is not relying in any manner upon any
representation or statement of Lender with respect thereto. Each Borrower
represents and warrants that it is in a position to obtain, and each Borrower
hereby assumes full responsibility for obtaining, any additional information
concerning any other Borrower's financial condition and any other matter
pertinent hereto as Borrower may desire, and Borrower is not relying upon or
expecting Lender to furnish to it any information now or hereafter in Lender's
possession concerning the same or any other matter.

 

(f) Subordination. All indebtedness of a Borrower now or hereafter arising held
by another Borrower is subordinated to the Obligations and the Borrower holding
the indebtedness shall take all actions reasonably requested by Lender to
effect, to enforce and to give notice of such subordination.

 

[Signatures on Next Page]

 

Form Version: -5.6 (11-16)

Document Version -12

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Pacific Mercantile Bank Loan Agreement

 

9.23 Mutual Waiver of Jury Trial. LENDER AND BORROWER EACH ACKNOWLEDGE THAT THE
RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL RIGHT, BUT THAT IT MAY BE WAIVED.
EACH OF THE PARTIES, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT,
WITH COUNSEL OF THEIR CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES
ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING
OUT OF THIS AGREEMENT OR ANY RELATED INSTRUMENT OR LOAN DOCUMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN), ACTION OR INACTION OF ANY OF THEM. THESE
PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR
RELINQUISHED BY LENDER OR BORROWER, EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY
EACH OF THEM. IF FOR ANY REASON THE PROVISIONS OF THIS SECTION ARE VOID, INVALID
OR UNENFORCEABLE, THE SAME SHALL NOT AFFECT ANY OTHER TERM OR PROVISION OF THIS
AGREEMENT, AND ALL OTHER TERMS AND PROVISIONS OF THIS AGREEMENT SHALL BE
UNAFFECTED BY THE SAME AND CONTINUE IN FULL FORCE AND EFFECT.

 

Borrower:

 

RW HOLDINGS NNN REIT, INC.   RICH UNCLES NNN OPERATING PARTNERSHIP, LP          
By:  /s/ RAYMOND J. PACINI   By: RW HOLDINGS NNN REIT, INC., general partner  
Name: Raymond J. Pacini   By: /s/ RAYMOND J. PACINI Title: CFO   Name: Raymond
J. Pacini       Title: CFO RICH UNCLES NNN LP, LLC               By: RW HOLDINGS
NNN REIT, INC., member                 By: /s/ RAYMOND J. PACINI       Name:
Raymond J. Pacini       Title: CFO                 Lender:                  
Pacific Mercantile Bank                 By: /S/ ROSS MACDONALD       Name: Ross
Macdonald       Title: Senior Vice President      

 

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 [tv520525_ex10-1img01.jpg] 

Schedule to

 

Loan Agreement

 

Borrowers: RW HOLDINGS NNN REIT, INC., a Maryland corporation       RICH UNCLES
NNN LP, LLC, a Delaware limited liability company       RICH UNCLES NNN
OPERATING PARTNERSHIP, LP, a Delaware limited partnership     Address:

3090 Bristol Street, Suite 550,

Costa Mesa, CA 92626

    Date: April 30, 2019

 

This Schedule forms an integral part of the Loan Agreement between Pacific
Mercantile Bank and the borrower(s) named above (jointly and severally, the
“Borrower”) of even date (the “Loan Agreement”).

 

 

 

1.Credit Limit

  (Section 1.1): An amount not to exceed the lesser of the limits described in
(A) and (B) below (the “Credit Limit”):

 

(A)a total of $10,000,000 at any one time outstanding (the “Maximum Credit
Limit”); or

 

(B)the maximum amount of Purchase Contract Loans and other Loans available as
described below.

 

(a) Purchase Contract Loans. Subject to the terms and conditions of this
Agreement, Lender shall from time to time make Loans to Borrower, each such Loan
in an amount of up to 70% (an “Advance Rate”) of the purchase price that the
applicable Single Purpose Subsidiary (as defined below) is obligated to pay
pursuant to an Eligible Purchase Contract (as defined below) (each such Loan, a
“Purchase Contract Loan”). There may be more than one Purchase Contract Loan
outstanding at any one time, subject to the Credit Limit.

 -1- 

 

 

Pacific Mercantile Bank   Schedule to Loan Agreement

 

For purposes hereof, the following terms shall have the following meanings:

 

“Eligible Property” means a single-tenant, income producing commercial, office,
industrial or retail real estate property located within the United States.

 

“Eligible Purchase Contract” means a contract for the purchase by a
Single-Purpose Subsidiary of an Eligible Property, which contract has been fully
executed by the parties thereto, is in full force and effect, has not yet
closed, and arises in the ordinary course of Borrower's business, which Lender,
in its Good Faith Business Judgment, shall deem eligible for borrowing.

 

“Single-Purpose Subsidiary” means a wholly-owned subsidiary of Rich Uncles NNN
Operating Partnership, LP that will only own and operate one Eligible Property
and engage in no other business.

 

(b)  Non-Purchase Contract Loans. Subject to the terms and conditions of this
Agreement, Lender may from time to time in its sole discretion make Loans other
than Purchase Contract Loans to Borrower subject to such requirements and
conditions as Lender shall determine.

 

(c)  Requesting Loans; Repayment. Any of the following Authorized Persons may,
from time to time, request a Loan from Lender (in writing if required by Lender)
provided that Borrower has provided Lender with an executed updated Compliance
Certificate and, in the case of Purchase Contract Loans, (i) the closing of the
applicable Single-Purpose Subsidiary’s purchase of the applicable Eligible
Property pursuant to the Eligible Purchase Contract to which the Purchase
Contract Loan relates shall close at the time or promptly after Lender makes
such Purchase Contract Loan and (ii) if Lender shall so require, Borrower has
provided Lender with the following, all in form and substance acceptable to
Lender: (y) the Eligible Purchase Contract upon which the Purchase Contract Loan
is to be based and (z) such other documents or information as Lender shall
request in its Good Faith Business Judgment. Borrower agrees to fully repay to
Lender each Loan on or before the earlier of the 90th day following the day such
Loan was advanced to Borrower or the Maturity Date. For purposes of clarity,
Borrower agrees that any loan or Advance (as those terms are used in the Prior
Loan Agreement) made prior to the date hereof pursuant to the Prior Loan
Agreement shall be repaid by Borrower to Lender on or before the 90th day
following the day such loan or Advance was advanced to Borrower.

 

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Pacific Mercantile Bank   Schedule to Loan Agreement

 

The “Authorized Persons” shall be the following: Aaron S. Halfacre, Raymond J.
Pacini, Sandra G. Sciutto and Jean Ho.

 

(d)  Representations, Warranties and Covenants. When Borrower requests a Loan,
Borrower’s request shall be deemed to be a representation, warranty and covenant
by Borrower that all the limits, requirements and conditions to such Loan that
are set forth in this Section 1 of the Schedule and in the other portions of
this Schedule and in the Loan Agreement are met, complied with and satisfied,
including in the case of a Purchase Contract Loan that the purchase contract
upon which the Loan is to be based is an Eligible Purchase Contract and that the
amount of the requested Purchase Contract Loan does not exceed the Advance Rate
of the purchase price. With respect to each Purchase Contract Loan, Borrower
agrees to cause the purchaser under the applicable Eligible Purchase Contract to
remain a Single-Purpose Subsidiary and the owner of the applicable Eligible
Property until such Purchase Contract Loan has been repaid in full.

 

(e) Miscellaneous. Lender may, from time to time, adjust the Advance Rate, in
its Good Faith Business Judgment, upon notice to the Borrower, based on changes
in risk factors or other issues or factors relating to any Eligible Purchase
Contract, Eligible Property, Single-Purpose Subsidiary or Borrower; provided
that the Advance Rate shall not be reduced below 65% of the purchase price that
the applicable Single Purpose Subsidiary is obligated to pay pursuant to an
Eligible Purchase Contract. In Lender’s discretion Loans may be made separately
to each Borrower based on each Borrower’s assets, liabilities and relationship
to the Single-Purpose Subsidiaries.

 

 

 

2.Interest.

 

Interest Rate (Section 1.2):

 

A rate equal to the Prime Rate in effect from time to time, plus the Applicable
Margin (as defined below), provided that the interest rate in effect on any day
shall not be less than 5.50% per annum. Interest shall be calculated on the
basis of a 360-day year for the actual number of days elapsed. The interest rate
applicable to the Obligations shall change on each date there is a change in the
Prime Rate. As used herein, “Applicable Margin” shall mean 1.00% per annum,
provided that, in the event that Borrower fails to maintain its Deposit Accounts
with Lender and/or maintain ACH automated payments hereunder, the “Applicable
Margin” shall, at the Lenders option, mean 1.25% per annum, for the remaining
term of this Agreement.

 

 

 

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Pacific Mercantile Bank   Schedule to Loan Agreement

 

3.Fees (Section 1.4):

 

          Loan Fee: $25,000, payable concurrently herewith and which Borrower
authorizes Lender, in its discretion, to deduct from any of Borrower’s operating
accounts held with Lender.

 

 

 

4.Maturity Date

 

(Section 6.1):

 

October 1, 2020.

 

 

 

5.Financial Covenants

  (Section 5.1):

Borrower shall comply with each of the following covenants:

 

 

  Debt Service Coverage Ratio: Parent, on a consolidated basis, shall maintain a
Debt Service Coverage Ratio of not less than 2.00 to 1.00 for each calendar
quarter.          

As used herein, “Debt Service Coverage Ratio” means for any applicable period,
on a consolidated basis, (i) the result of Parent’s net income before interest,
depreciation and amortization for such period, plus New Capital Invested for
such period, and less repurchases of common stock and other distributions
declared for such period; divided by (ii) the sum of Parent’s current portion of
long-term debt (inclusive of the current portion of long-term debt of
Subsidiaries of Rich Uncles NNN Operating Partnership, LP, as noted in the
Portfolio Status Reports (as defined in Section 6 below)) for such period, plus
capitalized lease payments for such period, plus interest expense (inclusive of
interest on long-term debt of Subsidiaries of Rich Uncles NNN Operating
Partnership, LP, as noted in the Portfolio Status Reports (as defined in Section
6 below)) for such period; calculated from Parent’s 10-Q Financial
Statements/10-K. 

         

As used herein, “New Capital Invested” means for any applicable period, proceeds
from the issuance of common stock, plus stock compensation expense, less the
reclassification of redeemable common stock. 

        Guarantors’ Liquidity: Borrower shall cause the Wirta Guarantors to
maintain a combined aggregate value of their unrestricted and unencumbered cash
plus unrestricted and unencumbered readily marketable securities, of at least
$17,000,000, measured as of the end of each calendar quarter and as calculated
by Lender in its Good Faith Business Judgment based upon such Wirta Guarantors’
Liquidity Statements (as defined in Section 6 below). For purposes of clarity,
the parties acknowledge and agree that such unrestricted and unencumbered cash
is to be net of any outstanding margin loan balance.

 

 

 

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Pacific Mercantile Bank   Schedule to Loan Agreement

 

6.Reporting.

(Section 5.3):

 

Borrower shall provide Lender with the following, all of which shall be in such
form as Lender shall specify:

 

(a)          Annual financial statements of Parent, on a consolidated basis, as
soon as available, and in any event within 120 days following the end of
Parent's fiscal year, certified by, and with an unqualified opinion of, Squar
Milner or other independent certified public accountants reasonably acceptable
to Lender (the “Annual Financial Statements”);

 

(b)          Quarterly financial statements of Parent, on a consolidated basis,
that Parent has filed with the U.S. Securities and Exchange Commission, as soon
as available, and in any event within 50 days after the end of each of Parent’s
fiscal quarters (“Quarterly Financial Statements”);

 

(c)          Each of the Quarterly Financial Statements shall be accompanied by
compliance certificates (“Compliance Certificates”), in such form as Lender
shall reasonably specify, signed by the Chief Financial Officer of Parent,
certifying that as of the end of such period and the date of such Certificate
Borrower was in full compliance with all of the terms and conditions of the Loan
Agreement in all material respects, and no Default or Event of Default had
occurred, and setting forth calculations showing compliance with the financial
covenants set forth in this Agreement and such other information as Lender shall
request in its Good Faith Business Judgment;

 

(d)          A portfolio status report (including without limitation the status
of the REIT portfolios, operating statements, and debt schedules), in form and
substance acceptable to Lender (a “Portfolio Status Report”), from Parent as
soon as available, and in any event within 50 days after the end of each of
Parent’s fiscal quarters;

 

(e)          A report of any REIT Portfolio Debt Default, within three (3)
Business Days after Borrower first having knowledge of its occurrence;

 

(f)          Promptly upon receipt, each management letter prepared by
Borrower’s independent certified public accounting firm regarding Borrower’s
management control systems;

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Pacific Mercantile Bank   Schedule to Loan Agreement

 

(g)          Such budgets, sales projections, operating plans or other financial
information as Lender may reasonably request from time to time; and

 

(h)          For all Guarantors: (a) their personal financial statements in form
and substance acceptable to Lender within 60 days after the end of each calendar
year, (b) such asset verifications as Lender shall from time to time request
(e.g., liquidity and/or brokerage statements), in form and substance acceptable
to Lender (“Liquidity Statements”), within 30 days after the end of each
calendar quarter, and (c) copies of their federal tax returns (including any
Schedule K-1s and all other schedules), within 15 days after the earlier of the
date they are filed or the date they are due (after giving effect to any proper
filing deadline extension actually received, a copy of which is provided to
Lender).

 

 

 

7.Borrower Information:

 

Borrower represents and warrants to Lender as follows:

 

(1)Prior Names and Styles. Further to Section 3.2 of the Loan Agreement, the
following are all of Borrower’s prior names, and existing and prior trade names,
within the last five years: Parent has prior names of Rich Uncles REIT, Inc. and
Rich Uncles Real Estate Investment Trust, Inc. and a fictitious business name of
Rich Uncles NNN REIT, Inc.

 

(2)Place of Business. Further to Section 3.3 of the Loan Agreement, in addition
to Borrower’s address set forth in the heading to the Loan Agreement, Borrower
only has the following places of business as of the date hereof: None.

 

(3)Deposit Accounts. Further to Section 3.4 of the Loan Agreement, the following
are all of Borrower’s Deposit Accounts as of the date hereof: (i) various
accounts at Lender and (ii) the following two accounts at Wells Fargo Bank that
are used for investor transactions: Nos. 4152788030 and 433-7887525.

 

 

 

8.ADDITIONAL PROVISIONS:

 

(a)          [Intentionally Omitted].

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Pacific Mercantile Bank   Schedule to Loan Agreement

 

(b)          Subordination of Inside Debt. All present and future indebtedness
of Borrower to its officers, directors and shareholders (“Inside Debt”) shall,
at all times, be subordinated to the Obligations pursuant to a subordination
agreement on Lender’s standard form. Borrower represents and warrants that there
is no Inside Debt presently outstanding, except for the following: None. Prior
to incurring any Inside Debt in the future, Borrower shall cause the person to
whom such Inside Debt will be owed to execute and deliver to Lender a
subordination agreement on Lender’s standard form.

 

(c)          Deposit Accounts; Automatic Payments. Concurrently herewith,
Borrower shall transfer all of its Deposit Accounts (except for payroll-specific
accounts previously approved by Lender) and investment accounts to Lender, and
at all times thereafter Borrower shall maintain the foregoing with Lender.
Borrower shall (and hereby does) authorize Lender to initiate Automated Clearing
House (“ACH”) loan payment transactions and Borrower shall sign documentation
prior to or in conjunction with disbursement of Loans hereunder which will
authorize Lender’s initiation of ACH debit entries from its operating account to
cover all amounts due under this Agreement.

 

(d)          Triggered Guaranties. Concurrently herewith, Borrower shall cause
each of the Wirta Guarantors to execute and deliver to Lender a Continuing
Guaranty with respect to all of the Obligations, on Lender’s standard form, and
certifications of trust or other evidence of authority with respect to the
execution and delivery of such Guaranties. Said Guaranties (the “Triggered
Guaranties”) shall provide that the guaranties therein become effective upon the
occurrence of any of the following events (each, a “Trigger Event”): (i) any
Event of Default, including without limitation Borrower’s failure to fully pay
any Loan when due pursuant to the terms hereof, (ii) any Resolution Failure
Trigger Event, (iii) any REIT Portfolio Debt Default which is not cured to
Lender’s satisfaction within 30 days of its occurrence, or (iv) any “Trigger
Event” as defined in the BrixInvest LSA. If after the Guaranties become
effective, all Trigger Events are cured to Lender’s satisfaction in its sole
discretion, then Lender may, in its discretion, by written notice to the Wirta
Guarantors, make the Guaranties ineffective again (subject to again becoming
effective upon the occurrence of another Trigger Event). Throughout the term of
the Loan Agreement Borrower shall cause such Guaranties to continue in full
force and effect.

 

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Pacific Mercantile Bank   Schedule to Loan Agreement

 

(e)          BrixInvest, LLC Guaranty. Concurrently herewith, Borrower shall
cause BrixInvest, LLC to execute and deliver to Lender a Continuing Guaranty
with respect to all of the Obligations, on Lender’s standard form, secured by
the Lien granted to Lender pursuant to the BrixInvest LSA, and certified
resolutions or other evidence of authority with respect to the execution and
delivery of such secured Guaranty. Throughout the term of this Loan Agreement
Borrower shall cause such Guaranty, and the Lien securing such Guaranty, to
continue in full force and effect.

 

(f)          Foreign Assets. Borrower represents and warrants that it does not
have, and covenants that, during the term of the Loan Agreement, it will not
have, any assets located outside the United States.

 

(g)          SEC Investigation. Reference is made to the investigation being
conducted by the Securities and Exchange Commission related to the advertising
and sale of securities by Parent in connection with its registered offering, as
further described in Note 9 of Notes to Consolidated Financial Statements of
Parent’s September 30, 2018 10-Q (the “SEC Investigation”). On or before the
date hereof, Parent shall provide Lender, in writing, with the most current
status of the SEC Investigation, including such information and copies of
filings, correspondence, pleadings and other documents as Lender shall request
in Lender’s Good Faith Business Judgment. After the date hereof, Parent shall
promptly notify Lender, in writing, of all developments in the SEC
Investigation, and shall provide Lender with written updates of the status of
the SEC Investigation (including such information and copies filings,
correspondence, pleadings and other documents as Lender shall request in
Lender’s Good Faith Business Judgment) from time to time as Lender shall request
in Lender’s Good Faith Business Judgment. Borrower agrees and covenants that the
SEC Investigation shall be resolved to the satisfaction of Lender in Lender’s
Good Faith Business Judgment, and to provide documentation of such resolution to
Lender satisfactory to Lender in Lender’s Good Faith Business Judgment, by July
31, 2019; provided that (y) at Parent’s request Lender shall reasonably consider
extending such dates to the extent that U.S. government shutdowns has delayed
said interviews, and (z) the failure of the SEC Investigation to be resolved in
such time frame shall not be an Event of Default but shall constitute a
“Resolution Failure Trigger Event” (as used above with respect to the Triggered
Guaranties).

 

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Pacific Mercantile Bank   Schedule to Loan Agreement

 

(h)          Consent to Loan Participation. Borrower agrees and consents to
Lender's sale or transfer, whether now or later, of one or more participation
interests in the Loan to one or more purchasers, whether related or unrelated to
Lender. Lender may provide, without any limitation whatsoever, to any one or
more purchasers, or potential purchasers, any information or knowledge Lender
may have about Borrower or about any other matter relating to the Loan, and
Borrower hereby waives any rights to privacy Borrower may have with respect to
such matters. Borrower additionally waives any and all notices of sale of
participation interests, as well as all notices of any repurchase of such
participation interests. Borrower also agrees that the purchasers of any such
participation interests will be considered as the absolute owners of such
interests in the Loan and will have all the rights granted under the
participation agreement or agreements governing the sale of such participation
interests. Borrower further waives all rights of offset or counterclaim that it
may have now or later against Lender or against any purchaser of such a
participation interest and unconditionally agrees that either Lender or such
purchaser may enforce Borrower's obligation under the Loan irrespective of the
failure or insolvency of any holder of any interest in the Loan. Borrower
further agrees that the purchaser of any such participation interests may
enforce its interests irrespective of any personal claims or defenses that
Borrower may have against Lender.

 

[Signatures on Next Page]

 

Form Version: -5.6 (11-16)

Document Version -12

 

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Pacific Mercantile Bank   Schedule to Loan Agreement

 

Borrower:

 

RW HOLDINGS NNN REIT, INC.   RICH UNCLES NNN OPERATING PARTNERSHIP, LP          
By: /s/ RAYMOND J. PACINI   By: RW HOLDINGS NNN REIT, INC., general partner
Name: Raymond J. Pacini   By: /s/ RAYMOND J. PACINI Title: CFO   Name: Raymond
J. Pacini       Title: CFO RICH UNCLES NNN LP, LLC               By: RW HOLDINGS
NNN REIT, INC., member                 By: /s/ RAYMOND J. PACINI       Name:
Raymond J. Pacini       Title: CFO                 Lender:                  
Pacific Mercantile Bank                 By: /S/ ROSS MACDONALD       Name: Ross
Macdonald       Title: Senior Vice President      

 

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