Exhibit 10.1

 

LOAN AGREEMENT

 

 

for a loan in the amount of

 

 

$10,000,000

  

MADE BY AND BETWEEN

 

Bank of Commerce Holdings,

as Borrower

 

AND

NEXBANK SSB,

2515 McKinney Avenue, Suite 1100,

Dallas, Texas 75201,

as Lender

 

 

Dated as of December 10, 2015

 

 

 
 

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LOAN AGREEMENT

 

THIS LOAN AGREEMENT (“Agreement”) is made as of December 10, 2015 (the
“Effective Date”), by and between Bank of Commerce Holdings, a California
corporation (“Borrower”), and NEXBANK SSB, a Texas savings bank, its successors
and assigns (“Lender”).

  

W I T N E S S E T H:

  

RECITALS

  

 

WHEREAS, Borrower has applied to Lender for a term loan in the amount of
$10,000,000 (the “Loan”), and Lender is willing to make the Loan on the terms
and conditions hereinafter set forth.

  

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, the parties hereto agree as follows:

  

ARTICLE I

INCORPORATION OF RECITALS AND EXHIBITS

 

1.1 Incorporation of Recitals.

  

The foregoing preambles and all other recitals set forth herein are made a part
hereof by this reference.

 

1.2 Incorporation of Exhibits.

 

Exhibit A to this Agreement, attached hereto is incorporated in this Agreement
and expressly made a part hereof by this reference.

  

ARTICLE II DEFINITIONS

  

2.1 Defined Terms.

 

The following terms as used herein shall have the following meanings:

 

Adjusted EBITDA: For any Person and for any applicable period of determination
thereof, an amount equal to (a) EBITDA minus (b) Permitted Tax Distributions
minus (c) the sum of distributions, dividends and non-financed Capital
Expenditures.

 

Affiliate: With respect to a specified person or entity, any individual,
partnership, corporation, limited liability company, trust, unincorporated
organization, association or other entity which, directly or indirectly, through
one or more intermediaries, Controls or is Controlled by or is under common
control with such person or entity, including, without limitation, any general
or limited partnership in which such person or entity is a partner.

 

Agreement: As such term is defined in the Preamble.

 

 

 
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Allowance for Loan and Lease Losses: As defined in accordance with the
then-current regulations of the applicable Bank Regulatory Authority and as
reported by any Person on the Regulatory Capital Schedule of their respective
Call Report applicable to such period.

 

Applicable Rate: As such term is defined in Section 5.1(a).

  

Authorized Representative: The person appointed as the Authorized Representative
pursuant to Section 17.3.

 

Average Total Assets: As defined in accordance with the then-current regulations
of the applicable Bank Regulatory Authority and as reported by any Person on the
Regulatory Capital Schedule of any their respective Call Report applicable to
such period.

 

Bank: Redding Bank of Commerce, a wholly owned subsidiary of Borrower, the
deposits of which are insured by the FDIC pursuant to the FDIA.

 

Bank Regulatory Authority: California Department of Business Oversight, the
FDIC, the Board of Governors of the Federal Reserve System, OFAC and all other
relevant regulatory authorities (including, without limitation, relevant state
bank regulatory authorities).

 

Bankers Blanket Bond: A fidelity bond or insurance policy providing coverage for
losses resulting from criminal activities and other actions of employees,
officers or directors of a Bank.

 

Bankruptcy Code: Title 11 of the United States Code entitled “Bankruptcy” as now
or hereafter in effect, or any successor thereto or any other present or future
bankruptcy or insolvency statute.

  

Borrower: As such term is defined in the Preamble.

 

Business Day: A day of the year on which banks are not required or authorized to
close in Dallas, Texas or California.

  

Call Report: For the Bank, the “Consolidated Reports of Condition and Income”
(FFIEC Form 041), or any successor form promulgated by the FFIEC.

 

Capital Expenditure: With respect to any Person, any expenditure by such Person
for (a) an asset which will be used in a year or years subsequent to the year in
which the expenditure is made and which asset is properly classified in relevant
financial statements of such Person as equipment, real property, a fixed asset
or a similar type of capitalized asset in accordance with GAAP or (b) an asset
relating to or acquired in connection with an acquired business, and any and all
acquisition costs related to clause (a) or (b) above.

 

Capital Lease Obligations: With respect to any Person, the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.

  

Change of Control: (a) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended) of Beneficial Ownership (as defined in Rules 13d-3 and
13d-5 under the Securities Exchange Act of 1934, as amended) of 75% or more of
the capital stock or voting power of Borrower (or any of its successors or any
Subsidiary of Borrower or any of its successors); (b) the majority of the seats
(other than vacant seats) on the board of directors (or similar governing body)
of Borrower cease to be occupied by Persons who were members of the board of
directors of Borrower on the Effective Date (the “Incumbent Board”); provided,
that if the election, or nomination for election by holders of Borrower’s common
stock, of any new director was approved by a vote of at least a majority of the
Incumbent Board, such new director shall be considered as a member of the
Incumbent Board, or (c) Borrower shall cease to beneficially own and control
100% on a fully diluted basis of the economic and voting interests in the Equity
Interests of the Bank; provided, that the issuance of TARP Interests shall not
be deemed a Change of Control.

 

 

 
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Classified Assets: An asset classified as “Substandard,” “Doubtful,” “Loss” or a
similar category in accordance with the then-current regulations of the
applicable Bank Regulatory Authority.

 

Classified Assets to Tier 1 Capital Ratio: With respect to any Person, the ratio
(expressed as a percentage) as of the last day of any fiscal quarter of (a)
Classified Assets of such Person to (b) (i) Tier 1 Capital of such Person, plus
(ii) Allowance for Loan and Lease Losses.

 

Collateral: Collectively, all of the property (including Equity Interests) in
which Liens are purported to be granted pursuant to the Security Documents as
security for the Obligations.

  

Consolidated Capital Expenditures: For any period, the aggregate of all
expenditures of Borrower and its Subsidiaries during such period determined on a
consolidated basis that, in accordance with GAAP, are or should be included in
“purchase of property and equipment or which should otherwise be capitalized” or
similar items reflected in the consolidated statement of cash flows of Borrower
and its Subsidiaries, excluding, however, any capital expenditures incurred by
Borrower in connection with its acquisition of five (5) bank branches from Bank
of America.

  

Consolidated Fixed Charges: For any period, the sum, without duplication, of the
amounts determined for Borrower and its Subsidiaries on a consolidated basis
equal to (a) Interest Expense, (b) scheduled payments of principal on
Consolidated Total Debt, (c) Consolidated Capital Expenditures, and (d) the
portion of Taxes based on income actually paid in cash and provisions for cash
income Taxes.

  

Consolidated Total Debt: As at any date of determination, the aggregate stated
balance sheet amount of all Indebtedness of Borrower and its Subsidiaries
determined on a consolidated basis in accordance with GAAP.

  

Constituent Documents: (a) in the case of a corporation, its articles or
certificate of incorporation and bylaws; (b) in the case of a general
partnership, its partnership agreement; (c) in the case of a limited
partnership, its certificate of limited partnership and partnership agreement;
(d) in the case of a trust, its trust agreement; (e) in the case of a joint
venture, its joint venture agreement; (f) in the case of a limited liability
company, its articles of organization, operating agreement, regulations and/or
other organizational and governance documents and agreements; and (g) in the
case of any other entity, its organizational and governance documents and
agreements.

 

Control: As such term is used with respect to any person or entity, including
the correlative meanings of the terms “controlled by” and “under common control
with”, shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management policies of such person or entity,
whether through the ownership of voting securities, by contract or otherwise.

  

Default or default: Any event, circumstance or condition, which, if it were to
continue uncured, would, with notice or lapse of time or both, constitute an
Event of Default hereunder.

  

 

 
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Default Rate: A rate per annum equal to three percentage points (300 basis
points) in excess of the Applicable Rate, but which shall not at any time exceed
the Maximum Lawful Rate.

  

EBITDA: For any period, Net Income of Bank for such period, plus, without
duplication and to the extent deducted in calculating Net Income for such
period, the sum of (a) Interest Expense for such period, (b) Taxes paid in cash
during such period, (c) the amount of depreciation and amortization expense
deducted in determining Net Income, (d) any extraordinary or non-recurring items
reducing Net Income for such period, and (e) any non-cash items reducing Net
Income for such period, minus (i) any extraordinary or non-recurring items
increasing Net Income for such period and (ii) any non-cash items increasing Net
Income for such period.

  

Effective Date: As defined in the Preamble.

  

Environmental Proceedings: Any environmental proceedings, whether civil
(including actions by private parties), criminal, or administrative proceedings,
relating to Borrower.

  

Equity Interests: Shares of capital stock, partnership interests, membership
interests in a limited liability company, beneficial interests in a trust or
other equity ownership interests in a Person, and any warrants, options or other
rights entitling the holder thereof to purchase or acquire any such equity
interest.

 

ERISA: The Employee Retirement Income Security Act of 1974, as amended, and the
regulations promulgated thereunder from time to time.

 

Event of Default: As such term is defined in Article XV.

 

FDIA: The Federal Deposit Insurance Act of 1933, as amended from time to time,
and the regulations promulgated pursuant thereto.

  

FDIC: The Federal Deposit Insurance Corporation, or any successor Governmental
Authority then performing the same or substantially similar duties.

  

Federal Reserve Bank: The Federal Reserve Bank or the Federal Reserve System, or
any successor Governmental Authority then performing the same or substantially
similar duties.

  

FFIEC: The Federal Financial Institutions Examination Council, or any successor
Governmental Authority then performing the same or substantially similar duties.

  

Fixed Charge Coverage Ratio: With respect to Borrower, the ratio as of the last
day of any fiscal quarter of (a) Adjusted EBITDA, to (b) Consolidated Fixed
Charges, in each case for Borrower and its subsidiaries, on a consolidated
basis.

 

GAAP: Generally accepted accounting principles in the United States of America.

  

Governmental Approvals: All authorizations, consents, approvals, permits,
licenses and exemptions of, registrations and filings with, and reports to, all
Governmental Authorities.

 

 

 
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Governmental Authority: Any nation or government, any state, province or
territory or other political subdivision thereof, any governmental agency
(including any Bank Regulatory Authority), department, authority,
instrumentality, regulatory body, court, central bank or other governmental
entity exercising executive, legislative, judicial, taxing, regulatory or
administrative functions of or pertaining to government, any securities exchange
and any self-regulatory organization exercising such functions (including any
supra-national bodies such as the European Union or the European Central Bank)
and any group or body charged with setting financial accounting or regulatory
capital rules or standards (including, without limitation, the Bank for
International Settlements or the Basel Committee on Banking Supervision or any
successor or similar authority to any of the foregoing).

  

Guarantee: Any obligation, contingent or otherwise, of the guarantor
guaranteeing or having the economic effect of guaranteeing any Indebtedness or
other obligation of any other Person (the “primary obligor”) in any manner,
whether directly or indirectly, and including any obligation of the guarantor,
direct or indirect, (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or other obligation or to purchase (or
to advance or supply funds for the purchase of) any security for the payment
thereof, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Indebtedness or other obligation of the
payment thereof, (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness or other obligation or (d)
as an account party in respect of any letter of credit or letter of guaranty
issued to support such Indebtedness or obligation; provided, that the term
Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business.

  

Including or including: Including but not limited to.

  

Indebtedness: Without duplication, with respect to any Person (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such Person
upon which interest charges are customarily paid, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty and (j) all obligations,
contingent or otherwise, of such Person in respect of bankers’ acceptances. The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person’s ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.

 

Intangible Assets: As defined in accordance with the then-current regulations of
the applicable Bank Regulatory Authority.

 

Interest Expense: For any period, total interest expense of Borrower (including
that portion attributable to Capital Lease Obligations), premium payments, debt
discount, fees and related expenses with respect to all outstanding Indebtedness
of Borrower

  

Internal Revenue Code: The Internal Revenue Code of 1986, as amended from time
to time.

 

 

 
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Late Charge: As such term is defined in Section 4.5.

 

Laws: Collectively, all federal, state and local laws, statutes, codes,
ordinances, orders, rules and regulations, including judicial opinions or
precedential authority in the applicable jurisdiction.

   

Lender: As defined in the opening paragraph of this Agreement, and including any
successor holder of the Loan from time to time.

  

Leverage Ratio: With respect to any Person, the ratio (expressed as a
percentage) as of the last day of any fiscal quarter of (a) Tier 1 Capital of
such Person to (b) Average Total Assets of such Person.

 

LIBOR: With respect to any LIBOR Reset Period, the rate of interest at which
deposits in U.S. dollars are offered to major banks in the London interbank
market for a ninety (90) day period on the day that is two (2) days prior to the
commencement of such LIBOR Reset Period, based on information presented by any
interest rate reporting service of recognized standing selected by Lender, or if
Lender determines that no interest rate reporting service has presented such
information, the rate of interest at which deposits in U. S. dollars are offered
to major banks in the London interbank market for a ninety (90) day period on
the day that is two (2) days prior to the commencement of such LIBOR Reset
Period by any bank reasonably selected by Lender. Under the terms of this
Agreement, the applicable “LIBOR” rate is used by Lender as a reference rate.
The use of ninety (90) day LIBOR as a reference rate does not mean the Borrower
will actually pay interest on the Loan pursuant to a ninety (90) day contract or
any other interest rate contract. Instead, the effective interest rate under
this Agreement will adjust at the beginning of each LIBOR Reset Period.

 

LIBOR Reset Period: (i) as to the calendar month in which the Effective Date
occurs, the period commencing on the Effective Date and ending on the last
calendar day of such month and (ii) as to any month thereafter, the period
commencing on the first calendar day of the month immediately following the end
of the prior LIBOR Reset Period, and ending on the earlier of (a) the last
calendar day of the month during which the Loan was made or most recently
continued and (b) the Maturity Date.

  

Lien: With respect to any asset, (a) any mortgage, deed of trust, lien, pledge,
hypothecation, encumbrance, charge or security interest in, on or of such asset,
(b) the interest of a vendor or a lessor under any conditional sale agreement,
capital lease or title retention agreement (or any financing lease having
substantially the same economic effect as any of the foregoing) relating to such
asset and (c) in the case of securities, any purchase option, call or similar
right of a third party with respect to such securities.

 

Loan: As defined in Recital A.

  

Loan Amount: The maximum amount of the Loan as set forth in Section 4.1(a).

  

Loan Documents: The collective reference to this Agreement, the documents and
instruments listed in Section 4.2, and all the other documents and instruments
entered into from time to time, evidencing or securing the Obligations or any
obligation of payment thereof or performance of Borrower’s obligations in
connection with the transaction contemplated hereunder, each as amended.

  

Loan Opening Date: The date of the initial disbursement of proceeds of the Loan.

  

Marketable Securities: Collectively, (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency thereof, (b)
marketable direct obligations issued by any of the United States or any
municipality thereof and currently having a rating of (i) AA or higher issued by
S&P and (ii) Aa2 or higher issued by Moody’s, and (c) corporate bonds and
issuances and currently having a rating of (i) AA or higher issued by S&P and
(ii) Aa2 or higher issued by Moody’s.

 

 

 
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Material Adverse Change or material adverse change: If, in Lender’s reasonable
discretion, the business prospects, operations or financial condition of a
person, entity or property has changed in a manner which could impair the value
of Lender’s security for the Obligations, prevent timely repayment of the
Obligations or otherwise prevent the applicable person or entity from timely
performing any of its material obligations under the Loan Documents.

  

Maturity Date: December 10, 2020.

  

Maximum Lawful Rate: As such term in defined in Section 5.3.

  

Moody’s: Moody’s Investors Service, Inc. and any successor thereto.

  

Net Income: For any period, the net income of Bank determined in accordance with
GAAP.

  

Note: A promissory note, in the Loan Amount, executed by Borrower and payable to
the order of Lender, evidencing the Loan.

 

Note Rate: A rate per annum equal to the sum of (a) LIBOR for the then-current
LIBOR Reset Period plus (b) 400 basis points (4.0%).

  

Obligations: All obligations, indebtedness, and liabilities of Borrower to
Lender or any Affiliate of Lender, or both, now existing or hereafter arising,
whether direct, indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several, or joint and several, including, without
limitation, the obligations, indebtedness, and liabilities under this Agreement,
the other Loan Documents, any cash management or treasury services agreements
and all interest accruing thereon (whether a claim for post-filing or
post-petition interest is allowed in any bankruptcy, insolvency, reorganization
or similar proceeding) and all attorneys’ fees and other expenses incurred in
the enforcement or collection thereof.

  

OFAC: As defined in Section 3.1(u).

  

Open the Loan, Opening of the Loan or Loan Opening: The disbursement of Loan
proceeds.

 

Other Real Estate Owned: As defined in accordance with the then-current
regulations of the applicable Bank Regulatory Authority.

 

Payment Date: The first day of each and every calendar month during the term of
the Note.

 

Permitted Acquisition: A purchase or other acquisition by the Borrower of: (a)
all or substantially all of the assets of any Permitted Acquisition Target or
all or substantially all of the assets constituting a line of business or a
division of a Permitted Acquisition Target or (b) all of the Equity Interests of
any Permitted Acquisition Target (including all of the voting rights) or (c) up
to 10 retail branches of any Permitted Acquisition Target; provided, that in
each case, (x) no Event of Default exists as of the consummation of the proposed
acquisition, (y) no Change of Control would result therefrom and (z) no Event of
Default would be created thereby.

 

 

 
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Permitted Acquisition Target: A Person whose assets, or whose Equity Interests,
are acquired by Borrower and such Person or assets or division as acquired in
accordance herewith shall be in same business or lines of business or a similar
line of business in which Borrower and its Subsidiaries are engaged in as of the
date hereof or permitted to engage in pursuant to applicable law.

 

Permitted Investments: Each of the following:

 

(a)     loans made in the ordinary course of business (including liquidity
support to broker-dealer Subsidiaries);

  

(b)    direct obligations of, or obligations the principal of and interest on
which are unconditionally guaranteed by, the United States of America (or by any
agency thereof to the extent such obligations are backed by the full faith and
credit of the United States of America), in each case maturing within one year
from the date of acquisition thereof;

 

(c)    investments in commercial paper maturing within 270 days from the date of
acquisition thereof and having, at such date of acquisition, the highest credit
rating obtainable from S&P or from Moody’s;

  

(d)    investments in certificates of deposit, banker’s acceptances and time
deposits maturing within 180 days from the date of acquisition thereof issued or
guaranteed by or placed with, and money market deposit accounts issued or
offered by, any domestic office of any commercial bank organized under the laws
of the United States of America or any State thereof which has a combined
capital and surplus and undivided profits of not less than $500,000,000;

 

(e)    fully collateralized repurchase agreements with a term of not more than
30 days for securities described in clause (a) above and entered into with a
financial institution satisfying the criteria described in clause (b) above;

 

(f)    money market funds that (i) comply with the criteria set forth in
Securities and Exchange Commission Rule 2a-7 under the Investment Company Act of
1940, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio
assets of at least $5,000,000,000; and

 

(g)   marketable direct obligations issued by any of the United States or any
municipality thereof and currently having a rating of (i) AA or higher issued by
S&P and (ii) Aa2 or higher issued by Moody’s, or as otherwise permitted by
Borrower’s written investment policy in effect as of the Effective Date or the
Effective time and provided to the Lender.

  

Permitted Liens: Each of the following:

 

(a)    Liens imposed by law for Taxes that are not yet due or are being
contested in compliance with Section 10.3;

  

(b)   carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and
other like Liens imposed by law, arising in the ordinary course of business and
securing obligations that are not overdue by more than 30 days or are being
contested in good faith by appropriate proceedings and which could not
reasonably be expected to cause a Material Adverse Change;

 

 

 
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(c)   pledges and deposits made in the ordinary course of business in compliance
with workers’ compensation, unemployment insurance and other social security
laws or regulations;

 

(d)   deposits to secure the performance of bids, trade contracts, leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature, in each case in the ordinary course of business;

 

(e)    judgment liens in respect of judgments that do not constitute an Event of
Default under clause (f) of Article XV;

 

(f)    easements, zoning restrictions, rights-of-way and similar encumbrances on
real property imposed by law or arising in the ordinary course of business that
do not secure any monetary obligations and do not materially detract from the
value of the affected property or interfere with the ordinary conduct of
business of the Borrower;

 

(g)   Liens securing the Obligations;

 

(h)   Liens arising from precautionary uniform commercial code financing
statements filed under any lease solely covering such leased items;

 

(i)    any interest or title of a lessor or sublessor under any lease; and

 

(j)    Liens (including the right of setoff) in favor of a bank or other
depository institution arising as a matter of law encumbering deposits.

 

provided that the term “Permitted Liens” shall not include any Lien securing
Indebtedness.

  

Permitted Tax Distributions: With respect to any Person, any dividend or
distribution to any holder of such Person’s stock or other equity interests to
permit such holders to pay federal income taxes and all relevant state and local
income taxes at a rate equal to the highest marginal applicable tax rate for the
applicable tax year, however denominated (together with any interest, penalties,
additions to tax, or additional amounts with respect thereto) imposed as a
result of taxable income attributed to such holder as a partner of such Person
under federal, state, and local income tax laws, determined on a basis that
combines those liabilities arising out of the net effect of the income, gains,
deductions, losses, and credits of such Person and attributable to it in
proportion and to the extent in which such holders hold stock or other equity
interests of such Person.

 

Person: Any natural person, corporation, limited liability company, trust, joint
venture, association, company, partnership, bank, Governmental Authority or
other entity.

  

Pledge Agreement: The Pledge and Security Agreement to be executed by Borrower
in form and substance satisfactory to Lender, as it may be amended, restated,
supplemented or otherwise modified from time to time.

  

Restricted Payment: Any dividend or other distribution (whether in cash,
securities or other property) with respect to any Equity Interests in the
Borrower or Bank, or any payment (whether in cash, securities or other
property), including any sinking fund or similar deposit, on account of the
purchase, redemption, retirement, acquisition, cancellation or termination of
any such Equity Interests in the Borrower or Bank or any option, warrant or
other right to acquire any such Equity Interests in the Borrower or Bank or the
repayment, purchase, repurchase, redemption, defeasance or other acquisition or
retirement for value, prior to scheduled maturity, scheduled repayment or
scheduled sinking fund payment of any Subordinated Indebtedness; provided, that
none of the following shall constitute a Restricted Payment: (i) dividends
comprised of Borrower’s Equity Interests; (ii) cash dividends to Borrower with
respect to any Equity Interests in the Bank, and (iii) cash dividends or cash
payments on account of the repurchase, redemption, retirement, acquisition,
cancellation or termination of Borrower’s Equity Interests (or options, warrant
or other rights to acquire such Equity Interests), in each case so long as such
dividend or payment is not reasonably expected to cause Borrower to breach its
financial covenants set forth in Sections 11.9 through 11.14 of this Agreement.

 

 

 
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Risk-Based Capital Guidelines: (a) the risk-based capital guidelines in effect
in the United States on the date of this Agreement, including transition rules,
(b) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all
requests, rules, guidelines or directives thereunder or issued in connection
therewith and (c) all requests, rules, guidelines or directives promulgated by
the Bank for International Settlements, the Basel Committee on Banking
Supervision (or any successor or similar authority) or the United States
regulatory authorities, in each case pursuant to Basel III, regardless of the
date enacted, adopted or issued and to the extent applicable.

 

S&P: Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc. and any successor thereto.

 

Sanctioned Entity: (a) an agency of the government of, (b) an organization
directly or indirectly controlled by, or (c) a person resident in, a country
that is subject to a sanctions program identified on the list maintained by OFAC
and available at http://www.treas.gov/offices/enforcement/ofac/programs, or as
otherwise published from time to time as such program may be applicable to such
agency, organization or person.

 

Sanctioned Person: A person named on the list of Specially Designated Nationals
or Blocked Persons maintained by OFAC available at
http://www.treas.gov/offices/enforcement/ofac/sdn/index.html, or as otherwise
published from time to time.

  

Security Documents: The Pledge Agreement and all other instruments, documents
and agreements delivered by or on behalf of Borrower pursuant to this Agreement
or any of the other Loan Documents in order to grant to, or perfect in favor of,
Lender, a Lien on any real, personal or mixed property of Borrower as security
for the Obligations.

 

Subordinated Indebtedness: Any Indebtedness of any Borrower (other than the
Loan) that has been subordinated to the Obligations by written agreement, in
form and content satisfactory to Lender and which has been approved in writing
by Lender as constituting Subordinated Indebtedness for purposes of this
Agreement.

  

Subordinated Notes: The Subordinated Notes issued by the Borrower pursuant to
the Subordinated Notes Purchase Agreement dated December 10, 2015 between
Borrower and one or more purchasers.

  

Subsidiary: (a) any corporation of which at least a majority of the outstanding
shares of stock having by the terms thereof ordinary voting power to elect a
majority of the board of directors of such corporation (irrespective of whether
or not at the time stock of any other class or classes of such corporation shall
have or might have voting power by reason of the happening of any contingency)
is at the time directly or indirectly owned or controlled by Borrower or one or
more of other Subsidiaries or by Borrower and one or more of such Subsidiaries,
and (b) any other entity (i) of which at least a majority of the ownership,
equity or voting interest is at the time directly or indirectly owned or
controlled by one or more of Borrower and other Subsidiaries and (ii) which is
treated as a subsidiary in accordance with GAAP.

  

 

 
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Swap Agreement: Any agreement with respect to any swap, forward, future or
derivative transaction or option or similar agreement involving, or settled by
reference to, one or more rates, currencies, commodities, equity or debt
instruments or securities, or economic, financial or pricing indices or measures
of economic, financial or pricing risk or value or any similar transaction or
any combination of these transactions; provided that no phantom stock or similar
plan providing for payments only on account of services provided by current or
former directors, officers, employees or consultants of Borrower shall be a Swap
Agreement.

  

Taxes: Any present or future taxes, levies, imposts, duties, deductions,
withholdings, assessments, fees or other charges imposed by any Governmental
Authority, including any interest, additions to tax or penalties applicable
thereto.

  

Texas Ratio: With respect to any Person, the ratio (expressed as a percentage)
as of the last day of any fiscal quarter of (a) (i) Total Non-Accrual Loans of
such Person, plus (ii) Other Real Estate Owned of such Person, plus (iii) to the
extent such Loan is not already included as part of subsection (a)(i) above, any
loan for which principal or interest has been in default for a period of ninety
(90) days or more to (b) (i) Total Capital of such Person, plus (ii) unrealized
losses (gains) on securities for such Person, plus (iii) Allowance for Loan and
Lease Losses of such Person, minus (iv) Intangible Assets of such Person.

 

Tier 1 Capital: As defined in accordance with the then-current regulations of
the applicable Bank Regulatory Authority.

 

Tier 2 Capital: As defined in accordance with the then-current regulations of
the applicable Bank Regulatory Authority.

 

Total Capital: As defined in accordance with the then-current regulations of the
applicable Bank Regulatory Authority.

 

Total Non-Accrual Loans: Total value of the loans held by any Person, which
loans are classified as non-accrual in accordance with the then-current
regulations of the applicable Bank Regulatory Authority and/or Call Report
instructions, or which loan meets any of the following conditions: (a) it is
maintained on a cash basis because the borrower’s financial condition has
deteriorated, (b) payment in full of principal or interest is not expected, or
(c) principal or interest has been in default for a period of ninety (90) days
or more (unless the loan is both well secured and in the process of collection);
provided that “Total Non-Accrual Loans” shall not include loans subject to a
loss-sharing agreement with the FDIC.

 

Total Risk-Based Capital Ratio: With respect to any Person, the ratio (expressed
as a percentage) as of the last day of any fiscal quarter of (a) (i) Tier 1
Capital of such Person, plus (ii) Tier 2 Capital of such Person, to (b) Total
Risk-Weighted Assets of such Person.

 

Total Risk-Weighted Assets: As defined in accordance with the then-current
regulations of the applicable Bank Regulatory Authority.

  

2.2 Other Definitional Provisions.

 

All terms defined in this Agreement shall have the same meanings when used in
the Note, any other Loan Documents, or any certificate or other document made or
delivered pursuant hereto. The words “hereof”, “herein” and “hereunder” and
words of similar import when used in this Agreement shall refer to this
Agreement.

 

 

 
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2.3 Accounting Terms.

 

All accounting terms not specifically or completely defined herein shall be
construed in conformity with, and all financial data (including financial ratios
and other financial calculations) required to be submitted pursuant to this
Agreement shall be prepared in conformity with GAAP, applied on a consistent
basis, as in effect from time to time and in a manner consistent with that used
in preparing the audited financial statements required by Section 10.1(a),
except as otherwise specifically prescribed herein.  Notwithstanding the
foregoing, all financial statements delivered hereunder shall be prepared, and
all financial covenants contained herein shall be calculated, without giving
effect to any election under the FASB ASC 825 (or any similar accounting
principle) permitting a Person to value its financial liabilities or
Indebtedness at the fair value thereof.

  

ARTICLE III

BORROWER’S REPRESENTATIONS AND WARRANTIES

  

3.1 Representations and Warranties.

 

To induce Lender to execute this Agreement and perform its obligations
hereunder, Borrower hereby represents and warrants to Lender that, except as
disclosed to Lender prior to the Effective Date in writing:

  

(a)     No litigation or proceedings are pending, or to the best of Borrower’s
knowledge threatened, against Borrower or its Subsidiaries, which could, if
adversely determined, cause a Material Adverse Change with respect to Borrower
or its Subsidiaries. There are no pending Environmental Proceedings and Borrower
has no knowledge of any threatened Environmental Proceedings or any facts or
circumstances which may give rise to any future Environmental Proceedings.

 

 

(b)     Borrower is a duly organized and validly existing corporation and has
full power and authority to execute, deliver and perform all Loan Documents to
which Borrower is a party, and such execution, delivery and performance have
been duly authorized by all requisite action on the part of Borrower. Each Loan
Document to which Borrower is a party has been duly executed and delivered by
Borrower and is the legally valid and binding obligation of Borrower,
enforceable against Borrower in accordance with its respective terms, except as
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or limiting creditors’ rights generally or by equitable
principles relating to enforceability.

 

(c)     No consent, approval or authorization of or declaration, registration or
filing with any Governmental Authority or nongovernmental person or entity,
including any creditor, partner, or member of Borrower or its Subsidiaries, is
required in connection with the execution, delivery and performance of this
Agreement or any of the Loan Documents other than the filing of UCC-1 financing
statements, except for such consents, approvals or authorizations of or
declarations or filings with any Governmental Authority or non-governmental
person or entity where the failure to so obtain would not have an adverse effect
on Borrower or its Subsidiaries or which have been obtained as of any date on
which this representation is made or remade. The Borrower and each Subsidiary of
Borrower (i) has all Governmental Approvals required by any applicable Law for
it to conduct its business, each of which is in full force and effect, is final
and not subject to review on appeal and is not the subject of any pending or, to
the best of its knowledge, threatened attack by direct or collateral proceeding,
(ii) is in compliance with each Governmental Approval applicable to it and in
compliance with all other material Laws relating to it or any of its respective
properties and (iii) has timely filed all material reports, documents and other
materials required to be filed by it under all applicable Laws with any
Governmental Authority and has retained all material records and documents
required to be retained by it under applicable Law except in each case (i), (ii)
or (iii) where the failure to have, comply or file could not reasonably be
expected to have a Material Adverse Change.

 

 

 
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(d)     The execution, delivery and performance of this Agreement, the execution
and payment of the Note and the granting of the security interests under the
Security Documents have not constituted and will not constitute, upon the giving
of notice or lapse of time or both, a breach or default under any other
agreement to which Borrower or its Subsidiaries is a party or may be bound or
affected, or a violation of any Law or court order.

  

(e)     Borrower is in compliance with all laws, regulations and orders of any
Governmental Authority applicable to it or its property and all indentures,
agreements and other instruments binding upon it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Change. Borrower has received all
permits and licenses issued by any Governmental Authority as are necessary for
the conduct of its business.

  

(f)     There is no default under this Agreement or any of the other Loan
Documents, nor any condition which, after notice or the passage of time or both,
would constitute a default or an Event of Default under said documents.

 

(g)     No brokerage fees or commissions are payable by or to any person in
connection with this Agreement or the Loan to be disbursed hereunder.

  

(h)     All financial statements and other information previously furnished by
Borrower or its Subsidiaries to Lender in connection with the Loan are true,
complete and correct and fairly present the financial condition of the subjects
thereof as of the respective dates thereof and do not fail to state any material
fact necessary to make such statements or information not misleading, and no
Material Adverse Change with respect to Borrower or its Subsidiaries has
occurred since the respective dates of such statements and information. None of
Borrower or its Subsidiaries has any Indebtedness or other material liability,
contingent or otherwise, not disclosed in such financial statements.

 

(i)     Borrower has good title to, or valid leasehold interests in, all its
real and personal property material to its business, except for minor defects in
title that do not interfere with its ability to conduct its business as
currently conducted or to utilize such properties for their intended purposes.
Except as permitted by this Agreement, all such property is free and clear of
Liens.

  

(j)     Reserved.

  

(k)     Borrower owns, or is licensed to use, all trademarks, tradenames,
copyrights, patents and other intellectual property material to its business,
and the use thereof by the Borrower and its subsidiaries does not infringe upon
the rights of any other Person, except for any such infringements that,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Change.

 

(l)     The Loan is not being made for the purpose of purchasing or carrying
“margin stock” within the meaning of Regulation T, U or X issued by the Board of
Governors of the Federal Reserve System.

 

 

 
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(m)   Borrower is not an “investment company” as defined in, or subject to
regulation under, the Investment Company Act of 1940.

  

(n)    Borrower has timely filed or caused to be filed all Tax returns and
reports required to have been filed and has paid or caused to be paid all Taxes
required to have been paid by it, except (a) Taxes that are being contested in
good faith by appropriate proceedings and for which the Borrower has set aside
on its books adequate reserves or (b) to the extent that the failure to do so
could not reasonably be expected to result in a Material Adverse Change.

 

(o)    Borrower is not a party in interest to any plan defined or regulated
under ERISA, and the assets of Borrower are not “plan assets” of any employee
benefit plan covered by ERISA or Section 4975 of the Internal Revenue Code.

  

(p)    Borrower has disclosed to Lender all agreements, instruments and
corporate or other restrictions to which it is subject, and all other matters
known to it, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Change. No \ reports, financial
statements, certificates or other information furnished by or on behalf of
Borrower to Lender in connection with the negotiation of this Agreement or
delivered hereunder (as modified or supplemented by other information so
furnished) contains any material misstatement of fact or omits to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided that, with
respect to projected financial information, Borrower represents only that such
information was prepared in good faith based upon assumptions believed to be
reasonable at the time.

  

(q)    Borrower is not a “foreign person” within the meaning of Section 1445 or
7701 of the Internal Revenue Code.

 

(r)     Borrower uses no trade name other than its actual name set forth herein.
The principal place of business of Borrower is as stated in Section 17.16.

  

(s)    Borrower’s place of formation or organization is the State of California.

 

(t)     All statements set forth in the Recitals are true and correct.

 

(u)    None of Borrower or its Subsidiaries is (or will be) a person with whom
Lender is restricted from doing business under regulations of the Office of
Foreign Asset Control (“OFAC”) of the Department of the Treasury of the United
States of America (including, those Persons named on OFAC’s Specially Designated
and Blocked Persons list) or under any statute, executive order (including, the
September 24, 2001 Executive Order Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism),
or other governmental action and is not and shall not engage in any dealings or
transactions or otherwise be associated with such persons. In addition, Borrower
hereby agrees to provide to the Lender with any additional information that the
Lender deems necessary from time to time in order to ensure compliance with all
applicable Laws concerning money laundering and similar activities. None of the
Borrower, any Subsidiary of the Borrower or any Affiliate of the Borrower:
(i) is a Sanctioned Person, (ii) has more than ten percent (10%) of its assets
in Sanctioned Entities, or (iii) derives more than ten percent (10%) of its
operating income from investments in, or transactions with Sanctioned Persons or
Sanctioned Entities.  The proceeds of any Loan will not be used and have not
been used to fund any operations in, finance any investments or activities in,
or make any payments to, a Sanctioned Person or a Sanctioned Entity.

 

 

 
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(v)    There are no pending informal or formal regulatory enforcement actions
against Bank, and Borrower has no knowledge of any threatened informal or formal
regulatory enforcement actions or any facts or circumstances which may give rise
to any future informal or formal regulatory enforcement actions.

   

3.2 Survival of Representations and Warranties.

 

Borrower agrees that all of the representations and warranties set forth in
Section 3.1 and elsewhere in this Agreement are true as of the date hereof, will
be true at the Loan Opening and, except for matters which have been disclosed by
Borrower and approved by Lender in writing, at all times thereafter.

   

ARTICLE IV

LOAN AND LOAN DOCUMENTS

  

4.1 Agreement to Borrow and Lend; Lender’s Obligation to Disburse.

 

Subject to the terms, provisions and conditions of this Agreement and the other
Loan Documents, Borrower agrees to borrow from Lender and Lender agrees to lend
to Borrower the Loan, for the purposes and subject to all of the terms,
provisions and conditions contained in this Agreement.

  

(a)    The maximum aggregate amount of the Loan shall not exceed $10,000,000
(the “Loan Amount”). No principal amount repaid may be reborrowed.

  

(b)    Lender agrees, upon Borrower’s compliance with and satisfaction of all
conditions precedent to the Loan Opening and provided no Material Adverse Change
has occurred with respect to Borrower or its Subsidiaries and no Default or
Event of Default has occurred and is continuing hereunder, to Open the Loan.

   

(c)    To the extent that Lender may have acquiesced in noncompliance with any
conditions precedent to the Opening of the Loan, such acquiescence shall not
constitute a waiver by Lender, and Lender may at any time after such
acquiescence require Borrower to comply with all such requirements.

 

4.2 Loan Documents.

 

Borrower agrees that it will, on or before the Loan Opening Date, execute and
deliver or cause to be executed and delivered to Lender the following documents
in form and substance acceptable to Lender:

  

(a)   The Note.

  

(b)   Each Security Document.

  

(c)   Such UCC financing statements as Lender determines are advisable or
necessary to perfect or notify third parties of the security interests intended
to be created by the Loan Documents.

  

(d)   Such other documents, instruments or certificates as Lender and its
counsel may reasonably require, including such documents as Lender in its sole
discretion deems necessary or appropriate to effectuate the terms and conditions
of this Agreement and the Loan Documents, and to comply with the Laws.

 

 

 
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4.3 Term of the Loan.

  

All principal, interest and other sums due under the Loan Documents shall be due
and payable in full on the Maturity Date.

 

4.4 Prepayments.

 

Borrower shall have the right to make prepayments of the Loan, in whole or in
part, upon not less than seven (7) days’ prior written notice to Lender without
any fee or penalty being imposed or due in connection with such prepayment. No
prepayment of all or part of the Loan shall be permitted unless same is made
together with the payment of all interest accrued on the Loan through the date
of prepayment.

 

4.5 Late Charge.

 

Any and all amounts due hereunder or under the other Loan Documents which remain
unpaid on the tenth (10th) day after the date said amount was due and payable
shall incur a fee (the “Late Charge”) equal to three percent (3%) of the payment
due, which payment shall be in addition to all of Lender’s other rights and
remedies under the Loan Documents, provided that no Late Charge shall apply to
the final payment of principal on the Maturity Date. Nothing in this Section
shall be deemed a cure period for the purpose of determining the occurrence of
an Event of Default.

  

ARTICLE V INTEREST

 

5.1 Interest Rate.

  

(a)     Subject to Section 5.3, the Loan will bear interest at the Note Rate
(the “Applicable Rate”), unless the Default Rate is applicable.

  

(b)     Interest at the Applicable Rate (or Default Rate) shall be calculated
for the actual number of days elapsed on the basis of a 360-day year, including
the first date of the applicable period to, but not including, the date of
repayment.

  

(c)     The Loan shall bear interest at the Default Rate during any time that an
Event of Default exists.

 

5.2 Required Principal and Interest Payments.

 

Commencing on January 1, 2016 and continuing on each Payment Date thereafter,
installments of principal in the amount of $83,333.33 and accrued interest
thereon shall be due and payable on each Payment Date. The outstanding principal
balance of the Loan and any and all accrued but unpaid interest hereon shall be
due and payable in full on the Maturity Date or upon the earlier maturity
hereof, whether by acceleration or otherwise. All payments (whether of principal
or of interest) shall be deemed credited to Borrower’s account only if received
by 2:00 p.m. Dallas time on a Business Day; otherwise, such payment shall be
deemed received on the next Business Day.

 

5.3 Maximum Lawful Rate.

  

It is the intent of Borrower and Lender to conform to and contract in strict
compliance with applicable usury law from time to time in effect. In no way, nor
in any event or contingency (including but not limited to prepayment, default,
demand for payment, or acceleration of the maturity of any obligation), shall
the rate of interest taken, reserved, contacted for, charged or received under
this Agreement and the other Loan Documents exceed the highest lawful interest
rate permitted under applicable law (the “Maximum Lawful Rate”). If Lender shall
ever receive anything of value which is characterized as interest under
applicable law and which would apart from this provision be in excess of the
Maximum Lawful Rate, an amount equal to the amount which would have been
excessive interest shall, without penalty, be applied to the reduction of the
principal amount owing on the Loan in the inverse order of its maturity and not
to the payment of interest, or refunded to the Borrower or the other payor
thereof if and to the extent such amount which would have been excessive exceeds
such unpaid principal. All interest paid or agreed to be paid to the holder
hereof shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full stated term (including any renewal or
extension) of the Loan so that the amount of interest on account of such
obligation does not exceed the Maximum Lawful Rate. As used in this Section, the
term “applicable law” shall mean the laws of the State of Texas or the federal
laws of the United States, whichever laws allow the greater interest, as such
laws now exist or may be changed or amended or come into effect in the future.

  

 

 
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ARTICLE VI

COSTS OF MAINTAINING LOAN

  

6.1 Increased Costs and Capital Adequacy.

  

(a) Borrower recognizes that the cost to Lender of maintaining the Loan or any
portion thereof may fluctuate and, Borrower agrees to pay Lender additional
amounts to compensate Lender for any increase in its actual costs incurred in
maintaining the Loan or any portion thereof outstanding or for the reduction of
any amounts received or receivable from Borrower as a result of any change after
the date hereof in any applicable Law, regulation or treaty (including any
Risk-Based Capital Guideline), or in the interpretation or administration
thereof, or by any domestic or foreign court, (i) changing the basis of taxation
of payments under this Agreement to Lender (other than Taxes imposed on all or
any portion of the overall net income or receipts of Lender), or (ii) imposing,
modifying or applying any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of, credit extended by, or
any other acquisition of funds for loans by Lender (which includes the Loan or
any applicable portion thereof), or (iii) imposing on Lender any other condition
affecting the Loan, provided that the result of the foregoing is to increase the
cost to Lender of maintaining the Loan or any portion thereof or to reduce the
amount of any sum received or receivable from Borrower by Lender under the Loan
Documents.

  

(b) If the application of any Law, rule, regulation or guideline adopted or
arising out of the Basel Committee on Banking Regulations and Supervisory
Practices entitled “International Convergence of Capital Measurement and Capital
Standards”, or the adoption after the date hereof of any other Law, rule,
regulation or guideline regarding capital adequacy, or any change after the date
hereof in any of the foregoing, or in the interpretation or administration
thereof by any domestic or foreign Governmental Authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by Lender, with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has the effect of reducing the rate of return on Lender’s
capital to a level below that which Lender would have achieved but for such
application, adoption, change or compliance (taking into consideration the
policies of Lender with respect to capital adequacy), then, from time to time
Borrower shall pay to Lender such additional amounts as will compensate Lender
for such reduction with respect to any portion of the Loan outstanding.

  

 

 
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(c) Any amount payable by Borrower under subsection (a) or subsection (b) of
this Section 6.1 shall be paid within five (5) Business Days of receipt by
Borrower of a certificate signed by an authorized officer of Lender setting
forth the amount due and the basis for the determination of such amount, which
statement shall be conclusive and binding upon Borrower, absent manifest error.
Failure on the part of Lender to demand payment from Borrower for any such
amount attributable to any particular period shall not constitute a waiver of
Lender’s right to demand payment of such amount for any subsequent or prior
period. Lender shall use reasonable efforts to deliver to Borrower prompt notice
of any event described in subsection (a) or (b) above, of the amount of the
reserve and capital adequacy payments resulting therefrom and the reasons
therefor and of the basis of calculation of such amount; provided, however, that
any failure by Lender to so notify Borrower shall not affect Borrower’s
obligation to pay the reserve and capital adequacy payment resulting therefrom.

  

6.2 Borrower Withholding.

  

If by reason of a change in any applicable Laws occurring after the date hereof,
Borrower is required by Law to make any deduction or withholding in respect of
any Taxes (other than Taxes imposed on or measured by the net income of Lender
or any franchise Tax imposed on Lender), duties or other charges from any
payment due under the Note, then to the maximum extent permitted by Law, the sum
due from Borrower in respect of such payment shall be increased to the extent
necessary to ensure that, after the making of such deduction or withholding,
Lender receives and retains a net sum equal to the sum which it would have
received had no such deduction or withholding been required to be made.

  

ARTICLE VII

LOAN EXPENSE AND ADVANCES

 

7.1 Loan and Administration Expenses.

  

Borrower unconditionally agrees to pay all costs and expenses incurred by Lender
in connection with the Loan, including all amounts payable pursuant to Sections
7.2 and 7.3 and any and all other fees owing to Lender pursuant to the Loan
Documents or any separate fee agreement, and also including, without limiting
the generality of the foregoing, all recording, filing and registration fees and
charges, mortgage or documentary taxes, all insurance premiums, cost of
certified copies of instruments, cost of premiums on surety company bonds, all
appraisal fees, insurance consultant’s fees, travel related expenses and all
costs and expenses incurred by Lender in connection with the determination of
whether or not Borrower has performed the obligations undertaken by Borrower
hereunder or has satisfied any conditions precedent to the obligations of Lender
hereunder and, if any default or Event of Default occurs hereunder or under any
of the Loan Documents or if the Loan or Note or any portion thereof is not paid
in full when and as due, all costs and expenses of Lender (including, without
limitation, court costs and counsel’s fees and disbursements and fees and costs
of paralegals) incurred in attempting to enforce payment of the Loan and
expenses of Lender incurred (including court costs and counsel’s fees and
disbursements and fees and costs of paralegals) in attempting to realize, while
a default or Event of Default exists, on any security or incurred in connection
with the sale or disposition (or preparation for sale or disposition) of any
security for the Loan. Whenever Borrower is obligated to pay or reimburse Lender
for any attorneys’ or paralegals’ fees, those fees shall include the reasonable
allocated costs for services of in-house counsel.

 

7.2 Lender’s Attorneys’ Fees and Disbursements.

 

Borrower agrees to pay Lender’s attorney fees and disbursements incurred in
connection with the Obligations, including (i) the preparation and negotiation
of this Agreement and the other Loan Documents and the preparation of the
closing binders, (ii) the disbursement, amendment, and administration of the
Loan and (iii) the enforcement of the terms of this Agreement and the other Loan
Documents.

 

 

 
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7.3 Time of Payment of Fees and Expenses.

  

Borrower shall pay all expenses and fees incurred as of the Loan Opening on the
Loan Opening Date (unless sooner required herein). At the time of the Opening of
the Loan, Lender may pay from the proceeds of the initial disbursement of the
Loan all Loan expenses and all fees payable to Lender. Lender may require the
payment of outstanding fees and expenses as a condition to any disbursement of
the Loan. Lender is hereby authorized, without any specific request or direction
by Borrower, to make disbursements from time to time in payment of or to
reimburse Lender for all Loan expenses and fees.

 

7.4 Expenses and Advances Secured by Loan Documents.

 

Any and all advances or payments made by Lender under this Article VII from time
to time, and any amounts expended by Lender pursuant to Article XVI, shall, as
and when advanced or incurred, constitute additional indebtedness evidenced by
the Note and secured by the Security Documents and the other Loan Documents.

 

7.5 Right of Lender to Make Advances to Cure Borrower’s Defaults.

 

In the event that Borrower fails to perform any of Borrower’s covenants,
agreements or obligations contained in this Agreement or any of the other Loan
Documents (after the expiration of applicable grace periods, except in the event
of an emergency or other exigent circumstances), Lender may (but shall not be
required to) perform any of such covenants, agreements and obligations, and any
amounts expended by Lender in so doing and shall constitute additional
indebtedness evidenced by the Note and secured by the Security Documents and the
other Loan Documents and shall bear interest at the Default Rate.

 

ARTICLE VIII

CONDITIONS PRECEDENT TO THE OPENING OF THE LOAN

  

8.1 Conditions Precedent.

  

Borrower agrees that Lender’s obligation to Open the Loan is conditioned upon
Borrower’s delivery, performance and satisfaction of the following conditions
precedent in form and substance satisfactory to Lender in its reasonable
discretion:

 

(a)  Loan Documents: The Lender shall have received copies of each of the
documents set forth in Section 4.2, executed by the Borrower or its
Subsidiaries, as the case may be, and recorded, if applicable, each in form and
substance satisfactory to the Lender.

 

(b)  Reserved.

  

(c)  Insurance Policies: Borrower shall have furnished to Lender policies or
binders evidencing that insurance coverages are in effect with respect to
Borrower, in such amounts and against such risks as are customarily maintained
by companies engaged in the same or similar businesses operating in the same or
similar locations.

 

 

 
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(d) No Litigation: No litigation or proceedings shall be pending or threatened
which could or might cause a Material Adverse Change with respect to Borrower or
its Subsidiaries;

 

(e) Legal Opinions: Borrower shall have furnished to Lender an opinion from
counsel for Borrower or its Subsidiaries covering due authorization, execution
and delivery and enforceability of the Loan Documents, and creation and
perfection of the security interests granted under the Loan Documents, and also
containing such other legal opinions as Lender shall require, in form and
substance satisfactory to Lender;

  

(f)  Searches: Borrower shall have furnished to Lender current bankruptcy,
federal tax lien and judgment searches and searches of all Uniform Commercial
Code financing statements filed in each place UCC Financing Statements are to be
filed hereunder, demonstrating the absence of adverse claims;

  

(g) Financial Statements: Borrower shall have furnished to Lender current annual
financial statements of Borrower or its Subsidiaries and such other persons or
entities connected with the Loan as Lender may request, each in form and
substance and certified by such individual as acceptable to Lender. Borrower and
its Subsidiaries shall provide such other additional financial information
Lender reasonably requires;

  

(h) Pro Forma Projection: Borrower shall have furnished to Lender a Pro Forma
Projection covering the succeeding one (1) year period;

 

(i) Equity Interests of Bank: Borrower shall have delivered to Lender the share
certificates, if any, evidencing the Equity Interests of Bank;

  

(j) Organizational Documents: Borrower shall have furnished to Lender proof
satisfactory to Lender of authority, formation, organization and good standing
in the state of its incorporation or formation and, if applicable, qualification
as a foreign entity in each other state in which Borrower conducts business.
Borrower shall also provide certified resolutions in form and content
satisfactory to Lender, authorizing execution, delivery and performance of the
Loan Documents, and such other documentation as Lender may reasonably require to
evidence the authority of the persons executing the Loan Documents. Borrower
shall also have delivered Constituent Documents for Borrower and Bank certified
as of a date acceptable to Lender by the appropriate government officials of the
state of incorporation or organization of such Borrower and each other Obligated
Party. Borrower shall also have delivered a certificate of incumbency certified
by an authorized officer or representative certifying the names of the
individuals or other Persons authorized to sign this Agreement and each of the
other Loan Documents to which Borrower is or is to be a party (including the
certificates contemplated herein) on behalf of such Person together with
specimen signatures of such individual Persons;

  

(k) No Default: There shall be no uncured Default or Event of Default by
Borrower hereunder;

 

(l) Subordinated Indebtedness: Borrower shall deliver documentation related to
all Subordinated Indebtedness reasonably satisfactory to Lender.

  

(m) Additional Documents: Borrower shall have furnished to Lender such other
materials, documents, papers or requirements regarding Borrower and its
Subsidiaries as Lender shall reasonably request.

 

 

 
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ARTICLE IX

RESERVED

 

ARTICLE X

AFFIRMATIVE COVENANTS

 

Borrower covenants and agrees as follows:

 

10.1     Furnishing Information.

  

(a)     Financial Reports. Borrower shall deliver or cause to be delivered to
Lender quarterly financial statements and a duly executed Certificate of
Compliance in the form of Exhibit A attached hereto within forty-five (45) days
after the end of each calendar quarter and an annual financial statement within
seventy-five (75) days after the end of each calendar year. All such financial
statements shall be in a format approved in writing by Lender in Lender’s
reasonable sole discretion, and all such annual financial statements shall be
prepared by a certified public accountant reasonably acceptable to Lender in
format acceptable to Lender. Each financial statement shall be certified as
true, complete and correct by Borrower or, in the case of each of its
Subsidiaries’ financial statements, by the Subsidiary to whom it relates.
Borrower shall deliver to Lender with respect to Borrower and its Subsidiaries
annual Federal Income Tax Returns within ten (10) days after timely filing.
Borrower and its Subsidiaries shall provide such additional financial
information as Lender reasonably requires. Borrower shall during regular
business hours and upon two (2) Business Days prior written notice (provided
that if an Event of Default has occurred and is continuing, no prior notice
shall be required), permit Lender or any of its agents or representatives to
have access to and examine all of its books and records. Documents required to
be delivered pursuant to this Section 10.1(a) (to the extent any such documents
are included in materials otherwise filed with the Securities & Exchange
Commission) may be delivered electronically and, if so delivered, shall be
deemed to have been delivered on the date on which the Borrower posts such
documents, or provides a link thereto, on the Borrower’s website on the Internet
or via electronic mail to the Lender; provided that the Borrower shall notify
(which may be facsimile or electronic mail) the Lender of the posting of any
such document and, promptly upon request by the Lender, provide to the Lender by
electronic mail an electronic version (i.e. a soft copy) of any such document
specifically requested by the Lender. The Lender shall have no obligation to
request the delivery or to maintain copies of the documents referred to above,
and in any event shall have no responsibility to monitor compliance by the
Borrower with any such request for delivery. .

 

(b)     Call Reports. Borrower shall notify Lender of the filing of the Bank’s
Call Reports or other quarterly reports of condition and income furnished to
Governmental Authorities within five (5) Business Days of the date on which such
reports become publicly available.

 

(c)     FR Y-9SP. Borrower shall notify Lender of the filing of Borrower’s
complete form FR Y-9SP as filed with the Federal Reserve Bank in the applicable
Federal Reserve District.

 

(d)     FR Y-6.  If applicable to Borrower, as soon as available, and in any
event within ninety (90) days after the end of each fiscal year, the Borrower’s
complete form FR Y-6 as filed with the Federal Reserve Bank in the applicable
Federal Reserve District.

 

(e)     Federal Reserve Bank or FDIC.  Borrower shall notify Lender of all other
non-confidential reports filed by or on behalf of Borrower or Bank within five
(5) Business Days of the date on which such reports become publicly available.

 

 

 
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(f)     Bankers Blanket Bond.  On the next Business Day after the earlier of
notice of intention to cancel or cancellation, in whole or in part, of any
Bankers Blanket Bond, a copy of the written notice to cancel or cancellation,
including a copy of any correspondence received from the underwriter or
underwriters of such Bankers Blanket Bond related to such intention to cancel or
cancellation.

 

(g)     USA Patriot Act. Promptly upon the request thereof, such other
information and documentation required by Bank Regulatory Authorities under
applicable “know your customer” and Anti-Money Laundering rules and regulations
(including, without limitation, the USA Patriot Act (Title III of Pub. L. 107-56
(signed into law October 26, 2001)), as amended), as from time to time
reasonably requested by the Lender.

 

(h)     Notice of Litigation and Other Matters. Prompt (but in no event later
than ten (10) days after Borrower obtains knowledge thereof) telephonic and
written notice of the commencement of all proceedings by or before any
Governmental Authority and all actions and proceedings in any court or before
any arbitrator against or involving the Borrower or any Subsidiary of Borrower
or any of their respective properties, assets or businesses that if adversely
determined could reasonably be expected to result in a Material Adverse Change.

 

(i)     Additional Information. Such other information regarding the credit or
financial condition of the Borrower or any Subsidiary as the Lender may
reasonably request. Nothing in this Agreement shall require Borrower to disclose
any information to Lender to the extent prohibited by applicable law or
regulation.

 

10.2 Maintenance of Insurance.

  

Borrower shall maintain, with financially sound and reputable insurance
companies, insurance in such amounts and against such risks as are customarily
maintained by companies and financial institutions engaged in the same or
similar businesses operating in the same or similar locations.

 

10.3 Payment of Taxes.

 

Borrower shall pay all Taxes before the same become delinquent, provided,
however, that Borrower shall have the right to pay such tax under protest or to
otherwise contest any such tax or assessment, but only if (i) such contest has
the effect of preventing the collection of such Taxes so contested and also of
preventing the attachment of any Lien to any of Borrower’s property, and (ii)
Borrower has notified Lender of Borrower’s intent to contest such Taxes. If
Borrower fails to commence such contest or, having commenced to contest the
same, and having deposited such security required by Lender for its full amount,
shall thereafter fail to prosecute such contest in good faith or with due
diligence, or, upon adverse conclusion of any such contest, shall fail to pay
such Tax, Lender may, at its election (but shall not be required to), pay and
discharge any such Tax, and any interest or penalty thereon, and any amounts so
expended by Lender shall be deemed to constitute disbursements of the Loan
proceeds hereunder (even if the total amount of disbursements would exceed the
face amount of the Note). Borrower shall furnish to Lender evidence that Taxes
are paid before imposition of any penalty or accrual of interest in connection
with such Taxes.

 

10.4 Lender’s Attorneys’ Fees for Enforcement of Agreement.

 

In case of any Default or Event of Default hereunder, Borrower (in addition to
Lender’s attorneys’ fees, if any, to be paid pursuant to Section 7.2) will pay
Lender’s attorneys’ and paralegal fees (including, without limitation, any
attorney and paralegal fees and costs incurred in connection with any litigation
or bankruptcy or administrative hearing and any appeals therefrom and any post-
judgment enforcement action including, without limitation, supplementary
proceedings) in connection with the enforcement of this Agreement; without
limiting the generality of the foregoing, if at any time or times hereafter
Lender employs counsel (whether or not any suit has been or shall be filed and
whether or not other legal proceedings have been or shall be instituted) for
advice or other representation with respect to this Agreement, or any of the
other Loan Documents, or to protect, collect, lease, sell, take possession of,
or liquidate any of the Collateral, or to attempt to enforce any security
interest or lien in any portion of the Collateral, or to enforce any rights of
Lender or Borrower’s obligations hereunder, then in any of such events all of
the attorneys’ fees arising from such services, and any expenses, costs and
charges relating thereto (including fees and costs of paralegals), shall
constitute an additional liability owing by Borrower to Lender, payable on
demand.

 

 

 
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10.5 Use of Proceeds.

  

The proceeds of the Loan will be used only to redeem Borrower’s shares of Senior
Non-Cumulative Perpetual Preferred Stock, Series B issued to the United States
Department of Treasury in the Small Business Lending Fund Program. No part of
the proceeds of the Loan will be used, whether directly or indirectly, for any
purpose that entails a violation of any of regulations of any Bank Regulatory
Authority, including Regulations T, U and X.

 

10.6 Lost Note.

  

Upon Lender’s furnishing to Borrower an affidavit to such effect, Borrower
shall, if the Note is mutilated, destroyed, lost or stolen, deliver to Lender,
in substitution therefor, a new note containing the same terms and conditions as
the Note.

 

10.7 Indemnification.

  

BORROWER SHALL INDEMNIFY LENDER, INCLUDING EACH ASSIGNEE OF THE LOAN AND THEIR
RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES AND CONSULTANTS (EACH, AN “INDEMNIFIED
PARTY”) AND DEFEND AND HOLD EACH INDEMNIFIED PARTY HARMLESS FROM AND AGAINST ALL
CLAIMS (INCLUDING, WITHOUT LIMITATION, ANY CIVIL PENALTIES OR FINES ASSESSED BY
OFAC), INJURY, DAMAGE, LOSS AND LIABILITY, COST AND EXPENSE (INCLUDING
ATTORNEYS’ FEES, COSTS AND EXPENSES) OF ANY AND EVERY KIND TO ANY PERSONS OR
PROPERTY BY REASON OF (I) ANY BREACH OF REPRESENTATION OR WARRANTY, DEFAULT OR
EVENT OF DEFAULT UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR RELATED
DOCUMENT; OR (II) ANY OTHER MATTER ARISING IN CONNECTION WITH THE LOAN, BORROWER
OR ITS SUBSIDIARIES. BORROWER’S DUTY TO INDEMNIFY, HOLD HARMLESS, AND DEFEND THE
INDEMNIFIED PARTIES AGAINST LOSSES EXTENDS TO LOSS THAT MAY BE CAUSED OR ALLEGED
TO BE CAUSED IN PART BY THE NEGLIGENCE OF INDEMNITEES TO THE FULLEST EXTENT THAT
SUCH INDEMNIFICATION IS PERMITTED BY APPLICABLE LAW. THE FOREGOING
INDEMNIFICATION SHALL SURVIVE REPAYMENT OF THE LOAN AND SHALL CONTINUE TO
BENEFIT LENDER FOLLOWING ANY ASSIGNMENT OF THE LOAN WITH RESPECT TO MATTERS
ARISING OR ACCRUING PRIOR TO SUCH ASSIGNMENT. NOTWITHSTANDING THE FOREGOING,
BORROWER SHALL HAVE NO OBLIGATION TO INDEMNIFY ANY INDEMNIFIED PARTY AGAINST ANY
CLAIM, INJURY, DAMAGE, LOSS, LIABILITY, COST OR EXPENSE DETERMINED BY A COURT OF
COMPETENT JURISDICTION BY FINAL AND NON-APPEALABLE JUDGMENT TO HAVE RESULTED
FROM LENDER’S OR ANY OTHER INDEMNIFIED PARTY’S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.

 

 

 
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ARTICLE XI NEGATIVE COVENANTS

 

Borrower covenants and agrees as follows:

 

11.1     Indebtedness.

 

Borrower will not create, incur, assume or permit to exist any Indebtedness,
except:

 

(a)     Indebtedness created hereunder;

 

(b)     Indebtedness existing on the date hereof and set forth in Schedule
11.1(b), but not any extensions, renewals or replacements of any such
Indebtedness; and

 

(c)     the Subordinated Notes.

 

11.2     Liens.

 

Borrower will not create, incur, assume or permit to exist any Lien on any
property or asset now owned or hereafter acquired by it, or assign or sell any
income or revenues (including accounts receivable) or rights in respect of any
thereof, except:

  

(a)     Permitted Liens;

  

(b)     any Lien on any property or asset of Borrower existing on the date
hereof and set forth in Schedule 11.2(b); provided that (i) such Lien shall not
apply to any other property or asset of the Borrower and (ii) such Lien shall
secure only those obligations which it secures on the date hereof; and

  

(c)     Liens on fixed or capital assets acquired, constructed or improved by
the Borrower; provided that (i) such security interests secure Indebtedness
permitted by Section 11.1, (ii) such security interests and the Indebtedness
secured thereby are incurred prior to or within 90 days after such acquisition
or the completion of such construction or improvement, (iii) the Indebtedness
secured thereby does not exceed 100% of the cost of acquiring, constructing or
improving such fixed or capital assets and (iv) such security interests shall
not apply to any other property or assets of the Borrower.

  

11.3     Fundamental Changes; Disposition of Assets.

  

Borrower will not (a) merge into or consolidate with any other Person, or permit
any other Person to merge into or consolidate with it, or sell, transfer, lease
or otherwise dispose of (in one transaction or in a series of transactions) all
any part of its assets (other than sales of inventory in the ordinary course of
business), or liquidate or dissolve, or (b) engage to any material extent in any
business other than businesses of the type conducted by the Borrower on the
Effective Date and businesses reasonably related thereto.

 

11.4     Investments, Loans, Advances, Guarantees and Acquisitions.

  

The Borrower will not purchase, hold or acquire any capital stock, evidences of
indebtedness or other securities (including any option, warrant or other right
to acquire any of the foregoing) of, make or permit to exist any loans or
advances to, Guarantee any obligations of, or make or permit to exist any
investment or any other interest in, any other Person, or purchase or otherwise
acquire (in one transaction or a series of transactions) any assets of any other
Person constituting a business unit, except:

  

(a)     Permitted Investments;

 

 

 
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(b)     Investments made in the Bank;

 

(c)     Guarantees constituting Indebtedness permitted by Section 11.1; and

 

(d)     Permitted Acquisitions.

 

11.5     Swap Agreements.

 

The Borrower will not enter into any Swap Agreement, except (a) Swap Agreements
entered into to hedge or mitigate risks to which the Borrower has actual
exposure, and (b) Swap Agreements entered into in order to effectively cap,
collar or exchange interest rates (from fixed to floating rates, from one
floating rate to another floating rate or otherwise) with respect to any
interest-bearing liability or investment of the Borrower.

 

11.6     Restricted Payments.

 

Without the prior written consent of Lender, the Borrower will not declare or
make, or agree to pay or make, directly or indirectly, any Restricted Payment,
except Permitted Tax Distributions; provided that such Permitted Tax
Distributions shall not exceed fifty percent (50%) of Borrower’s after-tax
earnings; provided that, until such time as an Event of Default has occurred and
is continuing, Borrower may pay regularly scheduled payments of interest on the
Subordinated Notes so long as such payment is not reasonably expected to result
in an Event of Default.

 

11.7     Transactions with Affiliates.

  

The Borrower will not sell, lease or otherwise transfer any property or assets
to, or purchase, lease or otherwise acquire any property or assets from, or
otherwise engage in any other transactions with, any of its Affiliates, except
in the ordinary course of business at prices and on terms and conditions not
less favorable to the Borrower than could be obtained on an arm’s-length basis
from unrelated third parties.

  

11.8     Restrictive Agreements.

 

The Borrower will not, directly or indirectly, enter into, incur or permit to
exist any agreement or other arrangement that prohibits, restricts or imposes
any condition upon the ability of the Borrower to create, incur or permit to
exist any Lien upon any of its property or assets; provided that (i) the
foregoing shall not apply to restrictions and conditions imposed by Law or by
this Agreement, (ii) the foregoing shall not apply to restrictions and
conditions existing on the date hereof identified on Schedule 11.8 (but shall
apply to any extension or renewal of, or any amendment or modification expanding
the scope of, any such restriction or condition), (iii) the foregoing shall not
apply to restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness and (iv) the
foregoing shall not apply to customary provisions in leases restricting the
assignment thereof.

 

11.9 Leverage Ratio. 

 

(a)     Borrower. As of the last day of any fiscal quarter, the Borrower shall
have a Leverage Ratio of 7.0% or greater.

 

 

 
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(b)     Bank. As of the last day of any fiscal quarter, the Bank shall have a
Leverage Ratio of 8.0% or greater.

 

11.10 Total Risk-Based Capital Ratio.

 

As of the last day of any fiscal quarter, the Bank shall have a Total Risk-Based
Capital Ratio of 11.50% or greater.

 

11.11 Texas Ratio.

 

As of the last day of any fiscal quarter, the Bank shall have a Texas Ratio of
40.0% or less.

 

11.12 Classified Assets to Tier 1 Capital Ratio.

  

As of the last day of any fiscal quarter, the Bank shall have a Classified
Assets to Tier 1 Capital Ratio of no greater than 50.0%.

 

11.13     Fixed Charge Coverage Ratio.

 

As of the last day of any fiscal quarter, Borrower shall not permit the Fixed
Charge Coverage Ratio to be less than 1.50 to 1.0.

 

11.14     Limitation on Payments and Modification of Subordinated Indebtedness.

 

Without the prior written consent of Lender, which consent shall not be
unreasonably withheld or delayed, the Borrower shall not amend, modify, waive or
supplement (or permit the modification, amendment, waiver or supplement of) any
of the terms or provisions of any Subordinated Indebtedness in a manner that is
adverse to Lender.

 

ARTICLE XII

RESERVED

  

ARTICLE XIII

ASSIGNMENTS BY LENDER AND BORROWER

 

13.1     Assignments and Participations.

  

Lender may from time to time sell the Loan and the Loan Documents (or any
interest therein) and may grant participations in the Loan. Borrower agrees to
cooperate with Lender’s efforts to do any of the foregoing (at no out-of-pocket
costs, including attorney’s fees, to Borrower) and to execute all documents
reasonably required by Lender in connection therewith which do not change the
economic terms, including without limitation, interest rate, repayment terms,
maturity date and financial covenants or otherwise materially adversely affect
Borrower’s rights under the Loan Documents.

 

13.2     Prohibition of Assignments by Borrower.

  

Borrower shall not assign or attempt to assign its rights under this Agreement
and any purported assignment shall be void.

 

 

 
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13.3     Successors and Assigns.

 

Subject to the foregoing restrictions on transfer and assignment contained in
this Article XIII, this Agreement shall inure to the benefit of and shall be
binding on the parties hereto and their respective successors and permitted
assigns.

  

ARTICLE XIV

 

TIME OF THE ESSENCE

  

14.1     Time is of the Essence.

  

Borrower and Lender agree that time is of the essence under this Agreement.

  

ARTICLE XV

EVENTS OF DEFAULT

 

15.1     Events of Default.

 

The occurrence of any one or more of the following shall constitute an “Event of
Default” as said term is used herein:

 

(a)     Failure of Borrower (i) (A) to make any payment when due, or (B) to
observe or perform any of the other covenants or conditions by Borrower to be
performed under the terms of this Agreement or any other Loan Document
concerning the payment of money, for a period of fifteen (15) days after written
notice from Lender that the same is due and payable; or (ii) other than as
otherwise addressed in this Section 15.1, for a period of thirty (30) days after
written notice from Lender, to observe or perform any non-monetary covenant or
condition contained in this Agreement or any other Loan Documents; provided that
if any such failure concerning a non-monetary covenant or condition covered by
Sections 11.9, 11.10, 11.11, 11.12, or 11.13, or is otherwise susceptible to
cure and cannot reasonably be cured within said thirty (30) day period, then
Borrower shall have an additional sixty (60) day period to cure such failure and
no Event of Default shall be deemed to exist hereunder so long as Borrower
commences such cure within the initial thirty (30) day period and diligently and
in good faith pursues such cure to completion within such resulting ninety (90)
day period from the date of Lender’s notice; and provided further that if a
different notice or grace period is specified under any other subsection of this
Section 15.1 with respect to a particular breach, or if another subsection of
this Section 15.1 applies to a particular breach and does not expressly provide
for a notice or grace period the specific provision shall control.

  

(b)    Any assignment in violation of Section 13.2.

  

(c)     If any warranty, representation, statement, report or certificate made
now or hereafter by Borrower or its Subsidiaries is untrue or incorrect at the
time made or delivered, provided that if such breach is reasonably susceptible
of cure, then no Event of Default shall exist so long as Borrower cures said
breach (i) within the notice and cure period provided in (a)(i) above for a
breach that can be cured by the payment of money or (ii) within the notice and
cure period provided in (a)(ii) above for any other breach.

 

 

 
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(d)     Borrower or its Subsidiaries shall commence a voluntary case concerning
Borrower or such Subsidiary under the Bankruptcy Code; or an involuntary
proceeding is commenced against Borrower or its Subsidiaries under the
Bankruptcy Code and relief is ordered against Borrower, or the petition is
controverted but not dismissed or stayed within sixty (60) days after the
commencement of the case, or a custodian (as defined in the Bankruptcy Code) is
appointed for or takes charge of all or substantially all of the property of
Borrower or its Subsidiaries; or the Borrower or any of its Subsidiaries
commences any other proceedings under any reorganization, arrangement,
readjustment of debt, relief of debtors, dissolution, insolvency or liquidation
or similar Law of any jurisdiction whether now or hereafter in effect relating
to the Borrower or its Subsidiaries; or there is commenced against Borrower or
its Subsidiaries any such proceeding which remains undismissed or unstayed for a
period of sixty (60) days; or the Borrower or its Subsidiaries fails to
controvert in a timely manner any such case under the Bankruptcy Code or any
such proceeding, or any order of relief or other order approving any such case
or proceeding is entered; or the Borrower or its Subsidiaries by any act or
failure to act indicates its consent to, approval of, or acquiescence in any
such case or proceeding or the appointment of any custodian or the like of or
for it for any substantial part of its property or suffers any such appointment
to continue undischarged or unstayed for a period of sixty (60) days.

  

(e)     Borrower or its Subsidiaries shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts generally as
they become due, or shall consent to the appointment of a receiver or trustee or
liquidator of all of its property or the major part thereof or if all or a
substantial part of the assets of Borrower or its Subsidiaries are attached,
seized, subjected to a writ or distress warrant, or are levied upon, or come
into the possession of any receiver, trustee, custodian or assignee for the
benefit of creditors.

 

(f)     One or more final, non-appealable judgments are entered (i) against
Borrower in amounts aggregating in excess of $1,000,000 or (ii) against any of
Borrower’s Subsidiaries in amounts aggregating in excess of $1,000,000, and said
judgments are not stayed or bonded over within sixty (60) days after entry.

 

(g)    If Borrower shall fail to pay any debt owed by it or is in default under
any agreement with Lender or any other party (other than a failure or default
for which

Borrower’s maximum liability does not exceed $500,000), including, but not
limited to, the Subordinated Indebtednesss, and such failure or default
continues after any applicable grace period specified in the instrument or
agreement relating thereto.

  

(h)    If a Material Adverse Change occurs with respect to Borrower or any of
its Subsidiaries.

 

(i)     The failure at any time of a security interest created under any
Security Document to be a valid first lien upon the Collateral described
therein.

  

(j)    Reserved.

 

(k)   A Change of Control shall occur without Lender’s prior written consent.

 

(l)    Failure of Borrower to comply with Section 10.1.

  

(m) The occurrence of any other event or circumstance denominated as an Event of
Default in this Agreement or under any of the other Loan Documents and the
expiration of any applicable grace or cure periods, if any, specified for such
Event of Default herein or therein, as the case may be.

  

 

 
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(n)  Reserved.

  

(o)  If (i) any Bank Regulatory Authority or other Governmental Authority having
regulatory authority over the Borrower or any Subsidiary of Borrower shall
impose any restriction on the Borrower or such Subsidiary with respect to the
payment of dividends from any such Subsidiary to the Borrower; other than
restrictions required in order for any Subordinated Indebtedness to qualify as
Tier 2 Capital, provided, however, that the current dividend restriction with
respect to Borrower by the Department of Business Oversight (which requires
Borrower to obtain approval to make any cash dividends from the Bank to the
Borrower, and which restrictions are anticipated to end in late 2016), shall not
be considered an Event of Default hereunder, (ii) the Bank shall cease for any
reason to be an insured bank under the FDIA, (iii) the FDIC or any other
Governmental Authority shall issue a cease and desist order to take other action
of a disciplinary or remedial nature against the Borrower or any Subsidiary and
such order or other action could reasonably be expected to have a Material
Adverse Change or there shall occur with respect to any Subsidiary any event
that is grounds for the required submission of a capital restoration plan under
12 U.S.C. § 1831o(e)(2) and the regulations thereunder, or (iv) the Borrower or
any Subsidiary shall enter into a written supervisory or similar agreement with
any Bank Regulatory Authority or other Governmental Authority for any reason,
but only to the extent that such supervisory or similar agreement would have a
Material Adverse Change with respect to such Subsidiary or the Borrower;
provided, that agreements entered into with any Bank Regulatory Authority or
other Governmental Authority in order for Subordinated Indebtedness to qualify
as Tier 2 Capital shall not be an Event of Default.

  

(p)  Without limiting the generality of Section 15.1(o), the appointment of a
conservator or receiver for any Subsidiary of Borrower that is an “insured
depository institution” as defined in the FDIA (12 U.S.C. § 1813(c)(2)), by any
“appropriate Federal banking agency” as defined in the FDIA (12 U.S.C.
§ 1813(q)), by any state supervisory agency or by the FDIC or any successor
thereto pursuant to the FDIA; or the organization of a bridge bank to purchase
assets and assume liabilities of such Subsidiary pursuant to the FDIA; or the
provision of any form of assistance to any such Subsidiary by the FDIC pursuant
to the FDIA or other Governmental Authority.

  

(q)  The Borrower shall cease to be a bank holding company.

  

(r)   The subordination provisions related to any Subordinated Indebtedness
shall for any reason be revoked or invalidated, or otherwise cease to be in full
force and effect, or any Person shall contest in any manner the validity or
enforceability thereof or deny that it has any further liability or obligation
thereunder, or the Loans, for any reason shall not have the priority
contemplated by this Agreement or any such subordination provisions, except for
changes to Subordinated Notes required by any Governmental Authority.

  

ARTICLE XVI

LENDER’S REMEDIES IN EVENT OF DEFAULT

  

16.1     Remedies Conferred Upon Lender.

 

Upon the occurrence of any Event of Default, Lender may pursue any one or more
of the following remedies concurrently or successively, it being the intent
hereof that none of such remedies shall be to the exclusion of any other:

  

(a)  Enforce any Liens or security interests under the Security Documents;

 

 

 
30

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(b) Declare the Note to be immediately due and payable; and

 

(c)  Exercise or pursue any other remedy or cause of action permitted under this
Agreement or any other Loan Documents, or conferred upon Lender by operation of
Law.

 

Notwithstanding the foregoing, upon the occurrence of any Event of Default under
Section 15.1(d), (e), (o), (p) or (q) with respect to Borrower or the Bank, all
amounts evidenced by the Note shall automatically become due and payable,
without any presentment, demand, protest or notice of any kind to Borrower.

  

ARTICLE XVII

GENERAL PROVISIONS

 

17.1     Captions.

  

The captions and headings of various Articles, Sections and subsections of this
Agreement and Schedules and Exhibits pertaining hereto are for convenience only
and are not to be considered as defining or limiting in any way the scope or
intent of the provisions hereof.

 

17.2     Modification; Waiver.

  

No modification, waiver, amendment or discharge of this Agreement or any other
Loan Document shall be valid unless the same is in writing and signed by the
party against which the enforcement of such modification, waiver, amendment or
discharge is sought.

 

17.3     Authorized Representative.

  

Borrower hereby appoints Sam Jimenez as its Authorized Representative for
purposes of dealing with Lender on behalf of Borrower in respect of any and all
matters in connection with this Agreement, the other Loan Documents, and the
Loan. The Authorized Representative shall have the power, in his discretion, to
give and receive all notices, monies, approvals, and other documents and
instruments, and to take any other action on behalf of Borrower. All actions by
the Authorized Representative shall be final and binding on Borrower. Lender may
rely on the authority given to the Authorized Representative until actual
receipt by Lender of a duly authorized resolution substituting a different
person as the Authorized Representative. No more than one person shall serve as
Authorized Representative at any given time.

 

17.4 Governing Law.

 

Irrespective of the place of execution and/or delivery, this Agreement shall be
governed by, and shall be construed in accordance with, the laws of the State of
Texas.

 

17.5 Acquiescence Not to Constitute Waiver of Lender’s Requirements.

 

Each and every covenant and condition for the benefit of Lender contained in
this Agreement may be waived by Lender, provided, however, that to the extent
that Lender may have acquiesced in any noncompliance with any conditions
precedent to the Opening of the Loan or to any subsequent disbursement of Loan
proceeds, such acquiescence shall not be deemed to constitute a waiver by Lender
of such requirements with respect to any future disbursements of Loan proceeds.

 

17.6 Disclaimer by Lender.

 

This Agreement is made for the sole benefit of Borrower and Lender, and no other
person or persons shall have any benefits, rights or remedies under or by reason
of this Agreement, or by reason of any actions taken by Lender pursuant to this
Agreement. Lender shall not be liable for any debts or claims accruing in favor
of any such parties against Borrower or others. Lender, by making the Loan or
taking any action pursuant to any of the Loan Documents, shall not be deemed a
partner or a joint venturer with Borrower or fiduciary of Borrower. No payment
of funds directly to a contractor or subcontractor or provider of services shall
be deemed to create any third-party beneficiary status or recognition of same by
the Lender.

 

 

 
31

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17.7 Partial Invalidity; Severability.

 

If any of the provisions of this Agreement, or the application thereof to any
person, party or circumstances, shall, to any extent, be invalid or
unenforceable, the remainder of this Agreement, or the application of such
provision or provisions to persons, parties or circumstances other than those as
to whom or which it is held invalid or unenforceable, shall not be affected
thereby, and every provision of this Agreement shall be valid and enforceable to
the fullest extent permitted by Law.

 

17.8 Definitions Include Amendments.

 

Definitions contained in this Agreement which identify documents, including, but
not limited to, the Loan Documents, shall be deemed to include all amendments
and supplements to such documents from the date hereof, and all future
amendments, modifications, and supplements thereto entered into from time to
time to satisfy the requirements of this Agreement or otherwise with the consent
of Lender. Reference to this Agreement contained in any of the foregoing
documents shall be deemed to include all amendments and supplements to this
Agreement.

 

17.9 Execution in Counterparts.

 

This Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.

 

17.10 Entire Agreement.

 

This Agreement, taken together with all of the other Loan Documents and all
certificates and other documents delivered by Borrower to Lender, embody the
entire agreement and supersede all prior agreements, written or oral, relating
to the subject matter hereof.

 

17.11 Waiver of Damages.

 

In no event shall Lender be liable to Borrower for punitive, exemplary or
consequential damages, including, without limitation, lost profits, whatever the
nature of a breach by Lender of its obligations under this Agreement or any of
the Loan Documents, and Borrower waives all claims for punitive, exemplary or
consequential damages.

 

17.12 Claims Against Lender.

  

Lender shall not be in default under this Agreement, or under any other Loan
Documents, unless a written notice specifically setting forth the claim of
Borrower shall have been given to Lender within three (3) months after Borrower
first had knowledge of the occurrence of the event which Borrower alleges gave
rise to such claim and Lender does not remedy or cure the default, if any there
be, promptly thereafter. Borrower waives any claim, set-off or defense against
Lender arising by reason of any alleged default by Lender as to which Borrower
does not give such notice timely as aforesaid. Borrower acknowledges that such
waiver is or may be essential to Lender’s ability to enforce its remedies
without delay and that such waiver therefore constitutes a substantial part of
the bargain between Lender and Borrower with regard to the Loan.

 

 

 
32

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17.13 Jurisdiction.

  

TO THE GREATEST EXTENT PERMITTED BY LAW, BORROWER HEREBY WAIVES ANY AND ALL
RIGHTS TO REQUIRE MARSHALLING OF ASSETS BY LENDER. WITH RESPECT TO ANY SUIT,
ACTION OR PROCEEDINGS RELATING TO THIS AGREEMENT (EACH, A “PROCEEDING”),
BORROWER IRREVOCABLY (A) SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS HAVING JURISDICTION IN THE CITY OF DALLAS, COUNTY OF DALLAS
AND STATE OF TEXAS, AND (B) WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME
TO THE LAYING OF VENUE OF ANY PROCEEDING BROUGHT IN ANY SUCH COURT, WAIVES ANY
CLAIM THAT ANY PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND FURTHER
WAIVES THE RIGHT TO OBJECT, WITH RESPECT TO SUCH PROCEEDING, THAT SUCH COURT
DOES NOT HAVE JURISDICTION OVER SUCH PARTY. NOTHING IN THIS AGREEMENT SHALL
PRECLUDE LENDER FROM BRINGING A PROCEEDING IN ANY OTHER JURISDICTION NOR WILL
THE BRINGING OF A PROCEEDING IN ANY ONE OR MORE JURISDICTIONS PRECLUDE THE
BRINGING OF A PROCEEDING IN ANY OTHER JURISDICTION. BORROWER FURTHER AGREES AND
CONSENTS THAT, IN ADDITION TO ANY METHODS OF SERVICE OF PROCESS PROVIDED FOR
UNDER APPLICABLE LAW, ALL SERVICE OF PROCESS IN ANY PROCEEDING IN ANY TEXAS
STATE OR UNITED STATES COURT SITTING IN THE CITY OF DALLAS AND COUNTY OF DALLAS
MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED
TO BORROWER AT THE ADDRESS INDICATED BELOW, AND SERVICE SO MADE SHALL BE
COMPLETE UPON RECEIPT; EXCEPT THAT IF BORROWER SHALL REFUSE TO ACCEPT DELIVERY,
SERVICE SHALL BE DEEMED COMPLETE FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN SO
MAILED.

 

17.14     Reserved.

 

17.15     Lender’s Consent.

  

Wherever in this Agreement there is a requirement for Lender’s consent and/or a
document to be provided or an action taken “to the satisfaction of Lender”, it
is understood by such phrase that, except as expressly modified herein, Lender
shall exercise its consent, right or judgment in its sole discretion.

 

17.16     Notices.

  

Any notice, demand, request or other communication which any party hereto may be
required or may desire to give hereunder shall be in writing and shall be deemed
to have been properly given (a) if hand delivered, when delivered; (b) if mailed
by United States Certified Mail (postage prepaid, return receipt requested),
three (3) Business Days after mailing (c) if by Federal Express or other
reliable overnight courier service, on the next Business Day after delivered to
such courier service or (d) if by telecopier on the day of transmission so long
as copy is sent on the same day by overnight courier as set forth below:

  

 

 
33

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If to Borrower:

 

Bank of Commerce Holdings

1901 Churn Creek Road

Redding, California 96002

Attention: Sam Jimenez

Telephone: 530-722-3952

Facsimile: 530-722-3946

  

With a copy to:

 

Miller Nash Graham & Dunn LLP

2801 Alaskan Way, Suite 300

Seattle, Washington 98121

Attention: Faye Ricci

Telephone: 206-624-8300

Facsimile: 206-340-9599

  

If to Lender:

NexBank SSB

2515 McKinney Avenue, Suite 1100

Dallas, Texas 75201

Attention: Josh Latina

Telephone: 404-991-8518

 

With a copy to:

 

Haynes and Boone, LLP

2323 Victory Avenue, Suite 700

Dallas, Texas 75219

Attention: Darrel Rice

Telephone: 214-651-5969

Facsimile: 214-200-0664

  

or at such other address as the party to be served with notice may have
furnished in writing to the party seeking or desiring to serve notice as a place
for the service of notice.

 

17.17     Waiver of Jury Trial.

 

BORROWER AND LENDER EACH WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS OR RELATING THERETO OR ARISING FROM THE LENDING RELATIONSHIP
WHICH IS THE SUBJECT OF THIS AGREEMENT AND AGREE THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

 

 

 
34

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17.18     No Oral Agreements.

 

THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN
THE PARTIES.

 

[Signature page follows.]

 

 

 
35

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EXECUTED as of the date first set forth above.

  

 

  BORROWER:        

 

BANK OF COMMERCE HOLDINGS

 

 

 

 

 

 

By:

/s/ Samuel D. Jimenez

 

 

Name:

Samuel D. Jimenez

 

 

Title: 

Executive Vice President and Chief Operating Officer

 

  

 

  LENDER:        

 

NEXBANK SSB

 

 

 

 

 

 

 

 

 

 

By:

/s/ Rhett A. Miller III

 

 

Name:

Rhett A. Miller III

 

 

Title:

SVP and Chief Credit Officer

 

 

 

 [Signature page to Loan Agreement]
36

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EXHIBIT A

  

Certificate of Compliance

  

NexBank SSB

2515 McKinney Avenue, Suite 1100

Dallas, Texas 75201

 

Attn: [●]

  

Re: Loan Agreement dated as of December 10, 2015 (as amended, modified,
supplemented, restated, or

renewed, from time to time, the “Agreement”), between Bank of Commerce Holdings
(“Borrower”) and NEXBANK SSB (“Lender”).

  

Reference is made to the Agreement. Capitalized terms used in this Certificate
(including schedules and other attachments hereto, this “Certificate”) without
definition have the meanings specified in the Agreement.

  

Pursuant to applicable provisions of the Agreement, the undersigned, being the
Authorized Representative designated in the Agreement, hereby certifies to the
Lender that the information furnished in the attached schedules, including,
without limitation, each of the calculations listed below are true, correct and
complete in all material respects as of the last day of the fiscal periods
subject to the financial statements and associated covenants being delivered to
the Lender pursuant to the Agreement together with this Certificate (such
statements the “Financial Statements” and the periods covered thereby the
“reporting period”) and for such reporting periods.

  

The undersigned hereby further certifies to the Lender that:

  

1.     Borrower’s Compliance with Financial Covenants. As shown below, the
Borrower, is in full compliance with the Financial Covenants contained in the
Agreement. All covenants are expressed as a percentage.

  

A.            Covenant: Leverage Ratio of not less than 7% tested quarterly

 

Calculation:

 

Leverage Ratio = Tier 1 Capital / Average Total Assets

  

Leverage Ratio of       for period ending      .

 

[Borrower to include specific calculation based upon formula outlined in
Agreement]

 

Compliance? (Yes or No)                                   

  

 

 
A-1

--------------------------------------------------------------------------------

 

  

B.            Covenant: Fixed Charge Coverage Ratio of less than 1.50 to 1.0
tested quarterly

 

Calculation:

 

Fixed Charge Coverage Ratio = Adjusted EBITDA / Consolidated Fixed Charges

  

Fixed Charge Coverage Ratio of       for period ending      .

 

[Borrower to include specific calculation based upon formula outlined in
Agreement]

 

Compliance? (Yes or No)                                   

  

2.     Bank’s Compliance with Financial Covenants. As shown below, the Bank, is
in full compliance with the Financial Covenants contained in the Agreement. All
covenants are expressed as a percentage.

 

A.           Covenant: Classified Assets to Tier 1 Capital Ratio of no greater
than 50% tested quarterly

 

Calculation:

 

Classified Assets to Tier 1 Capital Ratio = Classified Assets / (Tier 1 Capital
+ Allowance for Loan and Lease Losses)

 

 

Classified Assets to Tier 1 Capital Ratio of       for period ending      .

 

[Borrower to include specific calculation based upon formula outlined in
Agreement]

 

Compliance? (Yes or No)                                   

  

B.              Covenant: Texas Ratio of 40% or less tested quarterly

 

Calculation:

 

Texas Ratio = (Total Non-Accrual Loans + Other Real Estate Owned of such Person
+ loans in default for 90 days or more) / ((Total Capital + unrealized losses
(gains) on securities + Allowance for Loan and Lease Losses) - (Intangible
Assets))

 

Texas Ratio of       for period ending ___     .

 

[Borrower to include specific calculation based upon formula outlined in
Agreement]

 

Compliance? (Yes or No)                                   

  

 

 
A-2

--------------------------------------------------------------------------------

 

  

C.             Covenant: Leverage Ratio of not less than 8% tested quarterly

 

Calculation:

 

Leverage Ratio = Tier 1 Capital / Average Total Assets

  

Leverage Ratio of       for period ending      .

 

[Borrower to include specific calculation based upon formula outlined in
Agreement]

 

Compliance? (Yes or No)                                   

  

D.             Covenant: Total Risk-Based Capital Ratio of 11.50% or greater
tested quarterly

 

Calculation:

 

Total Risk-Based Capital Ratio = (Tier 1 Capital + Tier 2 Capital) / Total
Risk-Weighted Assets

  

Total Risk-Based Capital Ratio of       for period ending      .

 

[Borrower to include specific calculation based upon formula outlined in
Agreement]

 

Compliance? (Yes or No)                                   

  

3. Review of Condition. The undersigned has reviewed the terms of the Loan
Documents, including, but not limited to, the representations and warranties of
the Borrower set forth in the Loan Documents and the covenants of the Borrower
set forth in the Loan Documents, and has made, or caused to be made under his or
her supervision, a review in reasonable detail of the transactions and condition
of the Borrower through the reporting periods.

  

4. Representations and Warranties. The representations and warranties of the
Borrower contained in the Loan Documents, including those contained in the
Agreement, are true and accurate in all material respects as of the date hereof
and were true and accurate in all material respects at all times during the
reporting period except as expressly noted on Schedule A hereto.

 

5. Covenants.       During the reporting period, the Borrower observed and
performed all of the respective covenants and other agreements under the Loan
Documents, and satisfied each of the conditions contained therein to be
observed, performed or satisfied by the Borrower, except as expressly noted on
Schedule A hereto.

  

6. No Event of Default.    No Event of Default exists as of the date hereof or
existed at any time during the reporting period, except as expressly noted on
Schedule A hereto.

 

 

 
A-3

--------------------------------------------------------------------------------

 

  

IN WITNESS WHEREOF, this Certificate is executed by the undersigned this
         day of                     .

  

 

[●]

 

 

 

 

 

 

 

By:

 

 

 

 

Authorized Representative

 

 

 

 
A-4

--------------------------------------------------------------------------------

 

 

SCHEDULE 11.1(b)

 

Indebtedness

  

 

1.

Subordinated Notes issued to one or more purchasers pursuant to the Subordinated
Note Purchase Agreement, dated as of December 10, 2015 by and among Bank of
Commerce Holdings and the Purchasers named therein.

  

 

2.

Bank of Commerce Holdings Trust II Trust Preferred Securities Guaranteed by Bank
of Commerce Holdings and issued pursuant to an Indenture, dated as of July 29,
2005.

 

 

 
 

--------------------------------------------------------------------------------

 

  

SCHEDULE 11.2(b)

 

Liens

  

None.

 

 

 
 

--------------------------------------------------------------------------------

 

 

SCHEDULE 11.8

 

Restrictive Agreements

  

None, except to the extent such restrictions are included in (a) the
Subordinated Note Purchase Agreement, dated as of December 10, 2015 by and among
Bank of Commerce Holdings and the Purchasers named therein, or (b) Bank of
Commerce Holdings Trust II Trust Preferred Securities Guaranteed by Bank of
Commerce Holdings and issued pursuant to an Indenture, dated as of July 29,
2005.