Document:

ex10_1.htm

SUBORDINATED NOTE PURCHASE AGREEMENT

 

This SUBORDINATED NOTE PURCHASE AGREEMENT (this “Agreement”) is dated as of December 21, 2015, and is made by and among First Guaranty Bancshares, Inc., a Louisiana corporation (“Company”), and the purchaser of the Subordinated Note identified on the signature pages hereto (the “Purchaser”).

 

RECITALS

 

WHEREAS, Company has requested that the Purchaser purchase from Company $15.0 million in aggregate principal amount of Subordinated Note (as defined herein), which aggregate amount is intended to qualify as Tier 2 Capital (as defined herein).

 

WHEREAS, Company has engaged Sandler O’Neill + Partners, L.P., as its exclusive financial advisor (“Financial Advisor”) for the offering of the Subordinated Note.

 

WHEREAS, the Purchaser is an accredited investor as such term is contemplated by Rule 501 of Regulation D (“Regulation D”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”).

 

WHEREAS, the sale of the Subordinated Note by Company is being made pursuant to Rule 506(b) of Regulation D.

 

WHEREAS, Purchaser is willing to purchase from Company a Subordinated Note in the principal amount set forth on Purchaser’s respective signature page hereto (the “Subordinated Note Amount”) in accordance with the terms, subject to the conditions and in reliance on, the recitals, representations, warranties, covenants and agreements set forth herein and in the Subordinated Note.

 

NOW, THEREFORE, in consideration of the mutual covenants, conditions and agreements herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows:

 

AGREEMENT

 

1. DEFINITIONS.

 

1.1 Defined Terms.  The following capitalized terms generally used in this Agreement and in the Subordinated Note have the meanings defined or referenced below.  Certain other capitalized terms used only in specific sections of this Agreement may be defined in such sections.

 

“Affiliate(s)” means, with respect to any Person, such Person’s immediate family members, partners, members or parent and subsidiary corporations, and any other Person directly or indirectly controlling, controlled by, or under common control with said Person and their respective Affiliates.

 

“Agreement” has the meaning set forth in the preamble hereto.

 

“Bank” means First Guaranty Bank, a Louisiana chartered commercial bank and wholly owned subsidiary of Company.

 

  

  

  

“Business Day” means any day other than a Saturday, Sunday or any other day on which banking institutions in the State of Louisiana are permitted or required by any applicable law or executive order to close.

 

“Closing” has the meaning set forth in Section 2.4.

 

“Closing Date” means December 21, 2015.

 

“Company” has the meaning set forth in the preamble hereto and shall include any successors to Company.

 

“Company’s Liabilities” means Company’s obligations under the Transaction Documents.

 

“Company’s SEC Reports” means (i) Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014, as filed with the SEC, (ii) Company’s Definitive Proxy Statement on Schedule 14A related to its 2015 Annual Meeting of Shareholders, as filed with the SEC, (iii) any Current Report on Form 8-K, as filed or furnished by  Company with the SEC since January 1, 2015, or (iv) Company’s Quarterly Reports on Form 10-Q for the quarterly periods ended on March 31, 2015, June 30, 2015, and September 30, 2015, as filed with the SEC pursuant to the requirements of the Exchange Act.

 

“Disbursement” has the meaning set forth in Section 3.1.

 

“Equity Interest” means any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person which is not a corporation, and any and all warrants, options or other rights to purchase any of the foregoing.

 

 “Exchange Act” has the meaning set forth in Section 4.8.

 

“FDIC” means the Federal Deposit Insurance Corporation.

 

“Financial Advisor” means Sandler O’Neill + Partners, L.P.

 

 “GAAP” means generally accepted accounting principles in effect from time to time in the United States of America.

 

“Governmental Agency(ies)” means, individually or collectively, any federal, state, county or local governmental department, commission, board, regulatory authority or agency (including, without limitation, each applicable Regulatory Agency) with jurisdiction over Company.

 

“Governmental Licenses” has the meaning set forth in Section 4.3.

 

“Hazardous Materials” means flammable explosives, asbestos, urea formaldehyde insulation, polychlorinated biphenyls, radioactive materials, hazardous wastes, toxic or contaminated substances or similar materials, including, without limitation, any substances which are “hazardous substances,” “hazardous wastes,” “hazardous materials” or “toxic substances” under the Hazardous Materials Laws and/or other applicable environmental laws, ordinances or regulations.

 

  

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“Hazardous Materials Laws” mean any laws, regulations, permits, licenses or requirements pertaining to the protection, preservation, conservation or regulation of the environment which relates to real property, including:  the Clean Air Act, as amended, 42 U.S.C. Section 7401 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.; the Resource Conservation and Recovery Act of 1976, as amended, 42 U.S.C. Section 6901 et seq.; the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (including the Superfund Amendments and Reauthorization Act of 1986), 42 U.S.C. Section 9601 et seq.; the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 et seq.; the Occupational Safety and Health Act, as amended, 29 U.S.C. Section 651, the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq.; the Mine Safety and Health Act of 1977, as amended, 30 U.S.C. Section 801 et seq.; the Safe Drinking Water Act, 42 U.S.C. Section 300f et seq.; and all comparable state and local laws, laws of other jurisdictions or orders and regulations.

 

“Indebtedness” means and includes:  (i) 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 Company or any Subsidiary of Company; and (ii) all obligations secured by any lien in property owned by Company or any Subsidiary 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 Company’s or Bank’s business (including, without limitation, federal funds purchased, advances from any Federal Home Loan Bank, secured deposits of municipalities, letters of credit issued by Company or Bank and repurchase arrangements) and consistent with customary banking practices and applicable laws and regulations.

 

“Leases” means all leases, licenses or other documents providing for the use or occupancy of any portion of any Property, including all amendments, extensions, renewals, supplements, modifications, sublets and assignments thereof and all separate letters or separate agreements relating thereto.

 

 “Material Adverse Effect” means, with respect to any Person, any change or effect that (i) is or would be reasonably likely to be material and adverse to the financial position, results of operations or business of such Person, or (ii) would materially impair the ability of any Person to perform its respective obligations under any of the Transaction Documents, or otherwise materially impede the consummation of the transactions contemplated hereby; provided, however, that “Material Adverse Effect” shall not be deemed to include the impact of (1) changes in banking and similar laws, rules or regulations of general applicability or interpretations thereof by Governmental Agencies, (2) changes in GAAP or regulatory accounting requirements applicable to financial institutions and their holding companies generally, (3) changes after the date of this Agreement in general economic or capital market conditions affecting financial institutions or their market prices generally and not specifically related to Company or Purchaser, (4) direct effects of compliance with this Agreement on the operating performance of Company or Purchaser, including expenses incurred by Company or Purchaser in consummating the transactions contemplated by this Agreement, and (5) the effects of any action or omission taken by Company with the prior written consent of Purchaser, and vice versa, or as otherwise contemplated by this Agreement and the Subordinated Note.

 

“Maturity Date” means December 21, 2025.

 

“Person” means an individual, a corporation (whether or not for profit), a partnership, a limited liability company, a joint venture, an association, a trust, an unincorporated organization, a government or any department or agency thereof (including a Governmental Agency) or any other entity or organization.

 

  

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 “Property” means any real property owned or leased by Company or any Affiliate or Subsidiary of Company.

 

“Purchaser” has the meaning set forth in the preamble hereto.

 

“Regulation D” has the meaning set forth in the Recitals.

 

“Regulatory Agencies” means any federal or state agency charged with the supervision or regulation of depositary institutions or holding companies of depositary institutions, or engaged in the insurance of depositary institution deposits, or any court, administrative agency or commission or other authority, body or agency having supervisory or regulatory authority with respect to Company, Bank or any of their Subsidiaries.

 

“SEC” means the Securities and Exchange Commission.

 

 “Securities Act” has the meaning set forth in the Recitals.

 

“Subordinated Note” means the Subordinated Note in the form attached as Exhibit A hereto, as amended, restated, supplemented or modified from time to time, and each Subordinated Note delivered in substitution or exchange for such Subordinated Note.

 

“Subordinated Note Amount” has the meaning set forth in the Recitals.

 

“Subsidiary” means with respect to any Person, any corporation or entity in which a majority of the outstanding Equity Interest is directly or indirectly owned by such Person.

 

“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.

 

“Transaction Documents” has the meaning set forth in Section 3.2.1.

 

1.2 Interpretations.  The foregoing definitions are equally applicable to both the singular and plural forms of the terms defined.  The words “hereof”, “herein” and “hereunder” and words of like import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  The word “including” when used in this Agreement without the phrase “without limitation,” shall mean “including, without limitation.” All references to time of day herein are references to Eastern Time unless otherwise specifically provided.  All references to the Agreement and Subordinated Note shall be deemed to be to such documents as amended, modified or restated from time to time.  With respect to any reference in this Agreement to any defined term, (i) if such defined term refers to a Person, then it shall also mean all heirs, legal representatives and permitted successors and assigns of such Person, and (ii) if such defined term refers to a document, instrument or agreement, then it shall also include any replacement, extension or other modification thereof.

 

1.3 Exhibits Incorporated.  All Exhibits attached are hereby incorporated into this Agreement.

 

  

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2. SUBORDINATED DEBT.

 

2.1 Certain Terms.  Subject to the terms and conditions herein contained, Company proposes to issue and sell to the Purchaser a Subordinated Note, in an amount equal to the aggregate of the Subordinated Note Amount.  The Purchaser agrees to purchase the Subordinated Note, from Company on the Closing Date in accordance with the terms of, and subject to the conditions and provisions set forth in, this Agreement and the Subordinated Note.  The Subordinated Note Amount shall be disbursed in accordance with Section 3.1. The Subordinated Note shall bear interest per annum as set forth in the Subordinated Note.  The unpaid principal balance of the Subordinated Note plus all accrued but unpaid interest thereon shall be due and payable on the Maturity Date, or such earlier date on which such amount shall become due and payable on account of (i) acceleration by the Purchaser in accordance with the terms of the Subordinated Note and this Agreement or (ii) Company’s delivery of a notice of redemption or repayment in accordance with the terms of the Subordinated Note.

 

2.2 Subordination.  The Subordinated Note shall be subordinated in accordance with the subordination provisions set forth therein.

 

2.3 Maturity Date.  On the Maturity Date, all sums due and owing under this Agreement and the Subordinated Note shall be repaid in full.  Company acknowledges and agrees that the Purchaser has not made any commitments, either express or implied, to extend the term of the Subordinated Note past its Maturity Date, and shall not extend such terms beyond the Maturity Date unless Company and the Purchaser hereafter specifically otherwise agree in writing.

 

2.4 Unsecured Obligations.  The obligations of Company to the Purchaser under the Subordinated Note shall be unsecured.

 

2.5 The Closing.  The execution and delivery of the Transaction Documents (the “Closing”) shall occur at the offices of Company at 10:00 a.m. (local time) on the Closing Date, or at such other place or time or on such other date as the parties hereto may agree.

 

2.6 Payments.  Company agrees that matters concerning payments and application of payments shall be as set forth in this Agreement and in the Subordinated Note.

 

2.7 Right of Offset.  Purchaser hereby expressly waives any right of offset he may have against Company.

 

2.8 Use of Proceeds.  Company shall use the net proceeds from the sale of the Subordinated Note for general corporate purposes or towards the redemption of the Company’s preferred stock issued to the U.S Treasury as part of the Small Business Lending Fund.

 

3. DISBURSEMENT.

 

3.1 Disbursement.  On the Closing Date, assuming all of the terms and conditions set forth in Section 3.2 have been satisfied by Company and Company has executed and delivered to Purchaser each of the Agreement and the Subordinated Note and any other related documents in form and substance reasonably satisfactory to Purchaser, Purchaser shall disburse in immediately available funds the Subordinated Note Amount set forth on Purchaser’s signature page hereto to Company in exchange for a Subordinated Note with a principal amount equal to such Subordinated Note Amount (the “Disbursement”).  The Company will deliver to the Purchaser one or more certificates representing the Subordinated Note in definitive form (or provide evidence of the same with the original to be delivered by the Company by overnight delivery on the next calendar day in accordance with the delivery instructions of Purchaser), registered in such names and denominations as Purchaser may request.

 

  

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3.2 Conditions Precedent to Disbursement.

 

3.2.1 Conditions to Purchaser’s Obligation. The obligation of Purchaser to consummate the purchase of the Subordinated Note at Closing and to effect the Disbursement is subject to delivery by or at the direction of the Company to Purchaser each of the following (or written waiver by Purchaser prior to the Closing of such delivery):

 

3.2.1.1 Transaction Documents.  This Agreement and the Subordinated Note (collectively, the “Transaction Documents”), each duly authorized and executed by Company.

 

3.2.1.2 Authority Documents.

 

	
(a)  

	
A copy, certified by the Secretary or Assistant Secretary of Company, of the Articles of Incorporation, of Company;

 

	
(b)  

	
A certificate of existence of Company issued by the Secretary of State of the State of Louisiana;

 

	
(c)  

	
A copy, certified by the Secretary or Assistant Secretary, of the Bylaws of Company;

 

	
(d)  

	
A copy, certified by the Secretary or Assistant Secretary of Company, of the resolutions of the board of directors (and any committee thereof) of Company authorizing the execution, delivery and performance of the Transaction Documents; and

 

	
(e)  

	
An incumbency certificate of the Secretary or Assistant Secretary of Company certifying the names of the officer or officers of Company authorized to sign the Transaction Documents and the other documents provided for in this Agreement.

 

3.2.1.3 Officer’s Certificate.  A certificate signed on behalf of Company by a senior executive officer certifying that the representations and warranties of Company set forth in this Agreement are 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 Company set forth in Sections 4.2.1, 4.2.3 and 4.5 shall be true and correct in all respects).

 

  

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3.2.1.4 Other Documents.  Such other certificates, affidavits, schedules, resolutions, notes and/or other documents which are provided for hereunder or as Purchaser may reasonably request.

 

3.2.1.5 Aggregate Investments.  Prior to, or contemporaneously with the Closing, Purchaser shall have actually subscribed for the Subordinated Note Amount set forth on Purchaser’s signature page.

 

3.2.2 Conditions to Company’s Obligation.

 

3.2.2.1 Since the date of this Agreement, there shall not have been any action taken, or any law, rule or regulation enacted, entered, enforced or deemed applicable to Company or its Subsidiaries or the transactions contemplated by this Agreement by any Governmental Agency which imposes any restriction or condition that Company determines, in its reasonable good faith judgment, is materially and unreasonably burdensome on Company’s business or would materially reduce the economic benefits of the transactions contemplated by this Agreement to Company to such a degree that Company would not have entered into this Agreement had such condition or restriction been known to it on the date hereof.

 

3.2.2.2 With respect to Purchaser, the obligation of Company to consummate the sale of the Subordinated Note and to effect the Closing is subject to delivery by or at the direction of Purchaser to Company each of the following (or written waiver by Company prior to the Closing of such delivery):

 

	
(a)  

	
Transaction Documents.  This Agreement, duly authorized and executed by Purchaser.

 

	
(b)  

	
Certificate.  A certificate signed by Purchaser certifying that the representations and warranties of Purchaser set forth in this Agreement are 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.

 

4. REPRESENTATIONS AND WARRANTIES OF COMPANY.

 

Company hereby represents and warrants to Purchaser as follows:

 

4.1 Organization and Authority.

 

4.1.1 Organization Matters of Company and Its Subsidiaries.

 

4.1.1.1 Company is validly existing and in good standing under the laws of the State of  Louisiana and has all requisite corporate power and authority to conduct its business and activities as presently conducted, to own its properties, and to perform its obligations under the Transaction Documents.  Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect.  Company is duly registered as a bank holding company under the Bank Holding Company Act of 1956, as amended.

 

  

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4.1.1.2 Except as provided on Disclosure Schedule 4.1, each Subsidiary either has been duly organized and is validly existing as a corporation or limited liability company, or has been duly chartered and is validly existing as a Louisiana chartered bank, in each case in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect.  All of the issued and outstanding shares of capital stock or other equity interests in each Subsidiary have been duly authorized and validly issued, are fully paid and non-assessable and are owned by Company, directly or through Subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance or claim; none of the outstanding shares of capital stock of, or other equity interests in, any Subsidiary were issued in violation of the preemptive or similar rights of any securityholder of such Subsidiary or any other entity.

 

4.1.1.3 Bank is a Louisiana chartered bank.  The deposit accounts of Bank are insured by the FDIC up to applicable limits.  Neither Company nor Bank has received any notice or other information indicating that Bank is not an “insured depository institution” as defined in 12 U.S.C. Section 1813, nor has any event occurred which could reasonably be expected to adversely affect the status of Bank as an FDIC-insured institution.

 

4.1.2 Capital Stock and Related Matters.  All of the outstanding capital stock of Company has been duly authorized and validly issued and is fully paid and nonassessable.  There are, as of the date hereof, no outstanding options, rights, warrants or other agreements or instruments obligating Company to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of the capital stock of Company or obligating Company to grant, extend or enter into any such agreement or commitment to any Person other than Company.

 

4.1.3 Subsidiaries.  Each of Company’s Subsidiaries that is a “significant subsidiary” as defined in Rule 1-02 of Regulation S-X is reflected in its Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

 

4.2 No Impediment to Transactions.

 

4.2.1 Transaction is Legal and Authorized.  The issuance of the Subordinated Note, the borrowing of the aggregate of the Subordinated Note Amount, the execution of the Transaction Documents and compliance by Company with all of the provisions of the Transaction Documents are within the corporate and other powers of Company.

 

4.2.2 Agreement.  The Agreement has been duly authorized, executed and delivered, and, assuming due authorization, execution and delivery by the Purchaser, is the legal, valid and binding obligation of Company, enforceable in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors’ rights generally or by general equitable principles.

 

  

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4.2.3 Subordinated Note.  The Subordinated Note has been duly authorized by the Company and when executed by the Company and issued, delivered to and paid for by the Purchaser in accordance with the terms of the Agreement, will have been duly executed, authenticated, issued and delivered and will constitute the legal, valid and binding obligation of Company, and enforceable in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors’ rights generally or by general equitable principles.

 

4.2.4 No Defaults or Restrictions.  Neither the execution and delivery of the Transaction Documents nor compliance with their respective terms and conditions will (whether with or without the giving of notice or lapse of time or both) (i) violate, conflict with or result in a breach of, or constitute a default under:  (1) the Articles of Incorporation or Bylaws of Company; (2) any of the terms, obligations, covenants, conditions or provisions of any corporate restriction or of any contract, agreement, indenture, mortgage, deed of trust, pledge, bank loan or credit agreement, or any other agreement or instrument to which Company or Bank, as applicable, is now a party or by which it or any of its properties may be bound or affected; (3) any judgment, order, writ, injunction, decree or demand of any court, arbitrator, grand jury, or Governmental Agency; or (4) any statute, rule or regulation applicable to Company, except, in the case of items (2), (3) or (4), for such violations and conflicts that would not reasonably be expected to have, singularly or in the aggregate, a Material Adverse Effect on Company, or (ii) result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any property or asset of Company.  Neither Company nor Bank 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 any other agreement or instrument to which Company or Bank, as applicable, is a party or by which Company or Bank, as applicable, or any of its 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 Company.

 

4.2.5 Governmental Consent.  No governmental orders, permissions, consents, approvals or authorizations are required to be obtained by Company that have not been obtained, and no registrations or declarations are required to be filed by Company that have not been filed in connection with, or, in contemplation of, the execution and delivery of, and performance under, the Transaction Documents, except for applicable requirements, if any, of the Securities Act, the Exchange Act or state securities laws or “blue sky” laws of the various states and any applicable federal or state banking laws and regulations.

 

4.3 Possession of Licenses and Permits.  Company and its Subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, “Governmental Licenses”) issued by the appropriate Governmental Agencies necessary to conduct the business now operated by it except where the failure to possess such Governmental Licenses would not, singularly or in the aggregate, have a Material Adverse Effect on Company or such applicable Subsidiary; Company and each Subsidiary of Company is in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, have a Material Adverse Effect on Company or such applicable Subsidiary of Company; all of the Governmental Licenses are valid and in full force and effect, except where the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not have a Material Adverse Effect on Company or such applicable Subsidiary of Company; and neither Company nor any Subsidiary of Company has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses.

 

  

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4.4 Financial Condition.

 

4.4.1 Company Financial Statements.  The financial statements of Company included in Company’s SEC Reports (including the related notes, where applicable) (i) have been prepared from, and are in accordance with, the books and records of Company; (ii) fairly present in all material respects the results of operations, cash flows, changes in stockholders’ equity and financial position of Company and its consolidated Subsidiaries, for the respective fiscal periods or as of the respective dates therein set forth (subject in the case of unaudited statements to recurring year-end audit adjustments normal in nature and amount), as applicable; (iii) complied as to form, as of their respective dates of filing in all material respects with applicable accounting and banking requirements as applicable, with respect thereto; and (iv) have been prepared in accordance with GAAP consistently applied during the periods involved, except, in each case, as indicated in such statements or in the notes thereto and Regulation S-X promulgated under the Securities Act.  The books and records of Company have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements.  Company does not have any material liability of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether due or to become due), except for those liabilities that are reflected or reserved against on the consolidated balance sheet of Company contained in Company SEC Reports for Company’s most recently completed quarterly or annual fiscal period, as applicable, and for liabilities incurred in the ordinary course of business consistent with past practice or in connection with this Agreement and the transactions contemplated hereby.

 

4.4.2 Absence of Default.  Since the date of the latest audited financial statements included in Company’s SEC Reports, no event has occurred which either of itself or with the lapse of time or the giving of notice or both, would give any creditor of Company the right to accelerate the maturity of any material Indebtedness of Company.  Company is not in default under any other Lease, agreement or instrument, or any law, rule, regulation, order, writ, injunction, decree, determination or award, non-compliance with which could reasonably be expected to result in a Material Adverse Effect on Company.

 

4.4.3 Solvency.  After giving effect to the consummation of the transactions contemplated by this Agreement, Company has capital sufficient to carry on its business and transactions and is solvent and able to pay its debts as they mature.  No transfer of property is being made and no Indebtedness is being incurred in connection with the transactions contemplated by this Agreement with the intent to hinder, delay or defraud either present or future creditors of Company or any Subsidiary of Company.

 

4.4.4 Ownership of Property.  Except as provided on Disclosure Schedule 4.4, Company and each of its Subsidiaries has good and marketable title as to all real property owned by it and good title to all assets and properties owned by Company and such Subsidiary in the conduct of its businesses, whether such assets and properties are real or personal, tangible or intangible, including assets and property reflected in the most recent balance sheet contained in Company’s SEC Reports or acquired subsequent thereto (except to the extent that such assets and properties have been disposed of in the ordinary course of business, since the date of such balance sheet), subject to no encumbrances, liens, mortgages, security interests or pledges, except (i) those items which secure liabilities for public or statutory obligations or any discount with, borrowing from or other obligations to the Federal Home Loan Bank, inter-bank credit facilities, reverse repurchase agreements or any transaction by Bank acting in a fiduciary capacity, (ii) statutory liens for amounts not yet delinquent or which are being contested in good faith and (iii) such as do not, singly or in the aggregate, materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by Company or any of its Subsidiaries.  Company and each of its Subsidiaries, as lessee, has the right under valid and existing leases of real and personal properties that are material to Company or such Subsidiary, as applicable, in the conduct of its business to occupy or use all such properties as presently occupied and used by it.  Such existing leases and commitments to lease constitute or will constitute operating leases for both tax and financial accounting purposes.

 

  

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4.5 No Material Adverse Change.  Since the date of the latest audited financial statements included in Company’s SEC Reports, there has been no development or event which has had or could reasonably be expected to have a Material Adverse Effect on Company or any of its Subsidiaries.

 

4.6 Legal Matters.

 

4.6.1 Compliance with Law.  Company and each of its Subsidiaries (i) has complied with and (ii) is not under investigation with respect to, and, to the Company’s knowledge, have not been threatened to be charged with or given any notice of any material violation of any applicable statutes, rules, regulations, orders and restrictions of any domestic or foreign government, or any instrumentality or agency thereof, having jurisdiction over the conduct of its business or the ownership of its properties, except where any such failure to comply or violation would not reasonably be expected to have a Material Adverse Effect on Company or any of its Subsidiaries.

 

4.6.2 Regulatory Enforcement Actions.  Company, Bank and its other Subsidiaries are in compliance in all material respects with all laws administered by and regulations of any Governmental Agency applicable to it or to them, the failure to comply with which would have a Material Adverse Effect.  None of Company, Bank, Company’s Subsidiaries nor to the Company’s knowledge any of their officers or directors are now operating under any restrictions, agreements, memoranda, or commitments (other than restrictions of general application) imposed by any Governmental Agency, nor are, to Company’s knowledge, (a) any such restrictions threatened or (b) any agreements, memoranda or commitments being sought by any Governmental Agency.

 

4.6.3 Pending Litigation.  There are no actions, suits, proceedings or written agreements pending, or, to Company’s knowledge, threatened or proposed, against Company, Bank, or any of its other Subsidiaries at law or in equity or before or by any federal, state, municipal, or other governmental department, commission, board, or other administrative agency, domestic or foreign, that, either separately or in the aggregate, would reasonably be expected to have a Material Adverse Effect on Company or any of its Subsidiaries or affect issuance or payment of the Subordinated Note; and neither Company nor any of its Subsidiaries is a party to or named as subject to the provisions of any order, writ, injunction, or decree of, or any written agreement with, any court, commission, board or agency, domestic or foreign, that either separately or in the aggregate, will have a Material Adverse Effect on Company or any of its Subsidiaries.

 

  

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4.6.4 Environmental.  No Property is or, to Company’s knowledge, has been a site for the use, generation, manufacture, storage, treatment, release, threatened release, discharge, disposal, transportation or presence of any Hazardous Materials and neither Company nor any of its Subsidiaries has engaged in such activities.  There are no claims or actions pending or, to Company’s knowledge, threatened against Company or any of its Subsidiaries by any Governmental Agency or by any other Person relating to any Hazardous Materials or pursuant to any Hazardous Materials Law.

 

4.6.5 Investment Company Act.  Neither Company nor any of its Subsidiaries is an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.

 

4.7 No Misstatement.  No information, exhibit, report, schedule or document, when viewed together as a whole, furnished by Company to Purchaser in connection with the negotiation, execution or performance of this Agreement contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements contained therein not misleading in light of the circumstances under which they were made, not misleading.

 

4.8 Reporting Compliance.  Company is subject to, and is in compliance in all material respects with, the reporting requirements of Section 13 and Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended, and the rules and the regulations of the SEC thereunder (collectively, the “Exchange Act”).  Company’s SEC Reports at the time they were filed with the SEC, complied in all material respects with the requirements of the Exchange Act and did not include any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

4.9 Internal Control Over Financial Reporting.  Company and its Subsidiaries maintain systems of “internal control over financial reporting” (as defined in Rule 13a-15(f) of the Exchange Act) that comply with the requirements of the Exchange Act and have been designed by, or under the supervision of, their respective principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including, but not limited to, a system of accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.  Since the end of Company’s most recent audited fiscal year, (y) Company has no knowledge of (i) any material weakness in Company’s internal control over financial reporting (whether or not remediated) or (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in Company’s internal controls and (z) there has been no change in Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, Company’s internal control over financial reporting.

 

  

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4.10 Disclosure Controls and Procedures.  Company and its Subsidiaries maintain an effective system of disclosure controls and procedures (as defined in Rule 13a-15 and Rule 15d-15 of the Exchange Act), that (i) are designed to ensure that information required to be disclosed by Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that material information relating to Company and its Subsidiaries is made known to Company’s principal executive officer and principal financial officer by others within Company and its Subsidiaries to allow timely decisions regarding disclosure, and (ii) are effective in all material respects to perform the functions for which they were established.  As of the date hereof, Company has no knowledge that would reasonably cause it to believe that the evaluation to be conducted of the effectiveness of Company’s disclosure controls and procedures for the most recently ended fiscal quarter period will result in a finding that such disclosure controls and procedures are ineffective for such quarter ended.  Based on the evaluation of Company’s and each Subsidiary’s disclosure controls and procedures described above, Company is not aware of (1) any significant deficiency in the design or operation of internal controls which could adversely affect Company’s ability to record, process, summarize and report financial data or any material weaknesses in internal controls or (2) any fraud, whether or not material, that involves management or other employees who have a significant role in Company’s internal controls.  Since the most recent evaluation of Company’s disclosure controls and procedures described above, there have been no significant changes in internal controls or in other factors that could significantly affect internal controls.

 

4.11 No Registration.  No person has the right to require Company or any of its Subsidiaries to register any securities for sale under the Securities Act by reason of the issuance and sale of the Subordinated Note to be sold by Company hereunder.

 

4.12           No Placement Agent or Underwriter. The Company acknowledges that the Financial Advisor did not act as a placement agent or underwriter in connection with the transactions contemplated by this Agreement.

 

4.13 Representations and Warranties Generally.  The representations and warranties of Company set forth in this Agreement are true and correct as of the date hereof and will be true and correct as of the Closing Date and as otherwise specifically provided herein.  Any certificate signed by an officer of Company and delivered to the Purchaser or to counsel for Purchaser shall be deemed to be a representation and warranty by Company to the Purchaser as to the matters set forth therein.

 

5. GENERAL COVENANTS, CONDITIONS AND AGREEMENTS.

 

Company hereby further covenants and agrees with Purchaser as follows:

 

5.1 Compliance with Transaction Documents.  Company shall comply with, observe and timely perform each and every one of the covenants, agreements and obligations under the Transaction Documents.

 

  

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5.2 Compliance with Laws.

 

5.2.1 Generally.  Company shall comply and cause Bank and each other Subsidiary to comply in all material respects with all applicable statutes, rules, regulations, orders and restrictions in respect of the conduct of its business and the ownership of its properties, except, in each case, where such noncompliance would not reasonably be expected to have a Material Adverse Effect on Company.

 

5.2.2 Regulated Activities.  Company shall not itself, nor shall it cause, permit or allow Bank or any other Subsidiary to (i) engage in any business or activity not permitted by all applicable laws and regulations, except where such business or activity would not reasonably be expected to have a Material Adverse Effect on Company, Bank and/or such Subsidiary or (ii) make any loan or advance secured by the capital stock of another bank or depository institution, or acquire the capital stock, assets or obligations of or any interest in another bank or depository institution, in each case other than in accordance with applicable laws and regulations and safe and sound banking practices.

 

5.2.3 Taxes.  Company shall and shall cause Bank and any other Subsidiary to promptly pay and discharge all taxes, assessments and other governmental charges imposed upon Company, Bank or any other Subsidiary or upon the income, profits, or property of Company or any Subsidiary and all claims for labor, material or supplies which, if unpaid, might by law become a lien or charge upon the property of Company, Bank or any other Subsidiary.  Notwithstanding the foregoing, none of Company, Bank or any other Subsidiary shall be required to pay any such tax, assessment, charge or claim, so long as the validity thereof shall be contested in good faith by appropriate proceedings, and appropriate reserves therefor shall be maintained on the books of Company, Bank and such other Subsidiary.

 

5.2.4 Corporate Existence.  Company shall do or cause to be done all things reasonably necessary to maintain, preserve and renew its corporate existence and that of Bank and the other Subsidiaries and its and their rights and franchises, and comply in all material respects with all related laws applicable to Company, Bank or the other Subsidiaries.

 

5.2.5 Dividends, Payments, and Guarantees During Event of Default.  During the continuance of an Event of Default (as defined under the Subordinated Note) and except as required by any federal or state Governmental Agency, Company agrees not to (a) declare or pay any dividends on, or redeem, purchase, acquire or make a liquidation payment with respect to, any of its capital stock; (b) make any payment of principal of, or interest or premium, if any, on, or repay, repurchase or redeem any of Company’s debt that ranks equal with or junior to the Subordinated Note; or (c) make any payments under any guarantee that ranks equal with or junior to the Subordinated Note, other than (i) any dividends or distributions in shares of, or options, warrants or rights to subscribe for or purchase shares of, any class of Company’s common stock; (ii) any declaration of a dividend in connection with the implementation of a shareholders’ rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto; (iii) as a result of a reclassification of Company’s capital stock or the exchange or conversion of one class or series of Company’s capital stock for another class or series of Company’s capital stock; (iv) the purchase of fractional interests in shares of Company’s capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged; or (v) purchases of any class of Company’s common stock related to the issuance of common stock or rights under any benefit plans for Company’s directors, officers or employees or any of Company’s dividend reinvestment plans.

 

  

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5.2.6 Tier 2 Capital.  If all or any portion of the Subordinated Note 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 (5) years immediately preceding the Maturity Date of the Subordinated Note, Company will immediately notify the Purchaser, and thereafter Company and the Purchaser 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 Subordinated Note to qualify as Tier 2 Capital.

 

5.3 Absence of Control.  It is the intent of the parties to this Agreement that in no event shall Purchaser, by reason of any of the Transaction Documents, be deemed to control, directly or indirectly, Company.

 

6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER.

 

Purchaser hereby represents and warrants to Company, and covenants with Company, as follows:

 

6.1 Legal Power and Authority.  Purchaser has all necessary power and authority to execute, deliver and perform his obligations under this Agreement and to consummate the transactions contemplated hereby.

 

6.2 Authorization and Execution.  This Agreement is a legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, except as enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors’ rights generally or by general equitable principles.

 

6.3 No Conflicts.  Neither the execution, delivery or performance of the Transaction Documents nor the consummation of any of the transactions contemplated thereby will conflict with, violate, constitute a breach of or a default (whether with or without the giving of notice or lapse of time or both) under (i) any agreement to which he is party, (iii) any law applicable to him or (iv) any order, writ, judgment, injunction, decree, determination or award binding upon or affecting him.

 

6.4 Purchase for Investment.  Purchaser is purchasing the Subordinated Note for his own account and not with a view to distribution and with no present intention of reselling, distributing or otherwise disposing of the same.  Purchaser has no present or contemplated agreement, undertaking, arrangement, obligation, indebtedness or commitment providing for, or which is likely to compel, a disposition of the Subordinated Note in any manner.

 

6.5 Accredited Investor.  Purchaser is and will be on the Closing Date an “accredited investor” as such term is defined in Rule 501(a) of Regulation D and as contemplated by subsections (4), (5) and (6) of Rule 501(a) of Regulation D.

 

6.6 Financial and Business Sophistication.  Purchaser has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment in the Subordinated Note.  Purchaser has relied solely upon his own knowledge of, and/or the advice of his own legal, financial or other advisors with regard to, the legal, financial, tax and other considerations involved in deciding to invest in the Subordinated Note.

 

  

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6.7 Ability to Bear Economic Risk of Investment.  Purchaser recognizes that an investment in the Subordinated Note involves substantial risk.  He has the ability to bear the economic risk of the prospective investment in the Subordinated Note, including the ability to hold the Subordinated Note indefinitely, and further including the ability to bear a complete loss of all of his investment in Company.

 

6.8 Information.  Purchaser acknowledges that:  (i) he is not being provided with the disclosures that would be required if the offer and sale of the Subordinated Note were registered under the Securities Act, nor is he being provided with any offering circular or prospectus prepared in connection with the offer and sale of the Subordinated Note; (ii) he has conducted his own examination of Company and the terms of the Subordinated Note to the extent he deems necessary to make his decision to invest in the Subordinated Note; and (iii) he has availed himself of publicly available financial and other information concerning Company to the extent he deems necessary to make his decision to purchase the Subordinated Note.  He has reviewed the information set forth in Company’s SEC Reports and the exhibits and schedules hereto.

 

6.9 Access to Information.  Purchaser acknowledges that he and his advisors have been furnished with all materials relating to the business, finances and operations of Company that have been requested by him or his advisors and have been given the opportunity to ask questions of, and to receive answers from, persons acting on behalf of 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.

 

6.10 Investment Decision.  Purchaser has made his own investment decision based upon his own judgment, due diligence and advice from such advisors as he has deemed necessary and not upon any view expressed by any other person or entity, including the Financial Advisor.  Neither such inquiries nor any other due diligence investigations conducted by him or his advisors or representatives, if any, shall modify, amend or affect his right to rely on Company’s representations and warranties contained herein.  He is not relying upon, and has not relied upon, any advice, statement, representation or warranty made by any Person by or on behalf of Company, including, without limitation, the Financial Advisor, except for the express statements, representations and warranties of Company made or contained in this Agreement.  Furthermore, he acknowledges that (i) the Financial Advisor has not performed any due diligence review on behalf of him and (ii) nothing in this Agreement or any other materials presented by or on behalf of Company to him in connection with the purchase of the Subordinated Note constitutes legal, tax or investment advice.

 

6.11 Private Placement; No Registration; Restricted Legends.  Purchaser understands and acknowledges that the Subordinated Note is being sold by Company without registration under the Securities Act in reliance on the exemption from federal and state registration set forth in, respectively, Rule 506(b) of Regulation D under Section 4(a)(2) of the Securities Act and Section 18 of the Securities Act, or any state securities laws, and accordingly, may be resold, pledged or otherwise transferred only if exemptions from the Securities Act and applicable state securities laws are available to him.  He is not subscribing for the Subordinated Note as a result of or subsequent to any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or presented at any seminar or meeting.  He further acknowledges and agrees that all certificates or other instruments representing the Subordinated Note will bear the restrictive legend set forth in the form of Subordinated Note.  He further acknowledges his primary responsibilities under the Securities Act and, accordingly, will not sell or otherwise transfer the Subordinated Note or any interest therein without complying with the requirements of the Securities Act and the rules and regulations promulgated thereunder and the requirements set forth in this Agreement.

 

  

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6.12 Financial Advisor.  Purchaser will purchase the Subordinated Note directly from Company and not from the Financial Advisor and understands that neither the Financial Advisor nor any other broker or dealer has any obligation to make a market in the Subordinated Note.

 

6.13 Tier 2 Capital.  If all or any portion of the Subordinated Note 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 (5) years immediately preceding the Maturity Date of the Subordinated Note, Company will immediately notify the Purchaser, and thereafter Company and the Purchaser 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 Subordinated Note to qualify as Tier 2 Capital.

 

6.14 Accuracy of Representations.  Purchaser understands that 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 him are no longer accurate as of the Closing Date, or if any of the agreements made by him are breached on or prior to the Closing Date, he shall promptly notify the Company.

 

6.15 Representations and Warranties Generally.  The representations and warranties of Purchaser set forth in this Agreement are true and correct as of the date hereof and will be true and correct as of the Closing Date and as otherwise specifically provided herein.  Any certificate signed by Purchaser and delivered to the Company or to counsel for Company shall be deemed to be a representation and warranty by Purchaser to Company as to the matters set forth therein.

 

7. TERMINATION.  Purchaser may terminate this Agreement (i) at any time prior to the Closing Date by written notice signed by the Purchaser to Company if Purchaser shall decline to purchase the Subordinated Note for any reason permitted by this Agreement or (ii) on the Closing Date if any condition described in Section 3.2 is not fulfilled or waived by the Company in writing by the Purchaser on or prior to the Closing Date.  Any termination pursuant to this Section shall be without liability on the part of (a) Company to Purchaser or (b) Purchaser to Company.

 

8. MISCELLANEOUS.

 

8.1 Prohibition on Assignment by Company.  Except as described in Section 8(b) (Merger or Sale of Assets) of the Subordinated Note, Company may not assign, transfer or delegate any of its rights under this Agreement or the Subordinated Note without the prior written consent of Purchaser.  In addition, in accordance with the terms of the Subordinated Note, any transfer of such Subordinated Note must be made in accordance with the Assignment Form attached thereto and the requirements and restrictions thereof.

 

8.2 Time of the Essence.  Time is of the essence of this Agreement.

 

  

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8.3 Waiver or Amendment.  No waiver or amendment of any term, provision, condition, covenant or agreement herein or in the Subordinated Note shall be effective except with the consent of the holders of not less than more than fifty percent (50%) in aggregate principal amount (excluding any Subordinated Notes held by Company or any of its Affiliates) of the Subordinated Notes at the time outstanding; provided, however, that without the consent of each holder of an affected Subordinated Note, no such amendment or waiver may:  (i) reduce the principal amount of the Subordinated Note; (ii) reduce the rate of or change the time for payment of interest on any Subordinated Note; (iii) extend the maturity of any Subordinated Note, (iv) change the currency in which payment of the obligations of Company under this Agreement and the Subordinated Notes are to be made; or (v) lower the percentage of aggregate principal amount of outstanding Subordinated Notes required to approve any amendment of this Agreement or the Subordinated Notes, (vi) make any changes to Section 6 (Failure to Make Payments) of the Subordinated Notes that adversely affects the rights of any holder of a Subordinated Note; or (vii) disproportionately affect any of the holders of the then outstanding Subordinated Notes.  Notwithstanding the foregoing, Company may amend or supplement the Subordinated Notes without the consent of the holders of the Subordinated Notes to cure any ambiguity, defect or inconsistency or to provide for uncertificated Subordinated Notes in addition to or in place of certificated Subordinated Notes, or to make any change that does not adversely affect the rights of any holder of any of the Subordinated Notes.  No failure to exercise or delay in exercising, by a Purchaser or any holder of the Subordinated Notes, of any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other right or remedy provided by law.  The rights and remedies provided in this Agreement are cumulative and not exclusive of any right or remedy provided by law or equity.  No notice or demand on Company in any case shall, in itself, entitle Company to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Purchaser to any other or further action in any circumstances without notice or demand.  No consent or waiver, expressed or implied, by the Purchaser to or of any breach or default by Company in the performance of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance of the same or any other obligations of Company hereunder.  Failure on the part of the Purchaser to complain of any acts or failure to act or to declare an Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by the Purchaser of his rights hereunder or impair any rights, powers or remedies on account of any breach or default by Company.

 

8.4 Severability.  Any provision of this Agreement which is unenforceable or invalid or contrary to law, or the inclusion of which would adversely affect the validity, legality or enforcement of this Agreement, shall be of no effect and, in such case, all the remaining terms and provisions of this Agreement shall subsist and be fully effective according to the tenor of this Agreement the same as though any such invalid portion had never been included herein.  Notwithstanding any of the foregoing to the contrary, if any provisions of this Agreement or the application thereof are held invalid or unenforceable only as to particular persons or situations, the remainder of this Agreement, and the application of such provision to persons or situations other than those to which it shall have been held invalid or unenforceable, shall not be affected thereby, but shall continue valid and enforceable to the fullest extent permitted by law.

 

8.5 Notices.  Any notice which any party hereto may be required or may desire to give hereunder shall be deemed to have been given if in writing and if delivered personally, or if mailed, postage prepaid, by United States registered or certified mail, return receipt requested, or if delivered by a responsible overnight commercial courier promising next business day delivery, addressed:

 

  

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if to Company:

	
First Guaranty Bancshares, Inc.

400 East Thomas Street

Hammond, Louisiana 70401

Attention: Alton B. Lewis, Jr.

President and Chief Executive Officer

	
with a copy to:

	
Luse Gorman, PC

5335 Wisconsin Ave., NW Suite 780

Washington, D.C.  20015

Attention: Benjamin M. Azoff, Esq.

	
if to Purchaser:

	
To the address indicated on such Purchaser’s signature page.

 

or to such other address or addresses as the party to be given notice may have furnished in writing to the party seeking or desiring to give notice, as a place for the giving of notice; provided that no change in address shall be effective until five (5) Business Days after being given to the other party in the manner provided for above.  Any notice given in accordance with the foregoing shall be deemed given when delivered personally or, if mailed, three (3) Business Days after it shall have been deposited in the United States mails as aforesaid or, if sent by overnight courier, the Business Day following the date of delivery to such courier (provided next business day delivery was requested).

 

8.6 Successors and Assigns.  This Agreement shall inure to the benefit of the parties and their respective heirs, legal representatives, successors and assigns; except that, unless Purchaser consents in writing, no assignment made by Company in violation of this Agreement shall be effective or confer any rights on any purported assignee of Company.  The term “successors and assigns” will not include a purchaser of the Subordinated Note from Purchaser merely because of such purchase.

 

8.7 No Joint Venture.  Nothing contained herein or in any document executed pursuant hereto and no action or inaction whatsoever on the part of Purchaser, shall be deemed to make Purchaser a partner or joint venturer with Company.

 

8.8 Documentation.  All documents and other matters required by any of the provisions of this Agreement to be submitted or furnished to Purchaser shall be in form and substance satisfactory to Purchaser.

 

8.9 Entire Agreement.  This Agreement and the Subordinated Note along with the Exhibits thereto constitute the entire agreement between the parties hereto with respect to the subject matter hereof and may not be modified or amended in any manner other than by supplemental written agreement executed by the parties hereto.  No party, in entering into this Agreement, has relied upon any representation, warranty, covenant, condition or other term that is not set forth in this Agreement or in the Subordinated Note.

 

  

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8.10 Choice of Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Louisiana without giving effect to its laws or principles of conflict of laws.  Nothing herein shall be deemed to limit any rights, powers or privileges which a Purchaser may have pursuant to any law of the United States of America or any rule, regulation or order of any department or agency thereof and nothing herein shall be deemed to make unlawful any transaction or conduct by a Purchaser which is lawful pursuant to, or which is permitted by, any of the foregoing.

 

8.11 No Third Party Beneficiary.  This Agreement is made for the sole benefit of Company and the Purchaser, and no other person shall be deemed to have any privity of contract hereunder nor any right to rely hereon to any extent or for any purpose whatsoever, nor shall any other person have any right of action of any kind hereon or be deemed to be a third party beneficiary hereunder.

 

8.12 Legal Tender of United States.  All payments hereunder shall be made in coin or currency which at the time of payment is legal tender in the United States of America for public and private debts.

 

8.13 Captions; Counterparts.  Captions contained in this Agreement in no way define, limit or extend the scope or intent of their respective provisions.  This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same instrument.  In the event that any signature is delivered by facsimile transmission, or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.

 

8.14 Knowledge; Discretion.  All references herein to Company’s knowledge shall be deemed to mean the knowledge of such party based on the actual knowledge of such party’s Chief Executive Officer and Chief Financial Officer or such other persons holding equivalent offices.  Unless specified to the contrary herein, all references herein to an exercise of discretion or judgment by Purchaser, to the making of a determination or designation by Purchaser, to the application of Purchaser’s discretion or opinion, to the granting or withholding of  Purchaser’s consent or approval, to the consideration of whether a matter or thing is satisfactory or acceptable to Purchaser, or otherwise involving the decision making of Purchaser, shall be deemed to mean that Purchaser shall decide using the reasonable discretion or judgment of a prudent lender.

 

8.15 Waiver Of Right To Jury Trial.  TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, THE PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THAT THEY MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION ARISING IN ANY WAY IN CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS, OR ANY OTHER STATEMENTS OR ACTIONS OF COMPANY OR PURCHASER.  THE PARTIES ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL SELECTED OF THEIR OWN FREE WILL.  THE PARTIES FURTHER ACKNOWLEDGE THAT (i) THEY HAVE READ AND UNDERSTAND THE MEANING AND RAMIFICATIONS OF THIS WAIVER, (ii) THIS WAIVER HAS BEEN REVIEWED BY THE PARTIES AND THEIR COUNSEL AND IS A MATERIAL INDUCEMENT FOR ENTRY INTO THIS AGREEMENT AND (iii) THIS WAIVER SHALL BE EFFECTIVE AS TO EACH OF SUCH TRANSACTION DOCUMENTS AS IF FULLY INCORPORATED THEREIN.

 

  

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8.16 Expenses.  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 the Company will reimburse the Purchaser for up to $165,000 for Purchaser’s specific fees incurred in connection with the transaction.

 

8.17 Survival.  Each of the representations and warranties set forth in this Agreement shall survive the consummation of the transactions contemplated hereby for a period of one year after the date hereof.  Except as otherwise provided herein, all covenants and agreements contained herein shall survive until, by their respective terms, they are no longer operative.

 

 

[Signature Pages Follow]

 

 

 

  

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IN WITNESS WHEREOF, Company has caused this Subordinated Note Purchase Agreement to be executed by its duly authorized representative as of the date first above written.

 

	  	
COMPANY:

FIRST GUARANTY BANCSHARES, INC.

 

By:          /s/ Alton B. Lewis, Jr.         

Name: Alton B. Lewis, Jr.

Title:President and Chief Executive Officer

	 	

	  	
 

 

  

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IN WITNESS WHEREOF, the Purchaser has caused this Subordinated Note Purchase Agreement to be executed as of the date first above written.

 

	  	
 

	  	
PURCHASER:

Edgar Ray Smith, III

 

By: /s/Edgar Ray Smith, III          

Name:Edgar Ray Smith, III

 

	 	

	  	
Address of Purchaser:

P.O. Box 530

Roseland, Louisiana 70456

 

 

	 	

	  	
Principal Amount of Purchased Subordinated Note:

 

$15.0 million

 

 

	 	

 

  

23ex10_2.htm

LOAN AGREEMENT

THIS LOAN AGREEMENT (as amended, restated or supplemented or otherwise modified from time to time, hereinafter called the “Agreement”) made and entered into this 22nd day of December, 2015, (“Effective Date”) by and between FIRST GUARANTY BANCSHARES, INC., a Louisiana corporation, (hereinafter called “Borrower”) and FIRST TENNESSEE BANK NATIONAL ASSOCIATION, a national banking association having its principal office located in Memphis, Tennessee (“Lender”).

W I T N E S S E T H :

WHEREAS, the Borrower has requested that Lender provide a term loan in the amount of Twenty-Five Million Dollars ($25,000,000.00) (“Loan”) and Lender has agreed to make this Loan on the terms and conditions hereinafter set forth;

WHEREAS, Borrower and Lender wish to enter into this Loan Agreement to set forth certain terms of the Loan and to secure the Loan by a pledge of 4,823,899 shares of common stock of First Guaranty Bank, a Louisiana corporation (the “Bank”) which constitutes eighty-five percent (85.00%) of the outstanding shares of the Bank, which is a wholly-owned subsidiary of Borrower.

NOW, THEREFORE, in consideration of the premises and the mutual agreements, covenants and conditions herein contained, the receipt and sufficiency of which is hereby acknowledged, the parties hereto intending to be legally bound hereby agree as follows:

AGREEMENTS

1. AMOUNT AND TERMS OF BORROWINGS.

 

1.1 Defined Terms.  Any capitalized term used but not defined in the body of this Agreement shall have the meaning set forth on Appendix A attached hereto and incorporated herein by reference.

 

1.2 Loan.  Lender hereby agrees to lend, and Borrower hereby agrees to borrow, upon the terms and conditions set forth in this Agreement, the sum of up to Twenty-Five Million Dollars ($25,000,000.00), as the Loan, to be evidenced by a promissory note (the “Note”), as set forth in Exhibit A and included herein by reference.  The Loan shall bear interest and be payable in accordance with the terms and provisions of the Note.  The Loan shall expire and mature, and the outstanding principal balance of the Loan and all accrued interest thereon shall be due and payable, on the Maturity Date.

 

1.3 Collateral. All indebtedness and obligations of Borrower to Lender under this Agreement shall be secured by Lender’s lien and security interest in the Collateral.  The pledging of such Collateral shall be evidenced by the Pledge Agreement.  Borrower agrees that all of the rights of Lender with regard to the Pledge Agreement set forth in this Agreement shall apply to any modification of, or supplement to this Agreement.

 

1.4 Fees.

 

  

  

  

(a)           A loan origination fee in the amount of Twenty-Five Thousand Dollars ($25,000.00) shall be paid by Borrower to Lender on or before the closing of this Loan.  Borrower agrees that this fee is fair and reasonable considering the condition of the money market, the creditworthiness of the Borrower, the interest rate to be paid, and the nature of the security for the Loan.

 

1.5 Increased Costs Generally.

 

(a) If any Change in Law shall:

 

(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or advances, loans or other credit extended or participated in by, the Lender;

 

(ii) subject the Lender to any tax of any kind whatsoever with respect to this Agreement, or any Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof; or

 

(iii) impose on the Lender any other condition, cost or expense affecting this Agreement or the Loan made by the Lender;

 

and the result of any of the foregoing shall be to increase the cost to the Lender of making, converting to, continuing or maintaining the Loan (or of maintaining its obligations to make the Loan), or to increase the cost to the Lender of issuing or maintaining any letter of credit (or of maintaining its obligation to participate in or to issue any letter of credit), or to reduce the amount of any sum received or receivable by the Lender hereunder (whether of principal, interest or any other amount) then, upon written request of the Lender, the Borrower shall promptly pay to the Lender, as the case may be, such additional actual amount or amounts as will compensate the Lender, as the case may be, for such additional costs actually incurred or reductions actually suffered.

 

(b) Capital Requirements.  If Lender determines that any Change in Law affecting the Lender or Lender’s holding company, if any, regarding capital requirements, has or would have the effect of reducing the rate of return on the Lender’s capital or on the capital of the Lender’s holding company, if any, as a consequence of this Agreement, the commitment of the Lender hereunder or the Loan made by the Lender hereunder, to a return below that which the Lender or the Lender’s holding company could have achieved but for such Change in Law (taking into consideration the Lender’s policies and the policies of the Lender’s holding company with respect to capital adequacy), then from time to time upon written request of the Lender, the Borrower shall promptly pay to the Lender such additional amount or amounts as will compensate the Lender or the Lender’s holding company for any such actual reduction suffered.

 

(c) Certificates for Reimbursement.  A certificate of the Lender setting forth the amount or amounts necessary to compensate the Lender or its holding company, as the case may be, as specified in this Section and delivered to Borrower, shall be conclusive absent manifest error.  The Borrower shall pay the amount shown as due on any such certificate within ten (10) days after receipt thereof.

 

  

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(d) Delay in Requests.  Failure or delay on the part of Lender to demand compensation pursuant to this Section shall not constitute a waiver of Lender’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this Section for any increased costs incurred or reductions suffered more than six (6) months prior to the date that the Lender, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions, and of the Lender’s intention to claim compensation therefor (except that if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 6-month period referred to above shall be extended to include the period of retroactive effect thereof).

 

(e) Limitations.  Notwithstanding the foregoing, (i) Borrower shall not be required to so reimburse Lender unless Lender at, the time of the request for reimbursement, is generally assessing such amounts on a nondiscriminatory basis against similarly-situated borrowers under its other loan agreements that have similar increased costs provisions and (ii) Borrower shall not be required to reimburse Lender for such costs if Borrower instead repays the Loan and all other obligations under the Loan Documents to Lender within thirty (30) days of receipt of Lender's notice assessing same.

 

2. USE OF PROCEEDS.

 

2.1 Use of Loan Proceeds.  The proceeds of the Loan shall be used by the Borrower for the sole purpose of assisting in the redemption of preferred securities issued to the Small Business Lending Fund established by the Small Business Jobs Act of 2010, in the amount of $39,435,000, plus accrued dividends of $88,728.75.

 

3. CONDITIONS TO LOAN CLOSING.

 

The obligation of Lender to extend any loan or credit to Borrower under this Agreement or to make any Loan disbursements is subject to the strict satisfaction of each of the following conditions:

3.1 No Defaults; Certificate.  Borrower and the Bank shall be in full compliance with all the terms and conditions of this Agreement, and no Event of Default, nor any event which upon notice or lapse of time or both would constitute such an Event of Default, shall have occurred.  At Lender’s request, Lender shall have received from Borrower and the Bank a certificate, in form and content reasonably acceptable to Lender dated as of and delivered on the date of the Loan, certifying that (1) the representa­tions and warranties set forth herein, and the exhibits attached hereto, are accurate, true and correct on and as of such date, (2) show that neither the transactions contemplated hereby or by any other Loan Document will cause or result in any violation of (or creation of any right in third parties under the provisions of) any laws restricting or otherwise regulating the use, application or distribution of corporate funds and assets, and (3) that no Event of Default nor any event which upon notice or lapse of time or both would constitute such an Event of Default, exists.

 

  

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3.2 Accuracy of Representations and Warranties.  At the time of the initial Loan disbursement, the representa­tions and warranties set forth herein and in any other Loan Document shall be true and correct.

 

3.3 Corporate Action and Authority.  The Borrower shall have delivered to Lender: (i) a certificate from the Secretary of State of Louisiana that Borrower is in good standing and certificates from the Secretaries of State of each other State in which the Borrower owns any property, has stationed any employees or agents, or otherwise conducts business, certifying the Borrower’s good standing as a corporation in each such State; (ii) a copy of the Resolutions passed by the Borrower’s Board of Directors authorizing the execution and delivery of the performance of Borrower’s obligations under the Loan Documents certified by the Secretary or Assistant Secretary to be true and correct; and (iii) a certificate or certificates, dated as of and delivered on the date of the execution of this Agreement and signed on behalf of the Borrower by the Secretary or Assistant Secretary, certifying the names of the officers authorized to execute and deliver the Loan Documents on behalf of the Borrower, together with the original, not photocopied, signatures of each officer.  Borrower shall also deliver the same items specified in (i) above pertaining to the Bank from the appropriate regulatory agency.

 

3.4 Delivery of Note, Loan Agreement, Pledge Agreement, and Stock Certificates.  At the time of the exten­sion of the Loan, Borrower shall have deliv­ered the Loan Documents.  The security interest in the Collateral shall be prior to all other liens.

 

3.5 Proceedings.  The Loan Documents, upon their execution, and all proceedings in connection with the authorization, execution and delivery of and the performance of the obligations under the Loan Documents shall be satisfactory in substance and form to Lender.

 

3.6 Payment of Fees and Expenses.  Borrower shall have paid, at or prior to the date of the extension of the Loan, all costs and expenses in accordance with Section 8.9, to the extent then determined by Lender.

 

3.7 Other Writings.  The Lender shall receive such other agreements, instruments, documents, certificates, affidavits and other writings as Lender may reasonably require.

 

3.8 Opinion of Counsel.  Borrower shall have delivered to Lender at Borrower’s expense, favorable written opinions of counsel for Borrower dated as of and delivered on the date of the extension of the Loan, in form and content acceptable to Lender, as set forth in Exhibit B.

 

3.9 Financial Statements.  Prior to any disbursement under the Loan, Borrower shall have delivered to Lender, true and exact copies of the current financial statements of the Borrower, the Bank and all other Subsidiaries, for 2014 and audit report and opinion of  the Borrower’s independent accounting firm, with respect thereto (it being understood that Lender is relying upon such audit report and opinion in entering into this Loan Agreement), the unaudited financial statements of Borrower as of September 30, 2015 and the 2014 F.R. Y-6 Annual Report and F.R. Y-9 Parent Company only (and Consolidated, if applicable) financial statement(s) filed by Borrower with the Federal Reserve.

 

  

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3.10 No Material Adverse Change.  At the time the Loan is funded hereunder, there shall have occurred, in the opinion of Lender, no material adverse changes in the condition, financial or otherwise, of Borrower or Bank from that reflected in the financial statements furnished pursuant to Section 3.9 hereof or furnished to Lender from time to time hereafter as required herein.

 

3.11 Raising Funds.  Prior to the closing, Borrower shall provide Lender with evidence it has raised sufficient funds through a common equity raise, preferred stock offering, or subordinated debt issuance (not to exceed Fifteen Million Dollars ($15,000,000.00)), or that it has sufficient cash on hand, such that these funds may be combined with the Loan to fully redeem the aforementioned preferred securities issued to the Small Business Lending Fund.

 

4. REPRESENTATIONS AND WARRANTIES.

 

In order to induce the Lender to enter into this Agreement and to make the Loan, the Borrower represents and warrants to the Lender (which representations and warranties shall survive the delivery of the Loan Documents and the funding of the Loan) that:

4.1 Corporate Status.  Borrower is a corporation duly organized and existing under the laws of the State of Louisiana, is duly qualified to do business and is in good standing under the laws of other states where the Borrower does business, if any, and has the corporate power and authority to own its properties and assets and conduct its affairs and business.

 

4.2 Corporate Power and Authority.  Borrower has full power and authority to enter into this Agreement, to borrow funds as contemplated herein, to execute and deliver this Agreement, the Note and other Loan Documents executed and delivered by it, and to incur the obligations provided for herein, all of which have been duly authorized by all proper and necessary corporate action; and the officer executing each of the Loan Documents is duly authorized to do so by all necessary corporate action.  Any consents or approval of shareholders or directors of Borrower, or any other party (including without limitation any regulatory agency or authority) required as a condition to the execution, delivery, or validity of any Loan Document have been obtained; and each of said Loan Documents is the valid, legal, and binding obligation of Borrower enforceable in accordance with its terms.

 

4.3 No Violation of Agreements or Law.  Neither Borrower, Bank, nor any other Subsidiary of Borrower is in default beyond any applicable cure period under any indenture, agreement or instrument to which it is a party or by which it may be bound, nor in violation of any state or federal statute, rule, ruling, or regulation governing its operations and the conduct of its business, operations or financial condition of Borrower, Bank, or any other Subsidiary.  Neither the execution and delivery of the Loan Documents nor the consummation of the transactions herein contemplated, or compliance with the provisions hereof will conflict with, or result in the breach of, or constitute a default under, any indenture, agreement or other instrument to which Borrower is a party or by which it may be bound, or result in the creation or imposition of any lien, charge or encumbrance upon any of the property of Borrower, or violate or be in conflict with any provision of the charter or bylaws of Borrower, the Bank or any other Subsidiary.

 

  

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4.4 Compliance With Law; Government Approvals.

 

(a) Borrower has complied and is complying with all requirements, made all applications, and submitted all reports required by The Bank Holding Company Act of 1956, as amended, and any regulations or rulings issued in connection therewith, and the transaction contemplated hereby will not violate any such statutes, rules, rulings, or regulations nor will the consummation of said actions and transactions cause Borrower to be in violation thereof.  Borrower has, if required, made all filings and received all governmental or regulatory approvals necessary for the consummation of the transactions described herein, including without limitation the approval of the Board of Governors of the Federal Reserve System.

 

(b) Borrower has complied and is complying with all other applicable state or federal statutes, rules, rulings and regulations.  The borrowing of money and said actions and transactions required hereunder will not violate any of such statutes, rules, rulings, or regulations.

 

4.5 Litigation.  There are no actions, suits or proceedings pending or, to the knowledge of the Borrower threatened against the Borrower, the Bank or any other Subsidiary before any court, arbitrator or governmental or administrative body or agency which, if adversely determined, would result in any material and adverse change in the financial condition, business operation, or properties or assets of the Borrower, the Bank, or any other Subsidiary except as set forth in Exhibit C.

 

4.6 Supervisory Action.  Neither Borrower, the Bank nor any other Subsidiary is subject to any Supervisory Action by any federal or state bank regulatory authority, except as set forth on Schedule 4.6 attached hereto and incorporated by reference herein.

 

4.7 Financial Condition.  The balance sheets and the related statements of income of Borrower, the Bank, and the other Subsidiaries and the financial reports of Borrower, the Bank, and the other Subsidiaries which will be delivered to Lender pursuant to Section 3.9 hereof are, or will be as of their respective dates and for the respective periods stated therein, complete and correctly and fairly present the financial condition of Borrower, the Bank, and the other Subsidiaries, and the results of their operations, respectively, as of the dates and for the periods stated therein, and have been, or will be as of their respective dates and for the respective periods stated therein, prepared in accordance with generally accepted accounting principles consistently applied throughout the period involved and consistent with that of the preceding fiscal year or period, as the case may be.  There are no liabilities of the Borrower, the Bank, or any other Subsidiary not included in such financial statements.  There has been no material adverse change in the business, properties or condition of Borrower, the Bank, or the other Subsidiaries since the date of the financial statement furnished to Lender pursuant to Section 3.9 hereof.

 

4.8 Tax Liability.  Borrower, the Bank, and the other Subsidiaries have filed all federal, state and other tax returns, which are required to be filed by them, and have paid all taxes which have become due pursuant to such returns or pursuant to any assessments received by Borrower, the Bank, and the other Subsidiaries.

 

  

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4.9 Subsidiaries.  Borrower has no Subsidiaries and owns stock in no corporation or banking association other than the Subsidiaries listed in Exhibit D.

 

4.10 Bank Stock.  The common stock of the Bank owned by Borrower or any other Subsidiary of Borrower is duly authorized and validly issued by the Bank or other Subsidiary.  The total number of shares of common stock of the Bank and each other Subsidiary issued and outstanding as of the date hereof  are all owned by Borrower, the Bank or other Subsidiaries of Borrower.  Except as set forth in Section 6.2 hereof or on Exhibit E, the stock of the Bank and each other Subsidiary is free and clear of all liens, encumbrances, security interests; said common stock is fully paid and non-assessable. There are no outstanding warrants or options to acquire any common stock of the Bank and any other Subsidiary.  There are no outstanding securities convertible or exchangeable into shares of common stock of any Subsidiary; and there are no restrictions on the transfer or pledge of any shares of common stock of any Subsidiary, except as set forth in Section 6.2 hereof or on Exhibit E.  Borrower has the right to pledge and transfer the Collateral and assign the income therefrom without obtaining the consent of any other person or authority except as set forth in Section 6.2 hereof or on Exhibit E; and the Pledge Agreement creates for the benefit of Lender a first lien security interest in the Collateral subject to no other interests or claims.

 

4.11 Title to Assets; Liens.  Borrower and Bank each have good and marketable title to all its respective properties and assets reflected on the financial statements referred to herein, except for (i) such assets as have been disposed of since said date as no longer used or useful in the conduct of business and (ii) items which have been amortized in accordance with GAAP applied on a consistent basis.  There are no liens or any assets of the Borrower, the Bank or any other Subsidiaries other than as set forth in Section 6.2 hereof or as disclosed on Exhibit E.

 

4.12 Options, Warrants, Etc. Related to Shares.  Except as set forth in Exhibit F, there are no options, warrants or other rights agreements or commitments (including conversion rights and preemptive rights) obligating the Borrower, the Bank, or any Subsidiary to issue, sell, purchase or redeem shares of the Borrower, the Bank, or any other Subsidiary or securities convertible to such shares.

 

4.13 Environmental Laws.

 

(a) The Borrower and each of its Subsidiaries have obtained all permits, licenses, and other authorizations which are required under all Environmental Laws and are in compliance in all respects with all applicable Environmental Laws.

 

(b) On or prior to the date hereof, no notice, demand, request for information, citation, summons, or order has been issued, no complaint has been filed, no penalty has been assessed, and no investigation or review is pending or, to the best of the knowledge of the Borrower, threatened by any governmental or other Person with respect to any alleged or suspected failure by the Borrower or any of its Subsidiaries to comply in any material respect with any Environmental Laws.

 

  

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(c) There are no material Liens arising under or pursuant to any Environmental Laws on any of the property owned or leased by the Borrower or any of its Subsidiaries.

 

(d) There are no conditions existing currently or anticipated to exist during the term of this Agreement which would subject the Borrower or any of its Subsidiaries or any of their property to any material Lien, damages, penalties, injunctive relief, or cleanup costs under any Environmental Laws or which require or are likely to require cleanup, removal, remedial action, or other responses by the Borrower and its Subsidiaries pursuant to Environmental Laws.

 

4.14 Disclosure.  The Borrower has disclosed to the Lender (i) all agreements, instruments and corporate or other restrictions to which it, Bank or any of the other Subsidiaries is subject, the termination of which could reasonably be expected to result in a material and adverse change in the financial condition, business operation, or properties or assets of the Borrower, the Bank  or any of the other Subsidiaries and (ii) all matters known to it that, individually or in the aggregate, could reasonably be expected to result in a material and adverse change in the financial condition, business operation, or properties or assets of the Borrower, the Bank or any of the other Subsidiaries.  No report, financial statement, certificate or other information furnished (whether in writing or orally) by or on behalf of the Borrower to Lender in connection with the transactions contemplated hereby and the negotiation of this Agreement or delivered hereunder or under any other Loan Document (in each case as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to projected financial information, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time.

 

4.15 Contracts or Restrictions Affecting Borrower and/or Bank.  Neither Borrower nor Bank is a party to any agreement or instrument or subject to any charter or other corporate restrictions adversely affecting its business, properties or assets, operations or condition (financial or otherwise).

 

4.16 No Default.  Neither Borrower nor Bank is in default in the performance, observance or fulfillment of any of the obligations, covenants, or conditions contained in any agreement or instrument to which it is a party, which will or might materially and adversely affect the business or operations of Borrower or the Bank, as the case may be.

 

4.17 ERISA.  Borrower and Bank are in compliance with all applicable provisions of ERISA and all other laws, state or federal, applicable to any employees’ retirement plan maintained or established by either of them.

 

4.18 OFAC.  Neither the Borrower nor any Subsidiary (a) is an “enemy” or an “ally of the enemy” within the meaning of Section 2 of the Trading with the Enemy Act of the United States (50 U.S.C. App. §§ 1 et seq.), as amended, (b) is in violation of (i) the Trading with the Enemy Act, as amended, (ii) any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto or (iii) the PATRIOT Act or (c) is a Sanctioned Person.  No part of the proceeds of the Loan hereunder will be used directly or indirectly to fund any operations in, finance any investments or activities in or make any payments to, a Sanctioned Person or a Sanctioned Country.

 

  

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5. AFFIRMATIVE COVENANTS.

 

Borrower covenants and agrees that, until the Note together with interest thereon is paid in full, unless specifically waived by the Lender in writing, Borrower will, and will cause the Bank and the Subsidiaries to:

5.1 Business and Existence; Compliance with Laws.  Perform all things necessary to preserve and keep in full force and effect the existence, rights and franchises of Borrower, the Bank and the other Subsidiaries and to comply and cause the Bank and the other Subsidiaries to comply in all material respects with all local, state and federal laws and regulations applicable to banks and bank holding companies, and all laws and regulations of the Local Authorities, and the provisions and requirements of all franchises, permits, certificates of compliance and approval issued by regulatory authorities and other like grants of authority held by the Borrower and the Bank; and notify Bank immediately (and in detail) of any actual or alleged failure to comply with or perform, breach, violation or default under any such laws or regulations or under the terms of any such franchises or licenses, or grants of authority, the result of which would constitute a materially adverse effect on the Borrower or the Bank, or the occurrence or existence of any facts or circumstances which with the passage of time, the giving of notice or otherwise could create such a breach, violation or default or could occasion the termination of any such franchises or grants of authority.

 

5.2 Maintain Property.  Maintain, preserve, and protect all properties used or useful in the conduct of Borrower’s, the Bank’s, and each other Subsidiary’s business and keep the same in good repair, working order and condition.

 

5.3 Insurance.  At all times keep the insurable properties of Borrower, the Bank, and each other Subsidiary adequately insured and maintain in force (i) insurance, to such an extent and against such risks, including fire and theft, as is customary with companies in the same or similar business, (ii) necessary workmen’s compensation insurance, fidelity bonds and directors’ and officers’ insurance coverage in amounts satisfactory to Lender, and (iii) such other insurance as may be required by law; and if required by Lender, deliver to the Lender a copy of the bonds and policies providing such coverage and a certificate of Borrower’s, the Bank’s, or each other Subsidiary’s chief executive officer, as the case may be, setting forth the nature of the risks covered by such insurance, the amount carried with respect to each risk, and the name of the insurer.

 

5.4 Taxes and Liens.  Pay and discharge promptly all taxes, assessments, and governmental charges or levies imposed upon Borrower, the Bank, or each other Subsidiary or upon any of their respective income and profits, or their properties, real, personal or mixed, or any part thereof, before the same shall become delinquent; provided, however, that Borrower, the Bank, and each other Subsidiary shall not be required to pay and discharge or to cause to be paid and discharged any such tax, assessment, charge, levy or claim so long as the amount or validity thereof shall be contested in good faith by appropriate proceedings and provided that procedures satisfactory to Lender are carried out to prevent foreclosure of any lien therefrom.

 

  

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5.5 Financial Reports and ERISA.

 

(a) Furnish to Lender as soon as available and in any event within ninety (90) days after the end of each calendar year, (1) consolidated and consolidating balance sheets of Borrower, the Bank, and each other Subsidiary, as of the end of such year and consolidated and consolidating statements of income of Borrower, the Bank, and each other Subsidiary for the year then ended, together with the audit report and opinion of independent Certified Public Accountants acceptable to the Lender with respect thereto, such audit report and opinion shall contain no exceptions or qualifications unacceptable to Lender; (2) promptly upon receipt, copies of all management letters and other assessments and recommendations, formal or informal, submitted by the Certified Public Accountants to Borrower or each Subsidiary; (3) a copy of Borrower’s FR Y-9 Parent Company Only (and Consolidated, if applicable) financial statement(s) and (4) a copy of Borrower’s F.R. Y-6 Annual Report promptly upon the filing of the same with the Federal Reserve Board; and (5) a copy of the Bank’s Call Report promptly upon the filing with the appropriate regulatory agency.

 

(b) Upon senior management of the Borrower obtaining knowledge thereof, the Borrower will give written notice to the Lender promptly (and in any event within five (5) business days), of:  (1) any event or condition, including, but not limited to, any Reportable Event, that constitutes, or might reasonably lead to, an ERISA Event; (2) with respect to any Multiemployer Plan, the receipt of notice as prescribed in ERISA or otherwise of any withdrawal liability assessed against the Borrower or any of its ERISA Affiliates, or of a determination that any Multiemployer Plan is in reorganization or insolvent (both within the mean of Title IV of ERISA); (3) the failure to make full payment on or before the due date (including extensions) thereof of all amounts which the Borrower, the Bank, or any other Subsidiary or any ERISA Affiliate is required to contribute to each Plan pursuant to its terms and as required to meet the minimum funding standard set forth in ERISA and the Code with respect thereto; or (4) any change in the funding status of any Plan that could have a material adverse effect, together with a description of any such event or condition or a copy of any such notice and a statement by the chief financial officer of the Borrower briefly setting forth the details regarding such event, condition, or notice, and the action, if any, which has been or is being taken or is proposed to be taken by the Borrower with respect thereto.  Promptly upon request, the Borrower shall furnish the Lender and the Lenders with such additional information concerning any Plan as may be reasonably requested, including, but not limited to, copies of each annual report/return (Form 5500 series), as well as all schedules and attachments thereto required to be filed with the Department of Labor and/or the Internal Revenue Service pursuant to ERISA and the Code, respectively, for each “plan year” (within the meaning of Section 3(39) of ERISA).

 

  

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(c) Promptly upon the transmis­sion thereof, copies of all material financial statements, proxy statements, notices, reports and other communications sent by the Borrower or any other Subsidiary to the shareholders of the Borrower and any other such communications as may be requested by Lender and copies of any and all regular or periodic reports, registration statements, prospectuses or other written communications that the Borrower or the Bank or any other Subsidiary is or may be required to file with the Securities and Exchange Commission or any governmental department, bureau, commission or agency succeeding to the functions of the Securities and Exchange Commission if any.

 

(d) With reasonable promptness, such other financial information for the Borrower or the Bank or any other Subsidiary as Lender may reasonably request.

 

5.6 Regulatory Examinations.  (a) To the extent allowed by applicable Bank Regulatory Authorities, promptly notify Lender of every examination by, or any material correspondence, report, memoranda or other written communication from or with, any federal or state regulatory body or authority, with respect to the properties, loans, operations and/or condition of Borrower, the Bank, or any other Subsidiary, and of the receipt by Borrower, the Bank, or any other Subsidiary of every examination or other report prepared by such body or authority with respect thereto; and (b) if required by Lender, fully and completely assist and cooperate with Lender in requesting approval by such regulatory body or authority of the furnishing to Lender of any such report, and furnish such report to Lender if such approval is given; provided, however, that Lender shall take such steps as may be necessary to assure that all such reports shall remain confidential and shall be used by Lender solely in connection with the administration of the Loan in accordance with the provisions of this Agreement.

 

5.7 Additional Information.  Furnish such other information regarding the operations, business affairs and financial condition of Borrower, the Bank, and each other Subsidiary as Lender may from time to time reasonably request, including but not limited to true and exact copies of any monthly management reports to their respective directors, their respective tax returns, and all information furnished to shareholders, or any governmental authority, including the results of any stock valuation performed.

 

5.8 Right of Inspection.  Except to the extent, if any, prohibited by applicable law, permit any person designated by Lender, to inspect any of the properties, books and financial and other reports and records of Borrower, the Bank, and each other Subsidiary, including, but not limited to, all documentation and records pertaining to the Bank’s loans, investments and deposits; and to discuss their affairs; finances and accounts with Borrower’s, the Bank’s, and each other Subsidiary’s principal officers, at all such reasonable times and as often as Lender may reasonable request.  If required by Lender, Borrower will pay Lender loan fees in an amount determined by Lender to be necessary to cover the costs of such inspections, including a reasonable allowance for Lender’s overhead as well as out-of-pocket expenses in connection with such inspection; provided, however, that in the absence of an Event of Default, Borrower's liability under the foregoing provisions shall not exceed $5,000.00 per year.

 

5.9 Notice of Default.  At the time of Borrower’s first knowledge or notice, furnish the Lender with written notice or the occurrence of any event or the existence of any condition which constitutes or upon written notice or lapse of time or both would constitute an Event of Default under the terms of this Loan Agreement or other Loan Documents or an event of default or default under any other loan documents for any other loan to the Borrower, the Bank, or any other Subsidiary.

 

  

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5.10 Notice of Litigation.  Borrower shall notify Lender of any actions, suits or proceedings instituted by any person against the Borrower, the Bank or other Subsidiary claiming money damages or other monetary liability in an amount of Five Hundred Thousand Dollars ($500,000.00) or more, said notice to be given within ten days of the first notice to Borrower or other party of the institution of such action, suit or proceeding and to specify the amount of damages being claimed or other relief being sought, the nature of the claim, the person instituting the action, suit or proceeding, and any other significant features of the claim.

 

5.11 Perfection of Security Interest.  The Borrower or other Subsidiary shall perform such acts as may be necessary, in the reasonable judgment of Lender, now or in the future, to perfect or continue perfection of the security interests granted to Lender, or otherwise pro­vided for, under any and all Loan Documents.

 

5.12 Dividends to Borrower from the Bank.  Borrower shall cause the Bank and other Subsidiary to pay dividends or otherwise make such cash contributions at such times and in such amounts, as is necessary to enable Borrower to meet all of its obligations under the Loan Documents on a timely basis, including the payment, when due, of each installment of interest and the payment of princi­pal on the Loan to the extent permitted by law including applicable bank regulatory agency rules and regulations. Without limiting the generality of the foregoing, should any prepayment, accelerated payment or other payment ever be due with respect to the Loan, Borrower shall cause the Bank and other Subsidiary to pay dividends or otherwise make such additional distributions to the Borrower as necessary to enable the Borrower to make such prepayment, accelerated payment or other payment, to the extent permitted by law including applicable bank regulatory agency rules and regulations.

 

5.13 Capital Ratio/Equity Capital Adequacy.

 

(a) Borrower and Bank shall maintain at all times a “Well Capitalized” rating as required by any applicable regulatory authority as such requirement may be revised from time to time.

 

(b) Bank shall maintain as of each Covenant Compliance Date a Tier 1 Leverage Ratio of not less than Eight Percent (8.00%), monitored quarterly.

 

5.14  “Modified” Texas Ratio.  As of each Covenant Compliance Date Bank shall maintain a “Modified” Texas Ratio of not more than Thirty-Five Percent (35.00%), monitored quarterly.

 

5.15 Fixed Charge Coverage Ratio.  Borrower shall maintain a minimum Fixed Charge Coverage Ratio of not less than 1.35x. This ratio shall be tested annually as of each December 31st.

 

  

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5.16 Loan Loss Reserves.  With respect to the Bank, maintain at all times loan loss reserves in amounts deemed adequate by all federal and state regulatory authorities.

 

5.17 Loan to Value. Borrower and Bank shall maintain as of each Covenant Compliance Date a Loan-to-Value Ratio of not more than Fifty Percent (50.00%). Such ratio shall be monitored quarterly.

 

5.18 Change in Management. The Borrower shall promptly notify Lender of any change in the senior executive management personnel (CEO, President, CFO, or other "c-level" or equivalent offices) of Borrower or Bank and shall, thereafter, promptly replace such officer with a replacement reasonably qualified officer in accordance with applicable laws and regulations. 

 

5.19 Indemnification.  Borrower and Bank shall indemnify the Lender, and hold it harmless of and from any and all loss, cost, damage or expense, of every kind and nature, including reasonable attorneys’ fees, which the Lender could or might incur by reason of any violation of any Environmental Laws by Borrower or Bank or by any predecessors or successors to title to any property of the Borrower or Bank.

 

5.20 Compliance Certificate.  Furnish Lender a Certificate of Compliance duly certified by the Chief Executive Officer of Borrower within forty-five (45) days after the end of each calendar quarter stating that Borrower and each Bank Subsidiary and the Borrower and all Subsidiaries, as applicable, are in compliance with all terms, covenants and conditions of this Loan Agreement and all related Loan Documents, including, but not limited to, Sections 5.1 – 5.18 of this Agreement.  Such Certificate of Compliance shall be as set forth in Exhibit H and otherwise be in form and substance satisfactory to Lender.

 

6. NEGATIVE COVENANTS.

 

Borrower covenants and agrees with Lender that Borrower shall comply and cause the Bank and other Subsidiaries to comply with the following negative covenants unless the prior written consent of Lender shall be obtained, so long as any indebtedness remains outstanding under the Loan Documents:

6.1 Indebtedness.  Neither Borrower nor the Bank shall create, incur, assume or suffer to exist, contingently or otherwise, any indebtedness, except for the following indebtedness:

 

(a) The indebtedness of Borrower under the Loan;

 

(b) Indebtedness owed by the Borrower to the Bank or any other Subsidiary;

 

(c) Debt for operating expenses or otherwise incurred by the Bank or any other Subsidiary in the ordinary course of business;

 

(d) Indebtedness as set forth in Exhibit G; and

 

  

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(e) Obligations (contingent or otherwise) existing or arising under any Interest Rate Swap approved in advance by Lender.

 

6.2 Mortgages, Liens, Etc.  Neither Borrower nor the Bank shall create, assume or suffer to exist any mortgage, pledge, lien, charge or other encumbrance of any nature whatsoever on any of its assets, now or hereafter owned, except for:

 

(a) Liens in favor of Lender securing payment of the Loan; and

 

(b) Permitted Encumbrances.

 

6.3 Guaranties.  Guarantee or otherwise in any way become or be responsible for the indebtedness or obligations of any other Person, by any means whatsoever, whether by agreement to purchase the indebtedness of any other Person or agreement for the furnishing of funds to any other Person through the purchase of goods, supplies or services (or by way of stock purchase, capital contribution, advance or loan) for the purpose of paying or discharging the indebtedness of any other Person, or otherwise, except for the endorsement of negotiable instruments by the Borrower or Bank in the ordinary course of business for collection.

 

6.4 Merger, Dissolution, Acquisition of Assets.  Borrower shall not enter into, or permit the Bank or any other Subsidiary to enter into, any transaction of merger or consolidation, or any reorganization, reclassification of stock, readjustment or change in capital structure; or acquire, or permit any Subsidiary to acquire, all of the stock, or other ownership interest, property or assets of any other person, corporation, partnership or other entity; provided, however, that if at the time thereof and immediately after giving effect thereto on a pro forma basis (a) Borrower or the applicable Subsidiary has obtained all corporate and regulatory approvals required in connection therewith, (b) no Event of Default or event which would, with the passage of time, giving of notice, or both, constitute an Event of Default, exists, (c) such acquisition has the approval of the boards of directors and/or shareholders, as required, of both the acquiror and the target and is not a hostile acquisition, and (d) such transaction is in compliance with the restrictions on additional indebtedness and liens set forth in Sections 6.1 and 6.2 hereof, (i) any Subsidiary (other than the Bank) may merge into or transfer its property or assets to another Subsidiary and (ii) Borrower or any Subsidiary may acquire all of the stock or other ownership interests, property or assets of another Person if (x) the assets of the target(s) do not, in the aggregate, exceed Three Hundred Million Dollars ($300,000,000.00) in any fiscal year of the Borrower and (y) in the event such acquisition involves a merger of the acquired entity with an existing Subsidiary, the applicable existing Subsidiary is the surviving entity after consummation of the transaction.  In any of such events, to the extent permitted by applicable law, Borrower shall give Lender at least thirty (30) days' prior written notice of any such permitted acquisition which notice shall include Borrower's pro forma covenant calculations establishing continuing compliance as stated above as certified by a responsible officer of Borrower and, if and to the extent that such prior notice is impermissible under applicable law, Borrower shall give Lender written notice thereof together with such certified calculations as promptly as legally permissible.

 

6.5 Subsidiaries.  Except as permitted under Section 6.4 hereof, Borrower shall not create, establish or acquire Subsidiaries or acquire or own stock or any other interest in any bank other than the Bank, or permit the creation, establishment or acquisition of any such Subsidiaries by any other Subsidiary.

 

  

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6.6 Sale of Collateral, Merger, or Asset Disposition.

 

(a) Borrower shall not sell, transfer, pledge, assign, or otherwise dispose of, or otherwise encumber, any of the Collateral, nor permit the Bank or any other Subsidiary to issue additional shares of stock or rights, options or securities convertible into Capital Stock of the Bank or any other Subsidiary.

 

(b) The Borrower will not, nor will it permit any of its Subsidiaries to, make any Asset Disposition except in the ordinary course of business.

 

6.7 Dividends, Redemptions and Other Payments.  Borrower shall not declare or pay any dividends on the stock of Borrower or redeem any stock of Borrower if an Event of Default has occurred and is continuing under this Agreement or allow the payment of such a dividend that would create an Event of Default. The payment of any dividend or the redemption of any stock not otherwise prohibited shall in all respects comply with the rules and regulations of the Federal Reserve Board.

 

6.8 Capital Expenditures.  Borrower shall not make or become committed to make, or permit any Subsidiary to make or to become committed to make, directly or indirectly, during any calendar year, capital expenditures which for Borrower and the Subsidiary exceed amounts deemed acceptable to applicable regulatory authorities.

 

6.9 Relocation.  The Borrower shall not cause or permit Borrower or any Subsidiary to relocate their principal office, principal banking office, principal registered office or approved charter location without the written consent of Lender.

 

6.10 Transactions with Affiliates.  The Borrower shall not, nor will it permit any of its Subsidiaries to, enter into or permit to exist any transaction or series of transactions with any officer, director, shareholder, Subsidiary or Affiliate of such person or entity other than (a) normal compensation and reimbursement of expenses of officers and directors and (b) except as otherwise specifically limited in this Agreement, other transactions which satisfy the applicable requirements under Section 23A of the Federal Reserve Act, 12 USC §371c and Section 23B of the Federal Reserve Act, 12 USC §371c-1.  For purposes of this Agreement, the term affiliates shall have the same meaning as set forth in applicable bank regulations.

 

6.11 Intentionally Omitted.

 

6.12 Charter or By-Law Amendments.  Neither Borrower, Bank nor any other Subsidiary shall adopt, amend or enter into, as applicable, any charter, articles of incorporation, bylaws (or any amendments thereto) or other provisions or agreements that would affect in any way the rights, obligations and/or preferences of the Collateral.

 

  

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6.13 No Defaults.  Borrower shall not permit or suffer the occurrence of any event nor allow any Subsidiary or other Affiliate to knowingly permit or suffer the occurrence of any event which constitutes an event of default under any indenture or loan agreement or otherwise with respect to any indebtedness of the Borrower, the Bank, or any other Subsidiary, in each case where the principal amount of the obligations covered thereby exceed Five Hundred Thousand Dollars ($500,000.00).

 

7. DEFAULT AND REMEDIES.

 

7.1 Events of Default.  Any one or more of the following events which occurs and continues uncured beyond any applicable grace or notice and cure period, if any, shall constitute an "Event of Default" under the terms of this Agreement and the other Loan Documents:

 

(a) Failure to make prompt payment as and when due of the principal of or interest on the Loan or any fees due under this Loan Agreement within ten (10) days of the date when due, or in the prompt performance or payment when due of any other obligations of the Borrower to the Bank, whether now existing or hereafter created or arising, direct or indirect, absolute or contingent; provided, however, that for the first such payment which is not made within such ten (10) day cure period described above during any calendar year, Lender shall first provide Borrower with written notice and a five (5) day period to cure such payment failure.

 

(b) Except as otherwise expressly addressed in this Section 7.1 or with respect to an event that materially and adversely impacts the Lender's rights with respect to the Collateral, failure to comply with or in the performance or observance of any term, covenant, obligation, condition, or agreement in this Agreement or any other Loan Document which continues after thirty (30) days written notice from Lender or such other notice and cure period as may be expressly provided herein.

 

(c) If any representation, warranty or any other statement made or deemed to be made by the Borrower herein, in any other Loan Document, or in any writing, certificate, or report or statement at any time furnished to Lender pursuant to or in connection with this Agreement shall to be false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter, and is not cured to Lender's satisfaction within thirty (30) days after written notice to Borrower thereof.

 

(d) Borrower, the Bank or any other Subsidiary shall fail to pay when due and before the expiration of any grace period, any debt for borrowed money which it is primarily obligated to pay as borrower, or in any other capacity, whether such debt shall have become due because of acceleration of maturity or otherwise and where such debt shall be in a principal amount in excess of Five Hundred Thousand Dollars ($500,000.00), other than debt created by this Agreement, where such failure continues for thirty (30) days after the earlier to occur of (i) Borrower's notice thereof or (ii) Lender's written notice thereof to Borrower.

 

  

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(e) An event other than one expressly addressed in this Section 7.1(b) - (i) which occurs and which constitutes an event of default as defined in the Note or any other Loan Document, which continues for thirty (30) days after written notice thereof from Lender.

 

(f) The Borrower, the Bank, or any other Subsidiary shall

 

(i) admit in writing its inability to pay its debts as they become due; or

 

(ii) file a petition in bankruptcy or for reorganization or for the adoption of an arrangement under the Bankruptcy Act as now or in the future amended, or file a pleading asking such relief, or have or suffer to be filed an involuntary petition in bankruptcy against it which is not contested and discharged within sixty (60) days; or

 

(iii) make an assignment for the benefit of creditors generally; or

 

(iv) consent to the appointment of a trustee, custodian, or receiver for all or a major portion of its property; or

 

(v) be adjudicated a bankrupt or insolvent under any federal or state law; or

 

(vi) suffer the entry of a court order under any federal or state law appointing a receiver, custodian, or trustee for all or a major part of its property or ordering the winding up or liquidation of its affairs, or approving a petition filed against it under the Bankruptcy Act, as now or in the future amended; or

 

(vii) suffer the entry of a final judgment for the payment of money in excess of $500,000.00 and the same shall not be dis­charged or provision made for its discharge within 45 days from the date of entry thereof or an appeal or other appropriate proceeding for review thereof shall not be taken within said period and a stay of execu­tion pending such appeal shall not be obtained; or

 

(viii) suffer a writ or warrant of attachment or any similar process to be issued by any court against all or any substantial portion of its property.

 

No notice and cure period shall apply to Events of Default under this Section 7.1(f).

 

(g) The issuance of any Supervisory Action against the Borrower, the Bank or other Subsidiaries or the Borrower’s, the Bank’s or the other Subsidiaries’ directors, whether temporary or permanent, by or at the request of any bank regulatory agency; provided, however, that notwithstanding anything to the contrary in this Agreement (including without limitation Section 5.9 hereof), Borrower shall not be required to disclose the existence of any Supervisory Action to the extent that such disclosure is prohibited by applicable law or regulation; but further provided that (i) Section 5.9 of this Agreement shall nevertheless require Borrower to disclose to Lender the maximum amount of information legally permissible to be disclosed regarding any such Supervisory Action  and (ii) such Supervisory Action may, even if confidential, constitute an Event of Default hereunder if Lender becomes aware of such Supervisory Action through other channels without the violation of applicable law or regulation.  Notwithstanding the foregoing, Supervisory Actions that (i) relate to safety and soundness or the Bank Secrecy Act, (ii) could reasonably be expected to result in a material adverse effect upon the Borrower, the Bank, or the Borrower's ability to repay the Loan, (iii) which provide for a financial penalty that could reasonably be expected to cause the Borrower to breach a financial covenant set forth in this Loan Agreement, or (iv) impact the Bank's ability to provide dividends to the Borrower shall constitute an immediate Event of Default.  Other Supervisory Actions shall constitute an Event of Default if not cured or resolved to Lender's satisfaction within forty-five (45) days of the institution thereof;

 

  

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(h) There shall occur any Change of Control of Borrower.  No notice and cure period shall apply to this Section 7.1(h); or

 

(i) The failure of the Borrower, the Bank, or any other Subsidiary, or the Borrower’s, the Bank’s, or any other Subsidiary’s directors to comply with the terms of any memorandum of understanding or letter agreement with any bank regulatory agency, including but not limited to any applicable state bank regulatory agency, Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Board of Governors of the Federal Reserve System and such failure has not been fully corrected within thirty (30) business days of the earlier to occur of (i) Borrower’s or the Bank’s awareness of its failure to comply or (ii) Lender's written notice to Borrower thereof.

 

7.2 Intentionally Omitted.

 

7.3 Remedies on Default.  Upon the occurrence of an Event of Default, Lender may (i) terminate all obligations of Lender to Borrower, the Bank, or any other Subsidiary including, without limitation, all obli­gations to lend money to Borrower under this Agreement, (ii) declare the Note immediately due and payable, without presentment, demand, protest, notice of intent to accelerate and notice of acceleration of the maturity date of this Note, or any other notice of any kind, all of which are expressly waived, (iii) declare immediately due and payable from Borrower the expenses set forth in Section 8.14 hereof, and (iv) pursue any remedy available to it under this Agreement, the Note, the Pledge Agreement or any other Loan Document, or available at law or in equity, concurrently or subsequently, in such order as the Lender may elect, all of which remedies shall be cumulative.

 

8. MISCELLANEOUS.

 

8.1 No Waiver.  No delay or failure on the part of Lender or on the part of any holder of the Note in the exer­cise of any right, power or privilege granted under this Agreement, or under any other Loan Document, or available at law or in equity, shall impair any such right, power or privi­lege or be construed as a waiver of any Event of Default or any acquiescence therein. No single or partial exercise of any such right, power or privilege shall preclude the further exer­cise of such right, power or privilege. No waiver shall be valid against Lender unless made in writing and signed by Lender, and then only to the extent expressly specified therein.

 

  

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8.2 Notices.  All notices and communications provided for hereunder shall be in writing, delivered by hand or sent by first-class, registered or certified mail, postage prepaid, or express courier to the following addresses:

 

	
(1)

	
If to Lender:

	
First Tennessee Bank National Association

	  	  	
165 Madison Avenue, 5th Floor

	  	  	
Memphis, Tennessee  38103

	  	  	
Attention:  Correspondent Banking

	  	  	  
	
(2)

	
If to Borrower:

	
First Guaranty Bancshares, Inc.

	  	  	
400 East Thomas Street

Hammond, LA 70401

	  	  	
Attention:  Alton B. Lewis Jr.

Any party hereto may change its address for notice purposes by notice to the other parties in the manner provided herein. Notice shall be deemed given when hand delivered or first class, certified or registered mail, postage prepaid, or when delivered by express courier.

8.3 Governing Law.  This Agreement and all other Loan Documents shall be governed by and interpreted in accor­dance with the laws of the State of Tennessee except with respect to interest which shall be governed by and construed in accordance with applicable Federal laws in effect from time to time.

 

8.4 Survival of Representations and Warranties.  All representations, warranties and covenants contained herein or made by or furnished on behalf of Borrower, the Bank, or the other Subsidiaries in connection herewith shall survive the execution and delivery of this Agreement and all other Loan Documents and the extension or funding of the loan hereunder.

 

8.5 Descriptive Headings.  The descriptive head­ings of the several sections of this Agreement are inserted for convenience only and do not constitute a part of this Agreement.

 

8.6 Severability.  If any part of any provision contained in this Agreement or in any other Loan Document shall be invalid or unenforceable under applicable law, said part shall be ineffective to the extent of such invalidity only, without in any way affecting the remaining parts of said provi­sion or the remaining provisions.

 

8.7 Time is of the Essence.  Time is of the essence in interpreting and performing this Agreement and all other Loan Documents.

 

8.8 Counterparts.  This Agreement may be exe­cuted in any number of counterparts, each of which shall be deemed to be an original and all of which, taken together, shall constitute one and the same instrument.

 

8.9 Payment of Costs.  Borrower shall pay, promptly demand by Lender, all reasonable costs, expenses, taxes and fees incurred by Lender in connection with the preparation, execution and delivery of this Agreement and all other Loan Documents and the recording and filing and rerecording and refiling thereof, including, without limitation, the reasonable costs and professional fees of counsel for Lender, any and all transfer, mortgage or other taxes and all recording costs that may be payable.  In the future, Borrower shall pay promptly following written demand by the Lender, all such costs and expenses determined to be payable, in connection therewith.

 

  

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8.10 Successors and Assigns.  This Agreement shall bind and inure to the benefit of Borrower and Lender, and their respective successors and assigns; provided, however, Borrower, the Bank, and the other Subsidiaries shall not have any right to assign their rights or obligations hereunder to any person.  Notwithstanding anything in this Agreement to the contrary, but subject to the notice provisions of Section 8.25 below, Lender shall have the right, but shall not be obligated, to sell participation in the loan made pursuant hereto to other banks, financial institutions and investors.

 

8.11 Amendments; No Implied Waiver.  This Agreement may be amended or modified, and Borrower, the bank, and the other Subsidiaries may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if Borrower shall obtain the prior written con­sent of Lender to that specific amendment, modification, action or omission to act, and no course of dealing between Borrower, the Bank, or the other Subsidiaries and Lender shall operate as a waiver of any right, power or privilege granted to Lender under this Agreement or under any other Loan Document, or available to Lender at law or in equity.

 

8.12 Rights Cumulative.  All rights, powers and privileges granted hereunder shall be cumulative to and shall not be exclusive of any other rights, powers and privileges granted by any other Loan Document or available at law or in equity.

 

8.13 Indemnity.  Borrower agrees to protect, indemnify and save harmless Lender, and all directors, officers, employees and agents of Lender, from and against any and all (i) claims, demands and causes of action of any nature whatsoever brought by any Person not a party to this Agreement and arising from or related or incident to this Agreement or any other Loan Document, including, without limitation, any liability under federal or state securities laws arising out of Lender’s dispo­sition of all or part of the Collateral, (ii) costs and expenses incident to the defense of such claims, demands and causes of action, including, without limitation, reasonable attorneys’ fees, and (iii) liabilities, judgments, settlements, penalties and assessments arising from such claims, demands and causes of action; provided, however, that Borrower does not agree to indemnify Lender against Lender’s own negligence, misconduct, or default under this Agreement. The indemnity contained in this section shall survive the termina­tion of this Agreement.  If Lender receives a complaint, claim, or other notice of any item or claim indemnified against under this Section 8.13, Lender shall promptly notify Borrower of each such item or claim, but the omission to so notify Borrower shall not relieve Borrower of any liability under this Section 8.13 except to the extent Borrower is directly prejudiced by such failure.  If any judicial or administrative proceeding, including any governmental investigation, whether civil, criminal, or otherwise (individually, an "Action" and, collectively, "Actions"), is threatened, asserted, commenced, or brought against Lender for which Lender may be indemnified by Borrower pursuant to this Section 8.13, Borrower shall retain and direct counsel to defend such Action, and shall permit Lender to monitor the defense thereof.  Lender shall have the right to reasonably approve such counsel.  Lender shall cooperate fully with Borrower and with such counsel in such defense.  Borrower shall assume responsibility for the payment of all fees and disbursements of such counsel.  To the extent that the interests of Borrower and Lender with respect to any such Action conflict, Borrower shall, upon the request of Lender, retain separate counsel for Lender with respect to such action, and all fees and expenses of such separate counsel shall be paid by Borrower.  Expenses (including reasonable attorneys' fees) incurred by Lender in defending any Action shall be paid by Borrower in advance of the final disposition of such Action; provided, however, Lender agrees to repay any such expenses paid by Borrower if it shall be determined by a final non-appealable judgment by a court of competent jurisdiction that Lender is not entitled for indemnification for such expenses pursuant to this Section 8.13.

 

  

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8.14 Expenses.  Borrower agrees to promptly reimburse Lender for (i) all costs and expenses of collection of the Note, including reasonable attorneys’ fees, and (ii) all expenses incurred by Lender in acting on behalf of Borrower, the Bank or the other Subsidiaries in accordance with the terms of this Agreement or to maintain or preserve the value of the Collateral, or Lender’s interest therein pursuant to the Pledge Agreement, or any other Loan Document.  Such sums shall include interest at the maximum rate allowed by law accruing from the date Lender requests such reimbursement.

 

8.15 Usury.  It is the intent of the parties hereto not to violate any federal or state law, rule or regula­tion pertaining either to usury or to the contracting for or charging or collecting of interest, and Borrower, the Bank, and the other Subsidiaries, and Lender agree that, should any provision of this Agreement, or of the Note, or of any other Loan Document or any act performed hereunder or thereunder, violate any such law, rule or regulation, then the excess of interest contracted for or charged or collected over the maximum lawful rate of interest shall be applied to the outstanding principal indebtedness due to Lender by Borrower under this Agreement, and if the princi­pal indebtedness has been paid in full, any remaining excess shall forthwith be paid to Borrower.

 

8.16 Jurisdiction and Venue.  Borrower, the Bank, and the other Subsidiaries, and Lender agree, without power of revocation, that any civil suit or action brought against them as a result of , or which relates to, any of their obligations under this Agreement or under any other Loan Document may be brought against them, jointly or singly, in the United States District Court for the Western District of Tennessee, and Borrower, the Bank, the other Subsidiaries, and Lender irrevocably submit to the jurisdiction of such court and irrevocably waive, to the full­est extent permitted by law, any objections that they may now or hereafter have to the laying of the venue of such civil suit or action and any claim that such civil suit or action has been brought in an inconvenient forum, and Borrower, the Bank, and the other Subsidiaries, and Lender agree that final judgment in any such civil suit or action shall be conclusive and binding upon them and shall be enforceable against them by suit upon such judgment in any court of competent jurisdiction.

 

8.17 Construction.  Should any provision of this Agreement require judicial interpretation, the parties hereto agree that the court interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against one party by reason of the rule of construction that a document is to be more strictly construed against the party who itself or through its agents prepared the same, it being agreed that Borrower, Lender and their respective agents have participated in the preparation hereof.

 

  

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8.18 Holidays.  In any case where the date for any action required to be performed under this Agreement or under any other Loan Document shall be, in the city where the performance is to be made, a Saturday, a Sunday, a legal holi­day or a day on which banking institutions are authorized by law to close, then such performance may be made on the next succeeding business day not a Saturday, a Sunday, a legal holi­day or a day on which banking institutions are authorized by law to close.

 

8.19 Entire Agreement.  This Agreement and the other Loan Documents executed and delivered contemporaneously herewith, together with the exhibits attached hereto and thereto, constitute the entire understanding of the parties with respect to the subject matter hereof, and any other prior or contemporaneous agreements, whether written or oral, with respect thereto are expressly superseded hereby. The execution of this Agreement and the other Loan Documents by Borrower, the Bank, and the other Subsidiaries was not based upon any facts or materi­als provided by Lender, nor was Borrower, the Bank, and the other Subsidiaries induced to execute this Agreement or any other Loan Document by any representation, statement or analysis made by Lender. In the event that the provisions of this Loan Agreement shall conflict with provisions of any of the other Loan Documents, the provi­sions of this Agreement shall control.  This written Loan Agreement represents the final agreement between the parties and may not be contradicted by evidence of prior, contemporaneous, or subsequent oral agreements of the parties.  There are no unwritten oral agreements between the parties.

 

8.20 Consent.  Borrower hereby represents and warrants that to the best of Borrower’s knowledge there is no consent from any lender or creditor needed to prevent Borrower, the Bank, or the other Subsidiaries from being in default by Borrower executing the Note or Borrower, the Bank, and the other Subsidiaries executing, this Loan Agreement or any other loan document associated with this Loan.

 

8.21 Waiver Of Right To Trial By Jury.  EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

  

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8.22 Further Assurances.  Borrower agrees to furnish a current financial statement upon the request of Lender from time to time, and further agrees to execute and deliver all other instruments and take such other actions as Lender may from time to time reasonably request in order to carry out the provisions and intent hereof.

 

8.23 Execution by Bank.  The undersigned Bank is joining this Agreement for the sole purpose of acknowledging the pledge of its Capital Stock pursuant to the Pledge Agreement.

 

8.24 Non-Control.  In no event shall the Lender’s rights hereunder be deemed to indicate that the Lender is in control of the business, management or properties of the Borrower or the Bank or has power over the daily management functions and operating decisions made by the Borrower and the Bank, all such rights and powers being hereby expressly reserved to the Borrower and the Bank.

 

8.25 Assignments and Participations.  Lender may sell or offer to sell the Loan or interests therein to one or more assignees or participants.  Borrower shall execute, acknowledge and deliver any and all instruments reasonably requested by Lender in connection therewith, and to the extent, if any, specified in any such assignment or participation, such assignee(s) or participant(s) shall have the same rights and benefits with respect to the Loan Documents as such Person(s) would have if such Person(s) were Lender hereunder.  Lender may disseminate any information it now has or hereafter obtains pertaining to the Loan, including any security for the Loan, Borrower, Bank, any other Subsidiary, any of Borrower’s, Bank’s, or any other Subsidiary’s principals, or any guarantor, if any, to any actual or prospective assignee or participant, to Lender’s affiliates, to any regulatory body having jurisdiction over Lender, to any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to Lender and the Loan, or to any other party as necessary or appropriate in Lender’s reasonable judgment.  Except in case of a transfer after an Event of Default or in connection with a merger or sale of all or substantially all of the assets of Lender, Lender shall provide Borrower with at least thirty (30) days prior written notice of any such assignment or participation.

 

8.26 Electronic Transmission of Data.  Lender and Borrower agree that certain data related to the  Loan (including confidential information, documents, applications and reports) may be transmitted electronically, including transmission over the internet to the parties, the parties’ affiliates, agents and representatives, and other Persons involved with the subject matter of this Agreement.  Borrower acknowledges and agrees that (a) there are risks associated with the use of electronic transmission and that Lender does not control the method of transmittal or service providers, (b) Lender has no obligation or responsibility whatsoever and assumes no duty or obligation for the security, receipt or third party interception of any such transmission, and (c) Borrower and Bank will release, hold harmless and indemnify Lender from any claim, damage or loss, including that arising in whole or part from Lender’s strict liability or sole, comparative or contributory negligence, which is related to the electronic transmission of data.

 

  

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8.27 USA PATRIOT Act.  The Lender hereby notifies the Borrower and any guarantor that pursuant to the requirements of the PATRIOT Act, it is required to obtain, verify and record information that identifies the Borrower and any guarantors, which information includes the name and address of the Borrower and any guarantors and other information that will allow Lender to identify the Borrower and any guarantors in accordance with the PATRIOT Act.

 

8.28 No Inference of Extension Past Maturity Date.  Notwithstanding any other provision herein, the terms, conditions, and requirements provided for herein that would, by their express terms, be applicable to time periods after the Maturity Date of the Note, are not to be interpreted as an inference that the Lender has agreed to any extension, automatic or otherwise, to the extension of the Maturity Date.  The Lender has not agreed and is under no obligation to extend the Maturity Date of the Note.

 

WITNESS the hand and seal of the parties hereto through their duly authorized officers as of the date first above written.

	
LENDER:

 

FIRST TENNESSEE BANK NATIONAL

ASSOCIATION

 

By:          /s/ R. Chuck Hunt                                                      

Printed Name:   R. Chuck Hunt                                                             

Title: Vice President                                                                

 

 

	
BORROWER:

 

FIRST GUARANTY BANCSHARES, INC.

 

 

By: /s/ Alton B. Lewis, Jr.                                                           

Printed Name: Alton B. Lewis, Jr.                                                             

Title: President and Chief Executive Officer                                                               

 

	  	
The undersigned Bank executes this Loan Agreement for the sole purpose of acknowledging the pledge of its Capital Stock under the Pledge Agreement.

 

BANK:

 

FIRST GUARANTY BANK

 

 

By: /s/ Alton B. Lewis, Jr.                                                           

Printed Name: Alton B. Lewis, Jr.                                                             

Title: President and Chief Executive Officer                                                               

                                                          

  

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APPENDIX A

DEFINITIONS

“Affiliate” shall have the same meaning assigned to it in applicable bank regulations.

“Asset Disposition” shall mean the disposition (including the sale, lease or transfer) of any or all of the assets (including without limitation any common or preferred stock of the Bank or any other Subsidiary) of the Borrower or any of its Subsidiaries whether by sale, lease, transfer or otherwise.

“Average Assets” shall mean the year-to-date average of total assets of Bank.

“Bank Regulatory Authority” shall mean the Board of Governors of the Federal Reserve System, the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and all other relevant bank regulatory authorities (including, without limitation, relevant state bank regulatory authorities).

“Call Report” shall mean the Bank’s Quarterly Report of Condition and Income.

“Capital Stock” shall mean any and all shares, interests, participations or other equivalents (however designated) of capital stock or equity, whether now outstanding or issued after the date hereof, including all common stock, preferred stock, partnership interests and limited liability company member interests.

"Cash Flow" means the sum of (a) Borrower's consolidated Net Income, plus (b) non-cash charges or expenses of Borrower, including depreciation and amortization, plus (c) all interest expense of the Borrower to the extent deducted in the determination of consolidated Net Income, plus (d) proceeds from the purchase of Borrower shares by the Borrower's employee stock ownership plan, less (e) dividends or other payments paid or declared by the Borrower to its shareholders, less (f) Borrower's non-cash income.

“Change in  Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Entity or (c) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Entity; provided that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, regulations, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

  

  

  

“Change of Control” means a change in the ownership of the capital stock of the Borrower whereby a Person, who is not a shareholder as of the Effective Date, acquires, directly or indirectly, beneficial ownership of a number of shares of capital stock of the Borrower that constitutes fifty percent (50%) or more of the combined voting power of the Borrower's outstanding capital stock then entitled to vote.

“Collateral” shall mean 4,823,899 shares of the common stock of the Bank represented by stock certificate number 1-000-4603.

“Covenant Compliance Date” shall mean the last day of each fiscal quarter of the Borrower.

“Environmental Laws” shall mean all federal, state, and local laws, including statutes, regulations, ordinances, codes, rules, and other governmental restrictions and requirements, relating to the discharge of air pollutants, water pollutants, or process waste water or otherwise relating to the environment or hazardous substances or the treatment, processing, storage, disposal, release, transport, or other handling thereof, including, but not limited to, the federal Solid Waste Disposal Act, the federal Clean Air Act, the federal Clean Water Act, the federal Resource Conservation and Recovery Act, the federal Hazardous Materials Transportation Act, the federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, the federal Toxic Substances Control Act, regulations of the Nuclear Regulatory Agency, and regulations of any state department of natural resources or state environmental protection agency, in each case as now or at any time hereafter in effect.

“Equity Issuance” shall mean any issuance by the Borrower to any person of shares of its Capital Stock, any shares of its Capital Stock pursuant to the exercise of options or warrants or any shares of its Capital Stock pursuant to the conversion of any debt to equity, after the date of the Loan.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto, as interpreted by the rules and regulations thereunder, all as the same may be in effect from time to time.  References to sections of ERISA shall be construed also to refer to any successor sections.

“ERISA Affiliate” means an entity which is under common control with the Borrower within the meaning of Section 4001(a)(14) of ERISA, or is a member of a group which includes the Borrower and which is treated as a single employer under Sections 414(b) or (c) of the Code.

“ERISA Event” means (i) with respect to any Plan, the occurrence of a Reportable Event or the substantial cessation of operations (within the meaning of Section 4062(e) of ERISA); (ii) the withdrawal by the Borrower, the Bank, or any other Subsidiary or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan; (iii) the distribution of a notice of intent to terminate or the actual termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA; (iv) the institution of proceedings to terminate or the actual termination of a Plan by the PBGC under Section 4042 of ERISA; (v) any event or condition which might constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any plan; (vi) the complete or partial withdrawal of the Borrower or any of its Subsidiaries or any ERISA Affiliate from a Multiemployer Plan; (vii) the conditions for imposition of a lien under Section 302(f) of ERISA exist with respect to any Plan; or (viii) the adoption of an amendment to any Plan requiring the provision of security to such Plan pursuant to Section 307 of ERISA.

  

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“Event of Default” shall have the meaning assigned to such term in Section 7.1 of this Agreement.

"Fixed Charge Coverage Ratio" for any period shall mean the ratio of: (a) Cash Flow for such period to (b) Fixed Charges for such period.

 

"Fixed Charges" means the sum of (a) all interest expense of the Borrower to the extent deducted in the determination of consolidated Net Income, plus (b) all contractually required principal payments on any indebtedness of the Borrower, all determined with respect to the Borrower in accordance with GAAP.

“GAAP” shall mean generally accepted accounting principles applied on a consistent basis, maintained throughout the period involved.

“Governmental Entity” means the United States, any State, and/or any political subdivision, department, agency or instrumentality of any of the foregoing.

“Interest Rate Swap” means (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of  the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement, together with any related schedule and confirmation, as amended, supplemented, superseded or replaced from time to time.

  

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“Lien(s)” shall have the meaning set forth in Section 4.11 of this Agreement and are more specifically set forth in Exhibit E attached hereto.

“Local Authorities” means individually and collectively the state and local governmental authorities which govern the business and operations owned or conducted by the Borrower or its Subsidiaries.

“Loan Documents” shall mean the Note, the Agreement, the Pledge Agreement, stock certificates issued to Borrower evidencing the shares pledged pursuant to the Pledge Agreement, the Guaranty, stock powers with respect to such shares pledged as Collateral and any and all other documents, instruments or agreements evidencing, securing, guaranteeing or otherwise related to or delivered in connection with the Loan.

“Loan-to-Value Ratio” shall mean the ratio that (a) the then-outstanding balance of the Loan at the time of measurement bears to (b) the Bank's tangible common equity tier 1 capital at the time of measurement.

“Maturity Date” shall mean December 22, 2020.

“‘Modified’ Texas Ratio” shall mean a fraction, expressed as a percentage, where the numerator is the Non-Performing Assets, and where the denominator is the sum of Bank’s Tier 1 Capital plus the entire balance of Bank’s loan loss reserve, all determined on a basis satisfactory to Lender.

“Multiple Employer Plan” shall mean a Plan which is a multiemployer plan as defined in Sections 3(37) or 4001(a)(3) of ERISA.

“Net Cash Proceeds” shall mean the aggregate cash proceeds received by the Borrower in respect of any Equity Issuance, net of (1) direct costs (including, without limitation, legal, accounting, and investment banking fees and sales commissions) and (2) taxes paid or payable as a result thereof.

“Net Income” shall mean the net income after taxes including the Borrower’s equity in undistributed earnings of its Subsidiaries as determined under GAAP.

“Net Worth” shall mean the shareholders’ equity, net worth or surplus as determined under GAAP.

“Non-Performing Assets” shall mean the sum of (1) all Non-Performing Loans and (2) Other Real Estate Owned listed in Call Reports and other such assets acquired through foreclosure or other realization upon collateral or rearrangement or satisfaction of Indebtedness.

“Non-Performing Asset Ratio” shall mean the ratio of (1) Non-Performing Assets to (2) the sum of the total assets of Borrower and its Subsidiaries, determined in accordance with GAAP, as of the Covenant Compliance Date.

  

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“Non-Performing Loans” shall mean the sum of (1) all loans classified internally or by a Bank Regulatory Authority as non-accrual plus (2) loans past due by 90 days or more plus (3) loans for which the obligee has reduced the agreed interest rate, reduced the principal or interest obligation, extend the maturity, applied interest payments to reduce principal, capitalized interest, or otherwise renegotiated the terms of the obligation based upon the actual or asserted inability of the obligor(s) of such loans to perform their obligations pursuant to the agreements with the obligee prior to such modification or renegotiation; provided, however, that (a) loans for which the Borrower or the Bank has taken additional collateral satisfactory to it and therefore is prepared to make additional loan advances or any other loans which have been restructured and are performing in a manner satisfactory to the Borrower and (b) any portion of a Non-Performing Loan that is guaranteed by the United States government or an agency thereof in a manner acceptable to Lender shall not be included in the definition of Non-Performing Loans (but any un-guaranteed portion of a Non-Performing Loan covered by item (b) above shall be included as a Non-Performing Loan).

“Non-Performing Loan Ratio” shall mean the ratio of (1) Non-Performing Loans to (2) total gross loans made by Bank, measured as of each applicable Covenant Compliance Date.

“Note” shall have the meaning assigned to such term in Section 1.2 of this Agreement, together with any and all renewals, modifications, extensions and replacements thereof.

“Patriot Act” means the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), as amended.

“Permitted Encumbrances” shall mean and include: (a) liens for taxes, assessments or similar governmental charges not in default or being contested in good faith by appropriate proceedings; (b) workmen’s, vendors’, mechanics’ and materialmen’s liens and other liens imposed by law incurred in the ordinary course of business, and easements and encumbrances which are not substantial in character or amount and do not materially detract from the value or interfere with the intended use of the properties subject thereto and affected thereby; (c) liens in respect of pledges or deposits under social security laws, workmen’s compensation laws, unemployment insurance or similar legislation and in respect of pledges or deposits to secure bids, tenders, contracts (other than contracts for the payment of money), leases or statutory operations; and (d) (the debt to Premier Bank) [PLEASE PROVIDE MORE SPECIFICITY - DESCRIBE LOAN AMOUNT, LOAN AGREEMENT, ETC.] and such other liens and encumbrances to which Lender shall consent in writing, if any.

“Person” means an individual, partnership, corporation, limited liability company, trust, unincorporated organization, association, joint venture or a government or agency or political subdivision thereof, joint stock company, or non-incorporated organization, or any other entity of any kind whatsoever.

  

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“Plan” means any employee benefit plan (as defined in Section 3(3) of ERISA) which is covered by ERISA and with respect to which the Borrower, the Bank, or any other Subsidiary or any ERISA affiliate is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an “employer” within the meaning of Section 3(5) of ERISA.

“Pledge Agreement” shall mean that certain Pledge and Security Agreement executed by Borrower for the benefit of Lender dated December 22, 2015 pledging the Collateral.

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the notice requirement has been waived by regulation.

“Sanctioned Country” means a country subject to a sanctions program identified on the list maintained by OFAC and available at http://www.treasury.gov/resource-center/sanctions/Programs/Pages/Programs.aspx, or as otherwise published from time to time.

“Sanctioned Person” means (a) a Person named on the list of “Specially Designated Nationals and Blocked Persons” maintained by OFAC available at http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx, or as otherwise published from time to time, or (b) (i) an agency of the government of a Sanctioned Country, (ii) an organization controlled by a Sanctioned Country, or (iii) a person resident in a Sanctioned Country, to the extent subject to a sanctions program administered by the U.S. Department of Treasury’s Office of Foreign Assets Control.

“Subsidiaries” or individually “Subsidiary” shall mean any partnership, corporation, limited liability company, trust, unincorporated organization, association, joint venture, or other entity other than Borrower in an unbroken chain of entities beginning with the Borrower with each of the entities or the Bank other than the last entity in the unbroken chain owning fifty percent (50%) or more of the total combined voting power of all classes of stock or other form of equity in one of the other entities or the Bank and are more specifically listed in Exhibit D attached hereto.

“Supervisory Action” shall mean and include the issuance by or at the behest of any bank regulatory authority of a letter agreement, memorandum of understanding (regardless of whether consented or agreed to by the party to whom it is addressed), cease and desist order, injunction, directive, restraining order, formal agreement, notice of charges, or civil money penalties, against Borrower, the Bank, or any other Subsidiary or the directors or officers of any of them, whether temporary or permanent.

“Tier 1 Capital” shall have the meaning included in Appendix A to Title 12, Code of Federal Regulations, Part 225, Capital Adequacy Guidelines for Bank Holding Companies.

 

“Tier 1 Leverage Ratio” shall have the meaning and be calculated as set forth in Appendix D to Title 12, Code of Federal Regulations, Part 225, Capital Adequacy Guidelines for Bank Holding Companies.

“United States” means the government of the United States of America or any department, agency, division or instrumentality thereof.

  

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