Document:

ex_381037.htm

Exhibit 10.1

 

 

 

 

LOAN AGREEMENT

 

for a loan in the amount of

 

$20,000,000

 

 

 

 

MADE BY AND BETWEEN

 

FIRST NORTHWEST BANCORP

105 W. Eighth St.

Port Angeles, WA 98362

as Borrower

 

AND

 

NEXBANK,

2515 McKinney Avenue, Suite 1100,

Dallas, Texas 75201,

as Lender

 

Dated as of May 20, 2022

 

 

 

 

 

 

TABLE OF CONTENTS

 

Page

 

	
			ARTICLE I INCORPORATION OF RECITALS AND EXHIBITS

				
			1

			
	
			1.1

				
			Incorporation of Recitals

				
			1

			
	
			1.2

				
			Incorporation of Exhibits

				
			1

			
	 	 	 
	
			ARTICLE II DEFINITIONS

				1
	
			2.1

				
			Defined Terms

				
			1

			
	
			2.2

				
			Other Definitional Provisions

				
			10

			
	
			2.3

				
			Accounting Terms

				
			11

			
	 	 	 
	
			ARTICLE III BORROWER’S REPRESENTATIONS AND WARRANTIES

				
			11

			
	
			3.1

				
			Representations and Warranties

				
			11

			
	 	 	 
	
			ARTICLE IV LOAN AND LOAN DOCUMENTS

				
			14

			
	
			4.1

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

				
			14

			
	
			4.2

				
			Loan Documents

				
			15

			
	
			4.3

				
			Term of the Loan

				
			15

			
	
			4.4

				
			Voluntary Prepayments

				
			15

			
	
			4.5

				
			Reserved

				
			15

			
	
			4.6

				
			Extension of Maturity Date

				
			15

			
	 	 	 
	
			ARTICLE V INTEREST

				
			15

			
	
			5.1

				
			Interest Rate.

				
			15

			
	
			5.2

				
			Required Principal and Interest Payments

				
			16

			
	
			5.3

				
			Maximum Lawful Rate

				
			16

			
	 	 	 
	
			ARTICLE VI COSTS OF MAINTAINING LOAN

				
			16

			
	
			6.1

				
			Increased Costs and Capital Adequacy

				
			16

			
	
			6.2

				
			Borrower Withholding

				
			17

			
	 	 	 
	
			ARTICLE VII LOAN EXPENSE AND ADVANCES

				
			17

			
	
			7.1

				
			Costs and Expenses

				
			17

			
	
			7.2

				
			Time of Payment of Fees and Expenses

				
			17

			
	
			7.3

				
			Expenses and Advances Secured by Loan Documents

				
			17

			
	
			7.4

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

				
			18

			
	 	 	 
	
			ARTICLE VIII CONDITIONS PRECEDENT TO THE OPENING OF THE LOAN

				
			18

			
	
			8.1

				
			Conditions Precedent to Initial Extension of Credit

				
			18

			
	
			8.2

				
			Conditions Precedent to All Extensions of Credit

				
			19

			
	 	 	 
	
			ARTICLE IX RESERVED

				
			20

			
	 	 	 
	
			ARTICLE X AFFIRMATIVE COVENANTS

				
			20

			
	
			10.1

				
			Furnishing Information

				
			20

			
	
			10.2

				
			Maintenance of Insurance

				
			21

			
	
			10.3

				
			Payment of Taxes

				
			21

			
	
			10.4

				
			Lender’s Attorneys’ Fees for Enforcement of Agreement

				
			21

			
	
			10.5

				
			Use of Proceeds

				
			22

			
	
			10.6

				
			Lost Note

				
			22

			
	
			10.7

				
			Indemnification

				
			22

			
	 	 	 
	
			ARTICLE XI NEGATIVE COVENANTS

				
			22

			
	
			11.1

				
			Indebtedness

				
			22

			

 

i

 

 

	
			11.2

				
			Liens

				
			23

			
	
			11.3

				
			Fundamental Changes; Disposition of Assets

				
			23

			
	
			11.4

				
			Investments, Loans, Advances, Guarantees and Acquisitions

				
			23

			
	
			11.5

				
			Swap Agreements

				
			24

			
	
			11.6

				
			Reserved

				
			24

			
	
			11.7

				
			Transactions with Affiliates

				
			24

			
	
			11.8

				
			Restrictive Agreements

				
			24

			
	
			11.9

				
			Leverage Ratio

				
			24

			
	
			11.1

				
			Texas Ratio

				
			24

			
	
			11.11

				
			Classified Assets to Tier 1 Capital Ratio

				
			24

			
	
			11.12

				
			Fixed Charge Coverage Ratio

				
			24

			
	
			11.13

				
			Total Risk-Based Capital Ratio

				
			24

			
	
			11.14

				
			Limitation on Payments and Modification of Subordinated Indebtedness

				
			24

			
	 	 	 
	
			Article XII RESERVED

				
			25

			
	 	 	 
	
			ARTICLE XIII ASSIGNMENTS BY LENDER AND BORROWER

				
			25

			
	
			13.1

				
			Assignments and Participations

				
			25

			
	
			13.2

				
			Prohibition of Assignments by Borrower

				
			25

			
	
			13.3

				
			Successors and Assigns

				
			25

			
	 	 	 
	
			ARTICLE XIV TIME OF THE ESSENCE

				
			25

			
	
			14.1

				
			Time is of the Essence

				
			25

			
	 	 	 
	
			ARTICLE XV EVENTS OF DEFAULT

				
			25

			
	
			15.1

				
			Events of Default

				
			25

			
	 	 	 
	
			ARTICLE XVI LENDER’S REMEDIES IN EVENT OF DEFAULT

				
			27

			
	
			16.1

				
			Remedies Conferred Upon Lender

				
			27

			
	 	 	 
	
			ARTICLE XVII GENERAL PROVISIONS

				
			28

			
	
			17.1

				
			Captions

				
			28

			
	
			17.2

				
			Modification; Waiver

				
			28

			
	
			17.3

				
			Authorized Representative

				
			28

			
	
			17.4

				
			Governing Law

				
			28

			
	
			17.5

				
			Acquiescence Not to Constitute Waiver of Lender’s Requirements

				
			28

			
	
			17.6

				
			Disclaimer by Lender

				
			28

			
	
			17.7

				
			Partial Invalidity; Severability

				
			28

			
	
			17.8

				
			Definitions Include Amendments

				
			28

			
	
			17.9

				
			Execution in Counterparts

				
			29

			
	
			17.1

				
			Entire Agreement

				
			29

			
	
			17.11

				
			Waiver of Damages

				
			29

			
	
			17.12

				
			Jurisdiction

				
			29

			
	
			17.13

				
			Set‐Offs

				
			29

			
	
			17.14

				
			Lender’s Consent

				
			29

			
	
			17.15

				
			Notices

				
			30

			
	
			17.16

				
			Waiver of Jury Trial

				
			31

			
	
			17.17

				
			No Oral Agreements

				
			31

			

 

ii

 

 

LOAN AGREEMENT

 

THIS LOAN AGREEMENT (as the same may be amended, restated, supplemented or otherwise modified from time to time, this “Agreement”) is made as of May 20, 2022 (the “Effective Date”), by and between FIRST NORTHWEST BANCORP, a Washington corporation (“Borrower”) and NEXBANK, a Texas state bank, its successors and assigns (“Lender”).

 

W I T N E S S E T H:

 

RECITALS

 

WHEREAS, Borrower has applied to Lender for Revolving Credit Advances (as defined herein) in an aggregate amount not to exceed TWENTY MILLION DOLLARS ($20,000,000) (the “Loans”), and Lender is willing to make the Loans 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, which is attached hereto is hereby 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:

 

“Advance Request Form” means a certificate, in a form approved by Lender, properly completed and signed by Borrower requesting a Revolving Credit Advance.

 

“Affiliate” means 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” means as such term is defined in the Preamble.

 

“Allowance for Loan” and “Lease Losses” means 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 Bank Regulatory Authority” means, when used with reference to a Person, the Bank Regulatory Authority or Authorities which have jurisdiction over such Person.

 

“Applicable Rate” means as such term is defined in Section 5.1(a).

 

 

 

 

“Authorized Representative” means each person appointed as an Authorized Representative pursuant to Section 17.3.

 

“Average Total Assets” means 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” means First Fed Bank, a wholly owned subsidiary of Borrower, and any other Subsidiary of Borrower, the deposits of which are insured by the FDIC pursuant to the FDIA.

 

“Bank Regulatory Authority” means the Washington State Department of Financial Institutions, the OCC, the FDIC, the Board of Governors of the Federal Reserve System, OFAC, any regulatory authority (whether Federal or State) that has jurisdiction over the operations of Borrower, as a bank holding company, or over the banking operations of the Bank and all other relevant regulatory authorities (including, without limitation, relevant state bank regulatory authorities).

 

“Bankers Blanket Bond” means a fidelity bond or insurance policy providing coverage for losses resulting from criminal activities and other actions of employees, officers or directors of a commercial bank.

 

“Bankruptcy Code” means 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.

 

“Beneficial Ownership Certification” means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.

 

“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.

 

“BHCA” means the United States Bank Holding Company Act of 1956, as amended.

 

“BHCPR” means the Bank Holding Company Performance Report, as promulgated by the Board of Governors of the Federal Reserve System.

 

“Borrower” means as such term is defined in the Preamble.

 

“Business Day” means a day of the year on which banks are not required or authorized to close in Dallas, Texas.

 

“Call Report” means for each Bank, the “Consolidated Reports of Condition and Income” (FFIEC Form 031, Form 041 or other applicable form), or any successor form promulgated by the FFIEC.

 

“Capital Lease Obligations” means 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.

 

2

 

 

“Cash Equivalents” means (a) marketable direct obligations issued or unconditionally guaranteed by the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case, maturing within six months from the date of acquisition thereof; (b) commercial paper, maturing not more than 270 days after the date of issue rated P 1 by Moody's or A 1 by Standard & Poor's; (c) certificates of deposit maturing not more than 270 days after the date of issue, issued by commercial banking institutions and money market or demand deposit accounts maintained at commercial banking institutions, each of which is a member of the Federal Reserve System and has a combined capital and surplus and undivided profits of not less than $500,000,000; (d) repurchase agreements having maturities of not more than 90 days from the date of acquisition which are entered into with major money center banks included in the commercial banking institutions described in clause (c) above and which are secured by readily marketable direct obligations of the United States Government or any agency thereof; (e) money market accounts maintained with mutual funds having assets in excess of $2,500,000,000, which assets are primarily comprised of Cash Equivalents described in another clause of this definition; and (f) marketable tax exempt securities rated A or higher by Moody's or A+ or higher by Standard & Poor's, in each case, maturing within 270 days from the date of acquisition thereof.

 

“Change of Control” means (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 thirty‐five percent (35%) or more of the capital stock or voting power of Borrower (or any one of its successors, or any Subsidiary of Borrower or any of its successors), Borrower (or its successor), or any Subsidiary of Borrower or its successor, consolidates with, or merges with or into, another Person, or any Person consolidates with, or merges with or into, Borrower, in each case, whether pursuant to one or any series of transactions, except where (i) Borrower is the surviving entity and (ii) the ultimate beneficial owners of Borrower’s outstanding capital stock or voting power immediately prior to such transaction or transactions own not less than 51% of the outstanding capital stock or voting power of Borrower (or such successor) immediately after such transaction or transactions, (c) 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, or (d) Borrower shall cease to beneficially own and control one hundred percent (100%) on a fully diluted basis of the economic and voting interests in the Equity Interests of the Bank.

 

“Classified Assets” means 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” means 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” means 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.

 

“Constituent Documents” means (a) in the case of a corporation, its articles of incorporation, certificate of incorporation or certificate of formation 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” means 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.

 

3

 

 

“Default” or “default” means 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.

 

“Default Rate” means a rate per annum equal to 2% in excess of the Applicable Rate, but which shall not at any time exceed the Maximum Lawful Rate.

 

“EBITDA” means for any period, Net Income of Borrower 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) the portion of Taxes based on income actually paid in cash and provisions for cash income Taxes, (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, (e) losses on the sale of securities, and (f) any non‐cash items reducing Net Income for such period, minus (i) gains on the sale of any securities, (ii) any extraordinary or non‐recurring items increasing Net Income for such period and (iii) any non‐cash items increasing Net Income for such period.

 

“Effective Date” means as defined in the Preamble.

 

“Environmental Proceedings” means any environmental proceedings, whether civil (including actions by private parties), criminal, or administrative proceedings, relating to Borrower.

 

“Equity Interests” means shares of capital stock of a corporation, 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” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder from time to time.

 

“Event of Default” means as such term is defined in Article XV.

 

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

 

“FDIC” means the Federal Deposit Insurance Corporation, or any successor Governmental Authority then performing the same or substantially similar duties.

 

“Federal Reserve Bank” means the Federal Reserve Bank or the Board of Governors of the Federal Reserve System, or any successor Governmental Authority then performing the same or substantially similar duties.

 

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

 

“Fixed Charges” means for any period, the sum, without duplication, of the amounts determined for Borrower equal to (a) Interest Expense and (b) scheduled payments of principal on Total Debt.

 

“Fixed Charge Coverage Ratio” means with respect to Borrower, the ratio as of the last day of any fiscal quarter of (a) EBITDA, to (b) Fixed Charges, all for the four fiscal quarter period ending on such date.

 

4

 

 

“GAAP” means generally accepted accounting principles, applied on a consistent basis, as set forth in Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and/or in statements of the Financial Accounting Standards Board and/or their respective successors and which are applicable in the circumstances as of the date in question. Accounting principles are applied on a “consistent basis” when the accounting principles observed in a current period are comparable in all material respects to those accounting principles applied in a preceding period.

 

“Governmental Approvals” means all authorizations, consents, approvals, permits, licenses and exemptions of, registrations and filings with, and reports to, all Governmental Authorities.

 

“Governmental Authority” means any nation or government, any state, federal, county 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” means 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” means including but not limited to and including without limitation.

 

“Indebtedness” means 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 under conditional sale or other title retention agreements relating to property acquired by such Person, (d) 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), (e) 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 Capital Lease Obligations of such Person, (h) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (i) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances, and (j) all Guarantees by such Person of Indebtedness of others of the kind described in clauses (a) through (i). 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 under applicable Law 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.

 

5

 

 

“Intangible Assets” means as defined in accordance with the then‐current regulations of the Applicable Bank Regulatory Authority.

 

“Interest Expense” means 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, related to direct obligations of Borrower.

 

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

 

“Laws” means 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” means as defined in the opening paragraph of this Agreement and includes any successor holder of the Loans from time to time.

 

“Leverage Ratio” means 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.

 

“Lien” means 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 Amount” means the maximum amount of the Loans as set forth in Section 4.1(a).

 

“Loans” has the meaning given such term in the Recitals.

 

“Loan Documents” means 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” means the date of the initial disbursement of proceeds of the Loan.

 

“Material Adverse Change” or “material adverse change” means if the business 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” means the earlier of (a) May 19, 2023 or such later date as shall be established pursuant to Section 4.6 and (b) the date of the acceleration of the Obligation pursuant to this Agreement.

 

“Maximum Lawful Rate” means as such term is defined in Section 5.3.

 

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

 

“Net Income” means for any period, the net income of Borrower determined in accordance with GAAP.

 

6

 

 

“Note” means a promissory note, in the principal amount of the Loan Amount, executed by Borrower and payable to the order of Lender, evidencing the Loan.

 

“Note Rate” means a rate per annum equal to the sum of (a) the Prime Rate plus (b) fifty basis points (0.50%). In no event shall the Note Rate be less than 4.00% at any time.

 

“Obligations” means all obligations, indebtedness, and liabilities of Borrower to Lender now existing or hereafter arising, whether direct, indirect, related, unrelated, fixed, contingent, liquidated, unliquidated, joint, several, or joint and several, including, in each case arising out of this Agreement, the Note, 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.

 

“OCC” means the Office of the Comptroller of the Currency, or any successor Governmental Authority then performing the same or substantially similar duties.

 

“OFAC” means as defined in Section 3.1(u).

 

“Open the Loan”, “Opening of the Loan” or “Loan Opening” means the initial disbursement of Loans on the Loan Opening Date.

 

“Other Real Estate Owned” means as defined in accordance with the then‐current regulations of the Applicable Bank Regulatory Authority.

 

“Payment Date” means the last day of each and every calendar quarter during the term of the Note (or, if such date is not a Business Day, on the immediately succeeding Business Day).

 

“Permitted Investments” means 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 two hundred seventy (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 one hundred eighty (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;

 

7

 

 

(e)         fully collateralized repurchase agreements with a term of not more than thirty (30) days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (d) 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)         swaps permitted by Section 11.5.

 

“Permitted Liens” means 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 thirty (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;

 

(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 Borrower;

 

(g)         liens arising solely by virtue of any statutory or common law provision relating to bankers’ liens, rights of set-off or similar rights and remedies as to deposit accounts, securities accounts or other funds maintained with a creditor depository institution; and

 

(h)         bankers’ Liens, rights of setoff and other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or more accounts maintained by the Borrower or any of its Subsidiaries with any Lender, in each case in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, securing solely the customary amounts owing to such bank with respect to cash management and operating account arrangements.

 

“Permitted Tax Distributions” means 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.

 

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“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, bank, Governmental Authority or other entity.

 

“Prime Rate” means, for any day, the rate of interest per annum quoted in the “Money Rates” section of The Wall Street Journal from time to time and designated as the “Prime Rate.” If such prime rate, as so quoted is split between two or more different interest rates, then the Prime Rate shall be the highest of such interest rates. If such prime rate shall cease to be published or is published infrequently or sporadically, then the Prime Rate shall be the rate of interest per annum established from time to time by Lender and designated as its base or prime rate, which may not necessarily be the lowest interest rate charged by Lender and is set by Lender in its sole discretion.

 

“Restricted Payment” means (a) any dividend or other distribution (whether in cash or other property) with respect to any Equity Interests in the Borrower, (b) any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in the Borrower or Bank, (c) any payment (whether in cash 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 any option, warrant or other right to acquire any such Equity Interests in the Borrower or Bank, or (d) 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.

 

“Revolving Credit Advance” means any advance made by Lender to Borrower pursuant to Article IV of this Agreement.

 

“Risk‐Based Capital Guidelines” means (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 Bank Regulatory Authorities, in each case pursuant to Basel III, regardless of the date enacted, adopted or issued.

 

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw‐Hill Companies, Inc. and any successor thereto.

 

“Sanctioned Entity” means (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” means 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.

 

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“Security Agreement” means the 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.

 

“Security Documents” means the Security 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” means 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.

 

“Subsidiary” means (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.

 

“Swap Agreement” means 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” means 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” means 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 (unless the loan is both well secured and in the process of collection) to (b)(i) Total Capital of such Person, plus (ii) unrealized losses (gains) on securities owned by such Person, plus (iii) Allowance for Loan and Lease Losses of such Person, minus (iv) Intangible Assets of such Person.

 

“Tier 1 Capital” means as defined in accordance with the then‐current regulations of the Applicable Bank Regulatory Authority.

 

“Tier 2 Capital” means as defined in accordance with the then‐current regulations of the Applicable Bank Regulatory Authority.

 

“Total Capital” means as defined in accordance with the then‐current regulations of the Applicable Bank Regulatory Authority.

 

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“Total Debt” means as at any date of determination, the aggregate stated balance sheet amount of all Indebtedness related to direct obligations of Borrower determined in accordance with GAAP.

 

“Total Non‐Accrual Loans” means total value of the loans held by any Person that are classified as non‐accrual in accordance with the then‐current regulations of the Applicable Bank Regulatory Authority and/or Call Report instructions, or that meets any of the following conditions: (a) it is maintained on a cash basis because 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).

 

“Total Risk‐Based Capital Ratio” means 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” means as defined in accordance with the then‐current regulations of the Applicable Bank Regulatory Authority.

 

“Wellmade Note” means that certain Promissory Note dated February 28, 2022, in the face principal amount of $9,000,000 made by Wellmade Floor Coverings International, Inc. and Wellmade Industries MFR. N.A LLC in favor of Borrower.

 

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.

 

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 as follows:

 

(a)    Except as previously disclosed to Lender in writing, no litigation or proceedings are pending, or to the best of Borrower’s knowledge threatened in writing, against Borrower or its Subsidiaries, that could, if adversely determined, cause a Material Adverse Change. 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.

 

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(b)    Borrower is a duly formed 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 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 Borrower’s execution, delivery and performance of this Agreement or any of the Loan Documents other than the filing of UCC‐1 financing statements, except for (i) such consents, approvals or authorizations of or declarations or filings with any Governmental Authority or non‐governmental person or entity that have been obtained as of any date on which this representation is made or remade, and (ii) those required in connection with an exercise of remedies by the Lender with respect to the Collateral. 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, threatened in writing, attack by direct or collateral proceeding, (ii) is in compliance with each Governmental Approval applicable to it and in compliance with all other applicable Laws relating to it or any of its respective properties, (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, and (iv) has all Governmental Approvals with respect to the pledge of the Collateral in favor of Lender except in each case (i), (ii) or (iii) above where the failure to have, comply or file could not reasonably be expected to have a Material Adverse Change.

 

(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 any of 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 that, 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 Loans to be disbursed hereunder.

 

(h)    All financial statements and other information previously furnished by Borrower or its Subsidiaries to Lender in connection with the Loans are true, complete and correct in all material respects 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 material Indebtedness not disclosed in such financial statements.

 

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(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 for Permitted Liens, all such property is free and clear of Liens.

 

(j)    The Bank has not received written notice from any Bank Regulatory Authority that it is subject to any formal or informal enforcement action by a Bank Regulatory Authority.

 

(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 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)    Neither Borrower nor any of its Subsidiaries is engaged or will engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U), or extending credit for the purpose of purchasing or carrying margin stock. Following the application of the proceeds of each Revolving Credit Advance, not more than 25% of the value of the assets (either of Borrower only or of Borrower and its Subsidiaries on a consolidated basis) subject to the provisions of Section 11.2 or 11.3 or subject to any restriction contained in any agreement or instrument between Borrower or any of its Subsidiaries and Lender or any Affiliate of Lender relating to Indebtedness and within the scope of Section 15.1(g) will be margin stock.

 

(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 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)    No reports, financial statements, certificates or other information furnished by 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.

 

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(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 17.15.

 

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

 

(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 Borrower, any Subsidiary of Borrower or any Affiliate of 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.

 

ARTICLE IV 

LOAN AND LOAN DOCUMENTS

 

4.1    Agreement to Borrow and Lend; Lender’s Obligation to Disburse. Subject to the terms and conditions of this Agreement, Lender agrees to make one or more revolving credit loans to Borrower from time to time from the date hereof to and including the Maturity Date in an aggregate principal amount at any time outstanding up to but not exceeding the amount of the Loan Amount. Subject to the foregoing limitations, and the other terms and provisions of this Agreement, Borrower may borrow, repay, and reborrow hereunder.

 

(a)    The obligation of Borrower to repay the Revolving Credit Advances and interest thereon shall be evidenced by the Note executed by Borrower, and payable to the order of Lender, in the principal amount of the Loan Amount as originally in effect. Borrower shall repay the unpaid principal amount of all Revolving Credit Advances on the Maturity Date, unless sooner due by reason of acceleration by Lender as provided in this Agreement. The maximum aggregate principal amount of the Loans shall not at any time exceed twenty million Dollars ($20,000,000) (the “Loan Amount”).

 

(b)    Lender agrees, upon Borrower’s compliance with and satisfaction of all conditions precedent set forth in Section 8.1, 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.

 

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(d)    Borrower shall give Lender notice of each Revolving Credit Advance by means of an Advance Request Form containing the information required therein and delivered (by hand or by mechanically confirmed facsimile, including electronic transmission) to Lender no later than 2:00 p.m. Central Time at least one (1) Business Day before the day on which the Revolving Credit Advances are desired to be funded. Revolving Credit Advances shall be in a minimum amount of $100,000. Lender at its option may accept telephonic requests for such Revolving Credit Advances, provided that such acceptance shall not constitute a waiver of Lender’s right to require delivery of a Revolving Credit Advance Request Form in connection with subsequent Revolving Credit Advances. Any telephonic request for a Revolving Credit Advance by Borrower shall be promptly confirmed by submission of a properly completed Advance Request Form to Lender, but failure to deliver an Advance Request Form shall not be a defense to payment of the Revolving Credit Advance. Lender shall have no liability to Borrower for any loss or damage suffered by Borrower as a result of Lender’s honoring of any requests, execution of any instructions, authorizations or agreements or reliance on any reports communicated to it telephonically, by facsimile or electronically and purporting to have been sent to Lender by Borrower and Lender shall have no duty to verify the origin of any such communication or the identity or authority of the Person sending it. Subject to the terms and conditions of this Agreement, each Revolving Credit Advance shall be made available to Borrower by depositing the same, in immediately available funds, in an account of Borrower designated by Borrower maintained with Lender at its principal office.

 

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)    This Agreement.

 

(b)    The Note.

 

(c)    Each Security Document.

 

(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.

 

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    Voluntary Prepayments. Borrower shall have the right to make prepayments of the Loan, in whole or in part.

 

4.5    Reserved.

 

4.6    Extension of Maturity Date. So long as no Event of Default shall have occurred and be continuing on the date on which notice is given in accordance with the following clause (i) or on the then-effective Maturity Date, Borrower may extend the Maturity Date to a date that is three hundred and sixty-four (364) days after the then-effective Maturity Date, no more than two times, upon: (i) delivery of a written notice therefor to Lender at least thirty (30) days, but no more than (60) days, prior to the Maturity Date then in effect; (ii) receipt by the Lender of a certificate of Borrower dated the date of such request stating that (A) no Default or Event of Default then exists and is continuing and (B)  Borrower is in compliance with the covenants set forth in Article X and Article XI of this Agreement. Such extension shall be evidenced by delivery of written confirmation of the same by Lender to Borrower, but such confirmation is not a condition to such extension.

 

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ARTICLE V 

INTEREST

 

5.1    Interest Rate.

 

(a)    Subject to Section 5.3, any outstanding principal of any Revolving Credit Advance and (to the fullest extent permitted by law) any other amount payable by Borrower under this Agreement or any other Loan Document 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 three hundred sixty (360) day year, including the first date of the applicable period to, but not including, the date of repayment.

 

(c)    Any outstanding principal of any Revolving Credit Advance and (to the fullest extent permitted by law) any other amount payable by Borrower under this Agreement or any other Loan Document that is not paid in full when due (whether at stated maturity, by acceleration or otherwise) shall bear interest at the Default Rate for the period from and including the due date thereof to but excluding the date the same is paid in full. Additionally, upon the request of Lender at any time that an Event of Default exists, all outstanding and unpaid principal amounts of all of the Obligations shall, to the extent permitted by law, bear interest at the Default Rate. Interest payable at the Default Rate shall be payable from time to time on demand.

 

5.2    Required Principal and Interest Payments. All accrued but unpaid interest on the principal balance of the Loans outstanding from time to time shall be payable on each Payment Date. The then outstanding principal balance of the Loans and all accrued but unpaid interest thereon shall be due and payable on the Maturity Date. Borrower may from time to time during the term of this Agreement borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions of this Agreement; provided, however, that the total outstanding borrowings under this Agreement shall not at any time exceed the Loan Amount. The unpaid principal balance of the Loans at any time shall be the total amount advanced hereunder and the Note by Lender less the amount of principal payments made hereon by or for Borrower, which balance may be endorsed hereon from time to time by Lender or otherwise noted in Lender’s records, which notations shall be, absent manifest error, conclusive evidence of the amounts owing hereunder from time to time. All payments (whether of principal or of interest) shall be deemed credited to Borrower’s account only if received by 2:00 p.m. Central 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 Loans in the inverse order of its maturity and not to the payment of interest, or refunded to 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 Loans 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.

 

Borrower recognizes that the cost to Lender of maintaining the Loans 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 Loans 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 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 Loans 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 Loans or any portion thereof or to reduce the amount of any sum received or receivable from Borrower by Lender under the Loan Documents.

 

Any amount payable by Borrower under this Section 6.1 shall be paid within five (5) 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 receipts or 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.

 

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ARTICLE VII 

LOAN EXPENSE AND ADVANCES

 

7.1    Costs and Expenses. The Borrower shall pay (i) all reasonable out of pocket expenses incurred by Lender (including the reasonable fees, charges and disbursements of counsel for Lender), in connection with the preparation, negotiation, execution, delivery and administration of this Agreement and the other Loan Documents, or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), and (ii) all out of pocket expenses incurred by the Lender (including the fees, charges and disbursements of any counsel for Lender), in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents, or (B) in connection with the Loans made hereunder, including all such out of pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans.

 

7.2    Time of Payment of Fees and Expenses. Borrower shall pay all expenses and fees incurred and invoiced to Borrower 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 deduct from the proceeds of the initial disbursement of the Loans 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.

 

7.3    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.

 

7.4    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 to Initial Extension of Credit. Borrower agrees that Lender’s obligation to Open the Loans and make the initial Revolving Credit Advance under the Note is conditioned upon Borrower’s delivery and satisfaction of the following conditions precedent in form and substance reasonably satisfactory to Lender:

 

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

 

(b)    Insurance Policies. Borrower has 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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(c)    No Litigation. No litigation or proceedings are be pending or threatened that would reasonably be expected to cause a Material Adverse Change with respect to Borrower or its Subsidiaries;

 

(d)    Legal Opinions. Borrower has 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 perfection of the security interests granted under the Loan Documents;

 

(e)    Searches. Borrower shall have furnished to Lender current 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;

 

(f)    Financial Statements. Borrower has furnished to Lender current annual financial statements of Borrower or its Subsidiaries, and such other additional financial information Lender reasonably requires;

 

(g)    Equity Interests of Bank. Borrower has delivered to Lender the share certificates, if any, evidencing the Equity Interests of Bank.

 

(h)    Organizational Documents. Borrower has furnished to Lender proof satisfactory to Lender of authority, formation, organization and good standing (or comparable active status) in the state of its incorporation or formation. Borrower and Bank shall also provide certified resolutions in form and content reasonably 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 Borrower and Bank. 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 (including the certificates contemplated herein) on behalf of such Person together with specimen signatures of such individual Persons;

 

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

 

(j)    Subordinated Indebtedness. Borrower shall deliver documentation related to all Subordinated Indebtedness satisfactory to Lender;

 

(k)    Applicable Bank Regulatory Authority. Borrower shall have furnished to Lender evidence of any approvals, notices and/or filings required or requested by any Applicable Bank Regulatory Authority regarding the pledge of the Collateral in favor of Lender; and

 

(l)    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.

 

8.2    Conditions Precedent to All Extensions of Credit. The obligation of Lender to make any Revolving Credit Advance (including the initial Revolving Credit Advance) is conditioned upon Borrower’s delivery, performance and satisfaction the following additional conditions precedent:

 

(a)    Request for Revolving Credit Advance. Lender shall have received in accordance with this Agreement an Advance Request Form pursuant to Lender’s requirements and executed by an authorized officer of Borrower.

 

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(b)    No Default. No Default shall have occurred and be continuing, or would result from or exist after giving effect to such Revolving Credit Advance.

 

(c)    No Material Adverse Change. No Material Adverse Change has occurred and no circumstance exists that would reasonably be expected to result in a Material Adverse Change.

 

(d)    Representations and Warranties. The representations and warranties in Article III are (i) with respect to any representations or warranties that contain a materiality qualifier, true, complete and correct in all respects as of the date of such Revolving Credit Advance, except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true, complete and correct in all respects on and as of such earlier date and (ii) with respect to any representations or warranties that do not contain a materiality qualifier, true, complete and correct in all material respects as of the date of such Revolving Credit Advance, except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true, complete and correct in all material respects on and as of such earlier date.

 

Each Advance Request Form shall be deemed to be a representation and warranty by Borrower that the conditions specified in this Section 8.2 have been satisfied on and as of the date thereof.

 

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 B attached hereto within thirty (30) days after the end of each calendar quarter and an annual financial statement within ninety (90) 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 discretion. Quarterly statements shall be prepared internally by Borrower’s accounting personnel in a format reasonably acceptable to Lender. Annual statements shall be prepared by a certified public accountant reasonably acceptable to Lender in format reasonably acceptable to Lender. Each financial statement shall be certified as true, complete and correct by its preparer and 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) Business Days after timely filing. Borrower and its Subsidiaries shall provide such additional financial information as Lender reasonably requires. Borrower shall upon two Business Days’ prior notice permit Lender or any of its agents or representatives to have access to and examine all of its books and records during regular business hours.

 

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(b)    Call Reports. If requested by Lender and as soon as available, and in no event more than sixty (60) days after the end of each fiscal quarter of each Bank, Borrower shall deliver or caused to be delivered to Lender copies of each Bank’s Call Reports or other quarterly reports of condition and income furnished to Governmental Authorities.

 

(c)    FR Y‐9SP. If requested by Lender and if applicable to Borrower, as soon as available, and in any event no later than sixty (60) days after the end of each fiscal quarter, Borrower shall deliver or cause to be delivered to Lender Borrower’s complete form FR Y‐9SP as filed with the Federal Reserve Bank in the applicable Federal Reserve District.

 

(d)    FR Y‐9C. If requested by Lender and if applicable to Borrower, as soon as available, and in any event within sixty (60) days after the end of each fiscal quarter, Borrower shall deliver or cause to be delivered to Lender Borrower’s complete form FR Y‐9C as filed with the Federal Reserve Bank in the applicable Federal Reserve District.

 

(e)    BHCPR. If requested by Lender and if applicable to Borrower, as soon as available, and in any event within sixty (60) days after the end of each fiscal quarter, Borrower shall deliver or cause to be delivered to Lender Borrower’s complete BHCPR as filed with the Federal Reserve Bank in the applicable Federal Reserve District.

 

(f)    Federal Reserve Bank or FDIC. As soon as available, Borrower shall deliver or cause to be delivered to Lender all other material non‐confidential reports filed by or on behalf of Borrower or Bank with the Federal Reserve Bank or FDIC.

 

(g)    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, Borrower shall deliver or cause to be delivered to Lender 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.

 

(h)    USA Patriot Act. Promptly upon the request thereof, Borrower shall deliver or cause to be delivered to Lender such other information and documentation regarding Borrower 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 and the Beneficial Ownership Regulation), as from time to time reasonably requested by the Lender.

 

(i)    Notice of Litigation and Other Matters. Promptly (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 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.

 

(j)    Classified Assets Report. As soon as available, and in no event more than thirty (30) days after the end of each fiscal quarter of the Bank, Borrower shall deliver or cause to be delivered to Lender reports detailing the Bank’s Classified Assets, in a form and substance satisfactory to Lender.

 

(k)    Beneficial Ownership. Borrower shall furnish such information and documentation as Lender may request during the term of this Agreement to confirm or update the continued accuracy of the any information provided in connection with a “Beneficial Ownership Certification” or other similar certification.

 

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(l)    Additional Information. Borrower shall provide Lender such other information regarding the operations, business affairs and financial condition of Borrower or any Subsidiary as the Lender may reasonably request in writing.

 

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.

 

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 7.4) 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.

 

10.5    Use of Proceeds. The proceeds of the Loans will be used only for (a) working capital, (b) general corporate purposes and (c) Investments (other than Investments permitted by Section 11.4(b)) in an aggregate amount not to exceed $10,000,000. No part of the proceeds of the Loans 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.

 

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10.7    Indemnification. BORROWER SHALL INDEMNIFY LENDER AND ITS 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; PROVIDED THAT, SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS, DEMANDS, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NON-APPEALABLE JUDGMENT TO HAVE RESULTED FROM (1) THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PARTY, OR (2) A CLAIM BROUGHT BY THE BORROWER AGAINST AN INDEMNIFIED PARTY FOR BREACH OF SUCH INDEMNIFIED PARTY’S OBLIGATIONS HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT. THE FOREGOING INDEMNIFICATION SHALL SURVIVE REPAYMENT OF THE LOANS AND SHALL CONTINUE TO BENEFIT LENDER FOLLOWING ANY ASSIGNMENT OF THE LOANS WITH RESPECT TO MATTERS ARISING OR ACCRUING PRIOR TO SUCH ASSIGNMENT.

 

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; and

 

(b)    Indebtedness existing on the date hereof and set forth in Schedule 11.1(b), including any extensions, renewals or replacements of any such Indebtedness.

 

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 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 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 ninety (90) days after such acquisition or the completion of such construction or improvement, (iii) the Indebtedness secured thereby does not exceed one hundred percent (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 Borrower.

 

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Notwithstanding the foregoing, at no time will Borrower create, incur, assume or permit to exist any Lien on the Equity Interests of Bank.

 

11.3    Fundamental Changes; Disposition of Assets. The 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 liquidate or dissolve, (b) sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or any part of its assets, except for (i) dispositions in the ordinary course of business, (ii) sale of the Wellmade Note, and (iii) conversions or exchanges of notes and securities in accordance with their terms or connection with an insolvency proceeding involving the issuer or (c) 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. 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;

 

(b)    Investments made in its Subsidiaries;

 

(c)    Guarantees constituting Indebtedness permitted by Section 11.1;

 

(d)    Investments described on Schedule 11.4; and

 

(e)    Investments made after the date of this Agreement not exceeding $20,000,000 in the aggregate.

 

11.5    Swap Agreements. Borrower will not enter into any Swap Agreement, except (a) Swap Agreements entered into to hedge or mitigate risks to which 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 Borrower.

 

11.6    Restricted Payments. Borrower will not declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment (except Permitted Tax Distributions) if any Event of Default exists.

 

11.7    Transactions with Affiliates. 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 Borrower than could be obtained on an arm’s‐length basis from unrelated third parties.

 

11.8    Restrictive Agreements. 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 Borrower to create, incur or permit to exist any Lien upon any of its property or assets; provided that the foregoing will not apply to (i) restrictions and conditions imposed by Law or by this Agreement, (ii) restrictions and conditions existing on the date hereof identified on Schedule 11.8 (including any extension or renewal thereof, but not any amendment or modification expanding the scope of any such restriction or condition), (iii) 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, (iv)  customary provisions in leases restricting the assignment thereof, and (v) inbound licenses of intellectual property..

 

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11.9    Leverage Ratio. As of the last day of any fiscal quarter, the Bank shall have a Leverage Ratio of eight percent (8%) or greater. As of the last day of any fiscal quarter, Borrower shall have a Leverage Ratio of eight percent (8%) or greater.

 

11.10    Texas Ratio. As of the last day of any fiscal quarter, the Bank shall have a Texas Ratio of forty percent (40%) or less.

 

11.11    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 fifty percent (50%).

 

11.12    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.

 

11.13    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 twelve percent (12%) or greater.

 

11.14    Limitation on Payments and Modification of Subordinated Indebtedness. Without the prior written consent of Lender, 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 any respect.

 

ARTICLE XII 

RESERVED

 

ARTICLE XIII 

ASSIGNMENTS BY LENDER AND BORROWER

 

13.1    Assignments and Participations. Lender may from time to time sell the Loans and the Loan Documents (or any interest therein) and may grant participations in the Loans. Borrower agrees to cooperate with Lender’s efforts to do any of the foregoing and to execute all documents reasonably required by Lender in connection therewith which do not 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.

 

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 agrees that time is of the essence under this Agreement.

 

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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)    (i) Failure of Borrower to pay when due the principal of the Loans; (ii) failure of Borrower to pay when due any interest on any Loan or any other fee or any other amount due hereunder for a period of five days; (iii) failure of Borrower to perform or comply with any term or condition contained in Section 10.1, Section 10.2 or Article XI; and (iv) Borrower shall default in the performance of or compliance with any other provisions contained herein or any of the other Loan Documents, other than any such term referred to in any other clause of this Section 15.1, and such default shall not have been remedied or waived within thirty (30) days after the earlier of (A) an Authorized Representative of Borrower becoming aware of such default, or (B) receipt by an Authorized Representative of Borrower of notice from Lender of such default.

 

(b)    Any assignment in violation of Section 13.2.

 

(c)    If any representation or warranty, statement made by Borrower contained in any Loan Document or any report or certificate made now or hereafter delivered by Borrower or its Subsidiaries is untrue or incorrect at the time made or delivered.

 

(d)    Borrower or the Bank shall commence a voluntary case concerning Borrower or the Bank under the Bankruptcy Code; or an involuntary proceeding is commenced against Borrower or the Bank 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 the Bank; or Borrower or the Bank 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 Borrower or the Bank; or there is commenced against Borrower or the Bank any such proceeding which remains undismissed or unstayed for a period of sixty (60) days; or Borrower or the Bank 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 Borrower the Bank 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 the Bank 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 the Bank 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 to the extent not covered by independent third-party insurance as to which the insurer has been notified of such judgment or order and has not denied or failed to acknowledge coverage) or (ii) against Bank in amounts aggregating in excess of $1,000,000 to the extent not covered by independent third-party insurance as to which the insurer has been notified of such judgment or order and has not denied or failed to acknowledge coverage), and said judgments are not stayed or bonded over within thirty (30) days after entry.

 

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(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 $1,000,000) 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 that can be perfected by filing, subject to Permitted Liens.

 

(j)    A Change of Control shall occur.

 

(k)    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.

 

(l)    If (i) any Bank Regulatory Authority or other Governmental Authority having regulatory authority over Borrower or the Bank shall impose any restriction on Borrower or such Subsidiary with respect to the payment of dividends from the Bank, (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 Borrower or the Bank and such order or other action could reasonably be expected to have a Material Adverse Change or there shall occur with respect to the Bank 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) Borrower or the Bank 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.

 

(m)    Without limiting the generality of Section 15.1(k), the appointment of a conservator or receiver for the Bank 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.

 

(n)    Borrower shall cease to be a bank holding company or similarly organized entity.

 

(o)    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 the Loans, for any reason shall not have the priority contemplated by the Loan Documents or any such subordination provisions.

 

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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, without notice, 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.

 

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

 

(c)    Use and apply any monies or letters of credit deposited by Borrower with Lender, regardless of the purposes for which the same was deposited, to cure any such default or to apply on account of any indebtedness under this Agreement which is due and owing to Lender.

 

(d)    Terminate the Loan Amount or declare the Obligations or any part thereof to be immediately due and payable, or both, and the same shall thereupon become immediately due and payable, without notice, demand, presentment, notice of dishonor, notice of acceleration, notice of intent to accelerate, notice of intent to demand, protest, or other formalities of any kind, all of which are hereby expressly waived by Borrower.

 

(e)    Exercise or pursue any other remedy or cause of action permitted under this Agreement or under 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), (l), (m) or (n), the Loan Amount shall automatically terminate and all amounts evidenced by the Note shall automatically become due and payable, without any presentment, demand, protest or notice of any kind to Borrower, all of which are hereby expressly waived by Borrower. In addition to the foregoing, if any Event of Default shall occur and be continuing, Lender may exercise all rights and remedies available to it in law or in equity, under the Loan Documents, or otherwise.

 

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 Matt Deines, Geri Bullard, and Chris Riffle as its Authorized Representatives 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 Loans. Any one of the Authorized Representatives shall have the power, in such Person’s 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 any Authorized Representative shall be final and binding on Borrower. Lender may rely on the authority given to the Authorized Representatives until actual receipt by Lender of a duly authorized resolution substituting a different person as an Authorized Representative.

 

28

 

 

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 Loans 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 Loans 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.

 

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. Delivery of an executed counterpart of a signature page of this Agreement by fax or other digital or electronic imaging means shall be effective as delivery of a manually executed counterpart of this 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 supersedes 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 hereby waives all claims for punitive, exemplary or consequential damages.

 

29

 

 

17.12    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.

 

17.13    Set‐Offs. After an Event of Default has occurred and is continuing, Borrower hereby irrevocably authorizes and directs Lender from time to time to charge Borrower’s accounts and deposits with Lender (or its Affiliates), and to pay over to Lender an amount equal to any amounts from time to time due and payable to Lender hereunder, under the Note or under any other Loan Document.

 

17.14    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.

 

17.15    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 electronic mail on the day of transmission. Notices provided hereunder shall be as set forth below:

 

If to Borrower:

 

FIRST NORTHWEST BANCORP

105 W. Eighth Street

Port Angeles, Washington 98362

Attention: Matthew P. Deines, President and CEO

Email: matt.deines@ourfirstfed.com

 

With a copy to:

 

FIRST NORTHWEST BANCORP

105 W. Eighth Street

Port Angeles, Washington 98362

Attention: Legal Department

Email: legal@ourfirstfed.com

 

30

 

 

If to Lender:

 

NexBank

2515 McKinney Avenue, Suite 1100

Dallas, Texas 75201

Attention: Kevin Olding

Telephone: 972-934-4717

 

With a copy to: NexBank

 

2515 McKinney Avenue, Suite 1100

Dallas, Texas 75201

Attention: Rhett Miller

Telephone: 972-934-4705

 

With a copy to:

 

Haynes and Boone, LLP

2323 Victory Avenue, Suite 700

Dallas, Texas 75219

Attention: Sakina Foster          

Telephone: 214-651-5198

Facsimile: 214-200-0664

Email:    Sakina.foster@haynesboone.com

 

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.

 

17.16    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.

 

17.17    No Oral Agreements. THIS WRITTEN 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.

 

[Remainder of Page Intentionally Left Blank;

Signature Page(s) to Follow.]

 

31

 

 

 

EXECUTED as of the date first set forth above.

 

	
			 

				
			BORROWER:

			 

			FIRST NORTHWEST BANCORP

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			By: 

				
			/s/ Matthew P. Deines

				
			 

			
	
			 

				
			 

				
			Name: Matthew P. Deines

			Title: President and Chief Executive Officer

				
			 

			

 

 

Signature Page to

Loan Agreement

 

 

 

	
			 

				
			LENDER:

			 

			NEXBANK

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			By: 

				
			/s/ Rhett Miller

				
			 

			
	
			 

				
			 

				
			Name: Rhett Miller

			EVP & Chief Credit Officer

				
			 

			

 

Signature Page to

Loan Agreementex_381038.htm

Exhibit 10.2

 

SECURITY AGREEMENT

 

THIS SECURITY AGREEMENT (as it may be amended, restated or modified from time to time, this “Security Agreement”) is entered into as of May 20, 2022 by and among FIRST NORTHWEST BANCORP (“Grantor”), and NEXBANK, a Texas state bank (“Lender”) on behalf of itself and its Affiliates (“Secured Party”).

 

RECITALS

 

WHEREAS, Grantor and Lender are entering into a Loan Agreement dated as of May 20, 2022 (as it may be amended, restated or modified from time to time, the “Credit Agreement”).

 

WHEREAS, Grantor is entering into this Security Agreement in order to, among other things, induce Lender to enter into and extend credit to Grantor under the Credit Agreement.

 

NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereby agree as follows:

 

	
			1. 

				
			DEFINITIONS.

			

 

1.1    Reference to Security Agreement. Unless otherwise specified, all references herein to Articles, Sections, Recitals, and Schedules refer to Articles and Sections of, and Recitals and Schedules to, this Security Agreement. All Schedules include amendments and supplements thereto from time to time.

 

1.2    Principles of Construction. Words used herein, regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neutral, as the context indicates is appropriate. Whenever the words “include,” “includes” or “including” are used in this Security Agreement, they shall be deemed to be followed by the words “without limitation”. All references to agreements and other contractual Instruments shall be deemed to include subsequent amendments, permitted assignments and other modifications thereto, but only to the extent such amendments, assignments and other modifications are not prohibited by the terms of any Loan Document. Furthermore, any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing, or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified, or supplemented from time to time.

 

1.3    Definitions. Unless otherwise defined herein, or the context hereof otherwise requires, each term defined in either the Credit Agreement or the UCC is used in this Security Agreement with the same meaning; provided that, if the definition given to such term in the Credit Agreement conflicts with the definition given to such term in the UCC, the Credit Agreement definition shall control to the extent legally allowable; and if any definition given to such term in Article 9 of the UCC conflicts with the definition given to such term in any other chapter of the UCC, the Article 9 definition shall prevail. As used herein, the following terms have the meanings indicated:

 

“Account” means any “account,” as such term is defined in Section 9.102(a)(2) of the UCC.

 

“Account Debtor” means any person who is obligated on a Receivable.

 

“Cash Collateral Account” has the meaning set forth in Section 5.5.

 

 

 

 

“Change of Control Laws” shall mean all U.S. federal and state laws and regulations that govern or impose conditions, requirements or restrictions on changes in the ownership of FDIC insured banks, including the Change in Bank Control Act of 1978, as amended, the BHCA and Regulation Y under the Federal Reserve Act.

 

“Chattel Paper” means any “chattel paper”, as such term is defined in Section 9.102(a)(11) of the UCC, including all Electronic Chattel Paper and Tangible Chattel Paper.

 

“Collateral” has the meaning set forth in Section 2.1.

 

“Collateral Note Security” means all rights, titles, interests, and Liens that Grantor may have, be, or become entitled to under all present and future loan agreements, security agreements, pledge agreements, deeds of trust, mortgages, guarantees, or other Documents assuring or securing payment of or otherwise evidencing the Collateral Notes, including those set forth on Schedule 3.10.

 

“Collateral Notes” means all rights, titles, and interests of Grantor in and to all promissory notes and other Instruments payable to Grantor, including all inter‐company notes from the subsidiaries of Grantor and those set forth on Schedule 3.10.

 

“Collateral Records” means books, records, ledger cards, files, correspondence, customer lists, blueprints, technical specifications, manuals, computer software, computer printouts, tapes, disks and related data processing software and similar items that at any time evidence or contain information relating to any of the Collateral or are otherwise necessary or helpful in the collection thereof or realization thereupon.

 

“Collateral Support” means all property (real or personal) assigned, hypothecated or otherwise securing any Collateral and shall include any security agreement or other agreement granting a Lien or security interest in such real or personal property.

 

“Commercial Tort Claims” means any “commercial tort claim”, as such term is defined in Section 9.102(a)(13) of the UCC, including all commercial tort claims listed on Schedule 3.10.

 

“Commodity Account” means any “commodity account”, as such term is defined in Section 9.102(a)(14) of the UCC, and all sub‐accounts thereof.

 

“Contractual Obligations” means, as to any Person, any provision of any security issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement to which such Person is a party or by which it or any of its Property is bound.

 

“Control” has the meaning set forth in Sections 7.106, 8.106, 9.104, 9.105, 9.106, or 9.107 of the UCC, as applicable.

 

“Controlled Foreign Corporation” means “controlled foreign corporation” as defined in the Internal Revenue Code of 1986.

 

“Copyright Licenses” means any and all agreements providing for the granting of any right in or to Copyrights (whether Grantor is licensee or licensor thereunder).

 

“Copyrights” means all United States and foreign copyrights (including Community designs), including copyrights in software and databases, and all Mask Works (as defined under 17 U.S.C. § 901 of the U.S. Copyright Act), whether registered or unregistered, and, with respect to any and all of the foregoing:  (a) all registrations and applications therefor; (b) all extensions and renewals thereof; (c) all rights corresponding thereto throughout the world; (d) all rights to sue for past, present and future infringements thereof; and (e) all products and Proceeds of the foregoing, including any income, royalties, and awards and any claim by Grantor against third parties for past, present, or future infringement of any Copyright or any Copyright licensed under any Copyright License.

 

 

 

 

“Deposit Accounts” means any “deposit account”, as such term is defined in Section 9.102(a)(29) of the UCC, including those deposit accounts identified on Schedule 3.10, and any account which is a replacement or substitute for any of such accounts, together with all monies, Instruments, certificates, checks, drafts, wire transfer receipts, and other property deposited therein and all balances therein.

 

“Documents” means any “document”, as such term is defined in Section 9.102(a)(30) of the UCC.

 

“Electronic Chattel Paper” means any “electronic chattel paper”, as such term is defined in Section 9.102(a)(31) of the UCC.

 

“Equipment” means: (a) any “equipment”, as such term is defined in Section 9.102(a)(33) of the UCC; (b) all machinery, equipment, furnishings and Fixtures; and (c) any and all additions, substitutions, and replacements of any of the foregoing, wherever located, together with all attachments, components, parts, equipment, and accessories installed thereon or affixed thereto (in each case, regardless of whether characterized as equipment under the UCC).

 

“Excluded Account” means (a) deposit accounts which are payroll accounts, payroll tax accounts, or employee wage and benefit accounts, provided that the funds on deposit in such accounts shall at no time exceed the actual payroll, payroll taxes and other employee wage and benefit payments then owing by Grantor for the immediately succeeding payroll period, (b) fiduciary, custodial, trust or escrow deposit accounts held for the benefit of third parties, and (c) “zero balance” accounts.

 

“Excluded Equity” means, any voting stock of any direct Subsidiary of Grantor that is a Controlled Foreign Corporation, except to the extent that a pledge hereunder of such excess voting stock could not reasonably be expected to result in an adverse tax consequence to Grantor.

 

“Excluded Property” means, collectively, (a) Excluded Accounts, (b) Excluded Equity, (c) any permit or license or any Contractual Obligation of Grantor (i) that prohibits or requires the consent of any Person other than Borrower and its Affiliates which has not been obtained as a condition to the creation by Grantor of a Lien on any right, title or interest in such permit, license or Contractual Obligation related thereto or (ii) to the extent that any Requirement of Law applicable thereto prohibits the creation of a Lien thereon, but only, with respect to the prohibition in clauses (i) and (ii) of this definition, to the extent, and for as long as, such prohibition is not terminated or rendered unenforceable or otherwise deemed ineffective by the UCC or any other Requirement of Law, (d) any Property owned by Grantor that is subject to a purchase money Lien or a capital lease permitted under the Credit Agreement if the Contractual Obligation pursuant to which such Lien is granted (or in the document providing for such capital lease) prohibits or requires the consent of any Person other than Borrower and its Affiliates which has not been obtained as a condition to the creation of any other Lien on such equipment, (e) any “intent to use” Trademark applications for which a statement of use has not been filed (but only until such statement is filed), (f) any equity interests Grantor owns in any registered investment advisor or broker-dealer (or any entity that is required to be registered as an investment advisor or broker-dealer pursuant to any Requirement of Law) and (g) any Investments (as defined in the Credit Agreement) subject to restriction as disclosed in Schedule 11.8 to the Credit Agreement; provided, however, “Excluded Property” shall not include any proceeds, products, substitutions, or replacements of Excluded Property (unless such proceeds, products, substitutions, or replacements would otherwise constitute Excluded Property).

 

 

 

 

“Fixtures” means any “fixtures”, as such term is defined in Section 9.102(a)(41) of the UCC.

 

“General Intangibles” means: (a) any “general intangibles”, as such term is defined in Section 9.102(a)(42) of the UCC; and (b) all interest rate or currency protection or hedging arrangements, computer software, computer programs, all tax refunds and tax refund claims, all licenses, permits, concessions and authorizations, all contract rights, all joint venture interests, partnership interests, or membership interests that do not constitute a Security, all Material Agreements, and all Intellectual Property (in each case, regardless of whether characterized as general intangibles under the UCC).

 

“Goods” means: (a) “goods”, as that term is defined in Section 9.102(a)(44) of the UCC; (b) all Inventory; and (c) all Equipment (in each case, regardless of whether characterized as goods under the UCC).

 

“Grantor” has the meaning set forth in the introductory paragraph.

 

“Instrument” means any “instrument”, as such term is defined in Section 9.102(a)(47) of the UCC, including the Collateral Notes.

 

“Intellectual Property” means, collectively, the Copyrights, the Copyright Licenses, the Patents, the Patent Licenses, the Trademarks, the Trademark Licenses, the Trade Secrets, and the Trade Secret Licenses.

 

“Inventory” means: (a) any “inventory”, as such term is defined in Section 9.102(a)(48) of the UCC; (b) all wrapping, packaging, advertising, and shipping materials; (c) all goods that have been returned, repossessed, or stopped in transit; (d) all Documents evidencing any of the foregoing; and (e) all computer programs embedded in any goods and all accessions thereto and products thereof (in each case, regardless of whether characterized as inventory under the UCC).

 

“Investment Related Property” means: any “investment property”, as such term is defined in Section 9.102(a)(49) of the UCC;.

 

“Letter‐of‐Credit Right” means any “letter‐of‐credit right”, as such term is defined in Section 9.102(a)(51) of the UCC.

 

“Material Agreements” means: (a) all of Grantor’s rights, titles, and interests in, to, and under any contract or other arrangement to which Grantor is a party (other than the Loan Documents) for which (i) the aggregate annual payments reasonably expected to made in respect of such contract equal or exceed $3,000,000 or (ii) if breached, cancelled or non-renewed could reasonably be expected to have a Material Adverse Effect, including, but not limited to, those contracts and arrangements listed on Schedule 3.10, including all rights of Grantor to receive moneys due and to become due under or pursuant to the Material Agreements; (b) all rights of Grantor to receive Proceeds of any insurance relating to the Collateral, indemnity, warranty, or guaranty with respect to the Material Agreements; (c) all claims of Grantor for damages arising out of or for breach of or default under the Material Agreements; and (d) all rights of Grantor to compel performance and otherwise exercise all rights and remedies under the Material Agreements.

 

“Maximum Liability” has the meaning set forth in Section 6.2(a).

 

“Money” means “money” as defined in Section 1.201(b)(24) of the UCC.

 

 

 

 

“Patent Licenses” means all agreements providing for the granting of any right in or to Patents (whether Grantor is licensee or licensor thereunder).

 

“Patents” means all United States and foreign patents and certificates of invention, or similar industrial property rights, and applications for any of the foregoing, including: (a) all reissues, divisions, continuations, continuations‐in‐part, extensions, renewals, and reexaminations thereof; (b) all rights corresponding thereto throughout the world; (c) all inventions and improvements described therein; (d) all rights to sue for past, present and future infringements thereof; (f) all licenses, claims, damages, and Proceeds of suit arising therefrom; and (f) all products and Proceeds of the foregoing, including any income, royalties, and awards and any claim by Grantor against third parties for past, present, or future infringement of any Patent or any Patent licensed under any Patent License.

 

“Pledged Shares” means any and all shares of capital stock owned by Grantor (other than any shares of capital stock constituting Excluded Property) from time to time, including, but not limited to, the shares of capital stock described on Schedule 3.10 under the heading “Pledged Shares” (as such schedule may be amended or supplemented), and the certificates, if any, representing such shares and any interest of Grantor in respect of such shares in the entries on the books of the issuer of such shares, and all dividends, distributions, cash, warrants, rights, options, instruments, securities and other property or proceeds from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the Pledged Shares.

 

“Proceeds” means any “proceeds,” as such term is defined in Section 9.102(a)(65) of the UCC and, in any event, shall include, but not be limited to, (a) any and all proceeds of any insurance insuring the Collateral, indemnity, warranty, or guaranty payable to Grantor from time to time with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable to Grantor from time to time in connection with any requisition, confiscation, condemnation, seizure, or forfeiture of all or any part of the Collateral by any Governmental Authority (or any Person acting under color of Governmental Authority), and (c) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral.

 

“Receivables” means the Accounts, Chattel Paper, Documents, Investment Related Property, Instruments, or Commercial Tort Claims, and any other rights or claims to receive Money which are General Intangibles or which are otherwise included as Collateral, together with all of the applicable Grantor’s rights, if any, in all Collateral Support and Supporting Obligations related thereto.

 

“Requirement of Law” means, as to any Person, any law (statutory or common), ordinance, treaty, rule, regulation, order, policy, other legal requirement or determination of an arbitrator or of a Governmental Authority, in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject.

 

“Secured Obligations” means:

 

(a)    all Obligations;

 

(b)    all costs and expenses, including all attorneys’ fees and legal expenses, incurred by Lender or its Affiliates to preserve and maintain the Collateral, collect the obligations herein described, and enforce this Security Agreement or any rights under the other Loan Documents;

 

(c)    the obligation to reimburse any amount that Secured Party (in its sole and absolute discretion) elects to pay or advance on behalf of Grantor following the occurrence of any Event of Default;

 

 

 

 

(d)    all amounts owed under any extension, renewal, or modification of any of the foregoing; and

 

(e)    any of the foregoing that arises after the filing of a petition by or against Grantor under the Bankruptcy Code, even if the obligations due do not accrue because of the automatic stay under Bankruptcy Code § 362 or otherwise;

 

in each case with respect to clauses (a) through (e) above, whether or not (i) such Secured Obligations arise or accrue before or after the filing by or against Grantor of a petition under the Bankruptcy Code, or any similar filing by or against Grantor under the laws of any jurisdiction, or any bankruptcy, insolvency, receivership or other similar proceeding, (ii) such Secured Obligations are allowable under Section 502(b)(2) of the Bankruptcy Code or under any other insolvency proceedings, (iii) the right of payment in respect of such Secured Obligations is reduced to judgment, or (iv) such Secured Obligations are liquidated, unliquidated, similar, dissimilar, related, unrelated, direct, indirect, fixed, contingent, primary, secondary, joint, several, or joint and several, matured, disputed, undisputed, legal, equitable, secured, or unsecured.

 

“Securities Account” means any “securities account”, as such term is defined in Section 8.501(a) of the UCC, and all sub‐accounts thereof.

 

“Security” has the meaning set forth in Section 8.102(a)(15) of the UCC.

 

“Specified Pledged Shares” means all Pledged Shares issued by the Bank.

 

“Supporting Obligation” means all “supporting obligations” as defined in Section 9.102(a)(78) of the UCC.

 

“Tangible Chattel Paper” means any “tangible chattel paper”, as such term is defined in Section 9.102(a)(79) of the UCC.

 

“Trademark Licenses” means any and all agreements providing for the granting of any right in or to Trademarks (whether Grantor is licensee or licensor thereunder).

 

“Trademarks” means all United States and foreign trademarks, trade names, corporate names, company names, business names, fictitious business names, Internet domain names, service marks, certification marks, collective marks, logos, other source or business identifiers, designs and general intangibles of a like nature, all registrations and applications for any of the foregoing, including:  (a) all extensions or renewals of any of the foregoing; (b) all of the goodwill of the business connected with the use of and symbolized by the foregoing; (c) the right to sue for past, present and future infringement or dilution of any of the foregoing or for any injury to goodwill; and (d) all products and Proceeds of the foregoing, including any income, royalties, and awards and any claim by Grantor against third parties for past, present, or future infringement of any Trademark or any Trademark licensed under any Trademark License.

 

“Trade Secret Licenses” means any and all agreements providing for the granting of any right in or to Trade Secrets (whether Grantor is licensee or licensor thereunder).

 

“Trade Secrets” means all trade secrets and all other confidential or proprietary information and know‐how, whether or not such Trade Secret has been reduced to a writing or other tangible form, including all Documents and things embodying, incorporating, or referring in any way to such Trade Secret, including: (a) the right to sue for past, present and future misappropriation or other violation of any Trade Secret; and (b) all products and Proceeds of the foregoing, including any income, royalties, and awards and any claim by Grantor against third parties for past, present, or future infringement of any Trade Secrets or any Trade Secrets licensed under any Trade Secret License.

 

 

 

 

“Transfer” shall mean, when used as a noun, a transfer, sale, assignment, lease, license or other disposition of the Collateral, or any interest therein, whether in whole or in part.

 

	
			2. 

				
			GRANT OF SECURITY INTEREST.

			

 

2.1    Security Interest. To secure the prompt and complete payment and performance of the Secured Obligations when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise (including the payment of amounts that would become due but for the operation of the automatic stay under Section 362(a) of the Bankruptcy Code or any similar provisions of other applicable laws), Grantor hereby grants to Secured Party a continuing security interest in, a Lien upon, and a right of set off against, and hereby assigns to Secured Party as security, all personal property of Grantor, whether now owned or hereafter acquired or existing, and wherever located (together with all other collateral security for the Secured Obligations at any time granted to or held or acquired by Secured Party, collectively, the “Collateral”), including:

 

(a)    Accounts;

 

(b)    Chattel Paper;

 

(c)    Commercial Tort Claims;

 

(d)    Deposit Accounts, Securities Accounts, and Commodity Accounts;

 

(e)    Documents;

 

(f)    General Intangibles;

 

(g)    Goods;

 

(h)    Instruments;

 

(i)    Investment Related Property;

 

(j)    Pledged Shares;

 

(k)    Letter of Credit Rights;

 

(l)    Money;

 

(m)    Fixtures;

 

(n)    Intellectual Property;

 

(o)    Material Agreements;

 

(p)    to the extent not otherwise included above, all Collateral Records, Collateral Support, and Supporting Obligations relating to any of the foregoing; and

 

 

 

 

(q)    to the extent not otherwise included above, all accessions to, substitutions for, and all replacements, products, Proceeds of the foregoing, including Proceeds of and unearned premiums with respect to insurance policies insuring the Collateral, and claims against any Person for loss, damage, or destruction of any Collateral.

 

If the security interest granted hereby in any rights of Grantor under any contract included in the Collateral is expressly prohibited by such contract, then the security interest hereby granted therein nonetheless remains effective to the extent allowed by Article 9 of the UCC or other applicable law but is otherwise limited by that prohibition. Notwithstanding the foregoing, no Lien or security interest is hereby granted on any Excluded Property; provided that (i) if and when any Property shall cease to be Excluded Property, a Lien on and security in such Property shall be deemed granted therein and (ii) immediately upon the amendment of the Internal Revenue Code to allow the pledge of a greater percentage of the voting power of capital stock in a Controlled Foreign Corporation without adverse tax consequences, the Collateral shall include, and the security interest granted by Grantor shall attach to, such greater percentage of capital stock of each Controlled Foreign Corporation. Furthermore, notwithstanding any contrary provision, Grantor agrees that, if, but for the application of this paragraph, granting a security interest in the Collateral would constitute a fraudulent conveyance under 11 U.S.C. § 548 or a fraudulent conveyance or transfer under any state fraudulent conveyance, fraudulent transfer, or similar law in effect from time to time (each a “fraudulent conveyance”), then the security interest remains enforceable to the maximum extent possible without causing such security interest to be a fraudulent conveyance, and this Security Agreement is automatically amended to carry out the intent of this sentence.

 

2.2    Grantor Remains Liable. Notwithstanding anything to the contrary contained herein, (a) Grantor shall remain liable under the contracts and agreements included in the Collateral to the extent set forth therein to perform all of its respective duties and Secured Obligations thereunder to the same extent as if this Security Agreement had not been executed, (b) the exercise by Secured Party of any of its rights hereunder shall not release Grantor from any of its duties or Secured Obligations under the contracts and agreements included in the Collateral, and (c) Secured Party shall not have any obligation or liability under any of the contracts and agreements included in the Collateral by reason of this Security Agreement, nor shall Secured Party be obligated to perform any of the Secured Obligations or duties of Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

 

2.3    Authorization to File Financing Statements. Grantor hereby irrevocably authorizes Secured Party at any time and from time to time to file in any UCC jurisdiction any initial financing statements and amendments thereto that (a) indicate the Collateral (i) as all assets of Grantor or words of similar effect, regardless of whether any particular asset comprised in the Collateral falls within the scope of Article 9 of the UCC, or (ii) as being of an equal or lesser scope or with greater detail, and (b) contain any other information required by Subchapter E of Article 9 of the UCC for the sufficiency or filing office acceptance of any financing statement or amendment, including (A) whether Grantor is an organization, the type of organization and any organization identification number issued to Grantor and (B) in the case of a financing statement filed as a fixture filing or indicating Collateral as as‐extracted collateral or timber to be cut, a sufficient description of real property to which the Collateral relates. Grantor agrees to furnish any such information to Secured Party promptly upon request.

 

 

 

 

3.          REPRESENTATIONS AND WARRANTIES. Grantor represents and warrants to Secured Party that:

 

3.1    Title; Authorization; Enforceability; Perfection. (a) Grantor has good and valid rights in and title to the Collateral with respect to which it has purported to grant a security interest hereunder, free and clear of all Liens except for Permitted Liens, and has full power and authority to grant to Secured Party the security interest in such Collateral; (b) the execution and delivery by Grantor of this Security Agreement has been duly authorized, and this Security Agreement constitutes a legal, valid and binding obligation of Grantor and creates a security interest enforceable against Grantor in all now owned and hereafter acquired Collateral; (c)(i) upon the filing of all UCC financing statements naming Grantor as “debtor” and Secured Party as “secured party” and describing the Collateral in the filing offices set forth opposite Grantor’s name on Schedule 3.5 hereof, (ii) upon delivery of all Instruments, Chattel Paper, and Collateral Notes, (iii) upon sufficient identification of Commercial Tort Claims, (iv) upon execution of a control agreement establishing Secured Party’s Control with respect to any Deposit Account, Securities Account, or Commodity Account, (v) upon consent of the issuer or any nominated person with respect to Letter of Credit Rights, and (vi) to the extent not subject to Article 9 of the UCC, upon recordation of the security interests granted hereunder in Intellectual Property in the applicable intellectual property registries, including the United States Patent and Trademark Office and the United States Copyright Office, the security interests granted to Secured Party hereunder constitute valid and perfected first priority Liens (subject in the case of priority only to (1) Permitted Liens, and (2) the rights of the United States government (including any agency or department thereof) with respect to United States government Receivables on all of the Collateral).

 

3.2    Conflicting Legal Requirements and Contracts. Neither the execution and delivery by Grantor of this Security Agreement, the creation and perfection of the security interest in the Collateral granted hereunder, nor compliance with the terms and provisions hereof will (a) violate (i) any Requirement of Law binding on Grantor, (ii) Grantor’s organizational documents, or (iii) the provisions of any indenture, Instrument or agreement to which Grantor is a party or is subject, or by which it, or its property, is bound; or (b) conflict with or constitute a default under, or result in the creation or imposition of any Lien pursuant to, the terms of any such indenture, Instrument or agreement (other than any Lien of Secured Party).

 

3.3    Governmental Authority. No authorization, approval, or other action by, and no notice to or filing with, any Governmental Authority is required either (a) for the pledge by Grantor of the Collateral pursuant to this Security Agreement or for the execution, delivery, or performance of this Security Agreement by Grantor, or (b) for the exercise by Secured Party of the voting or other rights provided for in this Security Agreement or the remedies in respect of the Collateral pursuant to this Security Agreement, except for such consents, approvals or authorizations of or declarations or filings with any Governmental Authority or non‐governmental person or entity required in connection with an exercise of remedies by the Lender with respect to the Collateral.

 

3.4    Grantor Information. Grantor’s exact legal name, jurisdiction of organization, type of entity, state issued organizational identification number and the location of its principal place of business, or chief executive office (or the principal residence if Grantor is a natural person) and of the books and records relating to the Receivables, are disclosed on Schedule 3.5. Except as noted on Schedule 3.5 hereto, all such books, records, and Collateral are in Grantor’s possession. Grantor has not done in the last five (5) years, and does no, business under any other name (including any trade‐name or fictitious business name) except for those names set forth on Schedule 3.5. Except as provided on Schedule 3.5, Grantor has not changed its name, jurisdiction of organization, principal place of business, or chief executive office (or principal residence if Grantor is a natural person) or its corporate structure in any way (e.g., by merger, consolidation, change in corporate form or otherwise) within the past five (5) years.

 

3.5    No Financing Statements or Control Agreements. Other than the financing statements filed in connection with this Security Agreement or with respect to Permitted Liens, there are no other financing statements or control agreements covering any Collateral, other than those evidencing Permitted Liens.

 

 

 

 

3.6    Collateral. Schedule 3.10 accurately lists all Securities Accounts, Commodity Accounts, Deposit Accounts, Collateral Notes, Collateral Note Security, Commercial Tort Claims, Pledged Shares, Material Agreements, and all letters of credit, in which Grantor has any right, title, or interest. All information supplied by Grantor to Secured Party with respect to any of the Collateral (in each case taken as a whole with respect to any particular Collateral) is true, correct, and complete in all material respects.

 

3.7    Deposit, Commodity, and Securities Accounts. Schedule 3.10 correctly identifies all Deposit Accounts, Commodity Accounts, and Securities Accounts in which Grantor has an interest and the institutions holding such accounts. Grantor is the sole account holder of each such account, and Grantor has not consented to, and is not otherwise aware of, any person (other than Secured Party) having Control over, or any other interest in, any such account or the property credited thereto.

 

3.8    Receivables.

 

(a)    Each Receivable is and will be in compliance with all applicable laws, whether federal, state, local or foreign, except to the extent non-compliance would result in a Material Adverse Change.

 

(b)    No Receivable requires the consent of the Account Debtor in respect thereof in connection with the pledge hereunder after giving effect to the applicable anti-assignment provisions of the UCC and other applicable law, except any consent that has been obtained.

 

3.9    Letter of Credit Rights. All letters of credit to which Grantor has rights is listed on Schedule 3.10, and Grantor has obtained the consent of each issuer or the nominated person of any letter of credit to the assignment of the Proceeds of the letter of credit to Secured Party.

 

3.10    Instruments; Chattel Paper; Collateral Notes; and Collateral Note Security. All Instruments and Chattel Paper, including the Collateral Notes, in each case with a value of more than $3,000,000 individually have been delivered to Secured Party, together with corresponding endorsements duly executed by the applicable Grantor in favor of Secured Party, and such endorsements have been duly and validly executed. As of the date hereof, (i) each Collateral Note and the Documents evidencing the Collateral Note Security are in full force and effect, (ii) there have been no amendments, modifications, or supplements to such Collateral Note or Documents evidencing the Collateral Note Security about which Secured Party has not been advised in writing, and (iii) and no default has occurred and is continuing under any such Collateral Note or Documents evidencing the Collateral Note Security, except as disclosed on Schedule 3.10.

 

3.11    Material Agreements. All Material Agreements to which Grantor is a party are set forth on Schedule 3.10. True and correct copies of all such Material Agreements have been furnished to Secured Party. Each Material Agreement is in full force and effect; there have been no amendments, modifications, or supplements to any Material Agreement of which Secured Party has not been advised in writing; and no default has occurred and is continuing under any Material Agreement, except as disclosed on Schedule 3.10. Except as disclosed on Schedule 11.8 to the Loan Agreement, no Material Agreement prohibits assignment or requires consent of or notice to any person in connection with the assignment to Secured Party hereunder, except such as has been given or made.

 

3.12    Pledged Shares

 

(a)    Grantor is the record and beneficial owner of the Pledged Shares free of all Liens and, with respect to the Specified Pledged Shares, there are no outstanding warrants, options or other rights to purchase, or shareholder, voting trust or similar agreements outstanding with respect to, or property that is convertible into, or that requires the issuance or sale of, any such Specified Pledged Shares.

 

 

 

 

(b)    No consent of any Person including any other general or limited partner, any other member of a limited liability company, any other shareholder or any other trust beneficiary is necessary in connection with the creation, perfection or first priority status of the security interest of the Lender in any Pledged Shares.

 

The foregoing representations and warranties will be true and correct in all respects with respect to any additional Collateral or additional specific descriptions of certain Collateral delivered to Secured Party in the future by Grantor. The failure of any of these representations or warranties or any description of Collateral therein to be accurate or complete shall not impair the security interest in any such Collateral.

 

4.         COVENANTS. From the date of this Security Agreement, and thereafter until this Security Agreement is terminated:

 

4.1    Loan Documents. Grantor shall (a) comply with, perform, and be bound by all covenants and agreements in the Loan Documents that are applicable to it, its assets, or its operations, each of which is hereby ratified and confirmed (INCLUDING THE INDEMNIFICATION AND RELATED PROVISIONS IN SECTION 10.7 OF THE CREDIT AGREEMENT); AND (b) CONSENT TO AND APPROVE THE VENUE AND SERVICE OF PROCESS IN SECTION 17.12 OF THE CREDIT AGREEMENT.

 

4.2    General.

 

(a)    Inspection. Grantor will permit Secured Party, by its representatives and agents during regular business hours after reasonable advance notice (a) to inspect the Collateral, (b) to examine and make copies of the records of Grantor relating to the Collateral, and (c) to discuss the Collateral and the related records of Grantor with, and to be advised as to the same by, Grantor’s officers, employees all at such reasonable times and intervals as Secured Party may determine, and, if an Event of Default has occurred and is continuing, at Grantor’s expense.

 

(b)    Records and Reports; Notification of Default or Event of Default. Grantor will maintain true, complete, and accurate books and records in all material respects with respect to the Collateral, and furnish to Secured Party such reports relating to the Collateral at such intervals as Secured Party shall from time to time reasonably request. Grantor will give prompt notice in writing to Secured Party of the occurrence of any Default or Event of Default and of any other development, financial or otherwise, that is likely to materially and adversely affect the Collateral.

 

(c)    Schedules. Grantor shall promptly update any Schedules that were attached to the Loan Documents upon execution if any information therein shall become inaccurate or incomplete, and Grantor shall from time to time update the Schedules to the extent there is any material change in the Collateral that is to be described on any Schedule or to the extent necessary to preserve Secured Parties’ rights under the UCC. The failure of property descriptions to be accurate or complete on any Schedule shall not impair Secured Party’s security interest in such property.

 

(d)    Liens. Grantor will not create, incur, or suffer to exist any Lien on the Collateral except (i) the security interest created by this Security Agreement, and (ii) Permitted Liens.

 

(e)    Change in Location, Jurisdiction of Organization or Name. Grantor will not (i) change its name, or (i) change its jurisdiction of organization, unless Grantor shall have given Secured Party not less than thirty (30) days’ prior written notice thereof. Prior to making any of the foregoing changes, Grantor shall execute and deliver all such additional Documents and perform all additional acts as Secured Party may reasonably request in order to continue or maintain the existence and priority of its security interest in all of the Collateral.

 

 

 

 

(f)    Compliance with Agreements. Grantor shall comply in all material respects with all mortgages, deeds of trust, Instruments, and other agreements binding on it or affecting its properties or business.

 

(g)    Compliance with Legal Requirements. Grantor shall comply with all applicable laws, rules, regulations, and orders of any court or Governmental Authority, except where failure to comply could not reasonably be expected to result in a Material Adverse Change.

 

(h)    Other Financing Statements. Grantor will not authorize any other financing statement naming it as debtor covering all or any portion of the Collateral, except as in connection with Permitted Liens.

 

4.3    Receivables.

 

(a)    Certain Agreements on Receivables. Following notice from Secured Party after an Event of Default has occurred and is continuing, Grantor will not make or agree to make any material discount, credit, rebate or other reduction in the original amount owing on a Receivable or accept in satisfaction of a Receivable less than the original amount thereof, except in accordance with its present policies and in the ordinary course of business.

 

(b)    Delivery of Invoices. Grantor will deliver to Secured Party immediately upon its request after an Event of Default has occurred and is continuing, duplicate invoices with respect to each Account bearing such language of assignment as Secured Party shall specify.

 

4.4    Accounts.

 

(a)    Verification of Accounts. Secured Party shall have the right, after an Event of Default has occurred and is continuing, in its name or in the name of a nominee of Secured Party, to verify the validity, amount or any other matter relating to any Accounts, by mail, telephone, or otherwise.

 

(b)    Notice to Account Debtor. Secured Party may, in its sole discretion, at any time or times after an Event of Default has occurred and is continuing, and without prior notice to Grantor, (i) notify any or all Account Debtors that the Accounts have been assigned to Secured Party and that Secured Party has a security interest therein, and (ii) direct any or all Account Debtors to make all payments upon the Accounts directly to Secured Party. Secured Party shall furnish Grantor with a copy of such notice.

 

4.5    Pledged Shares.

 

(a)    If an Event of Default has occurred and is continuing, in the event Grantor receives any dividends, interest or distributions on any Pledged Shares, then (i) such dividends, interest or distributions and securities or other property shall be included in the definition of Collateral without further action and (ii) upon receipt of written notice from Secured Party to Grantor, Grantor shall promptly take all steps, if any, necessary to ensure the validity, perfection, priority and, if applicable, control of the Secured Party over such Pledged Shares and pending any such action Grantor shall be deemed to hold such dividends, interest, distributions, securities or other property in trust for the benefit of the Lender and shall segregate such dividends, distributions, Securities or other property from all other property of Grantor.

 

 

 

 

(b)    Voting.

 

(i)    So long as no Event of Default shall have occurred and be continuing, Grantor shall be entitled, in its sole and absolute discretion, to exercise or refrain from exercising any and all voting and other consensual rights pertaining to the Pledged Shares or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Credit Agreement; and

 

(ii)    If an Event of Default shall have occurred and be continuing, Grantor shall follow all instructions provided to it by Secured Party with respect to voting and other consensual rights which Grantor may be entitled to exercise unless such instructions would (A) violate any Requirement of Law, (B) require a Governmental Approval. Upon notice to Grantor, Secured Party shall receive all dividends and other distributions which it may be entitled to receive hereunder.

 

(c)    Without the prior written consent of Secured Party, Grantor shall not vote to enable or take any other action to: (i) amend or terminate any certificate of incorporation, by-laws or other organizational documents in any way that materially and adversely changes the rights of Grantor with respect to any Pledged Shares or adversely affects the validity, perfection or priority of Secured Party’s security interest therein; (ii) permit any issuer of any Specified Pledged Shares to issue any additional stock or other equity interests of any nature or to issue securities convertible into or granting the right of purchase or exchange for any stock or other equity interest of any nature of such issuer except to Grantor; or (iii) if Security Party is exercising remedies with respect to any Pledged Shares, waive any default under or breach of any terms of organizational document relating to the issuer of any Pledged Shares.

 

4.6    Collateral Notes and Collateral Note Security. Upon noticed from Secured Party after an Event of Default has occurred and is continuing, Grantor may not (a) modify or substitute, or permit the modification, or substitution of, any Collateral Note or any Document evidencing the Collateral Note Security or (b) release any Collateral Note Security unless specifically required by the terms thereof.

 

4.7    Instruments; Chattel Paper; and Documents. Grantor will (a) deliver to Secured Party immediately upon written request from Secured Party the originals of all Chattel Paper and Instruments (if any then exists) with an individual value of $3,000,000 or more, and (b) mark conspicuously all Chattel Paper (other than any delivered to Secured Party) with an appropriate reference to the security interest of Secured Party. Secured Party shall immediately deliver to Grantor and Collateral held by Secured Party (a) if no Event of Default has occurred and is continuing, in connection with an exercise of Grantor’s rights with respect to such Collateral, and (b) if required pursuant to the terms of the agreements governing such Collateral, subject in each case to Grantor’s obligations (if any) to deliver any Collateral received in exchange therefor.

 

4.8    Commercial Tort Claims. If Grantor at any time holds or acquires a Commercial Tort Claim in an aggregate amount in excess of $250,000, Grantor shall (a) promptly forward to Secured Party written notification of any and all Commercial Tort Claims, including any and all actions, suits and proceedings before any court or Governmental Authority by or affecting Grantor; and (b) execute and deliver such statements, Documents and notices and do and cause to be done all such things as may be required by Secured Party, or required by law, including all things which may from time to time be necessary under the UCC to fully create, preserve, perfect and protect the priority of Secured Party’s security interest in any Commercial Tort Claims.

 

 

 

 

4.9    Letters‐of‐Credit Rights. If Grantor is at any time a beneficiary under a letter of credit now or hereafter issued in favor of Grantor in an aggregate amount in excess of $250,000, Grantor shall promptly notify Secured Party thereof in writing and, at Secured Party’s request, Grantor shall, pursuant to an agreement in form and substance satisfactory to Secured Party, either (a) arrange for the issuer or any confirmer of such letter of credit to consent to an assignment to Secured Party of the Proceeds of any drawing under the letter of credit or (b) arrange for Secured Party to become the transferee beneficiary of the letter of credit, with Secured Party agreeing, in each case, that the Proceeds of any drawing under the letter of credit are to be applied to the Secured Obligations as provided in the Credit Agreement.

 

4.10    Use and Operation of Collateral. Should any Collateral come into the possession of Secured Party, Secured Party may use or operate such Collateral for the purpose of preserving it or its value, pursuant to the order of a court of appropriate jurisdiction or in accordance with any other rights held by Secured Party in respect of such Collateral. Grantor covenants to promptly reimburse and pay to Secured Party, at Secured Party’s request, the amount of all expenses (including the cost of any insurance and payment of taxes or other charges) incurred by Secured Party in connection with its custody and preservation of the Collateral, and all such expenses, costs, taxes, and other charges shall bear interest at the Default Rate until repaid and, together with such interest, shall be payable by Grantor to Secured Party upon demand and shall become part of the Secured Obligations. However, the risk of accidental loss or damage to, or diminution in value of, the Collateral is on Grantor, and Secured Party shall have no liability whatever for failure to obtain or maintain insurance, nor to determine whether any insurance ever in force is adequate as to amount or as to the risks insured. With respect to the Collateral that is in the possession of Secured Party, Secured Party shall have no duty to fix or preserve rights against prior parties to such Collateral and shall never be liable for any failure to use diligence to collect any amount payable in respect of such Collateral, but shall be liable only to account to Grantor for what it may actually collect or receive thereon. The provisions of this subparagraph are applicable whether or not an Event of Default has occurred.

 

4.11    Certain Proceeds. Notwithstanding any contrary provision herein, any and all Proceeds of any Collateral consisting of cash, checks and other non‐cash items shall be part of the Collateral hereunder, and shall, if received by Grantor, and if an Event of Default has occurred and is continuing, upon notice by Secured Party, be held in trust for the benefit of Secured Party, and shall forthwith be delivered to Secured Party (accompanied by proper instruments of assignment and/or stock and/or bond powers executed by Grantor in accordance with Secured Party’s instructions) to be held subject to the terms of this Security Agreement. Any cash Proceeds of the Collateral which come into the possession of Secured Party after an Event of Default has occurred and is continuing (including insurance Proceeds) shall be applied to the Secured Obligations (to the extent then due).

 

4.12    Further Assurances. At any time and from time to time, upon the request of Secured Party, and at the sole expense of Grantor, Grantor shall promptly execute and deliver all such further Instruments and Documents and take such further actions as Secured Party may deem necessary or desirable (a) to assure Secured Party that its security interests hereunder are perfected with a first priority Lien, (b) to carry out the provisions and purposes of this Security Agreement, including (i) the filing of such financing statements as Secured Party may require, (ii) if an Event of Default has occurred and is continuing, executing control agreements with respect to the Collateral, in each case naming Secured Party, as secured party, in form and substance reasonably satisfactory to Secured Party, (iii) furnishing to Secured Party from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Secured Party may reasonably request, all in reasonable detail, (iv) the deposit of all certificates of title issuable with respect to any of the Collateral and noting thereon the security interest hereunder, and (v) taking all actions required by law in any relevant UCC, or by other law as applicable in any foreign jurisdiction. A carbon, photographic, or other reproduction of this Security Agreement or of any financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement and may be filed as a financing statement.

 

 

 

 

	
			5. 

				
			REMEDIES UPON EVENT OF DEFAULT

			

 

5.1    Remedies. On and after the occurrence of an Event of Default under the Credit Agreement or any other Loan Document that is not cured within the applicable cure period, if any, Secured Party may exercise any or all of the following rights and remedies:

 

(a)    Contractual Remedies. Those rights and remedies provided in this Security Agreement, the Credit Agreement, or any other Loan Document, provided that this Section 5.1(a) shall not limit any rights or remedies available to Secured Party prior to the occurrence of an Event of Default.

 

(b)    Legal Remedies. Those rights and remedies available to a secured party under the UCC (whether or not the UCC applies to the affected Collateral) or under any other applicable law (including any law governing the exercise of a bank’s right of setoff or bankers’ lien) when a debtor is in default under a security agreement.

 

(c)    Disposition of Collateral. Sell, lease, assign, grant an option or options to purchase or otherwise dispose of the Collateral or any part thereof in one or more parcels at public or private sale, for cash, on credit or for future delivery, and upon such other terms as are commercially reasonable. Neither Secured Party’s compliance with any applicable state or federal law in the conduct of such sale, nor its disclaimer of any warranties relating to the Collateral, shall be considered to affect the commercial reasonableness of such sale. Grantor hereby waives (to the extent permitted by applicable law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.

 

(d)    Distributions. On and after an Event of Default has occurred and is continuing, all payments and distributions made to Grantor upon or with respect to the Collateral shall be paid or delivered to Secured Party upon notice by Secured Party to Grantor, and Grantor agrees to take all such action as Secured Party may deem necessary or appropriate to cause all such payments and distributions to be made to Secured Party. Further, Secured Party shall have the right, at any time after an Event of Default has occurred and is continuing,, to notify and direct any issuer to thereafter make all payments, dividends, and any other distributions payable in respect thereof directly to Secured Party. Such issuer shall be fully protected in relying on the written statement of Secured Party that it then holds a security interest which entitles it to receive such payments and distributions. Any and all Money and other property paid over to or received by Secured Party hereunder shall be applied in accordance with Section 5.9 hereof.

 

5.2    Grantor’s Obligations Upon Event of Default. Upon the request of Secured Party on and after the occurrence of an Event of Default, Grantor will:

 

(a)    Assembly of Collateral. Assemble and make available to Secured Party the Collateral and all records relating thereto at any place or places specified by Secured Party.

 

(b)    Secured Party Access. Permit Secured Party, by Secured Party’s representatives and agents, to enter any premises where all or any part of the Collateral, or the books and records relating thereto, or both, are located, to take possession of all or any part of the Collateral and to remove all or any part of the Collateral.

 

 

 

 

(c)    Notice of Disposition of Collateral. Any notice made with respect to a disposition of Collateral shall be deemed reasonable if sent to Grantor, addressed as set forth in Section 6.13, at least ten (10) days prior to (i) the date of any such public sale or (ii) the time after which any such private sale or other disposition may be made. Secured Party shall not be obligated to make any sale or other disposition of the Collateral regardless of notice having been given. Subject to the provisions of applicable law, Secured Party may postpone or cause the postponement of the sale of all or any portion of the Collateral by announcement at the time and place of such sale, and such sale may, without further notice, to the extent permitted by law, be made at the time and place to which the sale was postponed, or Secured Party may further postpone such sale by announcement made at such time and place.

 

5.3    Condition of Collateral; Warranties. Secured Party has no obligation to clean‐up or otherwise prepare the Collateral for sale. Secured Party may sell the Collateral without giving any warranties as to the Collateral. Secured Party may specifically disclaim any warranties of title or the like. This procedure will not be considered adversely to affect the commercial reasonableness of any sale of the Collateral.

 

5.4    Collection of Receivables. After an Event of Default has occurred and is continuing, Secured Party may at any time in its sole discretion, by giving Grantor written notice, elect to require that the Receivables be paid directly to Secured Party. In such event, Grantor shall, and shall permit Secured Party to, promptly notify the Account Debtors under the Receivables of Secured Party’s interest therein and direct such Account Debtors to make payment of all amounts then or thereafter due under the Receivables directly to Secured Party. Upon receipt of any such notice from Secured Party, Grantor shall thereafter hold in trust for Secured Party, all amounts and Proceeds received by it with respect to the Receivables and immediately and at all times thereafter deliver to Secured Party all such amounts and Proceeds in the same form as so received, whether by cash, check, draft or otherwise, with any necessary endorsements. Secured Party shall hold and apply funds so received as provided by the terms of Section 5.9. If after an Event of Default has occurred and is continuing, any Account Debtor fails or refuses to make payment on any Collateral when due, Secured Party is authorized, in its sole discretion, either in its own name or in the name of Grantor, to take such action as Secured Party shall deem appropriate for the collection of any amounts owed with respect to Collateral or upon which a delinquency exists. Grantor agrees that Secured Party may at any time and from time to time, if an Event of Default has occurred and is continuing, compromise with the obligor on any Receivable, accept in full payment of any Receivable such amount as Secured Party as may be commercially reasonable or abandon any Receivable. Regardless of any other provision hereof, however, Secured Party is not any duty whatsoever to anyone except Grantor to account for funds that it shall actually receive hereunder.

 

5.5    Cash Collateral Account. On and after an Event of Default has occurred and is continuing, Secured Party shall have, and Grantor hereby grants to Secured Party, the right and authority to transfer all funds on deposit in the Deposit Accounts other than the Excluded Accounts to a “Cash Collateral Account” (herein so called) maintained with a depository institution acceptable to Secured Party and subject to the exclusive direction, domain, and Control of Secured Party, and no disbursements or withdrawals shall be permitted to be made by Grantor from such Cash Collateral Account. Such Cash Collateral Account shall be subject to the security interest in favor of Secured Party herein created, and Grantor hereby grants a security interest to Secured Party in and to, such Cash Collateral Account and all checks, drafts, and other items ever received by Grantor for deposit therein. Furthermore, if an Event of Default has occurred and is continuing, Secured Party shall have the right, at any time in its discretion without notice to Grantor, (a) to transfer to or to register in the name of Secured Party or nominee any certificates of deposit or deposit instruments constituting Deposit Accounts and shall have the right to exchange such certificates or Instruments representing Deposit Accounts for certificates or Instruments of smaller or larger denominations and (b) to take and apply against the Secured Obligations any and all funds then or thereafter on deposit in the Cash Collateral Account or otherwise constituting Deposit Accounts.

 

 

 

 

5.6    Intellectual Property. For purposes of enabling Secured Party to exercise its rights and remedies under this Security Agreement and enabling Secured Party and its successors and assigns to enjoy the full benefits of the Collateral, Grantor hereby grants to Secured Party an irrevocable, nonexclusive license (exercisable without payment of royalty or other compensation to Grantor) to use, license, or sublicense any of the Intellectual Property. Grantor shall provide Secured Party with reasonable access to all media in which any of the Intellectual Property may be recorded or stored and all computer programs used for the completion or printout thereof. This license shall also inure to the benefit of all successors, assigns, and transferees of Secured Party. On and after the occurrence of an Event of Default, Secured Party may require that Grantor assign all of its right, title, and interest in and to the Intellectual Property or any part thereof to Secured Party or such other person as Secured Party may designate pursuant to Documents satisfactory to Secured Party. If no Event of Default has occurred, Grantor shall have the exclusive, non‐transferable right and license to use the Intellectual Property in the ordinary course of business and the exclusive right to grant to other persons licenses and sublicenses with respect to the Intellectual Property for full and fair consideration.

 

5.7    Sales of Investment Related Property and Pledged Shares. Grantor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (collectively, the “Securities Act”) and applicable state securities laws, Secured Party may be compelled, with respect to any sale of all or any part of the Investment Related Property or Pledged Shares conducted without prior registration or qualification of such Investment Related Property or Pledged Shares under the Securities Act and/or such state securities laws, to limit purchasers to those who will agree, among other things, to acquire the Investment Related Property or Pledged Shares for their own account, for investment and not with a view to the distribution or resale thereof. Grantor acknowledges that any such private sale may be at prices and on terms less favorable than those obtainable through a public sale without such restrictions (including a public offering made pursuant to a registration statement under the Securities Act) and, notwithstanding such circumstances, Grantor agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that Secured Party shall have no obligation to engage in public sales and no obligation to delay the sale of any Investment Related Property or Pledged Shares for the period of time necessary to permit the issuer thereof to register it for a form of public sale requiring registration under the Securities Act or under applicable state securities laws, even if such issuer would, or should, agree to so register it. If Secured Party determines to exercise its right to sell any or all of the Investment Related Property or Pledged Shares, upon written request, Grantor shall, each partnership and each limited liability company from time to time to furnish to Secured Party all such information as Secured Party may request in order to determine the number and nature of interest, shares or other Instruments included in the Investment Related Property or Pledged Shares which may be sold by Secured Party in exempt transactions under the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder. In case of any sale of all or any part of the Investment Related Property or Pledged Shares on credit or for future delivery, such Collateral so sold may be retained by Secured Party until the selling price is paid by the purchaser thereof, but Secured Party shall not incur any liability in case of the failure of such purchaser to take up and pay for such assets so sold and in case of any such failure, such Collateral may again be sold upon like notice. Secured Party, instead of exercising the power of sale herein conferred upon them, may proceed by a suit or suits at law or in equity to foreclose security interests created hereunder and sell such Investment Related Property or or Pledged Shares, or any portion thereof, under a judgment or decree of a court or courts of competent jurisdiction.

 

 

 

 

5.8    Sales on Credit. If Secured Party sells any of the Collateral upon credit, Grantor will be credited only with payments actually made by the purchaser, received by Secured Party, and applied to the indebtedness of the purchaser. In the event the purchaser fails to pay for the Collateral, Secured Party may resell the Collateral and Grantor shall be credited with the Proceeds of the sale.

 

5.9    Application of Proceeds. If an Event of Default has occurred and is continuing, the Proceeds of the Collateral shall be applied by Secured Party to payment of the Secured Obligations in such manner and order as Secured Party may elect in its sole discretion. If the Proceeds of any sale or other disposition of the Collateral are insufficient to pay all the Secured Obligations, Grantor shall be liable for the deficiency and the fees of any attorneys employed by Secured Party to collect such deficiency.

 

5.10    Power of Attorney.    Grantor hereby irrevocably appoints Secured Party (such appointment being coupled with an interest) as Grantor’s attorney-in-fact, with full authority in the place and stead of Grantor and in the name of Grantor, the Lender or otherwise, from time to time in the Secured Party’s discretion to take any action and to execute any instrument that the Secured Party may deem reasonably necessary to accomplish the purposes of this Agreement, including, without limitation, the following:

 

(a)    upon the occurrence and during the continuance of any Event of Default, to ask for, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral;

 

(b)    upon the occurrence and during the continuance of any Event of Default, to receive, endorse and collect any drafts or other instruments, documents and chattel paper in connection with clause (b) above;

 

(c)    subject to any necessary regulatory approvals or consents and solely in respect of the Specified Pledged Shares, upon the occurrence and during the continuance of any Event of Default, to file any claims or take any reasonable action or institute any proceedings that the Secured Party may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Secured Party with respect to any of the Collateral;

 

(d)    upon the occurrence and during the continuance of any Event of Default, to take or cause to be taken all reasonable actions necessary to perform or comply or cause performance or compliance with the terms of this Agreement, including, without limitation, access to pay or discharge taxes or Liens levied or placed upon or threatened against the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by the Secured Party in its reasonable discretion, any such payments made by the Secured Party to become obligations of Grantor to the Secured Party, due and payable immediately without demand;

 

(e)    subject to any necessary regulatory approvals or consents and solely in respect of the Specified Pledged Shares, upon the occurrence and during the continuance of any Event of Default, but subject to the provisions of Section 5.7, generally to Transfer or make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Lender were the absolute owner thereof for all purposes, and to do, at the Lender’s option and Grantor’s expense, at any time or from time to time, all acts and things that the Lender deems reasonably necessary to protect, preserve or realize upon the Specified Pledged Shares and the Lender’s security interest therein in order to effect the intent of this Agreement, all as fully and effectively as Grantor might do, in each case, subject, however, to compliance with any applicable Laws by Lender and by any Person to whom Lender may Transfer the Specified Pledged Shares, in whole or part.

 

 

 

 

	
			6. 

				
			GENERAL PROVISIONS.

			

 

6.1    Joint and Several Obligations of Grantors.

 

(a)    Grantor is accepting joint and several liability hereunder with other persons that have executed or will execute a Security Agreement in consideration of the financial accommodation to be provided by the holders of the Secured Obligations, for the mutual benefit, directly and indirectly, of Grantor and in consideration of the undertakings of Grantor to accept joint and several liability for the Secured Obligations of each of them.

 

(b)    Grantor jointly and severally hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co‐debtor, joint and several liability with any other Grantor that joins this Security Agreement with respect to the payment and performance of all of the Secured Obligations, it being the intention of the parties hereto that all the Secured Obligations shall be the joint and several Secured Obligations of such Grantors without preferences or distinction among them.

 

6.2    Limitation of Obligations.

 

(a)    The provisions of this Security Agreement are severable, and in any action or proceeding involving any applicable law affecting the rights of creditors generally, if the Secured Obligations of Grantor under this Security Agreement would otherwise be held or determined to be avoidable, invalid or unenforceable on account of the amount of Grantor’s liability under this Security Agreement, then, notwithstanding any other provision of this Security Agreement to the contrary, the amount of such liability shall, without any further action by Grantor or Secured Party, be automatically limited and reduced to the highest amount that is valid and enforceable as determined in such action or proceeding (such highest amount determined hereunder being the relevant Grantor’s “Maximum Liability”). This Section 6.2 with respect to the Maximum Liability of Grantor is intended solely to preserve the rights of Secured Party hereunder to the maximum extent not subject to avoidance under applicable law, and none of Grantor or any other Person shall have any right or claim under this Section 6.2(a) with respect to the Maximum Liability, except to the extent necessary to ensure that the Secured Obligations of Grantor hereunder shall not be rendered voidable under applicable law.

 

(b)    Grantor agrees that the Secured Obligations may at any time and from time to time exceed the Maximum Liability of Grantor, and may exceed the aggregate Maximum Liability of all other Grantors, without impairing this Security Agreement or affecting the rights and remedies of Secured Party. Nothing in this Section 6.2(b) shall be construed to increase Grantor’s Secured Obligations hereunder beyond its Maximum Liability.

 

(c)    Notwithstanding any or all of the Secured Obligations becoming unenforceable against Grantor or the determination that any or all of the Secured Obligations shall have become discharged, disallowed, invalid, illegal, void or otherwise unenforceable as against Grantor (whether by operation of any present or future law or by order of any court or governmental agency), the Secured Obligations shall, for the purposes of this Security Agreement, continue to be outstanding and in full force and effect.

 

6.3    NO RELEASE OF GRANTOR. THE OBLIGATIONS OF GRANTOR UNDER THIS SECURITY AGREEMENT SHALL NOT BE REDUCED, LIMITED OR TERMINATED, NOR SHALL GRANTOR BE DISCHARGED FROM ANY OBLIGATION HEREUNDER, FOR ANY REASON WHATSOEVER (other than pursuant to Section 6.16), including (and whether or not the same shall have occurred or failed to occur once or more than once and whether or not Grantor shall have received notice thereof):

 

(a)    (i) any increase in the principal amount of, or interest rate applicable to, (ii) any extension of the time of payment, observance or performance of, (iii) any other amendment or modification of any of the other terms and provisions of, (iv) any release, composition or settlement (whether by way of acceptance of a plan of reorganization or otherwise) of, (v) any subordination (whether present or future or contractual or otherwise) of, or (vi) any discharge, disallowance, invalidity, illegality, voidness or other unenforceability of, the Secured Obligations;

 

 

 

 

(b)    (i) any failure to obtain, (ii) any release, composition or settlement of, (iii) any amendment or modification of any of the terms and provisions of, (iv) any subordination of, or (v) any discharge, disallowance, invalidity, illegality, voidness or other unenforceability of, any Loan Documents;

 

(c)    (i) any failure to obtain or any release of, any failure to protect or preserve, (ii) any release, compromise, settlement or extension of the time of payment of any Secured Obligations constituting, (iii) any failure to perfect or maintain the perfection or priority of any Lien upon, (iv) any subordination of any Lien upon, or (v) any discharge, disallowance, invalidity, illegality, voidness or other unenforceability of any Lien or intended Lien upon, any collateral now or hereafter securing, the Secured Obligations or any other guaranties thereof;

 

(d)    any termination of or change in any relationship between Grantor and Secured Party or the addition or release of Grantor;

 

(e)    any exercise of, or any failure or election not to exercise, delay in the exercise of, waiver of, or forbearance of or other indulgence with respect to, any right, remedy or power available to Secured Party, including (i) any election not to or failure to exercise any right of setoff, recoupment or counterclaim, (ii) any election of remedies effected by Secured Party, including the foreclosure upon any real estate constituting collateral, whether or not such election affects the right to obtain a deficiency judgment, and (iii) any election by Secured Party in any proceeding under the Bankruptcy Code of the application of Section 1111(b)(2) of the Bankruptcy Code; and

 

(f)    ANY OTHER ACT OR FAILURE TO ACT OR ANY OTHER EVENT OR CIRCUMSTANCE THAT (i) VARIES THE RISK OF GRANTOR UNDER THIS SECURITY AGREEMENT OR (ii) BUT FOR THE PROVISIONS HEREOF, WOULD, AS A MATTER OF STATUTE OR RULE OF LAW OR EQUITY, OPERATE TO REDUCE, LIMIT OR TERMINATE THE OBLIGATIONS OF GRANTOR HEREUNDER OR DISCHARGE GRANTOR FROM ANY OBLIGATION HEREUNDER.

 

6.4    Subordination of Certain Claims. Any and all rights and claims of Grantor against Borrower or against any other Person or property, arising by reason of any payment by Grantor to Secured Party pursuant to the provisions, or in respect, of this Security Agreement shall be subordinate, junior and subject in right of payment to the prior and indefeasible payment in full of all Secured Obligations to Secured Party, and until such time, Grantor defers all rights of subrogation, contribution or any similar right and until such time agree not to enforce any such right or remedy Secured Party may now or hereafter have against Borrower, any endorser or any other Grantor of all or any part of the Secured Obligations and any right to participate in, or benefit from, any security given to Secured Party to secure any of the Secured Obligations. All Liens and security interests of Grantor, whether now or hereafter arising and howsoever existing, in assets of Borrower or any assets securing the Secured Obligations shall be and hereby are subordinated to the rights and interests of Secured Party and in those assets until the prior and indefeasible final payment in full of all Secured Obligations to Secured Party. If any amount shall be paid to Grantor contrary to the provisions of this Section 6.4 at any time when any of the Secured Obligations shall not have been indefeasibly paid in full, such amount shall be held in trust for the benefit of Secured Party and shall forthwith be turned over in kind in the form received to Secured Party (duly endorsed if necessary) to be credited and applied against the Secured Obligations, whether matured or unmatured, in accordance with the terms of the Credit Agreement.

 

 

 

 

6.5    Recovered Payments. The Secured Obligations shall be deemed not to have been paid, observed or performed, and Grantor’s Secured Obligations under this Security Agreement in respect thereof shall continue and not be discharged, to the extent that any payment, observance or performance thereof by Grantor is recovered from or paid over by or for the account of Secured Party for any reason, including as a preference or fraudulent transfer or by virtue of any subordination (whether present or future or contractual or otherwise) of the Secured Obligations, whether such recovery or payment over is effected by any judgment, decree or order of any court or governmental agency, by any plan of reorganization or by settlement or compromise by Secured Party (whether or not consented to by Grantor) of any claim for any such recovery or payment over. Grantor hereby expressly waives the benefit of any applicable statute of limitations and agrees that it shall be liable hereunder whenever such a recovery or payment over occurs.

 

6.6    No Waiver. No delay or omission of Secured Party to exercise any right or remedy granted under this Security Agreement shall impair such right or remedy or be construed to be a waiver of any Event of Default, or an acquiescence therein, and any single or partial exercise of any such right or remedy shall not preclude any other or further exercise thereof or the exercise of any other right or remedy. No waiver, amendment or other variation of the terms, conditions or provisions of this Security Agreement whatsoever shall be valid unless in writing signed by Secured Party and then only to the extent in such writing specifically set forth. All rights and remedies contained in this Security Agreement or by law afforded shall be cumulative and all shall be available to Secured Party until the Secured Obligations have been paid in full.

 

6.7    Secured Party Performance of Grantor’s Obligations. Without having any obligation to do so, Secured Party may perform or pay any Secured Obligation which Grantor has agreed to perform or pay in this Security Agreement and Grantor shall, jointly and severally, reimburse Secured Party for any amounts paid by Secured Party pursuant to this Section 6.7. Grantor’s Secured Obligation to reimburse Secured Party pursuant to the preceding sentence shall be a Secured Obligation payable on demand.

 

6.8    Specific Performance of Certain Covenants. Grantor acknowledges and agrees that a breach of any of the covenants contained in Sections 4.2(d), 4.7, 5.4, 5.5, 5.6, 5.9, 5.10, or 6.9 will cause irreparable injury to Secured Party, that Secured Party has no adequate remedy at law in respect of such breaches and therefore agrees, without limiting the right of Secured Party to seek and obtain specific performance of other Secured Obligations of Grantor contained in this Security Agreement, that the covenants of Grantor contained in the Sections referred to in this Section 6.8 shall be specifically enforceable against Grantor.

 

6.9    Dispositions Not Authorized. Grantor is not authorized to sell or otherwise dispose of the Collateral except as set permitted by the Credit Agreement. If prohibited by the Loan Agreement, no authorization to sell or otherwise dispose of the Collateral shall be binding upon Secured Party unless such authorization is in writing signed by Secured Party.

 

6.10    Waivers. Except to the extent expressly otherwise provided herein or in other Loan Documents and to the fullest extent permitted by applicable law, Grantor waives (a) any right to require Secured Party to proceed against any other Person, to exhaust its rights in Collateral, or to pursue any other right which Secured Party or any Lender may have; (b) with respect to the Secured Obligations, presentment and demand for payment, protest, notice of protest and nonpayment, notice of intent to accelerate, and notice of acceleration; and (c) all rights of marshaling in respect of any and all of the Collateral.

 

 

 

 

6.11    Benefit of Agreement. The terms and provisions of this Security Agreement shall be binding upon and inure to the benefit of Grantor, Secured Party and their respective successors and assigns, except that Grantor shall not have the right to assign its rights or delegate its Secured Obligations under this Security Agreement or any interest herein, without the prior written consent of Secured Party.

 

6.12    Survival. All representations and warranties of Grantor contained in this Security Agreement shall survive the execution and delivery of this Security Agreement. Without prejudice to the survival of any other Secured Obligation of Grantor hereunder, the Secured Obligations of Grantor under Sections 6.14 and the indemnity under Section 10.7 of the Credit Agreement shall survive termination of this Security Agreement.

 

6.13    Sending Notices. Whenever any notice is required or permitted to be given under the terms of this Security Agreement, the same shall, except as otherwise expressly provided for in this Security Agreement, be given in writing, and sent by: (a) certified mail, return receipt requested, postage pre‐paid; (b) a national overnight delivery service; (c) hand delivery with written receipt acknowledged; or (d) facsimile, followed by a copy sent in accordance with clause (b) or (c) of this Section 6.13 sent the same day as the facsimile, in each case to the address or facsimile number (together with a contemporaneous copy to each copied addressee), as applicable, set forth on the signature page to this Security Agreement or in the Credit Agreement. Lender and Grantor shall not conduct communications contemplated by this Security Agreement by electronic mail or other electronic means, except by facsimile transmission as expressly provided in this Section 6.13, and the use of the phrase “in writing” or the word “written” shall not be construed to include electronic communications except by facsimile transmissions as expressly provided in this Section 6.13. Any notice required or given hereunder shall be deemed received the same Business Day if sent by hand delivery or facsimile, the next Business Day if sent by overnight courier, or three (3) Business Days after posting if sent by certified mail, return receipt requested; provided that any notice received after 5:00 p.m. central time on any Business Day or received on any day that is not a Business Day shall be deemed to have been received on the following Business Day.

 

6.14    Taxes and Expenses. Any taxes (including income taxes) payable or ruled payable by federal or state authority in respect of this Security Agreement shall be paid by Grantor, together with interest and penalties, if any. Grantor shall reimburse Secured Party for any and all out‐of‐pocket expenses and internal charges (including reasonable attorneys’, auditors’ and accountants’ fees and reasonable time charges of attorneys, paralegals, auditors and accountants who may be employees of Secured Party) paid or incurred by Secured Party in connection with the preparation, execution, delivery, and administration, of this Security Agreement and in the audit, analysis, administration, collection, preservation or sale of the Collateral (including the expenses and charges associated with any periodic or special audit of the Collateral). In addition, Grantor shall be obligated to pay all of the costs and expenses incurred by Secured Party, including attorneys’ fees and court costs, in obtaining or liquidating the Collateral, in enforcing payment of the Secured Obligations, or in the prosecution or defense of any action or proceeding by or against Secured Party or Grantor concerning any matter arising out of or connected with this Security Agreement, any Collateral or the Secured Obligations, including any of the foregoing arising in, arising under or related to a case under any bankruptcy, insolvency or similar law. Any and all costs and expenses incurred by Grantor in the performance of actions required pursuant to the terms hereof shall be borne solely by Grantor.

 

6.15    Headings. The title of and section headings in this Security Agreement are for convenience of reference only, and shall not govern the interpretation of any of the terms and provisions of this Security Agreement.

 

 

 

 

6.16    Termination. This Security Agreement shall continue in effect (notwithstanding the fact that from time to time there may be no Secured Obligations outstanding) until (a) the Credit Agreement has terminated pursuant to its express terms and (b) all of the Secured Obligations have been indefeasibly paid and performed in full and no commitments of Secured Party which would give rise to any Secured Obligations are outstanding; provided that the termination of this Security Agreement under this Section 6.16 is subject to Section 6.5.

 

6.17    FINAL AGREEMENT. THIS 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.

 

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signature page to follow.

 

 

 

 

IN WITNESS WHEREOF, Grantor and Secured Party have executed this Security Agreement as of the date first above written.

 

	
			 

				
			GRANTOR:

			 

			FIRST NORTHWEST BANCORP

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			By: 

				
			/s/ Matthew P. Deines

				
			 

			
	
			 

				
			 

				
			Name: Matthew P. Deines

			Title: President and Chief Executive Officer

				
			 

			

 

Signature Page to

Security Agreement

 

 

 

	
			 

				
			SECURED PARTY:

			 

			NEXBANK

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			By: 

				
			/s/ Rhett Miller

				
			 

			
	
			 

				
			 

				
			Name: Rhett Miller

			Title: EVP & Chief Credit Officer

				
			 

			

 

 

Signature Page to

Security Agreement

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