Document:

ex10-2.htm

Exhibit 10.2

  

PLEDGE AND SECURITY AGREEMENT

  

 

dated as of December 10, 2015

   

between

   

BANK OF COMMERCE HOLDINGS, as Grantor

   

and 

NEXBANK SSB, as Lender

 

 

 

 

 

  

PLEDGE AND SECURITY AGREEMENT

  

This PLEDGE AND SECURITY AGREEMENT, dated as of December 10, 2015 (as it may be amended, restated, supplemented or otherwise modified from time to time, this “Agreement”), by and among Bank of Commerce Holdings, a California corporation (the “Borrower”), each Additional Grantor (as herein defined) (along with the Borrower, each, a “Grantor”), and NexBank SSB, as lender (together with its successors and permitted assigns, the “Lender”).

 

RECITALS:

 

WHEREAS, reference is made to that certain Loan Agreement, dated as of the date hereof (as it may be amended, restated, supplemented or otherwise modified from time to time, the “Loan Agreement”), by and between Borrower and Lender;

  

WHEREAS, in consideration of the extensions of credit and other accommodations of Lender as set forth in the Loan Agreement, Grantor has agreed to secure Grantor’s obligations under the Loan Documents as set forth herein; and

  

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, and for other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, Grantor and Lender agree as follows:

 

SECTION 1. DEFINITIONS; GRANT OF SECURITY.

  

1.1 General Definitions. In this Agreement, the following terms shall have the following meanings:

  

“Additional Grantors” shall have the meaning assigned in Section 7.2.

  

“Agreement” shall have the meaning set forth in the preamble.

 

“Borrower” shall have the meaning set forth in the preamble. 

 

“Cash Proceeds” shall have the meaning assigned in Section 9.4. “Collateral” shall have the meaning assigned in Section 2.1.

  

“Collateral Account” shall mean any account established by the Lender.

   

“Collateral Records” shall mean books, records, ledger cards, files, correspondence, customer lists, supplier lists, blueprints, technical specifications, manuals, computer software and related documentation, computer printouts, tapes, disks and other electronic storage media 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.

  

“Control” shall mean: (1) with respect to any Deposit Accounts, control within the meaning of Section 9-104 of the UCC, (2) with respect to any Securities Accounts, Security Entitlements, Commodity Contract or Commodity Account, control within the meaning of Section 9-

106 of the UCC, (3) with respect to any Uncertificated Securities, control within the meaning of Section 8-106(c) of the UCC, (4) with respect to any Certificated Security, control within the meaning of Section 8-106(a) or (b) of the UCC, (5) with respect to any Electronic Chattel Paper, control within the meaning of Section 9-105 of the UCC, (6) with respect to Letter of Credit Rights, control within the meaning of Section 9-107 of the UCC and (7) with respect to any “transferable record”(as that term is defined in Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in any relevant jurisdiction), control within the meaning of Section 201 of the Federal Electronic Signatures in Global and National Commerce Act or in Section 16 of the Uniform Electronic Transactions Act as in effect in the jurisdiction relevant to such transferable record.

 

 

 

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“Grantor” shall have the meaning set forth in the preamble.

  

“Investment Related Property” shall mean: (i) all “investment property” (as such term is defined in Article 9 of the UCC) and (ii) all of the following (regardless of whether classified as investment property under the UCC): all Pledged Stock.

 

“Lender” shall have the meaning set forth in the preamble.

  

“Loan Agreement” shall have the meaning set forth in the recitals.

  

“Pledge Supplement” shall mean any supplement to this Agreement in substantially the form of Exhibit A.

  

“Pledged Stock” shall mean all shares of capital stock owned by Grantor, including, without limitation, all shares of capital stock described on Schedule 5.2(I) under the heading “Pledged Stock” (as such schedule may be amended or supplemented from time to time), and the certificates, if any, representing such shares and any interest of Grantor in the entries on the books of the issuer of such shares or on the books of any securities intermediary pertaining to 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 such shares.

  

“Secured Obligations” shall have the meaning assigned in Section 3.1.

  

“UCC” shall mean the Uniform Commercial Code as in effect from time to time in the State of Texas; provided, however, that in the event that, by reason of mandatory provisions of law, any or all of the perfection or priority of, or remedies with respect to, any Collateral is governed by the Uniform Commercial Code as enacted and in effect in a jurisdiction other than the State of Texas, the term “UCC” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes of the provisions hereof relating to such perfection, priority or remedies.

  

“United States” or “U.S.” shall mean the United States of America.

  

1.2     Definitions; Interpretation.

 

(a) In this Agreement, the following capitalized terms shall have the meaning given to them in the UCC (and, if defined in more than one Article of the UCC, shall have the meaning given in Article 9 thereof): Certificated Security, Proceeds and Supporting Obligations.

 

(b) All other capitalized terms used herein (including the preamble and recitals hereto) and not otherwise defined herein shall have the meanings ascribed thereto in the UCC or Loan Agreement, as applicable. The incorporation by reference of terms defined in the Loan Agreement shall survive any termination of the Loan Agreement until this Agreement is terminated as provided in Section 10 hereof. Any of the terms defined herein may, unless the context otherwise requires, be used in the singular or the plural, depending on the reference. References herein to any Section, Appendix, Schedule or Exhibit shall be to a Section, an Appendix, a Schedule or an Exhibit, as the case may be, hereof unless otherwise specifically provided. The use herein of the word “include” or “including”, when following any general statement, term or matter, shall not be construed to limit such statement, term or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not non-limiting language (such as “without limitation” or “but not limited to” or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that fall within the broadest possible scope of such general statement, term or matter. The terms lease and license shall include sub-lease and sub-license, as applicable. If any conflict or inconsistency exists between this Agreement and the Loan Agreement, the Loan Agreement shall govern. All references herein to provisions of the UCC shall include all successor provisions under any subsequent version or amendment to any Article of the UCC.

 

 

 

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SECTION 2.     GRANT OF SECURITY.

 

2.1 Grant of Security. The Grantor hereby grants to the Lender a security interest in and continuing lien on all of Grantor’s right, title and interest in, to and under the following personal property of the Grantor, in each case whether now or hereafter existing or in which the Grantor now has or hereafter acquires an interest and wherever the same may be located (all of which being hereinafter collectively referred to as the “Collateral”):

  

	 	
(a)
	
Pledged Stock;

 

	 	
(b)
	
Investment Related Property;

  

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

  

	 	
(d)
	
to the extent not otherwise included above, all Proceeds, products, accessions, rents and profits of or in respect of any of the foregoing.

   

SECTION 3.     SECURITY FOR OBLIGATIONS; GRANTOR REMAINS LIABLE.

 

3.1 Security for Obligations. This Agreement secures, and the Collateral is collateral security for, the prompt and complete payment or performance in full 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, 11 U.S.C. §362(a) (and any successor provision thereof)), of all Obligations of Grantor arising under the Loan Documents (the “Secured Obligations”).

  

3.2 Continuing Liability Under Collateral. Notwithstanding anything herein to the contrary, (i) Grantor shall remain liable for all obligations under the Collateral and nothing contained herein is intended or shall be a delegation of duties to the Lender, (ii) Grantor shall remain liable under each of the agreements included in the Collateral, including, without limitation, any agreements relating to Pledged Stock, to perform all of the obligations undertaken by it thereunder all in accordance with and pursuant to the terms and provisions thereof and the Lender shall have no obligation or liability under any of such agreements by reason of or arising out of this Agreement or any other document related thereto nor shall the Lender have any obligation to make any inquiry as to the nature or sufficiency of any payment received by it or have any obligation to take any action to collect or enforce any rights under any agreement included in the Collateral, including, without limitation, any agreements relating to Pledged Stock, and (iii) the exercise by the Lender of any of its rights hereunder shall not release Grantor from any of its duties or obligations under the contracts and agreements included in the Collateral.

 

 

 

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SECTION 4. CERTAIN PERFECTION REQUIREMENTS

 

4.1     Delivery Requirements. With respect to any Certificated Securities included in the Collateral, Grantor shall deliver to the Lender the Certificates evidencing such Certificated Securities duly indorsed by an effective indorsement (within the meaning of Section 8-107 of the UCC), or accompanied by share transfer powers or other instruments of transfer duly endorsed by such an effective endorsement, in each case, to the Lender or in blank.

  

4.2     Control Requirements. With respect to any Uncertificated Security included in the Collateral (other than any Uncertificated Securities credited to a Securities Account), Grantor shall cause the issuer of such Uncertificated Security to notify the Lender of any Uncertificated Security included in the Collateral. Upon the request of the Lender, the Grantor shall enter into an agreement with the Lender, such agreement in form and substance reasonably satisfactory to the Lender, pursuant to which such issuer agrees to comply with the Lender’s instructions with respect to such Uncertificated Security without further consent by Grantor. 

  

4.3     Timing and Notice. With respect to any Collateral in existence on the Effective Date, Grantor shall comply with the requirements of Section 4 on the date hereof and, with respect to any Collateral hereafter owned or acquired, Grantor shall comply with such requirements within thirty (30) days of Grantor acquiring rights therein. Grantor shall promptly inform the Lender of its acquisition of any Collateral for which any action is required by Section 4 hereof.

 

SECTION 5.     REPRESENTATIONS AND WARRANTIES. Grantor hereby represents and warrants, on the Effective Date that:

 

5.1     Grantor Information and Status.

 

(a) Schedule 5.1(A) and (B) sets forth, as of the Effective Date, under the appropriate headings: (1) the full legal name of Grantor, (2) all trade names or other names under which Grantor currently conducts business, (3) the type of organization of Grantor, (4) the jurisdiction of organization of Grantor, (5) its organizational identification number, if any, and (6) the jurisdiction where the chief executive office or its principal place of business is located.

  

(b) except as provided on Schedule 5.1(C), it has not changed its name, jurisdiction of organization or its corporate structure in any way (e.g., by merger, consolidation, change in corporate form or otherwise) and has not done business under any other name, in each case, within the past five (5) years;

 

(c) it has been duly organized and is validly existing as an entity of the type as set forth opposite its name on Schedule 5.1(A) solely under the laws of the jurisdiction as set forth opposite its name on Schedule 5.1(A) and remains duly existing as such. It has not filed any certificates of dissolution or liquidation, any certificates of domestication, transfer or continuance in any other jurisdiction; and

   

(d)     Grantor is not a “transmitting utility” (as defined in Section 9-102(a)(80) of the UCC).

 

 

 

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5.2     Collateral Identification, Special Collateral.

 

(a)     Schedule 5.2 sets forth as of the Effective Date under the appropriate headings all of Grantor’s Pledged Stock;

  

(b)     none of the Collateral constitutes, or is the Proceeds of, (1) Farm Products, (2) As-Extracted Collateral, (3) Manufactured Homes, (4) timber to be cut, or (5) aircraft, aircraft engines, satellites, ships or railroad rolling stock; and

 

(c)     all information supplied by Grantor with respect to any of the Collateral (in each case taken as a whole with respect to any particular Collateral) is accurate and complete in all material respects.

 

5.3     Ownership of Collateral and Absence of Other Liens.

 

It owns the Collateral purported to be owned by it or otherwise has the rights it purports to have in each item of Collateral and, as to all Collateral whether now existing or hereafter acquired, developed or created (including by way of lease or license), will continue to own or have such rights in each item of the Collateral (except as otherwise permitted by the Loan Agreement), in each case free and clear of any and all Liens, rights or claims of all other Persons, including, without limitation, liens arising as a result of Grantor becoming bound (as a result of merger or otherwise) as debtor under a security agreement entered into by another Person other than, in the case of priority only, any Permitted Liens.

  

5.4     Status of Security Interest.

 

(a) upon the filing of financing statements naming Grantor as “debtor” and the Lender as “secured party” and describing the Collateral in the filing offices set forth opposite Grantor’s name on Schedule 5.4 hereof (as such schedule may be amended or supplemented from time to time), the security interest of the Lender in all Collateral that can be perfected by the filing of a financing statement under the Uniform Commercial Code as in effect in any jurisdiction will constitute a valid, perfected, first priority Lien subject, in the case of priority only, to any Permitted Liens with respect to Collateral. Each agreement purporting to give the Lender Control over any Collateral is effective to establish the Lender’s Control of the Collateral subject thereto; and

  

(b) no authorization, consent, approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body or any other Person is required for either (i) the pledge or grant by Grantor of the Liens purported to be created in favor of the Lender hereunder or (ii) the exercise by Lender of any rights or remedies in respect of any Collateral (whether specifically granted or created hereunder or created or provided for by applicable law), except (A) for the filings contemplated by clause (a) above, (B) those that have been obtained prior to the date of determination and (C) as may be required, in connection with the disposition of any Investment Related Property, by laws generally affecting the offering and sale of Securities and the regulations of any applicable Bank Regulatory Authority.

   

5.5     Reserved.

  

5.6     Pledged Stock, Investment Related Property.

 

(a) it is the record and beneficial owner of the Pledged Stock free of all Liens, rights or claims of other Persons and 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 Pledged Stock;

 

 

 

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(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 Stock or the exercise by the Lender of the voting or other rights provided for in this Agreement or the exercise of remedies in respect thereof except such as have been obtained and as may be required, in connection with the disposition of any Investment Related Property, by laws generally affecting the offering and sale of Securities and the regulations of any applicable Bank Regulatory Authority.

 

SECTION 6.     COVENANTS AND AGREEMENTS. 

 

Grantor hereby covenants and agrees that:

 

6.1     Grantor Information and Status.

 

(a) Without limiting any prohibitions or restrictions on mergers or other transactions set forth in the Loan Agreement, it shall not change Grantor’s name, identity, corporate structure (e.g. by merger, consolidation, change in corporate form or otherwise), principal place of business, chief executive office, organizational identification number, type of organization or jurisdiction of organization unless it shall have (a) notified the Lender in writing at least ten (10) days prior to any such change or establishment, identifying such new proposed name, identity, corporate structure, principal place of business, chief executive office, jurisdiction of organization or trade name and providing such other information in connection therewith as the Lender may reasonably request and (b) taken all actions necessary to maintain the continuous validity, perfection and the same or better priority of the Lender’s security interest in the Collateral granted or intended to be granted and agreed to hereby, which in the case of any merger or other change in corporate structure shall include, without limitation, executing and delivering to the Lender a completed Pledge Supplement together with all Supplements to Schedules thereto, upon completion of such merger or other change in corporate structure confirming the grant of the security interest hereunder.

  

6.2     Ownership of Collateral and Absence of Other Liens.

 

(a) except for the security interest created by this Agreement, it shall not create or suffer to exist any Lien upon or with respect to any of the Collateral, other than Permitted Liens, and Grantor shall defend the Collateral against all Persons at any time reasonably claiming any interest therein;

 

(b) upon Grantor or any executive officer of Grantor obtaining knowledge thereof, it shall promptly notify the Lender in writing of any event that could reasonably be expected to materially diminish the value of the Collateral or any portion thereof, the ability of Grantor or the Lender to dispose of the Collateral or any portion thereof, or the rights and remedies of the Lender in relation thereto, including, without limitation, the levy of any legal process against the Collateral or any portion thereof; and

  

(c) it shall not sell, transfer or assign (by operation of law or otherwise) or exclusively license to another Person any Collateral except as otherwise permitted by the Loan Agreement.

  

6.3     Status of Security Interest.

 

(a) Grantor shall maintain the security interest of the Lender hereunder in all Collateral as valid, perfected, first priority Liens (subject to Permitted Liens).

 

 

 

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(b) Notwithstanding the foregoing, Grantor shall not be required to take any action to perfect any Collateral to the extent that the Grantor, in consultation with the Lender, reasonably determines that the cost of obtaining a security interest in such Collateral exceeds the practical benefit thereof to the Lender.

  

6.4     Pledged Stock, Investment Related Property.

  

(a) except as provided in the next sentence, in the event Grantor receives any dividends, interest or distributions on any Pledged Stock or other Investment Related Property, upon the merger, consolidation, liquidation or dissolution of any issuer of any Pledged Stock or Investment Related Property, then (a) such dividends, interest or distributions and securities or other property shall be included in the definition of Collateral without further action and (b) Grantor shall promptly take all steps, if any, necessary to ensure the validity, perfection, priority and, if applicable, control of the Lender over such Investment Related Property 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. Notwithstanding the foregoing, so long as no Event of Default shall have occurred and be continuing, the Lender authorizes Grantor to retain all ordinary cash dividends and distributions paid consistent with the past practice of the issuer and all scheduled payments of interest;

  

(b)     Voting.

  

(i) So long as no Event of Default shall have occurred and be continuing, except as otherwise provided under the covenants and agreements relating to Investment Related Property in this Agreement or elsewhere herein or in the Loan Agreement, Grantor shall be entitled to exercise or refrain from exercising any and all voting and other consensual rights pertaining to the Investment Related Property or any part thereof for any purpose not inconsistent with the terms of this Agreement or the Loan Agreement; and

 

(ii)     Upon the occurrence and during the continuation of an Event of Default:

  

(1)   all rights of Grantor to exercise or refrain from exercising the voting and other consensual rights which it would otherwise be entitled to exercise pursuant hereto shall upon notice from the Lender cease and all such rights shall thereupon become vested in the Lender who shall thereupon have the sole right to exercise such voting and other consensual rights; and

 

(2)   in order to permit the Lender to exercise the voting and other consensual rights which it may be entitled to exercise pursuant hereto and to receive all dividends and other distributions which it may be entitled to receive hereunder: (x) Grantor shall promptly execute and deliver (or cause to be executed and delivered) to the Lender all proxies, dividend payment orders and other instruments as the Lender may from time to time reasonably request and (y) Grantor acknowledges that the Lender may utilize the power of attorney set forth in Section 8.1.

 

 

 

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SECTION 7.     FURTHER ASSURANCES; ADDITIONAL GRANTORS.

  

7.1     Further Assurances.

 

(a) Grantor agrees that from time to time, at the expense of Grantor, that it shall promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary, or that the Lender may reasonably request, in order to create and/or maintain the validity, perfection or priority of and protect any security interest granted or purported to be granted hereby or to enable the Lender to exercise and enforce its rights and remedies hereunder with respect to any Collateral.

  

(b) Grantor hereby authorizes the Lender to file a Record or Records, including, without limitation, financing or continuation statements and amendments and supplements to any of the foregoing, in any jurisdictions and with any filing offices as the Lender may determine, in its sole discretion, are necessary to perfect or otherwise protect the security interest granted to the Lender herein. Such financing statements may describe the Collateral in the same manner as described herein or may contain an indication or description of collateral that describes such property in any other manner as the Lender may determine, in its sole discretion, is necessary to ensure the perfection of the security interest in the Collateral granted to the Lender herein.

    

7.2 Additional Grantors. From time to time subsequent to the date hereof, to the extent required by the Loan Agreement, additional Persons may become parties hereto as additional Grantors (each, an “Additional Grantor”), by executing a joinder agreement in a form reasonably acceptable to Grantor and Lender. Upon delivery of any such joinder agreement to the Lender, notice of which is hereby waived by Grantor, each Additional Grantor shall be a Grantor and shall be as fully a party hereto as if Additional Grantor were an original signatory hereto. Grantor expressly agrees that its obligations arising hereunder shall not be affected or diminished by the addition or release of any other Grantor hereunder, nor by any election of Lender not to cause any Subsidiary of Borrower to become an Additional Grantor hereunder. This Agreement shall be fully effective as to any Grantor that is or becomes a party hereto regardless of whether any other Person becomes or fails to become or ceases to be a Grantor hereunder.

 

SECTION 8.     LENDER APPOINTED ATTORNEY-IN-FACT.

 

8.1 Power of Attorney. Grantor hereby irrevocably appoints the Lender (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 Lender’s discretion to take any action and to execute any instrument, in each case, that the Lender may deem reasonably necessary in connection with any of the following actions:

 

(a) upon the occurrence and during the continuance of any Event of Default, to obtain and adjust insurance required to be maintained by Grantor or paid to the Lender pursuant to the Loan Agreement;

   

(b) 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;

 

 

 

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(c) 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;

 

(d) upon the occurrence and during the continuance of any Event of Default, to file any claims or take any action or institute any proceedings that the Lender may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce the rights of the Lender with respect to any of the Collateral;

 

(e) to prepare and file any UCC financing statements against Grantor as debtor;

 

(f) to take or cause to be taken all actions necessary to perform or comply or cause performance or compliance with the terms of this Agreement (if Grantor has failed to take such action), including, without limitation, access to pay or discharge taxes or Liens (other than Permitted 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 Lender in its sole discretion, any such payments made by the Lender to become obligations of Grantor to the Lender, due and payable immediately without demand; and

  

(g) upon the occurrence and during the continuance of any Event of Default, generally to sell, transfer, lease, license, pledge, 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 Collateral 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.

  

8.2 No Duty on the Part of Lender. The powers conferred on the Lender hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon the Lender to exercise any such powers. The Lender shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither the Lender nor any of its officers, directors, employees or agents shall be responsible to Grantor for any act or failure to act hereunder, except for their own gross negligence bad faith or willful misconduct.

 

SECTION 9.     REMEDIES.

 

9.1     Generally.

 

(a) If any Event of Default shall have occurred and be continuing, the Lender may exercise in respect of the Collateral, in addition to all other rights and remedies provided for

 

herein or otherwise available to it at law or in equity, all the rights and remedies of the Lender on default under the UCC (whether or not the UCC applies to the affected Collateral) to collect, enforce or satisfy any Secured Obligations then owing, whether by acceleration or otherwise, and also may pursue any of the following separately, successively or simultaneously:

 

(i) require Grantor to, and Grantor hereby agrees that it shall at its expense and promptly upon request of the Lender forthwith, assemble all or part of the Collateral as directed by the Lender and make it available to the Lender at a place to be designated by the Lender that is reasonably convenient to both parties;

 

 

 

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(ii) enter onto the property where any Collateral is located and take possession thereof with or without judicial process;

 

(iii) prior to the disposition of the Collateral, store, process, repair or recondition the Collateral or otherwise prepare the Collateral for disposition in any manner to the extent the Lender deems appropriate; and

  

(iv) without notice except as specified below or under the UCC, sell, assign, lease, license (on an exclusive or nonexclusive basis) or otherwise dispose of the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Lender’s offices or elsewhere, for cash, on credit or for future delivery, at such time or times and at such price or prices and upon such other terms as the Lender may deem commercially reasonable.

  

(b) The Lender may be the purchaser of any or all of the Collateral at any public or private (to the extent the portion of the Collateral being privately sold is of a kind that is customarily sold on a recognized market or the subject of widely distributed standard price quotations) sale in accordance with the UCC and the Lender shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such sale made in accordance with the UCC, to use and apply any of the Secured Obligations as a credit on account of the purchase price for any Collateral payable by the Lender at such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of Grantor, and 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. Grantor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days’ notice to Grantor of the time and place of any sale shall constitute reasonable notification. The Lender shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Lender may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Grantor hereby waives any claims against the Lender arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Lender accepts the first offer received and does not offer such Collateral to more than one offeree. 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 the Lender to collect such deficiency. Grantor further agrees that a breach of any of the covenants contained in this Section will cause irreparable injury to the Lender, that the Lender has no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against Grantor, and Grantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Secured Obligations becoming due and payable prior to their stated maturities. Nothing in this Section shall in any way limit the rights of the Lender hereunder.

 

(c) The Lender may sell the Collateral without giving any warranties as to the Collateral. The Lender may specifically disclaim or modify any warranties of title or the like. This procedure will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral.

  

(d)     The Lender shall have no obligation to marshal any of the Collateral.

  

9.2 Application of Proceeds. Except as expressly provided elsewhere in this Agreement, all proceeds received by the Lender in the event that an Event of Default shall have occurred and not otherwise been waived, and the maturity of the Obligations shall have been accelerated pursuant to Section 16.1 of the Loan Agreement and in respect of any sale of, any collection from, or other realization upon all or any part of the Collateral shall be applied in full or in part by the Lender against, the Secured Obligations in the following order of priority: first, to the payment of all costs and expenses of such sale, collection or other realization, including reasonable compensation to the Lender and its agents and counsel, and all other expenses, liabilities and advances made or incurred by the Lender in connection therewith, and all amounts for which the Lender is entitled to indemnification hereunder and all advances made by the Lender hereunder for the account of the Grantor, and to the payment of all costs and expenses paid or incurred by the Lender in connection with the exercise of any right or remedy hereunder or under the Loan Agreement, all in accordance with the terms hereof or thereof; second, to the extent of any excess of such proceeds, to the payment of all other Secured Obligations; and third, to the extent of any excess of such proceeds, to the payment to or upon the order of the Grantor or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.

 

 

 

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9.3 Investment Related Property. Grantor recognizes that, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws, the Lender may be compelled, with respect to any sale of all or any part of the Investment Related Property conducted without prior registration or qualification of such Investment Related Property 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 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, each Grantor agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that the Lender shall have no obligation to engage in public sales and no obligation to delay the sale of any Investment Related Property 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 the Lender determines to exercise its right to sell any or all of the Investment Related Property, upon written request, Grantor shall and shall cause each issuer of any Pledged Stock to be sold hereunder, each partnership and each limited liability company from time to time to furnish to the Lender all such information as the Lender may request in order to determine the number and nature of interest, shares or other instruments included in the Investment Related Property which may be sold by the Lender in exempt transactions under the Securities Act and the rules and regulations of the Securities and Exchange Commission thereunder, as the same are from time to time in effect.

  

9.4     Cash Proceeds. If any Event of Default shall have occurred and be continuing, all proceeds of any Collateral received by Grantor consisting of cash, checks and other near-cash items (collectively, “Cash Proceeds”) shall be held by Grantor in trust for the Lender, segregated from other funds of Grantor, and shall, upon the exercise of remedies by the Lender, be turned over to the Lender in the exact form received by Grantor (duly indorsed by such Grantor to the Lender, if required) and held by the Lender in the Collateral Account. Any Cash Proceeds received by the Lender (whether from a Grantor or otherwise) may, in the sole discretion of the Lender, (A) be held by the Lender as collateral security for the Secured Obligations (whether matured or unmatured) and/or (B) then or at any time thereafter may be applied by the Lender against the Secured Obligations then due and owing.

 

SECTION 10. CONTINUING SECURITY INTEREST; TRANSFER OF LOANS.

 

This Agreement shall create a continuing security interest in the Collateral and shall remain in full force and effect until the payment in full of all Secured Obligations (other than contingent obligations that survive the termination of the Loan Agreement), be binding upon Grantor, its successors and assigns, and inure, together with the rights and remedies of the Lender hereunder, to the benefit of the Lender and its successors, transferees and assigns. Without limiting the generality of the foregoing, but subject to the terms of the Loan Agreement, Lender may assign or otherwise transfer any Loans held by it to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to Lender herein or otherwise. Upon the payment in full of all Secured Obligations (other than contingent obligations that survive the termination of the Loan Agreement), the security interest granted hereby shall automatically terminate hereunder and of record and all rights to the Collateral shall revert to the Grantor. Upon any such termination the Lender shall, at the Grantor’s expense, promptly return all Collateral in the Lender’s possession and execute and deliver to the Grantor or otherwise authorize the filing of such documents as the Grantor shall reasonably request, including financing statement amendments to evidence such termination. Upon any disposition of property permitted by the Loan Agreement, the Liens granted herein shall be deemed to be automatically released and such property shall automatically revert to the Grantor with no further action on the part of any Person, and to the extent in the Lender’s possession, shall promptly be returned to the Grantor. The Lender shall, at the Grantor’s expense, execute and deliver or otherwise authorize the filing of such documents as Grantor shall reasonably request, in form and substance reasonably satisfactory to the Lender, including financing statement amendments to evidence such release.

 

 

 

11

 

 

SECTION 11. STANDARD OF CARE; LENDER MAY PERFORM.

 

The powers conferred on the Lender hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the exercise of reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Lender shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. The Lender shall be deemed to have exercised reasonable care in the custody and preservation of Collateral in its possession if such Collateral is accorded treatment substantially equal to that which the Lender accords its own property. Neither the Lender nor any of its directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon all or any part of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of Grantor or otherwise. If Grantor fails to perform any agreement contained herein, the Lender may itself perform, or cause performance of, such agreement, and the expenses of the Lender incurred in connection therewith shall be payable by Grantor under Section 7.5 of the Loan Agreement.

 

SECTION 12. MISCELLANEOUS.

  

Any notice required or permitted to be given under this Agreement shall be given in accordance with Section 17.16 of the Loan Agreement. No failure or delay on the part of the Lender in the exercise of any power, right or privilege hereunder or under any other Loan Document shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement and the other Loan Documents are cumulative to, and not exclusive of, any rights or remedies otherwise available. In case any provision in or obligation under this Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists. This Agreement shall be binding upon and inure to the benefit of the Lender and the Grantor and its respective successors and assigns. Grantor shall not, without the prior written consent of the Lender given in accordance with the Loan Agreement, assign any right, duty or obligation hereunder. This Agreement and the other Loan Documents embody the entire agreement and understanding between the Grantor and the Lender and supersede all prior agreements and understandings between such parties relating to the subject matter hereof and thereof. Accordingly, the Loan Documents 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. This Agreement may be executed in one or more counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document.

 

 

 

12

 

 

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.

 

THE PROVISIONS OF THE LOAN AGREEMENT UNDER THE HEADINGS “JURISDICTION” AND “WAIVER OF JURY TRIAL” ARE INCORPORATED HEREIN BY THIS REFERENCE AND SUCH INCORPORATION SHALL SURVIVE ANY TERMINATION OF THE LOAN AGREEMENT.

 

[Signature page follows.]

 

 

 

13

 

  

IN WITNESS WHEREOF, Grantor and the Lender have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.

 

	
 
	
BANK OF COMMERCE HOLDINGS
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
By: 
	
/s/ Samuel D. Jimenez
	
 

	
 
	
Name: 
	
Samuel D. Jimenez
	
 

	
 
	
Title:
	
Executive Vice President and Chief Operating Officer 
	
 

 

 

	
 
	
NEXBANK SSB,
	
 

	 	as Lender	 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
By: 
	
/s/ Rhett A. Miller III
	
 

	
 
	
Name:
	
Rhett A. Miller III
	
 

	
 
	
Title: 
	
SVP and Chief Credit Officer
	
 

 

 

 [Signature Page to Pledge and Security Agreement]

 

  

SCHEDULE 5.1

TO PLEDGE AND SECURITY AGREEMENT

   

GENERAL INFORMATION

   

(A) Full Legal Name, Type of Organization, Jurisdiction of Organization, Chief Executive Office/Principal Place of Business and Organizational Identification Number of Grantor:

 

	
Full Legal Name
	 	
Type of Organization
	 	
Jurisdiction of Organization
	 	
Chief Executive Office/Principal Place of Business
	 	
Organization I.D. #

	  	 	  	 	  	 	  	 	  
	Bank of Commerce Holdings	 	Corporation	 	California	 	1901 Churn Creek Rd 	 	C1101478
	 	 	 	 	 	 	Redding, CA 96002	 	 

 

 

	
(B)
	
Other Names (including any Trade Name or Fictitious Business Name) under which Grantor currently conducts business:

 

	Full Legal Name	Trade Name or Fictitious Business Name

 

 

	
(C)
	
Changes in Name, Jurisdiction of Organization, Chief Executive Office or Principal Place of Business and Corporate Structure within past five (5) years: N/A

 

 

 

 

  

SCHEDULE 5.2

TO PLEDGE AND SECURITY AGREEMENT

  

COLLATERAL IDENTIFICATION

 

I. INVESTMENT RELATED PROPERTY

 

(A)     Pledged Stock:

  

	
 Grantor
	
Stock Issuer
	
Class of Stock
	
Certificated (Y/N)
	
Stock Cert. No.
	
Par Value
	
No. of Shares Pledged Stock
	
%

of Outstanding Stock of the Stock Issuer

	
Bank of Commerce Holdings
	
Redding Bank of Commerce
	
Common
	
Y
	
1
	
*
	
1,000
	
100%

  

*Par value of stock is not specified

 

 

 

 

   

SCHEDULE 5.4 TO

PLEDGE SECURITY AGREEMENT

  

FINANCING STATEMENTS:

  

	
Grantor
	
Filing Jurisdiction(s)

	
 
	
 

	
BANK OF COMMERCE HOLDINGS
	
California 

 

 

 

 

   

EXHIBIT A

   

SUPPLEMENT TO PLEDGE AND SECURITY AGREEMENT

 

SUPPLEMENT dated as of __________ (the “Supplement”), to the Pledge and Security Agreement dated as of December 10, 2015 (as amended, supplemented, restated, or otherwise modified from time to time, the “Security Agreement”), between Bank of Commerce Holdings (“Grantor”), and NexBank SSB (“Lender”).

 

Grantor hereby confirms the grant to Lender set forth in the Security Agreement of, and does hereby grant to Lender, a security interest in the Collateral (as defined therein). Grantor represents and warrants that the attached Supplement to Schedule accurately and completely sets forth all additional information required pursuant to the Security Agreement and hereby agrees that such Supplement to Schedule shall constitute part of the Schedule to the Security Agreement.

 

This Supplement shall be governed by and construed in accordance with the laws of the State of Texas, except to the extent that federal laws of the United States of America may apply.

 

[Remainder of Page Intentionally Blank]

[Signature Page to Follow]

 

 

 

 

 

IN WITNESS WHEREOF, Grantor has caused this Supplement to be duly executed and delivered by its duly authorized officer as of the date first written above.

  

	
 
	
BANK OF COMMERCE HOLDINGS,
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
By: 
	 	
 

	
 
	
Name:
	
 
	
 

	
 
	
Title:ex10-3.htm

Exhibit 10.3

 

SUBORDINATED NOTE PURCHASE AGREEMENT

  

Dated as of December 10, 2015

  

by and among

  

Bank of Commerce Holdings

  

and

  

THE PURCHASERS NAMED HEREIN

 

 

 

 

 

 

This SUBORDINATED NOTE PURCHASE AGREEMENT, dated as of December 10, 2015 (this “Agreement”), is by and among Bank of Commerce Holdings, a California corporation (the “Company”), and each purchaser named on Schedule A (each, a “Purchaser,” and together, “Purchasers”).

 

BACKGROUND

 

The Company intends to sell to Purchasers, and Purchasers intend to purchase from the Company, Fixed-to-Floating Subordinated Notes due 2025 in the aggregate principal amount of $10,000,000.00 in the form set forth on Exhibit A (the “Notes”) evidencing unsecured subordinated debt of the Company. 

 

NOW, THEREFORE, in consideration of the premises, and of the representations, warranties, covenants and agreements set forth herein, the parties agree as follows:

 

Article I
PURCHASE; CLOSING

 

Section 1.1     Purchase. On the terms and subject to the conditions set forth herein, and in consideration of each Purchaser’s payment of the Purchase Price (as defined herein), each Purchaser will purchase from the Company, and the Company will sell to Purchasers, in the aggregate, the Notes. The principal amount of the Notes to be delivered to each Purchaser is set forth next to such Purchaser’s name on Schedule A. 

 

Section 1.2     Closing. 

 

(a)     Subject to the satisfaction or waiver of the conditions set forth in this Agreement, the closing of the purchase of the Notes by Purchasers pursuant hereto (the “Closing”) shall occur at 10:00 a.m., Eastern time, on the third business day after the satisfaction or waiver (by the party entitled to grant such waiver) of the conditions to the Closing set forth in this Agreement (other than those conditions that by their nature are to be satisfied at the Closing, but subject to fulfillment or waiver at the Closing of those conditions), at the offices of Bryan Cave LLP located at 1201 West Peachtree Street NW, 14th Floor, Atlanta Georgia 30309, or remotely via the electronic or other exchange of documents and signature pages, or such other date or location as agreed in writing by the parties. The date of the Closing is referred to as the “Closing Date.”

 

(b)     Subject to the satisfaction or waiver on the Closing Date of the applicable conditions to the Closing in Section 1.2(c), at the Closing:

 

(i)     The Company will deliver to each Purchaser, in the denominations set forth on Schedule A, a Note duly executed by the Company; and

 

(ii)     Each Purchaser will deliver the amount set forth next to its name and designated as its “Purchase Price” on Schedule A to the Company by wire transfer of immediately available funds to the account provided to such Purchaser by the Company. The aggregate payments by Purchasers on the Closing Date shall equal $10,000,000.00 (the “Purchase Price”). 

 

 

 

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(c)     Closing Conditions.

 

(i)     The obligation of Purchasers, on the one hand, and the Company, on the other hand, to effect the Closing is subject to the fulfillment or written waiver by each Purchaser or the Company, as applicable, of the following condition:

 

(1)     no provision of any applicable law or regulation and no judgment, injunction, order or decree shall prohibit the Closing or shall prohibit or restrict Purchasers or their Affiliates from owning any Notes in accordance with the terms thereof and no lawsuit shall have been commenced by any court, administrative agency or commission or other governmental authority or instrumentality, whether federal, state, local or foreign, or any applicable industry self-regulatory organization (each, a “Governmental Entity”) seeking such prohibition or restriction.

 

(ii)     The obligation of Purchasers to consummate the purchase of the Notes to be purchased by them at Closing is also subject to the fulfillment by the Company or written waiver by each Purchaser prior to the Closing of each of the following conditions:

 

(1)     the representations and warranties of the Company set forth in this Agreement shall be true and correct in all respects on and as of the date of this Agreement and on and as of the Closing Date as though made on and as of the Closing Date, except where the failure to be true and correct (without regard to any materiality or Material Adverse Effect qualifications contained therein), individually or in the aggregate, would not be reasonably likely to have a Material Adverse Effect (and except that (i) representations and warranties made as of a specified date shall only be required to be true and correct as of such date and (ii) the representations and warranties of the Company set forth in Sections 2.2(b) (but only with respect to the last sentence thereof), 2.2(c) and 2.2(l)(4) shall be true and correct in all respects);

 

(2)     the Company shall have performed in all material respects all obligations required to be performed by it at or prior to the Closing, as the case may be, under this Agreement to be performed by it on or prior to the Closing Date;

 

(3)     Purchasers shall have received a certificate signed on behalf of the Company by a senior executive officer certifying to the effect that the conditions set forth in Section 1.2(c)(ii)(1) and Section 1.2(c)(ii)(2) have been satisfied;

 

(4)     any governmental and other consents, approvals, authorizations, non-objections, applications, registrations and qualifications that are required to be obtained in connection with or for the consummation of the transactions contemplated by this Agreement and the performance of the Company’s obligations thereunder (the “Required Approvals”) shall have been made or been obtained and shall be in full force and effect as of the Closing Date; provided, that no such Required Approval shall impose any Burdensome Condition;

 

 

 

- 2 -

 

 

(5)     since the date hereof, no Material Adverse Effect shall have occurred;

 

(6)     at the Closing, the Company shall deliver to Purchasers a certificate of the Secretary of the Company, in the form attached hereto as Exhibit B (the “Secretary’s Certificate”), dated as of the Closing Date, (i) certifying the resolutions adopted by the Board of Directors of the Company or a duly authorized committee thereof approving the transactions contemplated by this Agreement and the issuance of the Notes under this Agreement, (ii) certifying the current versions of the Certificate of Incorporation, as amended, and bylaws, as amended, of the Company, and (iii) certifying as to the signatures and authority of persons signing this Agreement and related documents on behalf of the Company; 

 

(7)     since the date hereof, there shall not be any action taken, or any law, rule or regulation enacted, entered, enforced or deemed applicable to the Company or the Company Subsidiaries, Purchasers or the transactions contemplated by this Agreement, by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) or any other Governmental Entity, whether in connection with the Required Approvals or otherwise, which imposes any restriction or condition which any Purchaser determines, in its reasonable good faith judgment, is materially and unreasonably burdensome on the Company’s or such Purchaser’s business or would materially reduce the economic benefits of the transactions contemplated by this Agreement to such Purchaser to such a degree that such Purchaser would not have entered into this Agreement had such condition or restriction been known to it on the date hereof (any such condition or restriction, a “Burdensome Condition”), and, for the avoidance of doubt, (i) any requirements to disclose the identities of limited partners, shareholders or members of such Purchaser or its Affiliates or its investment advisors, other than the identities of Affiliates of such Purchaser, shall be deemed a Burdensome Condition unless otherwise determined by such Purchaser in its sole discretion and (ii) any restrictions or conditions imposed on such Purchaser in any passivity commitments shall not be deemed a Burdensome Condition; provided, that the Purchasers agree that (i) obtaining the consent of the Company’s senior term loan lender, (ii) approval of the Federal Reserve Bank of San Francisco of the Company’s redemption of Preferred Stock issued to the U.S. Treasury pursuant to the Small Business Lending Fund, and (iii) confirmation from the Federal Reserve Bank that the Notes constitute Tier 2 Capital shall not be considered a Burdensome Condition; and

 

(8)     prior to, or contemporaneously with the Closing, each of the Purchasers set forth on Schedule A shall have actually subscribed for the amounts set forth opposite such Purchaser’s name on Schedule A.

 

(iii)     The obligation of the Company to effect the Closing is subject to the fulfillment or written waiver by the Company prior to the Closing of the following additional conditions:

 

(1)     the representations and warranties of each Purchaser set forth in this Agreement shall be true and correct in all respects on and as of the date of this Agreement and on and as of the Closing Date as though made on and as of the Closing Date, except where the failure to be true and correct (without regard to any materiality or Material Adverse Effect qualifications contained therein) would not materially adversely affect the ability of such Purchaser to perform its obligations hereunder;

 

 

 

- 3 -

 

 

(2)     each Purchaser shall have performed in all material respects all obligations required to be performed by it at or prior to the Closing, as the case may be, under this Agreement to be performed by it on or prior to the Closing Date; 

 

(3)     the Required Approvals shall have been made or been obtained and shall be in full force and effect as of the Closing Date; provided, that no such Required Approval shall impose any Burdensome Condition; 

 

(4)     since the date hereof, there shall not be any action taken, or any law, rule or regulation enacted, entered, enforced or deemed applicable to the Company or the Company Subsidiaries, Purchasers or the transactions contemplated by this Agreement, by the Federal Reserve or any other Governmental Entity, whether in connection with the Required Approvals or otherwise, which imposes any restriction or condition that is a Burdensome Condition; and 

 

(5)     the Company shall have received a Certificate signed on behalf of each Purchaser by a duly authorized person certifying to the effect that the conditions set forth in Section 1.2(c)(iii)(1) and Section 1.2(c)(iii)(2) have been satisfied. 

 

Article II
REPRESENTATIONS AND WARRANTIES

 

Section 2.1     Disclosure.

 

(a)     On or prior to the date hereof, the Company delivered to Purchasers a letter (a “Disclosure Letter”) setting forth, among other things, items the disclosure of which is (i) required by an express disclosure requirement contained in a provision hereof or (ii) necessary or appropriate to take exception to one or more representations or warranties contained in Section 2.2 with respect to the Company or to one or more covenants contained in Article III; provided, that if such information is disclosed in such a way as to make its relevance or applicability to another provision of this Agreement reasonably apparent on its face, such information shall be deemed to be responsive to such other provision of this Agreement. Notwithstanding anything in this Agreement to the contrary, the mere inclusion of an item in a Disclosure Letter shall not be deemed an admission that such item represents a material exception or material fact, event or circumstance or that such item has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 

 

(b)     As used in this Agreement, any reference to any fact, change, circumstance or effect being “material” with respect to the Company means such fact, change, circumstance or effect is material in relation to the business, assets, results of operations or financial condition of the Company and the Company Subsidiaries taken as a whole. As used in this Agreement, the term “Material Adverse Effect” means any circumstance, event, change, development or effect that, individually or in the aggregate, (1) is material and adverse to the business, assets, results of operations or financial condition of the Company and Company Subsidiaries taken as a whole or (2) would materially impair the ability of the Company to perform its obligations under this Agreement or to consummate the Closing; provided, that in determining whether a Material Adverse Effect has occurred, there shall be excluded any effect to the extent resulting from the following: (A) changes, after the date hereof, in U.S. generally accepted accounting principles (“GAAP”) or regulatory accounting principles generally applicable to banks, savings associations or their holding companies, (B) changes, after the date hereof, in applicable laws, rules and regulations or interpretations thereof by Governmental Entities, (C) actions or omissions of the Company expressly required by the terms of this Agreement or taken with the prior written consent of Purchasers, (D) changes in general economic, monetary or financial conditions in the United States, (E) changes in global or national political conditions, including the outbreak or escalation of war or acts of terrorism, or (F) the public disclosure of this Agreement or the transactions contemplated by this Agreement; provided, further, however, that if any event described in clause (A), (B), (D) or (E) of this Section 2.1(b) occurs and such event has a materially disproportionate effect on the Company relative to other banks, savings associations and their holding companies in the United States, only then such event will be deemed to have had a Material Adverse Effect.

 

 

 

- 4 -

 

 

(c)     “Previously Disclosed” with regard to a party means information set forth on its Disclosure Letter.

 

Section 2.2     Representations and Warranties of the Company. Except as Previously Disclosed, the Company hereby represents and warrants to Purchasers, as of the date of this Agreement and as of the Closing Date (except for the representations and warranties that are as of a specific date, which shall be made as of that date), that:

 

(a)     Organization and Authority. Each of the Company and the Company Subsidiaries is a corporation, bank or other entity duly organized and validly existing under the laws of the jurisdiction of its incorporation or organization, is duly qualified to do business and is in good standing in all jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so qualified except where any failure to be so qualified would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and has the corporate or other organizational power and authority to own its properties and assets and to carry on its business as it is now being conducted. The Company is duly registered as a bank holding company under the Bank Holding Company Act of 1956, as amended, and under applicable state Laws.

 

(b)     Company Subsidiaries. The Company has Previously Disclosed a true, complete and correct list of all of its Subsidiaries as of the date of this Agreement (each, a “Company Subsidiary” and, collectively, the “Company Subsidiaries”). The Company owns, directly or indirectly, all of its interests in each Company Subsidiary free and clear of any and all Liens. The deposit accounts of Redding Bank of Commerce, a wholly owned subsidiary bank of the Company (the “Bank”), are insured by the Federal Deposit Insurance Corporation (“FDIC”) to the fullest extent permitted by the Federal Deposit Insurance Act, as amended and the rules and regulations of the FDIC thereunder, and all premiums and assessments required to be paid in connection therewith have been paid when due (after giving effect to any applicable extensions). The Company beneficially owns all of the outstanding capital securities and has sole control of the Bank.

 

 

 

- 5 -

 

 

(c)     Authorization; No Conflicts; No Defaults.

 

(i)     The Company has the corporate power and authority to execute and deliver this Agreement and the Notes (collectively, the “Transaction Documents”) and to perform its obligations hereunder and thereunder. The execution, delivery and performance of the Transaction Documents by the Company and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of the Company. The Board of Directors has duly approved the agreements and the transactions contemplated by the Transaction Documents. No other corporate proceedings are necessary for the execution and delivery by the Company of the Transaction Documents, the performance by it of its obligations hereunder or thereunder or the consummation by it of the transactions contemplated hereby or thereby. The Transaction Documents have been, and when delivered at the Closing will be, duly and validly executed and delivered by the Company and, assuming due authorization, execution and delivery by Purchasers and the other parties thereto, are, or in the case of documents executed after the date of this Agreement, will be, upon execution, the valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms, except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles (whether applied in equity or at law).

 

(ii)     Neither the execution and delivery by the Company of the Transaction Documents nor the consummation of the transactions contemplated hereby or thereby, nor compliance by the Company with any of the provisions hereof or thereof, will (A) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or result in the loss of any benefit or creation of any right on the part of any third party under, or accelerate the performance required by, or result in a right of termination or acceleration of, or result in the creation of any liens, charges, adverse rights or claims, pledges, covenants, title defects, security interests and other encumbrances of any kind (“Liens”) upon any of the properties or assets of the Company or any Company Subsidiary, under any of the terms, conditions or provisions of (i) the articles of incorporation or bylaws (or similar governing documents) of the Company and each Company Subsidiary or (ii) subject to receipt of any Requisite Governmental Consents, any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which the Company or any of the Company Subsidiaries is a party or by which it may be bound, or to which the Company or any of the Company Subsidiaries, or any of the properties or assets of the Company or any of the Company Subsidiaries may be subject, or (B) subject to receipt of any Requisite Governmental Consents, violate any Law applicable to the Company or any of the Company Subsidiaries or any of their respective properties or assets except in the case of clauses (A)(ii) and (B) of this paragraph for such violations, conflicts and breaches as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(iii)     None of the Company, the Bank or any other Subsidiary of the Company is in default in the performance, observance or fulfillment of any of the terms, obligations, covenants, conditions or provisions contained in any indenture or other agreement creating, evidencing or securing Indebtedness of any kind or pursuant to which any such Indebtedness is issued, or other agreement or instrument to which Borrower, Bank or any other Subsidiary of Borrower is a party or by which the Company, the Bank or any other Subsidiary of the Company or their respective properties may be bound or affected, except, in each case, only such defaults that would not reasonably be expected to have, singularly or in the aggregate, a Material Adverse Effect on Borrower. For purposes of this Agreement, “Indebtedness” shall mean and include: (a) all items arising from the borrowing of money that, according to GAAP as in effect from time to time, would be included in determining total liabilities as shown on the consolidated balance sheet of the Company; and (b) all obligations secured by any lien in Property owned by the Company whether or not such obligations shall have been assumed; provided, however, Indebtedness shall not include deposits or other indebtedness created, incurred or maintained in the ordinary course of the Company’s or the Bank’s business (including, without limitation, federal funds purchased, advances from any Federal Home Loan Bank, secured deposits of municipalities and repurchase arrangements) and consistent with customary banking practices and applicable laws and regulations.

 

 

 

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(d)     Governmental Consents. Other than with respect to any Required Approvals or any approval required under the securities or blue sky laws of the various states (collectively, the “Requisite Governmental Consents”), no governmental consents are necessary for the execution and delivery of the Transaction Documents or for the consummation by the Company of the transactions contemplated hereby and thereby.

 

(e)     Litigation and Other Proceedings. Except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, there is no pending or, to the Knowledge of the Company, threatened claim, action, suit, arbitration, complaint, charge or investigation or proceeding (each an “Action”) against the Company or any Company Subsidiary or any of its assets, rights or properties, nor is the Company or any Company Subsidiary a party or named as subject to the provisions of any order, writ, injunction, settlement, judgment or decree of any court, arbitrator or government agency, or instrumentality. The Company is in compliance in all material respects with all existing decisions, orders, and agreements of or with Governmental Entities to which it is subject or bound. 

 

(f)     Financial Statements. Each of the audited consolidated balance sheets of the Company and the Company Subsidiaries and the related audited consolidated statements of income (loss), statements of shareholders’ equity and comprehensive income (loss) and cash flows, together with the notes thereto, for the last three years, and the unaudited consolidated balance sheets of the Company and the Company Subsidiaries and the related unaudited consolidated statements of income (loss), statements of shareholders’ equity and comprehensive income (loss) and cash flows, together with the notes thereto, as of and for the quarter ended September 30, 2015, all of which have been previously provided or made available to Purchasers (collectively, the “Company Financial Statements”), (1) have been prepared from, and are in accordance with, the books and records of the Company and the Company Subsidiaries, (2) complied, as of their respective date of such filing, in all material respects with applicable accounting requirements, (3) have been prepared in accordance with GAAP applied on a consistent basis and in accordance with the financial statement requirements of the United States Securities and Exchange Commission’s Regulation S-X, and (4) present fairly in all material respects the consolidated financial position of the Company and the Company Subsidiaries at the dates and the consolidated results of operations, changes in shareholders’ equity and cash flows of the Company and the Company Subsidiaries for the periods stated therein. As of September 30, 2015, the Bank’s allowance for loan losses was in compliance in all material respects with (A) the Bank’s methodology for determining the adequacy of its allowance for loan losses and (B) the standards established by applicable Governmental Entities and the Financial Accounting Standards Board. 

 

 

 

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(g)     Reports. Since December 31, 2011, the Company and each Company Subsidiary have filed all material reports, registrations, documents, filings, statements and submissions, together with any required amendments thereto, that it was required to file with any Governmental Entity (the foregoing, collectively, the “Company Reports”) and have paid all material fees and assessments due and payable in connection therewith. As of their respective filing dates, the Company Reports complied in all material respects with all statutes and applicable rules and regulations of the applicable Governmental Entities, as the case may be. 

 

(h)     Books and Records; Internal Accounting and Disclosure Controls. The books and records of the Company and the Company Subsidiaries are complete and correct in all material respects. No written or, to the Knowledge of the Company, oral notice or allegation of any material inaccuracies or discrepancies in such books and records has been received by the Company. The records, systems, controls, data and information of the Company and the Company Subsidiaries are recorded, stored, maintained and operated under means (including any electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of the Company or the Company Subsidiaries or accountants (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 

 

(i)     Off Balance Sheet Arrangements. There is no transaction, arrangement, or other relationship between the Company or any of the Company Subsidiaries and an unconsolidated or other affiliated entity that is not reflected on the Company Financial Statements.

 

(j)     Risk Management Instruments. All material derivative instruments, including swaps, caps, floors and option agreements entered into for the Company’s or any of the Company Subsidiaries’ own account were entered into (1) only in the ordinary course of business, (2) in accordance with prudent practices and in all material respects with all applicable Laws and (3) with counterparties believed to be financially responsible at the time; and each of them constitutes the valid and legally binding obligation of the Company or any Company Subsidiary, as applicable, enforceable in accordance with its terms. Neither the Company nor, to the Knowledge of the Company, any other parties thereto is in breach of any of its material obligations under any such agreement or arrangement.

 

(k)     No Undisclosed Liabilities. There are no liabilities of the Company or any of the Company Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, except for (1) liabilities adequately reflected or reserved against in accordance with GAAP in the Company Financial Statements, (2) liabilities that have arisen in the ordinary and usual course of business since September 30, 2015 and that have not or would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and (3) liabilities entered into by the Company in connection with the issuance of Trust Preferred Securities in July, 2005 (“TRUPS”).

 

 

 

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(l)     Absence of Certain Changes. Since January 1, 2015, except as disclosed in the Company Financial Statements, (1) the Company and the Company Subsidiaries have conducted their respective businesses in all material respects in the ordinary and usual course of business materially consistent with past practices, except that upon approval of its primary regulators, the Company expects to acquire five (5) retail branches from Bank of America, N.A. pursuant to a purchase transaction in the first quarter of 2016 (such transaction, the “BofA Transaction”), (2) none of the Company or any Company Subsidiary has incurred any material liability or obligation, direct or contingent, for borrowed money, except borrowings in the ordinary course of business (including entering into a Senior Term Loan Agreement with NexBank SSB, dated December 10, 2015), (3) the Company has not made or declared any distribution in cash or in kind to its shareholders or issued or repurchased any shares of its capital stock (except for the payment of dividends when due on the Company’s Small Business Lending Fund preferred stock and the redemption of the preferred stock at Closing with the proceeds of the Notes as contemplated by the Transaction Documents), (4) through (and including) the date of this Agreement, no fact, event, change, condition, development, circumstance or effect has occurred that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and (5) no material default (or event which, with notice or lapse of time, or both, would constitute a material default) exists on the part of the Company or any Company Subsidiary or, to the Knowledge of the Company, on the part of any other party, in the due performance and observance of any term, covenant or condition of any agreement to which the Company or any Company Subsidiary is a party and which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

(m)     Compliance with Laws. The Company and each Company Subsidiary have all permits, licenses, franchises, authorizations, orders and approvals of, and have made all filings, applications and registrations with, Governmental Entities that are required in order to permit them to own or lease their properties and assets and to carry on their business as presently conducted and that are material to the business of the Company and each Company Subsidiary, except where the failure to have such permits, licenses, franchises, authorizations, orders and approvals, or to have made such filings, applications and registrations, would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. The Company and each Company Subsidiary have complied in all material respects and (1) are not in default or violation in any respect of, (2) to the Company’s Knowledge, are not under investigation with respect to, and (3) to the Company’s Knowledge, have not been threatened to be charged with or given notice of any material violation of, any applicable material domestic (federal, state or local) or foreign law, statute, ordinance, license, rule, regulation, policy or guideline, order, demand, writ, injunction, decree or judgment of any Governmental Entity (each, a “Law”), other than such noncompliance, defaults or violations that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. Except for statutory or regulatory restrictions of general application, no Governmental Entity has placed any material restriction on the business or properties of the Company or any of the Company Subsidiaries. As of the date hereof, the Bank has a Community Reinvestment Act rating of “satisfactory” or better.

 

 

 

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(n)     Agreements with Regulatory Agencies. Neither the Company nor any Company Subsidiary (A) is subject to any cease-and-desist or other similar order or enforcement action issued by, (B) is a party to any written agreement, consent agreement or memorandum of understanding with, (C) is a party to any commitment letter or similar undertaking to, or (D) is subject to any capital directive by, and since December 31, 2011, neither of the Company nor any Company Subsidiary has adopted any board resolutions at the request of, any Governmental Entity that currently restricts in any material respect the conduct of its business or that in any material manner relates to its capital adequacy, its liquidity and funding policies and practices, its ability to pay dividends (except that Redding Bank of Commerce, a wholly owned subsidiary Bank of the Company, is required pursuant to Section 1133 of the California Financial Code, to seek approval of the California Department of Business Oversight prior to paying dividends to the Bank Holding Company), its credit, risk management or compliance policies, its internal controls, its management or its operations or business (each item in this sentence, a “Regulatory Agreement”), nor has the Company nor any of the Company Subsidiaries been advised since December 31, 2011 by any Governmental Entity that it is considering issuing, initiating, ordering, or requesting any such Regulatory Agreement. 

 

(o)     Brokers and Finders. The Company has engaged Raymond James & Associates, Inc. (the “Placement Agent”), a registered broker-dealer subject to the rules and regulations of the Financial Industry Regulatory Authority (“FINRA”), in connection with the offer and sale of the Notes as contemplated by the Transaction Documents, and the BofA Transaction. Except for such engagement, neither the Company nor any of its officers, directors, employees or agents has employed any broker or finder or incurred any liability for any financial advisory fees, brokerage fees, commissions or finder’s fees, and no broker or finder has acted directly or indirectly for the Company in connection with the Transaction Documents or the transactions contemplated hereby or thereby. 

 

(p)     Tax Matters. The Company and each of the Company Subsidiaries has (i) filed all material foreign, U.S. federal, state and local tax returns, information returns and similar reports that are required to be filed, and all such tax returns are true, correct and complete in all material respects, and (ii) paid all material taxes required to be paid by it and any other material assessment, fine or penalty levied against it other than taxes (x) currently payable without penalty or interest, or (y) being contested in good faith by appropriate proceedings.

 

(q)     Offering of Securities. Neither the Company nor any Person acting on its behalf has taken any action which would subject the offering, issuance or sale of the Notes to the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). Neither the Company nor any Person acting on its behalf has engaged or will engage in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with any offer or sale of the Notes pursuant to the transactions contemplated by the Transaction Documents. Assuming the accuracy of Purchasers’ representations and warranties set forth in this Agreement, no registration under the Securities Act is required for the offer and sale of the Notes by the Company to Purchasers.

 

 

 

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(r)     Investment Company Status. The Company is not, and upon consummation of the transactions contemplated by the Transaction Documents will not be, an “investment company,” a company controlled by an “investment company” or an “affiliated Person” of, or “promoter” or “principal underwriter” of, an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended.

 

Section 2.3     Representations and Warranties of Purchasers. Each Purchaser, severally, but not jointly, hereby represents and warrants to the Company, as of the date of this Agreement and as of the Closing Date (except to the extent made only as of a specified date, in which case as of such date), that:

 

(a)     Organization and Authority. Such Purchaser is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, is duly qualified to do business and is in good standing in all jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so qualified and where failure to be so qualified would be reasonably expected to materially and adversely affect such Purchaser’s ability to perform its obligations under this Agreement or consummate the transactions contemplated by this Agreement on a timely basis, and such Purchaser has the corporate or other power and authority and governmental authorizations to own its properties and assets and to carry on its business as it is now being conducted.

 

(b)     Authorization.

 

(i)     Such Purchaser has the corporate or other power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution, delivery and performance of this Agreement by such Purchaser and the consummation of the transactions contemplated by this Agreement have been duly authorized by such Purchaser’s board of directors, general partner or managing members, as the case may be (if such authorization is required), and no further approval or authorization by any of its partners or other equity owners, as the case may be, is required. This Agreement has been duly and validly executed and delivered by such Purchaser and assuming due authorization, execution and delivery by the Company, is a valid and binding obligation of such Purchaser enforceable against such Purchaser in accordance with its terms (except as enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar laws of general applicability relating to or affecting creditors’ rights or by general equity principles).

 

(ii)     Neither the execution, delivery and performance by such Purchaser of this Agreement, nor the consummation of the transactions contemplated by this Agreement, nor compliance by such Purchaser with any of the provisions hereof, will (A) violate, conflict with, or result in a breach of any provision of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by, or result in a right of termination or acceleration of, or result in the creation of any Lien upon any of the properties or assets of such Purchaser under any of the terms, conditions or provisions of (i) its certificate of limited partnership, certificate of formation, operating agreement or partnership agreement or similar governing documents or (ii) any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which such Purchaser is a party or by which it may be bound, or to which such Purchaser or any of the properties or assets of such Purchaser may be subject, or (B) subject to compliance with the statutes and regulations referred to in the next paragraph, violate any law, statute, ordinance, rule or regulation, permit, concession, grant, franchise or any judgment, ruling, order, writ, injunction or decree applicable to such Purchaser or any of its properties or assets except in the case of clauses (A) (ii) and (B) for such violations, conflicts and breaches as would not reasonably be expected to materially and adversely affect such Purchaser’s ability to perform its respective obligations under this Agreement or consummate the transactions contemplated by this Agreement on a timely basis.

 

 

 

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(iii)     No notice to, registration, declaration or filing with, exemption or review by, or authorization, order, consent or approval of, any Governmental Entity, nor expiration or termination of any statutory waiting period, is necessary for the consummation by such Purchaser of the transactions contemplated by this Agreement. 

 

(c)     Purchase for Investment. Such Purchaser acknowledges that the Notes have not been registered under the Securities Act or under any state securities laws. Such Purchaser (1) is acquiring the Notes pursuant to an exemption from registration under the Securities Act solely for investment with no present intention to distribute any of the Notes to any person, (2) will not sell or otherwise dispose of any of the Notes, except in compliance with the registration requirements or exemption provisions of the Securities Act and any other applicable securities laws, (3) has such knowledge and experience in financial and business matters and in investments of this type that it is capable of evaluating the merits and risks of its investment in the Notes and of making an informed investment decision, (4) is an “accredited investor” (as that term is defined by Rule 501 of the Securities Act) and (5) became aware of the offering of the Notes, and the Notes were offered to Purchaser, solely by direct contact between such Purchaser and the Company or the Placement Agent, and not by any other means, including any form of “general solicitation” or “general advertising” (as such terms are used in Regulation D under the Securities Act).

 

(d)     Qualified Institutional Buyer. Each Purchaser is and will be on the Closing Date a “qualified institutional buyer” as such term is defined in Rule 144A promulgated under the Securities Act (“QIB”).

 

(e)     Financial Capability. At the Closing, such Purchaser shall have available funds necessary to consummate the Closing on the terms and conditions contemplated by this Agreement.

 

(f)     Knowledge as to Conditions. As of the date of this Agreement, such Purchaser does not know of any reason why any Required Approvals and, to the extent necessary, any other approvals, authorizations, filings, registrations, and notices required or otherwise a condition to the consummation by it of the transactions contemplated by this Agreement will not be obtained.

 

(g)     Brokers and Finders. Neither such Purchaser nor its Affiliates, any of their respective officers, directors, employees or agents has employed any broker or finder or incurred any liability for any financial advisory fees, brokerage fees, commissions or finder’s fees, and no broker or finder has acted directly or indirectly for such Purchaser, in connection with this Agreement or the transactions contemplated by this Agreement, in each case, whose fees the Company would be required to pay (other than the reimbursement of transaction expenses as provided in Section 6.2).

 

 

 

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(h)     Investment Decision. Such Purchaser, or the duly appointed investment manager of such Purchaser (the “Investment Manager”), if applicable, has (1) reached its decision to invest in the Company independently from any other Person, (2) except with respect to other Purchasers, has not entered into any agreement or understanding with any other Person to act in concert for the purpose of exercising a controlling influence over the Company or any Company Subsidiary, including any agreements or understandings regarding the voting or transfer of shares of the Company, (3) except with respect to other Purchasers, has not shared with any other Person proprietary due diligence materials prepared by such Purchaser or its Investment Manager or any of its other advisors or representatives (acting in their capacity as such) and used by its investment committee as the basis for purposes of making its investment decision with respect to the Company or any Company Subsidiary, (4) has not been induced by any other Person to enter into the transactions contemplated by this Agreement, and (5) except with respect to other Purchasers, has not entered into any agreement with any other Person with respect to the transactions contemplated by this Agreement. Such Purchaser understands that nothing in this Agreement or any other materials presented by or on behalf of the Company to such Purchaser in connection with the purchase of the Notes constitutes legal, tax or investment advice. Such Purchaser has consulted such accounting, legal, tax and investment advisors as it has deemed necessary or appropriate in connection with its purchase of the Notes. 

 

(i)     Ability to Bear Economic Risk of Investment. Such Purchaser recognizes that an investment in the Notes involves substantial risk, and has the ability to bear the economic risk of the prospective investment in the Notes, including the ability to hold the Notes indefinitely, and further including the ability to bear a complete loss of all of its investment in Borrower.

 

(j)     Information. Such Purchaser acknowledges that: (i) it is not being provided with the disclosures that would be required if the offer and sale of the Notes were registered under the Securities Act, nor is it being provided with any offering circular or prospectus prepared in connection with the offer and sale of the Notes; (ii) it has conducted its own examination of the Company and the terms of the Notes to the extent it deems necessary to make its decision to invest in the Notes; and (iii) it has availed itself of public access to financial and other information concerning the Company to the extent it deems necessary to make its decision to purchase the Notes. It has reviewed the information set forth in the exhibits hereto. It acknowledges that it and its advisors have been furnished with all materials relating to the business, finances and operations of the Company that have been requested of it or its advisors and have been given the opportunity to ask questions of, and to receive answers from, persons acting on behalf of the Company concerning terms and conditions of the transactions contemplated by this Agreement in order to make an informed and voluntary decision to enter into this Agreement.

 

(k)     Placement Agent. Such Purchaser will purchase the Note directly from the Company and not from the Placement Agent, is not relying on the Placement Agent in any manner with respect to its decision to purchase the Note, and understands that neither the Placement Agent nor any other broker or dealer has any obligation to make a market in the Notes.

 

 

 

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(l)     Restricted Securities. Such Purchaser understands that the Notes are characterized as “restricted securities” under the Securities Act inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under the Securities Act and the rules and regulations thereunder, such securities may be resold without registration under the Securities Act only in limited circumstances. Such Purchaser represents that it understands the resale limitations imposed by Rule 144 promulgated under the Securities Act and by the Securities Act on the Notes.

 

(m)     Accuracy of Representations. Such Purchaser understands that each of the Placement Agent and the Company will rely upon the truth and accuracy of the foregoing representations, acknowledgements and agreements in connection with the transactions contemplated by this Agreement, and agrees that if any of the representations or acknowledgements made by it are no longer accurate as of the Closing Date, or if any of the agreements made by it are breached on or prior to the Closing Date, it shall promptly notify the Placement Agent and the Company. 

 

(n)     Subsequent Transfers. Such Purchaser acknowledges and agrees that the Company is not conducting any offering other than the sale to Purchasers set forth in this Agreement and any subsequent resale of the Notes in the secondary market, including a securitization, shall not result in any additional costs or liability to the Company, except as contemplated by Section 4.3. 

 

Article III
COVENANTS

 

Section 3.1     Filings; Other Actions.

 

(a)     Each Purchaser, on the one hand, and the Company, on the other hand, will cooperate and consult with the other and use commercially reasonable efforts to prepare and file all necessary documentation, to effect all necessary applications, notices, petitions, filings and other documents, and to obtain all necessary permits, consents, orders, approvals and authorizations of, or any exemption by, all third parties and Governmental Entities, and the expiration or termination of any applicable waiting period, necessary or advisable to consummate the transactions contemplated by this Agreement, to perform the covenants contemplated by this Agreement, to satisfy all of the conditions precedent to the obligations of such party thereto and defend any claim, action, suit, investigation or proceeding, whether judicial or administrative, challenging this Agreement or the performance of the obligations hereunder; provided, that nothing in this Agreement shall obligate such Purchaser to disclose the identities of limited partners, shareholders or members of such Purchaser or its Affiliates or investment advisors or other confidential proprietary information of such Purchaser or any of its Affiliates (collectively, “Proprietary Information”). All parties shall execute and deliver both before and after the Closing such further certificates, agreements and other documents and take such other actions as the other parties may reasonably request to consummate or implement such transactions or to evidence such events or matters. Each Purchaser and the Company will have the right to review in advance, and to the extent practicable each will consult with the other, in each case subject to applicable Laws relating to the exchange of information, all the information (other than Proprietary Information) relating to such other parties, and any of their respective Affiliates, which appears in any filing made with, or written materials submitted to, any third party or any Governmental Entity in connection with the transactions to which it will be party contemplated by this Agreement. In exercising the foregoing right, each of the parties hereto agrees to act reasonably and as promptly as practicable. All parties hereto agrees to keep the other parties apprised of the status of matters referred to in this Section 3.1(a). Each Purchaser shall promptly furnish the Company, and the Company shall promptly furnish each Purchaser, to the extent permitted by applicable Law, with copies of written communications received by it or its Subsidiaries from, or delivered by any of the foregoing to, any Governmental Entity in respect of the transactions contemplated by this Agreement that are not confidential and/or subject to regulatory restrictions on disclosure. Notwithstanding the foregoing, in no event shall any Purchaser be required to become a bank holding company, accept any Burdensome Condition in connection with the transactions contemplated by this Agreement, or be required to agree to provide capital to the Company or any Company Subsidiary thereof other than the Purchase Price to be paid for the Notes to be purchased by it pursuant to the terms of, subject to the conditions set forth in, this Agreement.

 

 

 

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(b)     Each Purchaser, on the one hand, agrees to furnish the Company, and the Company, on the other hand, agrees, upon request, to furnish to such Purchaser, in each case to the extent legally permissible and not in contravention of any applicable Law, regulatory restriction on disclosure, confidentiality obligation, or contractual obligation, all information concerning itself, its Affiliates, directors, officers, partners and shareholders and such other matters as may be reasonably necessary in connection with any statement, filing, notice or application made by or on behalf of such other parties or any of its Subsidiaries to any Governmental Entity in connection with the Closing and the other transactions contemplated by this Agreement; provided, that the Company and each such Purchaser shall only be required to provide information only to the extent typically provided by the Company or such Purchaser to such Governmental Entities under such Company’s policies or Purchaser’s policies consistently applied and subject to such confidentiality requests as the Company or such Purchaser shall reasonably seek.

 

 

 

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Section 3.2     Access, Information and Confidentiality.

 

(a)     From the date hereof until the Closing Date, the Company will furnish to Purchasers and their Affiliates (and their financial and professional advisors and representatives), and permit Purchasers, their Affiliates and their representatives access during the Company’s normal business hours, to such information and materials relating to the financial, business and legal condition of the Company as may be reasonably necessary or advisable to allow Purchasers to become and remain familiar with the Company and to confirm the accuracy of the representations and warranties of the Company in this Agreement and the compliance with the covenants and agreements by the Company in this Agreement; provided that such information and materials are not restricted by applicable Law, contractual obligations, regulatory restrictions or other confidentiality obligations.

 

(b)     All parties hereto will hold, and will cause its respective Affiliates and its and their respective directors, officers, employees, agents, consultants and advisors to hold, in strict confidence, unless disclosure to a Governmental Entity is reasonably necessary or desirable in connection with any Required Approvals, examination or inspection or unless disclosure is required by judicial or administrative process or, by other requirement of Law or the applicable requirements of any Governmental Entity or relevant stock exchange (in which case, the party disclosing such information shall provide the other parties with prior written notice of such permitted disclosure), all non-public records, books, contracts, instruments, computer data and other data and information (collectively, “Information”) concerning the other parties hereto furnished to it by or on behalf of such other parties or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (1) previously known by such party on a non-confidential basis, (2) publicly available through no fault of such party or (3) later lawfully acquired from other sources by such party), and no party hereto shall release or disclose such Information to any other person, except its auditors, attorneys, financial advisors, other consultants and advisors, provided, that Purchasers shall be permitted to disclose Information to any of their limited partners who are subject to obligations to keep such Information confidential in accordance with this Section 3.2. 

 

Section 3.3     Conduct of the Business. Prior to the earlier of the Closing Date and the termination of this Agreement pursuant to Section 5.1 (the “Pre-Closing Period”), the Company shall, and shall cause each Company Subsidiary to, use commercially reasonable efforts to carry on its business in the ordinary course of business and use commercially reasonable efforts to maintain and preserve its and such Company Subsidiary’s business (including its organization, assets, properties, goodwill and insurance coverage) and preserve its business relationships with customers, strategic partners, suppliers, distributors and others having business dealings with it; provided, that nothing in this sentence shall limit or require any actions that the Board of Directors or the Company’s senior management may, in good faith, determine to be inconsistent with their duties or the Company’s obligations under applicable Law. 

 

 

 

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Article IV
ADDITIONAL AGREEMENTS

 

Section 4.1     No Control. No Purchaser shall, without the prior consent of the Company, contribute capital to the Company or acquire an amount of voting securities of the Company that in either case would cause such Purchaser to be deemed to control the Company for purposes of the Bank Holding Company Act of 1956, as amended, or the Change in Bank Control Act of 1978, as amended.

 

Section 4.2     Legend.

 

(a)     Purchasers agree that all certificates or other instruments, if any, representing the Notes subject to this Agreement will bear a legend substantially to the following effect:

 

THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION. THIS OBLIGATION IS SUBORDINATED TO THE CLAIMS OF GENERAL AND SECURED CREDITORS OF THE COMPANY, IS INELIGIBLE AS COLLATERAL FOR A LOAN BY THE COMPANY OR ANY OF ITS SUBSIDIARIES AND IS UNSECURED.

 

THIS SUBORDINATED NOTE WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN MINIMUM DENOMINATIONS OF $10,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF SUCH NOTES IN A DENOMINATION OF LESS THAN $10,000 AND MULTIPLES OF $10,000 IN EXCESS THEREOF SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF SUCH SECURITIES FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PAYMENTS ON SUCH SECURITIES, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH SECURITIES.

 

THIS SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAWS. NEITHER THIS SUBORDINATED NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SUBORDINATED NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SUBORDINATED NOTE ONLY (A) TO THE COMPANY, (B) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”), TO A PERSON THE HOLDER REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) TO A “NON U.S. PERSON” IN AN “OFFSHORE TRANSACTION” PURSUANT TO REGULATION S UNDER THE SECURITIES ACT, (D) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT TO AN “ACCREDITED INVESTOR” WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SUBORDINATED NOTE FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN “ACCREDITED INVESTOR,” FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE SECURITIES PURCHASE AGREEMENT, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY. THE HOLDER OF THIS SUBORDINATED NOTE BY ITS ACCEPTANCE HEREOF AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.

 

 

 

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THE HOLDER OF THIS SUBORDINATED NOTE BY ITS ACCEPTANCE HEREOF AGREES, REPRESENTS AND WARRANTS THAT IT WILL NOT ENGAGE IN HEDGING TRANSACTIONS INVOLVING THIS SECURITY UNLESS SUCH TRANSACTIONS ARE IN COMPLIANCE WITH THE SECURITIES ACT OR AN APPLICABLE EXEMPTION THEREFROM.

 

IN CONNECTION WITH ANY TRANSFER, THE HOLDER OF THIS SUBORDINATED NOTE WILL DELIVER TO THE COMPANY SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE COMPANY TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.

 

(b)     Subject to Section 4.2(a), the restrictive legend set forth in Section 4.2(a), above shall be removed and the Company shall issue a certificate without such restrictive legend to the holder of the applicable Notes upon which it is stamped or issue to such holder by electronic delivery at the applicable balance account at the Depository Trust Company (“DTC”), as applicable, if (1) such Notes are registered for resale under the Securities Act, (2) such Notes are sold or transferred pursuant to Rule 144 (if the transferor is not an Affiliate of the Company), or (3) such Notes are eligible for sale under Rule 144, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to such securities and without volume restrictions. Following the earlier of (A) the sale of the Notes pursuant to an effective registration statement or pursuant to Rule 144 or (B) Rule 144 becoming available for the resale of Notes, without the requirement for the Company to be in compliance with the current public information required under Rule 144 as to the Notes and without volume restrictions, upon receipt by the Company of an opinion of counsel to any Purchaser regarding the removal of such legend set forth in Section 4.2(a), the Company shall instruct its transfer agent to remove such legend above from the Notes. Any fees associated with the removal of such legend (other than with respect to a Purchaser’s counsel) shall be borne by the Company. If a legend is no longer required pursuant to the foregoing, the Company will no later than three business days following the delivery by Purchasers to the Company or the transfer agent (with notice to the Company) of a legended certificate or instrument representing such Notes (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer, an opinion of counsel to such Purchasers) and a representation letter to the extent required, deliver or cause to be delivered to Purchasers a certificate or instrument (as the case may be) representing such Notes that is free from the restrictive legend set forth in Section 4.2(a). Notes free from all restrictive legends may be transmitted by the transfer agent to Purchasers by crediting the account of Purchasers’ prime broker with DTC as directed by such Purchasers, provided that the Notes are DTC eligible at such time. Purchasers acknowledge that the Notes have not been registered under the Securities Act or under any state securities laws and agrees that they will not sell or otherwise dispose of any of the Notes, except in compliance with the registration requirements or exemption provisions of the Securities Act and any other applicable securities laws and this Agreement.

 

 

 

- 18 -

 

 

Section 4.3     Secondary Market Transactions. Each Purchaser shall have the right at any time and from time to time to securitize the Note owned by such Purchaser or any portion thereof in a single asset securitization or a pooled loan securitization of rated single or multi-class securities secured by or evidencing ownership interests in the Notes (each such securitization is referred to herein as a “Secondary Market Transaction”). In connection with any such Secondary Market Transaction, the Company shall be given a reasonable opportunity to review and comment on any disclosure or legal agreement required to be provided by the Company relating to such Secondary Market Transaction pertaining to the Company or its affiliates at the Company’s sole expense, it being the expectation of the Purchaser that the Company will not be required to sign any documents or provide any disclosure in connection with such Secondary Market Transaction. The Company will use commercially reasonable efforts to cooperate in good faith with Purchasers and otherwise assist Purchasers in satisfying the market standards to which Purchasers customarily adhere or which may be reasonably required in the marketplace or by applicable rating agencies in connection with any such Secondary Market Transactions. All information regarding the Company may be furnished, without liability to any Purchaser, to any Person deemed necessary by Purchaser in connection with such Secondary Market Transaction, provided, that the Company shall be given reasonable notice prior to furnishing such information. All documents, financial statements, appraisals and other data relevant to the Company or the Notes may be exhibited to and retained by any such Person.

 

Section 4.4     Transfer Taxes. On the Closing Date, all transfer or other similar taxes which are required to be paid in connection with the sale and transfer of the Notes to be sold to the Purchasers hereunder will be, or will have been, fully paid or provided for by the Company, and all Laws imposing such taxes will be or will have been complied with in all material respects.

 

Section 4.5     Rule 144A Information. While any Notes remain “restricted securities” within the meaning of the Securities Act, the Company will make available, upon reasonable request, to any seller of such Notes the information specified in Rule 144A(d)(4) under the Securities Act, unless the Company is then subject to Section 13 or 15(d) of the Exchange Act (as defined below).

 

 

 

- 19 -

 

 

Section 4.6     Bloomberg. Within 30 days after Closing, the Company will utilize its commercially reasonable efforts to have the Subordinated Notes quoted on Bloomberg.

 

Section 4.7     Failure to Register or Have Quoted. If within 60 days after Closing the Company has not secured a quotation on Bloomberg for the Notes or the Notes are not registered in the name of The Depository Trust Company as contemplated by Section 4(a) of the Note, the Company shall pay Purchasers an amount equal to $5,000 per month (pro rated for any partial month) for each months such obligation to secure quotation has not been satisfied (a “Delinquent Month”), with such payment due on the tenth day of the month following each Delinquent Month.

 

Section 4.8     Tier 2 Capital. If all or any portion of the Notes ceases to be deemed to be Tier 2 Capital, other than due to the limitation imposed on the capital treatment of subordinated debt during the five years immediately preceding the maturity date of the Notes, the Company will immediately notify the Purchasers, and thereafter the Company and the Purchasers will work together in good faith to execute and deliver all agreements as reasonably necessary in order to restructure the applicable portions of the obligations evidenced by the Notes to qualify as Tier 2 Capital.

 

Section 4.9     Restrictions on Transfer. Such Purchaser agrees with the Company (as to itself only) that until the first anniversary of the Closing (unless such Purchaser avails itself of another applicable exemption under the Securities Act) it will solicit offers for the Notes only from, and will offer the Notes only to, (A) in the case of offers inside the United States, persons whom such Purchaser reasonably believe to be QIBs or, if any such person is buying for one or more institutional accounts for which such person is acting as fiduciary or agent, only when such person has represented to such Purchaser that each such account is a QIB, to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A, and, in each case, in transactions under Rule 144A and (B) in the case of offers outside the United States, to persons other than U.S. persons (which shall include dealers or other professional fiduciaries in the United States acting on a discretionary basis for non-U.S. beneficial owners (other than an estate or trust)).

 

Article V
TERMINATION

 

Section 5.1     Termination. This Agreement may be terminated prior to the Closing:

 

(a)     by mutual written agreement of the Company and Purchasers;

 

(b)     by the Company or Purchasers, upon written notice to the other parties, in the event that the Closing does not occur on or before December 31, 2015; provided, that the right to terminate this Agreement pursuant to this Section 5.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, the failure of the Closing to occur on or prior to such date;

 

 

 

- 20 -

 

 

(c)     by the Company or Purchasers, upon written notice to the other parties, in the event that any Governmental Entity shall have issued any order, decree or injunction or taken any other action restraining, enjoining or prohibiting any of the transactions contemplated by this Agreement, and such order, decree, injunction or other action shall have become final and nonappealable;

 

(d)     by Purchasers, upon written notice to the Company, if there has been a breach of any representation, warranty, covenant or agreement made by the Company in this Agreement, or any such representation or warranty shall have become untrue after the date of this Agreement, in each case such that a closing condition in Section 1.2(c)(ii)(1) or Section 1.2(c)(ii)(2) would not be satisfied and such breach or condition is not curable or, if curable, is not cured by the date set forth in Section 5.1(b); or

 

(e)     by the Company, upon written notice to Purchasers, if there has been a breach of any representation, warranty, covenant or agreement made by any Purchaser in this Agreement, or any such representation or warranty shall have become untrue after the date of this Agreement, in each case such that a closing condition in Section 1.2(c)(iii)(1) or Section 1.2(c)(iii)(2) would not be satisfied and such breach or condition is not curable or, if curable, is not cured by the date set forth in Section 5.1(b).

 

Section 5.2     Effects of Termination. In the event of any termination of this Agreement as provided in Section 5.1, this Agreement (other than Section 3.2(c), this Article V and Article VI, which shall remain in full force and effect) shall forthwith become wholly void and of no further force and effect; provided, however, that nothing herein shall relieve any party from liability for an intentional breach of this Agreement.

 

Article VI
MISCELLANEOUS

 

Section 6.1     Survival. Each of the representations and warranties set forth in this Agreement shall survive the Closing under this Agreement. Except as otherwise provided herein, all covenants and agreements contained herein shall survive until, by their respective terms, they are no longer operative, other than those which by their terms are to be performed in whole or in part prior to or on the Closing Date, which shall terminate as of the Closing Date.

 

Section 6.2     Expenses. Except as otherwise provided in this Section 6.2, each of the parties will bear and pay all other costs and expenses incurred by it or on its behalf in connection with the transactions contemplated pursuant to this Agreement; except that at the Closing the Company shall bear, and upon request by Purchasers, reimburse each Purchaser (or group of Affiliated Purchasers) that purchases a Note with an initial principal amount of at least $6,000,000 for all reasonable out-of-pocket fees and expenses of attorneys incurred by each Purchaser and their Affiliates in connection with the negotiation and preparation of this Agreement and undertaking of the transactions contemplated pursuant to this Agreement for a flat fee of $10,000.

 

Section 6.3     Amendment; Waiver. No amendment or waiver of any provision of this Agreement will be effective with respect to any party unless made in writing and signed by an officer of a duly authorized representative of such party. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The conditions to each party’s obligation to consummate the Closing are for the sole benefit of such party and may be waived by such party in whole or in part to the extent permitted by applicable Law. No waiver of any party to this Agreement will be effective unless it is in a writing signed by a duly authorized officer of the waiving party that makes express reference to the provision or provisions subject to such waiver. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

 

 

 

- 21 -

 

 

Section 6.4     Counterparts and Facsimile. For the convenience of the parties hereto, this Agreement may be executed in any number of separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement. Executed signature pages to this Agreement may be delivered by facsimile transmission or by e-mail delivery of a “pdf” format data file and such signature pages will be deemed as sufficient as if actual signature pages had been delivered.

 

Section 6.5     Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within such State. The parties hereby irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the state and federal courts located in the City of New York, New York for any actions, suits or proceedings arising out of or relating to this Agreement and the transactions contemplated by this Agreement. The parties hereby irrevocably and unconditionally consent to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such action, suit or proceeding and irrevocably waive, to the fullest extent permitted by law, any objection that they may now or hereafter have to the laying of the venue of any such action, suit or proceeding in any such court or that any such action, suit or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such action, suit or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 6.7 shall be deemed effective service of process on such party.

 

Section 6.6     WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE RELATIONSHIP OF THE PARTIES.

 

Section 6.7     Notices. Any notice, request, service of process, instruction or other document to be given hereunder by any party to the other will be in writing and will be deemed to have been duly given (a) on the date of delivery if delivered personally or by facsimile, upon confirmation of receipt, (b) on the first business day following the date of dispatch if delivered by a recognized next-day courier service, or (c) on the third business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice.

 

 

 

- 22 -

 

 

	 	
(i)
	
If to Purchasers, as indicated on each such Purchaser’s signature page hereto.

 

	
 
	
(ii)
	
If to the Company:

	 	 	Bank of Commerce Holdings

 

1901 Churn Creek Road

Redding, California 96002

Attention: Sam Jimenez

Telephone: 530-722-3952

Facsimile: 530-722-3946

 

 

with a copy to (which copy alone shall not constitute notice):

 

Miller Nash Graham & Dunn LLP

2801 Alaskan Way, Suite 300

Seattle, Washington 98121

Attention: Faye Ricci

Telephone: 206-777-7547

Facsimile: 206-340-9599

Section 6.8     Entire Agreement, Etc. (a) This Agreement (including the Exhibits hereto) constitutes the entire agreement, and supersedes all other prior agreements, understandings, representations and warranties, both written and oral, among the parties, with respect to the subject matter hereof; and (b) this Agreement will not be assignable by the Company by operation of law or otherwise (any attempted assignment in contravention hereof being null and void), except to the extent that there is a merger or consolidation of the Company in which case the successor shall be a party to this Agreement without the consent of the Purchasers.

 

Section 6.9     Other Agreements. In the event that (i) the Company shall directly or indirectly, enter into or otherwise consent to any other agreements concerning the incurrence of Indebtedness on parity with, or junior to, the Subordinated Notes, which other agreement (a) gives or grants to any Person (i) covenants (excluding covenants of the Company to pay a specific rate of interest on such other Indebtedness, but including, without limitation, all other covenants such as financial covenants or financial covenant levels) which are more restrictive or more favorable to the Person which is a party to such other agreement or (ii) additional or greater rights or remedies (including, without limitation, more stringent or shorter periods of time that must elapse prior to such Person’s right to exercise remedies under such other agreement upon the occurrence of a default or event of default thereunder) or (b) waives the rights that the Company may assert in any action to enforce the other agreement (such more favorable covenants or greater rights or remedies or waivers in the foregoing clauses (a) and (b) and (ii) the Company’s primary regulator has adopted regulatory guidance or statutory interpretations that provide that such provisions will still permit the Indebtedness to qualify as Tier 2 Capital , each a “Tier 2 More Favorable Provision”), in each case than are given or granted to the Purchasers hereunder, then simultaneously with the execution of such other agreement(s), the Company shall provide the Purchasers a copy of such other agreement(s), and the Tier 2 More Favorable Provision(s) therein shall automatically be incorporated into this Section 6.9, without further action by any party to this Agreement, for so long as such other agreement remains in effect. Upon receipt by the Purchasers of a copy of such other agreement(s), the Purchasers may elect, upon written consent of the Purchasers holding at least 67% of the principal amount of Subordinated Notes at such time outstanding, that any Tier 2 More Favorable Provision therein shall not be incorporated into this Section 6.9 and, upon such determination, any incorporation of such More Favorable Provision into this Section 6.9 shall be deemed to be void ab initio and of no force and effect.

 

 

 

- 23 -

 

 

Section 6.10     Interpretation; Other Definitions. Wherever required by the context of this Agreement, the singular shall include the plural and vice versa, and the masculine gender shall include the feminine and neuter genders and vice versa, and references to any agreement, document or instrument shall be deemed to refer to such agreement, document or instrument as amended, supplemented or modified from time to time. All article, section, paragraph or clause references not attributed to a particular document shall be references to such parts of this Agreement, and all exhibit, annex, letter and schedule references not attributed to a particular document shall be references to such exhibits, annexes, letters and schedules to this Agreement. In addition, the following terms are ascribed the following meanings:

 

(a)     the term “Affiliate” means, with respect to any person, any person directly or indirectly controlling, controlled by or under common control with, such other person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) when used with respect to any person, means the possession, directly or indirectly, of the power to cause the direction of management or policies of such person, whether through the ownership of voting securities by contract or otherwise;

 

(b)     “business day” means any day that is not Saturday or Sunday and that, in New York, New York, is not a day on which banking institutions generally are authorized or obligated by law or executive order to be closed;

 

(c)     the terms “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular section, paragraph or subdivision;

 

(d)     the words “including,” “includes,” “included” and “include” are deemed to be followed by the words “without limitation”;

 

(e)     to the “Knowledge of the Company” or “Company’s Knowledge” means the actual knowledge after due inquiry of the “officers” (as such term is defined in Rule 3b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), but excluding any Vice President or Secretary) of the Company; 

 

 

 

- 24 -

 

 

(f)     the term “Person” has the meaning given to it in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act;

 

(g)     the term “Subsidiary” means any entity in which the Company, directly or indirectly, owns sufficient capital stock or holds a sufficient equity or similar interest such that it is consolidated with the Company in the financial statements of the Company; and

 

(h)     the term “Tier 2 Capital” has the meaning given to the term “Tier 2 capital” in 12 C.F.R. Part 208 and 12 C.F.R. Part 250, as amended, modified and supplemented and in effect from time to time or any replacement thereof.

 

Section 6.11     Captions. The article, section, paragraph and clause captions herein are for convenience of reference only, do not constitute part of this Agreement and will not be deemed to limit or otherwise affect any of the provisions hereof.

 

Section 6.12     Severability. If any provision of this Agreement or the application thereof to any person (including the officers and directors of the parties hereto) or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to persons or circumstances other than those as to which it has been held invalid or unenforceable, will remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any party. Upon such determination, the parties shall negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties.

 

Section 6.13     No Third Party Beneficiaries. Nothing contained in this Agreement, expressed or implied, is intended to confer upon any person other than the parties hereto, any benefit right or remedies; provided, however, that the Placement Agent shall be a third party beneficiary hereto and may rely on the representations and warranties contained herein to the same extent as if it were a party to the Agreement.

 

Section 6.14     Time of Essence. Time is of the essence in the performance of each and every term of this Agreement.

 

Section 6.15     Public Announcements. Subject to each party’s disclosure obligations imposed by Law, each of the parties hereto will cooperate with each other in the development and distribution of all news releases and other public information disclosures with respect to this Agreement and any of the transactions contemplated by this Agreement, and except as otherwise permitted in the next sentence, neither the Company nor Purchasers will make any such news release or public disclosure that identifies the other party without first consulting with the other, and, in each case, also receiving the other’s consent (which shall not be unreasonably withheld or delayed) and all parties shall coordinate with the party whose consent is required with respect to any such news release or public disclosure. In the event a party hereto is advised by its outside legal counsel that a particular disclosure is required by Law, such party shall be permitted to make such disclosure but shall be obligated to use its commercially reasonable efforts to consult with the other parties hereto and take their comments into account with respect to the content of such disclosure before issuing such disclosure.

 

 

 

- 25 -

 

 

Section 6.16     Specific Performance. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms. It is accordingly agreed that the parties shall be entitled to seek specific performance of the terms hereof, this being in addition to any other remedies to which they are entitled at law or equity.

 

 

 

- 26 -

 

 

IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties hereto on the date first written above.

  

	 	COMPANY:	 
	 	 	 
	
 
	
Bank of Commerce Holdings
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
By: 
	
/s/ Samuel D. Jimenez
	
 

	
 
	
Name:
	
Samuel D. Jimenez
	
 

	
 
	
Title:
	
Executive Vice President and Chief Operating Officer
	
 

 

 

[Signatures Continued on Following Page]

 

 

[Signature Page of Purchase Agreement] 

 

  

	 	PURCHASERS:	 
	 	 	 
	 	ANGEL OAK MULTI-STRATEGY INCOME FUND	 
	 	 	 
	
 
	
By: Angel Oak Capital Advisors, LLC, solely as investment advisor and not in its individual capacity
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
By: 
	
/s/ Linda H. Singer
	
 

	
 
	
Name:
	
Linda H. Singer
	
 

	
 
	
Title:
	
Managing Director, Operations
	
 

 

	
 
	
Address for notices: 

 

c/o Angel Oak Capital Advisors, LLC

One Buckhead Plaza

3060 Peachtree Rd., NW, Suite 500

Atlanta, Georgia 30306

 

Attention: Linda Singer

Telephone: (404) 953-4726

Fax: (404) 953-4988

Email: linda.singer@angeloakcapital.com

 

with a copy to (which copy alone shall not constitute notice):

 

Bryan Cave, LLP

1201 West Peachtree Street, NW, 14th Fl.

Atlanta, GA 30309

Attention: Todd Wade

Telephone: (404) 572 6694

Fax: (404) 420-0694

Email: todd.wade@BryanCave.com 

 

 

[Signature Page of Purchase Agreement] 

 

   

	 	PURCHASERS:	 
	 	 	 
	 	ANGEL OAK FLEXIBLE INCOME FUND	 
	 	 	 
	
 
	
By: Angel Oak Capital Advisors, LLC, solely as investment advisor and not in its individual capacity
	
 

	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 

	
 
	
By: 
	
/s/ Linda H. Singer
	
 

	
 
	
Name:
	
Linda H. Singer
	
 

	
 
	
Title: 
	
Managing Director, Operations
	
 

 

	
 
	
Address for notices: 

 

c/o Angel Oak Capital Advisors, LLC

One Buckhead Plaza

3060 Peachtree Rd., NW, Suite 500

Atlanta, Georgia 30306

 

Attention: Linda Singer

Telephone: (404) 953-4726

Fax: (404) 953-4988

Email: linda.singer@angeloakcapital.com

 

with a copy to (which copy alone shall not constitute notice):

 

Bryan Cave, LLP

1201 West Peachtree Street, NW, 14th Fl.

Atlanta, GA 30309

Attention: Todd Wade

Telephone: (404) 572 6694

Fax: (404) 420-0694

Email: todd.wade@BryanCave.com

 

 

[Signature Page of Purchase Agreement]  

 

  

SCHEDULE A

 

Schedule of Purchasers

 

	
Name of Purchaser
	
Principal Amount of Notes To Be Purchased
	
Purchase Price

	
ANGEL OAK MULTI-STRATEGY INCOME FUND
	
$7,000,000.00
	
$1,000

	
ANGEL OAK FLEXIBLE INCOME FUND
	
$3,000,000.00
	
$1,000

	  	  	  
	  	  	  
	  	  	  
	  	  	  
	  	  	  

 

 

 

 

  

EXHIBIT A

 

FORM OF SUBORDINATED NOTE

 

 

 

 

 

EXHIBIT B

 

FORM OF SECRETARY’S CERTIFICATE

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