Document:

Blueprint

Exhibit 10.26

 

AMENDMENT

 

TO THE

LOAN AGREEMENT

 

 

THIS AMENDMENT (this “Amendment”) is entered into on this 15th day of July, 2016 (the “Effective Date”) by and between Gilla Inc. (“Gilla”, the
“Company” or the “Borrower”), and Sarasvati Investments Inc. (“Sarasvati” or the “Lender”) to amend the terms of the Loan Agreement (the “Loan Agreement”), dated January 18, 2016.

 

RECITALS:

 

A. On January 18, 2016, Gilla and Sarasvati entered into the Loan Agreement whereby Sarasvati made available to Gilla a term loan facility in the aggregate principal amount of CAD $1,000,000, such Loan Agreement attached hereto as Exhibit “A”.

 

B. Sarasvati is prepared to extend to Gilla an additional CAD $600,000 in principal under the Loan Agreement and to extend the maturity date to July 2, 2018.

 

C. Gilla is prepared to extend the warrants issued in connection to the Loan Agreement to December 31, 2018 and issue an additional 300,000 warrants in connection to this Amendment.

 

D. Gilla and Sarasvati intend to amend certain terms and conditions of the Term Loan by entering into this Amendment.

 

NOW, THEREFORE, for and in consideration of the mutual promises herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Gilla and Sarasvati, intending to be legally bound hereby, agree as follows:

 

1. Recitals and Loan Agreement. The foregoing recitals are true and correct and, together with the Term Loan, attached hereto as Exhibit “A”, are incorporated herein by this reference.

 

2. Loan. Sarasvati acknowledges and agrees to extend to Gilla an additional CAD $600,000 in principal to increase the term loan facility up to the aggregate principal amount of $1,600,000 (the “Loan”).

 

3. Maturity Date. Sarasvati and Gilla acknowledge and agree to extend the maturity date of the Term Loan to July 2, 2018.

 

4. Warrant Extensions. Upon execution of this Amendment, Gilla shall extend the term of the warrants issued on August 1, 2014, and extended on
January 18, 2016 in connection to the Loan Agreement, to Karen Gautam to December 31, 2018, with all other terms of the warrants remaining the same. Further, upon execution of this Amendment, Gilla shall also extend the term of the warrants issued on January 18, 2016 in connection to the Loan Agreement to Karen Gautam to December 31, 2018, with all other terms of the warrants remaining the same. The warrant extensions shall be collectively referred to as the “Warrant Extensions”.

 

 

 

5. Warrants. Upon execution of this Amendment, Sarasvati or parties designated by Sarasvati shall receive a total of three hundred thousand (300,000) fully vested purchase warrants (each a “Warrant”
and collectively the “Warrants”), each Warrant entitling the holders to purchase one (1) common share of Gilla, a publicly listed company trading on the OTCQB under the symbol “GLLA”. The Warrants shall have an exercise price of twenty United States cents (US $0.20) per share and shall expire on December 31, 2018. The securities, if exercised and issued, will be subject to the standard restrictions as required by the regulators, the stock exchange
and the U.S. Securities and Exchange Commission.

 

6. Entire Agreement. The provisions of this Amendment along with the unaltered provisions of the Loan Agreement, Warrant Extensions and the Warrants, incorporated herein by reference, collectively constitutes the entire agreement
(the “Entire Agreement”) between the parties with respect to its subject matter. All prior or contemporaneous oral and written agreements, memoranda and representations relating to Secured Promissory Notes are superseded by this Entire Agreement.

 

7. Amendments. The Entire Agreement may be amended only by a subsequent writing signed by authorized representatives of both parties hereto, indicating an intent to amend the Entire Agreement.

 

8. Counterparts. This Amendment may be executed by each party upon a separate counterpart, each of which shall be deemed an original and all of which together shall constitute one agreement. Facsimile signature pages shall be acceptable
as originals.

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their duly authorized representatives as of the day and year first written above.

 

	
GILLA INC.

 

 

	
Per:
	
/s/ J. Graham Simmonds

	
Name:
	
J. Graham Simmonds

	
Title:
	
Chief Executive Officer

 

	
SARASVATI INVESTMENTS INC.

 

 

	
Per:
	
/s/ Ashok Gautam

	
Name:
	
Ashok Gautam

	
Title:
	
President

 

Page 2 of 2

 

 

Exhibit “A”

 

[exhibit follows]

 

 

 

LOAN AGREEMENT

 

Loan agreement dated January 18, 2016 (this “Agreement”) between Gilla Inc. (the “Borrower”) and Sarasvati Investments
Inc. (the “Lender”).

RECITALS

WHEREAS the Borrower and the Lender entered into a revolving credit facility loan agreement, dated August 1, 2014;

WHEREAS the Borrower and the Lender have mutually agreed to terminate and retire the revolving credit facility loan agreement as of the date hereof and wish to replace such facility with this Agreement;

WHEREAS the Borrower desires that the Lender make available a term loan facility to the Borrower in the aggregate principal amount of $1,000,000;

AND WHEREAS the Lender is prepared to extend such a term loan facility to the Borrower subject to the terms and conditions set out herein;

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged), the Borrower and the Lender agree as follows:

ARTICLE 1

INTERPRETATION

Section 1.1 Defined Terms.

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

“Applicable Rate” means, at any given time, the greater of: (a) 16% per annum; and (b) from the Closing Date up to and including the Maturity Date, the highest interest rate per annum paid, or payable, by the Borrower
to any arm’s length commercial lender (or syndicate of lenders) pursuant to a financing arrangement with such lender (or lenders) for the purposes set out in Section 2.2 on terms and conditions equivalent to the terms and conditions of this Agreement.

“Borrower” means Gilla Inc. and its successors and permitted assigns.

“Business Day” means any day of the year, other than a Saturday, Sunday or any day on which major banks are closed for business in Toronto, Ontario.

“Cash Sweep Report” means a monthly Cash Sweep Report, substantially in the form of Schedule “A”, certified by the Borrower’s management.

“CFADS” means the cash flow available for debt service on the Loan as indicated in the monthly Cash Sweep Report.

“Closing Date” means the date on which this Agreement becomes effective.

 

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

“Draw” means the initial draw on the Loan facility by the Borrower from the Lender pursuant to this Agreement on the Closing Date.

“Early Repayment Penalty” has the meaning specified in Section 2.4.

“Event of Default” has the meaning specified in Section 6.1.

“E-Liquid Bottle” means the e-liquid bottles sold by the Borrower under the brands as listed in Schedule “B”. Schedule “B” to be amended or restated from time to time upon mutual agreement between
the Borrower and the Lender.

“Funded Debt” of any Person means (i) all indebtedness of such Person for or in respect of, borrowed money, bankers acceptances, letters of credit or letters of guarantee, (ii) all indebtedness of such Person for the
deferred purchase price of property or services represented by a note, bond, debenture or other evidence of indebtedness, (iii) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (iv) all current liabilities of such Person represented by a note, bond, debenture
or other evidence of indebtedness, and (v) all obligations under leases which have been or should be, in accordance with U.S. GAAP, recorded as capital leases in respect of which such Person is liable as lessee.

“U.S. GAAP” means generally accepted accounting principles in the United States, as approved by the Financial Accounting Standards Board, as in effect from time to time.

“Governmental Entity” means (i) any international, multinational, national, federal, provincial, state, municipal, local or other governmental or public department, central bank, court, commission, board, bureau, agency
or instrumentality, domestic or foreign, (ii) any subdivision or authority of any of the above, (iii) any stock exchange and (iv) any quasi-governmental or private body exercising any regulatory, expropriation or taxing authority under or for the account of any of the above.

“Indemnified Person” has the meaning specified in Section 7.4.

“Intercreditor and Subordination Agreement” means the intercreditor and subordination agreement, dated August 1, 2014, among Gravitas Financial Inc., the Lender and the Borrower, as amended, restated, amended and restated
or replaced from time to time.

“Key Personnel” means J. Graham Simmonds serving as the Borrower’s Chief Executive officer and Ashish Kapoor serving as the Borrower’s Chief Financial Officer.

“Lender” means Sarasvati Investments Inc. and its successors and assigns.

”Loan” means the term loan facility in the aggregate principal amount of $1,000,000 to be made available to the Borrower by the Lender under this Agreement for the purposes set out in Section 2.2.

 

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“Lien” means any mortgage, charge, pledge, hypothecation, security interest, assignment, encumbrance, lien (statutory or otherwise), title retention agreement or arrangement, restrictive covenant or other encumbrance
of any nature or any other arrangement or condition that in substance secures payment or performance of an obligation.

“Loan Documents” means this Agreement, the Intercreditor and Subordination Agreement, the Warrant, the Warrant Extension, the Security Documents and all other documents to be executed and delivered to the Lender by the
Borrower pursuant to or in connection with this Agreement.

“Material Adverse Effect” means a material adverse effect on the business, operations, results of operations, prospects, assets, liabilities or financial condition of the Borrower.

“Material Agreement” means any contract or agreement to which the Borrower is a party or by which it is bound, the termination or cancellation of which (prior to the scheduled termination date) could have a Material Adverse
Effect.

“Maturity Date” means July 3, 2017.

“Permitted Liens” means, in respect of any Person, any one or more of the following:

(a)

Liens for taxes, assessments or governmental charges or levies which are not delinquent or the validity of which is being contested at the time by the Person in good faith by proper legal proceedings if, in the Lender’s opinion, adequate provision has been made for payment;

(b)

inchoate or statutory Liens of contractors, subcontractors, mechanics, workers, suppliers, materialmen, carriers and others in respect of construction, maintenance, repair or operation of assets of the Person, provided that such Liens are related to obligations not due or delinquent, are not registered against title to any assets of the Person and in respect of which adequate holdbacks
are being maintained as required by applicable law or such Liens are being contested in good faith by appropriate proceedings and in respect of which there has been set aside a reserve (segregated to the extent required by U.S. GAAP) in an adequate amount and provided further that such Liens do not, in the Lender’s reasonable opinion, reduce the value of the asset so affected or materially interfere with the use of such asset in the operation of the business of the Person;

(c)

the right reserved to or vested in any Governmental Entity by any statutory provision or by the terms of any lease, licence, franchise, grant or permit of the Person, to terminate any such lease, licence, franchise, grant or permit, or to require annual or other payments as a condition to the continuance thereof; and

(d)

Liens in favour of the Lender created by the Security Documents.

“Person” means a natural person, partnership, corporation, joint stock company, trust, unincorporated association, joint venture or other entity or Governmental Entity and pronouns have a similarly extended meaning.

 

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“Security” means, at any time, the security interest in favour of the Lender, in those assets and properties of the Borrower securing its obligations under this Agreement and the other Loan Documents to which it is a
party.

"Security Agreement” means the security agreement, dated August 1, 2014, by the Borrower in favour of the Lender.

“Security Documents” means the Security Agreement and any other security granted to the Lender, as security for the obligations of the Borrower under
this Agreement and the other Loan Documents.

“Warrant” means the warrant granted by Borrower to Karen Gautam, containing terms acceptable to Karen Gautam in its sole and reasonable discretion, entitling Karen Gautam to purchase 250,000 common shares of the Borrower
at an exercise price equal to US$0.20, which warrant is to remain in effect from the Closing Date until December 31, 2017.

“Warrant Extension” means the warrant extension granted by Borrower to Karen Gautam, extending the term of the warrants issued on August 1, 2014 to Karen Gautam to December 31, 2017, with all other terms of the warrants
remaining the same.

          Section 1.2       Gender and Number.

Any reference in the Loan Documents to gender includes all genders and words importing the singular number only include the plural and vice versa.

Section 1.3       Headings, etc.

The division of this Agreement into Articles and Sections and the insertion of headings are for convenient reference only and are not to affect the interpretation of this Agreement.

Section 1.4       Currency.

All references in the Loan Documents to dollars, unless otherwise specifically indicated, are expressed in Canadian currency.

Section 1.5       Certain Phrases, etc.

In any Loan Document (i) (a) the words “including” and “includes” mean “including (or includes) without limitation” and (b) the phrase “the aggregate of”, “the total of”, “the sum of”, or a phrase of similar meaning means “the aggregate (or total or sum),
without duplication, of”, and (ii) in the computation of periods of time from a specified date to a later specified date, unless otherwise expressly stated, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding”.

Section 1.6       Accounting Terms.

All accounting terms not specifically defined in this Agreement shall be interpreted in accordance with U.S. GAAP.

 

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Section 1.7       Conflict.

The provisions of this Agreement prevail in the event of any conflict or inconsistency between its provisions and the provisions of any of the other Loan Documents.

ARTICLE 2

CREDIT FACILITY

Section 2.1       Availability.

(1)

The Lender agrees, on the terms and subject to the conditions of this Agreement, to make the Loan available on the Closing Date.

(2)

The Loan shall be a term loan facility. For greater certainty, the Borrower shall be entitled to Draw the Loan on the Closing Date and, subject to Section 2.4, repay the outstanding principal amount under the Loan with the Early Repayment Penalty.

(3)

The Lender shall maintain, in accordance with its usual practice, records evidencing the amounts owing under this Agreement; and the information entered into such records shall constitute conclusive evidence of such amounts owed absent manifest error.

Section 2.2      Purpose.

The Loan shall be used by the Borrower, or any of its subsidiaries’, for capital expenditures, marketing expenditures and working capital.

 

Section 2.3       Repayment of Principal and Interest Payments.

(1)

The principal amount of the outstanding Loan shall bear interest at the Applicable Rate.

(2)

Interest shall accrue daily and shall be calculated and payable monthly, in arrears.

(3)

Borrower shall disburse the CFADS as indicated in the monthly Cash Sweep Report to the Lender in the following priority:

a)

First, the funds required to make the monthly interest payable on the Loan; and

b)

Second, the residual monthly CFADS to repay principal outstanding on the Loan.

(4)

Borrower shall be required to pay the monthly interest payment on the Loan regardless of the sufficiency of the CFADS to cover such interest payment.

(5)

Borrower shall make one (1) monthly installment of interest and principal repayment within fifteen (15) Business Days of each months’ end.

 

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(6)

Subject to Section 6.2, the outstanding principal amount of the Loan together with all accrued and unpaid interest thereon shall become due and payable on the Maturity Date, if any.

(7)

If a change in Key Personnel shall occur (a) the Borrower will, within ten (10) Business Days of occurrence thereof, give the Lender notice thereof describing in reasonable detail the facts and circumstances giving rise thereto and (b) the Lender may, by fifteen (15) Business Days’ notice to the Borrower given not later than ten (10) Business Days after receipt of such notice of change
in Key Personnel, terminate the Loan, which shall thereupon be terminated, and declare the principal amount of the Loan together with all accrued and unpaid interest thereon become, immediately due and payable.

Section 2.4       

Early Repayment.

In the event that the Borrower elects to repay the Loan together with all accrued and unpaid interest thereon prior to the Maturity Date, the Borrower shall also pay an Early Repayment Penalty of the maximum of i) three (3) months interest on the outstanding principal amount under the Loan; or ii) fifty percent (50%) of the interest
payable on the outstanding principal amount under the Loan until the Maturity Date.

Section 2.5       Payments under this Agreement.

(1)

Unless otherwise expressly provided in this Agreement or by the parties in writing, the Borrower shall make any payment required to be made by it to the Lender by depositing the amount of the payment to an account specified by the Lender not later than 4:00 p.m. (Toronto time) on the date the payment is due.

(2)

All amounts owed by the Borrower to the Lender, which are not paid when due (whether at stated maturity, by acceleration or otherwise) shall bear interest (both before and after default and judgment), from the date on which such amount is due until such amount is paid in full, payable on demand, at a rate per annum equal to the Applicable Rate, plus 2%

Section 2.6       Computations of Interest.

(1)

All computations of interest shall be made by the Lender taking into account the actual number of days occurring in the period for which such interest is payable, on the basis of a year of 365 days.

(2)

For purposes of the Interest Act (Canada), (i) whenever any interest or fee under this Agreement is calculated using a rate based on a year of 365 days, the rate determined pursuant to such calculation, when expressed as an annual rate, is equivalent to (x) the Applicable Rate based
on a year of 365 or 366 days, as the case may be, (y) multiplied by the actual number of days in the calendar year in which the period for which such interest or fee is payable (or compounded) ends, and (z) divided by 365 or 366 days, as the case may be, (ii) the principle of deemed reinvestment of interest does not apply to any interest calculation under this Agreement, and (iii) the rates of interest stipulated in this Agreement are intended to be nominal rates and not effective rates or yields.

 

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Section 2.7       Cash Sweep Report.

The Borrower shall provide to the Lender a monthly Cash Sweep Report, substantially in the form of Schedule “A”, certified by the Borrower’s management and deliverable within ten (10) Business Days of each month until the earlier of i) the Maturity Date or ii) the principal amount of the Loan together with all accrued
and unpaid interest thereon is repaid in full. The Cash Sweep Report shall indicate the CFADS on the Loan based on the following:

a)

$0.50 per 0-15ml E-Liquid Bottle sold by the Borrower, and its subsidiaries, within the monthly period; and

b)

$1.00 per >15ml E-Liquid Bottle sold by the Borrower, and its subsidiaries, within the monthly period.

The Cash Sweep Report shall total the CFADS and will indicate the appropriate disbursement of such funds towards interest payments and principal re-payments on the Loan.

ARTICLE 3

CONDITIONS OF LENDING

Section 3.1       Conditions Precedent to Initial Draw.

The Lender shall have no obligation to make the initial Draw hereunder unless at the time of making such draw the following terms and conditions shall have been satisfied:

(a)

the Lender has received, in form, substance, scope and dated a date satisfactory to it and its counsel:

(i)

an executed copy of each of the Loan Documents; and

(ii)

evidence of registration of the Security Documents in such jurisdictions as the Lender may reasonably require, including all required consents to obtain such registrations.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES

Section 4.1       Representations and Warranties.

The Borrower represents and warrants to the Lender, acknowledging and confirming that the Lender is relying on such representations and warranties without independent inquiry in entering into this Agreement and providing the Loan that:

(a)

Incorporation and Qualification. The Borrower is a corporation duly incorporated, organized and validly existing under the laws of the State of Nevada. The Borrower is qualified, licensed or registered to carry on business under the laws applicable to it in all jurisdictions in which such qualification, licensing or registration
is necessary or where failure to be so qualified would have a Material Adverse Effect;

 

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(b)

Corporate Power. The Borrower has all requisite corporate power and authority to (i) own, lease and operate its properties and assets and to carry on its business as now being conducted by it, and (ii) enter into and perform its obligations under the Loan Documents;

(c)

Conflict with Other Instruments. The execution and delivery by the Borrower and the performance by it of its obligations under, and compliance with the terms, conditions and provisions of, the Loan Documents will not (i) conflict with or result in a breach of any of the terms or conditions of (t) its constating documents,
(u) any applicable law, rule or regulation, (v) any contractual restriction binding on or affecting it or its properties, or (w) any judgment, injunction, determination or award which is binding on it, or (ii) result in, require or permit (x) the imposition of any Lien in, on or with respect to any of its assets or property (except in favour of the Lender), (y) the acceleration of the maturity of any Funded Debt binding on or affecting the Borrower, or (z) any third party to terminate or acquire rights under
any Material Agreement;

(d)

Corporate Action, Governmental Approvals, etc. The execution and delivery of each of the Loan Documents by the Borrower and the performance by the Borrower of its obligations under the Loan Documents has been duly authorized by all necessary corporate action including, without limitation, the obtaining of all necessary
shareholder consents. No authorization, consent, approval, registration, qualification, designation, declaration or filing with any Governmental Entity or other Person, is or was necessary in connection with the execution, delivery and performance of obligations under the Loan Documents except as are in full force and effect, unamended, at the date of this Agreement;

(e)

Execution and Binding Obligation. This Agreement and the other Loan Documents have been duly executed and delivered by the Borrower and constitute legal, valid and binding obligations of the Borrower enforceable against it in accordance with its terms, subject only to any limitation under applicable laws relating to (i)
bankruptcy, insolvency, arrangement or creditors’ rights generally, and (ii) the discretion that a court may exercise in the granting of equitable remedies;

(f)

Authorizations, etc. The Borrower possesses all authorizations, permits, consents, registrations and approvals necessary to properly conduct its businesses and to enter into and perform its obligations under the Loan Documents and all such authorizations, permits, consents, registrations and approvals are in good standing
and in full force and effect;

(g)

Ownership and Use of Property. Except for Permitted Liens, the Borrower has good and marketable title to all the real and personal property reflected as assets in its books and records. The Borrower owns, leases or has the lawful right to use all of the assets necessary for the conduct of its businesses;

(h)

Compliance with Laws. The Borrower is in compliance with all applicable laws, judgments and orders and rulings, guidelines and decisions having force of law;

(i)

No Default. The Borrower is not in violation of its constating documents, or any shareholders’ agreement applicable to it or any Material Agreement; and

 

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(j)

No Material Adverse Agreements. The Borrower is not party to any agreement or instrument or subject to any restriction (including any restriction set forth in its constating documents, any shareholders’ agreement applicable to it or any Material Agreement) which has or may have a Material Adverse Effect.

Section 4.2       Survival of Representations and Warranties.

The representations and warranties in this Agreement and in any certificates or documents delivered to the Lender shall not merge in or be prejudiced by and shall continue in full force and effect so long as any amounts are owing by the Borrower to the Lender under this Agreement.

ARTICLE 5

COVENANTS OF THE BORROWER

Section 5.1       Affirmative Covenants.

So long as there remains any outstanding amount owing under the Loan or the Lender has any obligation under this Agreement, the Borrower shall:

(a)

Corporate Existence. Preserve and maintain its corporate existence;

(b)

Compliance with Laws, etc. Comply with the requirements of all applicable laws, judgments, orders, decisions, awards, Material Agreements and Loan Documents;

(c)

Payment of Taxes and Claims. Pay when due, (i) all taxes, assessments and governmental charges or levies imposed upon it or upon its income, sales, capital or profit or any other property belonging to, and (ii) all claims which, if unpaid, might by law become a Lien upon the assets, except any such tax, assessment, charge,
levy or claim which is being contested in good faith and by proper proceedings and in respect of which the Borrower has established adequate reserves in accordance with U.S. GAAP or which are Permitted Liens;

(d)

Keeping of Books. Keep proper books of record and account, in which full and correct entries shall be made in respect of its business and operations;

(e)

Ordinary Course. The Borrower shall conduct its business in a manner consistent with past practices, and in the ordinary course of its normal day-to-day operations; and

(f)

Further Assurances. At its cost and expense, upon the reasonable request of the Lender, execute and deliver or cause to be executed and delivered to the Lender such further instruments, agreements and security documents and do and cause to be done such further acts as may be necessary or proper in the reasonable opinion
of the Lender to carry out more effectually the provisions and purposes of the Loan Documents.

 

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Section 5.2       Negative Covenants.

So long as there remains any outstanding amount owing under the Loan or the Lender has any obligation under this Agreement, the Borrower shall not create, incur, assume or suffer to exist any Lien on any of its property or assets covered by the Security other than Permitted Liens.

ARTICLE 6

EVENTS OF DEFAULT

Section 6.1 

      Events of Default.

If any of the following events (each an “Event of Default”) occurs and is continuing:

(a)

the Borrower fails to pay any amount under the Loan, any interest thereon or any other amounts due under any Loan Document when such amount becomes due and payable;

(b)

any representation or warranty or certification made or deemed to be made by the Borrower or any of its respective directors or officers in any Loan Document shall prove to have been incorrect when made or deemed to be made;

(c)

the Borrower fails to perform, observe or comply with any other term, covenant or agreement contained in any Loan Document to which it is a party and such failure remains unremedied for thirty (30) days;

(d)

any judgment or order for the payment of money in excess of $3,000,000 (or the equivalent amount in any other currency) is rendered against the Borrower and either (i) enforcement proceedings have been commenced by a creditor upon the judgment or order, or (ii) there is any period of fifteen (15) consecutive days during which a stay of enforcement of the judgment or order, by reason of
a pending appeal or otherwise, is not in effect; or

(e)

the Borrower (i) becomes insolvent or generally not able to pay its debts as they become due, (ii) admits in writing its inability to pay its debts generally or makes a general assignment for the benefit of its creditors, (iii) institutes or has instituted against it any proceeding seeking (x) to adjudicate it a bankrupt or insolvent, (y) liquidation, winding-up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors including any plan of compromise or arrangement or other corporate proceeding involving or affecting its creditors, or (z) the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its properties and assets, and in the case of any such proceeding instituted against it (but not instituted
by it), either the proceeding remains undismissed or unstayed for a period of forty-five (45) days, or any of the actions sought in such proceeding (including the entry of an order for relief against it or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its properties and assets) occurs, or (iv) takes any corporate action to authorize any of the above actions.

then the Lender may declare that the Loan, all accrued interest and fees and all other amounts payable under this Agreement to be immediately due and payable, without presentment, demand, protest or further notice of any kind, all of which are expressly waived by the Borrower.

 

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Section 6.2       Remedies Upon Default.

(1)

Upon a declaration that the Loan is immediately due and payable pursuant to Section 6.1, the Lender may commence such legal action or proceedings as it, in its sole discretion, deems expedient, including, the commencement of enforcement proceedings under the Loan Documents all without any additional notice,
presentation, demand, protest, notice of dishonour, entering into of possession of any property or assets, or any other action or notice, all of which are expressly waived by the Borrower.

(2)

The rights and remedies of the Lender under the Loan Documents are cumulative and are in addition to, and not in substitution for, any other rights or remedies. Nothing contained in the Loan Documents with respect to the indebtedness or liability of the Borrower to the Lender, nor any act or omission of the Lender with respect to the Loan Documents or the Security shall in any way prejudice
or affect the rights, remedies and powers of the Lender under the Loan Documents and the Security.

ARTICLE 7

MISCELLANEOUS

Section 7.1       Amendments, etc.

No amendment or waiver of any provision of any of the Loan Documents, nor consent to any departure by the Borrower or any other Person from such provisions, is effective unless in writing and approved by the Lender. Any amendment, waiver or consent is effective only in the specific instance and for the specific purpose for which it
was given.

Section 7.2       Waiver.

(1)

No failure on the part of the Lender to exercise, and no delay in exercising, any right under any of the Loan Documents shall operate as a waiver of such right; nor shall any single or partial exercise of any right under any of the Loan Documents preclude any other or further exercise of such right or the exercise of any other right.

(2)

Except as otherwise expressly provided in this Agreement, the covenants, representations and warranties shall continue in full force and effect. The closing of this transaction shall not prejudice any right of one party against any other party in respect of anything done or omitted under this Agreement or in respect of any right to damages or other remedies.

Section 7.3       Notices, etc.

Any notice, direction or other communication to be given under this Agreement shall, except as otherwise permitted, be in writing and given by delivering it or sending it by facsimile or other similar form of recorded communication addressed:

 

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(a)

to the Lender at:

33 Kennedy Park Road

                                                  Toronto, Ontario

                                                  M6P 3H2

karen.gautam@gmail.com (with a copy to rajeevuofw@gmail.com)

(b)

to the Borrower at:

70 York Street, Suite 1610

Toronto, Ontario, M5J 1S9

graham@gillainc.com (with a copy to ashish@gillainc.com)

 

Any such communication shall be deemed to have been validly and effectively given if (i) personally delivered, on the date of such delivery if such date is a Business Day and such delivery was made prior to 4:00 p.m. (Toronto time), otherwise on the next Business Day, (ii) transmitted by facsimile or similar means of recorded communication
on the Business Day following the date of transmission. Any party may change its address for service from time to time by notice given in accordance with the foregoing and any subsequent notice shall be sent to the party at its changed address.

Section 7.4 

      Indemnity.

The Borrower shall, whether or not the transaction contemplated by this Agreement is completed, indemnify and hold the Lender and its officers, directors, employees and agents (each an “Indemnified Person”) harmless from, and shall pay to such Indemnified Person on demand any amounts required to compensate the Indemnified
Person for, any cost, expense, claim or loss suffered by, imposed on, or asserted against, the Indemnified Person as a result of, or arising out of (i) the preparation, execution and delivery of, preservation of rights under, enforcement of, or refinancing, renegotiation or restructuring of, the Loan Documents and any related amendment, waiver or consent, (ii) a Default (whether or not constituting a Default or an Event of Default), and (iii) any proceedings brought by or against the Indemnified Person, or in
which the Indemnified Person otherwise participates, due to its entering into or being a party to any of the Loan Documents, or by reason of its exercising or performing, or causing the exercise or performance of, any right, power or obligation under any of the Loan Documents, whether or not such proceedings are directly related to the enforcement of any Loan Document, except to the extent caused by the gross negligence or wilful misconduct of the Indemnified Person.

Section 7.5       Successors and Assigns.

(1)

This Agreement shall become effective when executed by the Borrower and the Lender and after that time shall be binding upon and enure to the benefit of the Borrower and the Lender and their respective successors and permitted assigns.

(2)

The Borrower shall not have the right to assign its rights or obligations under this Agreement or any interest in this Agreement without the prior consent of the Lender, which consent may not be unreasonably withheld.

 

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Section 7.6 

      Right of Set-off.

Upon the occurrence and during the continuance of any Event of Default, the Lender is authorized at any time and from time to time, to the fullest extent permitted by law (including general principles of common-law), to set off and apply any and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by it to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower under any of the Loan Documents, irrespective of whether or not the Lender has made demand under any of the Loan Documents and although such obligations may be unmatured or contingent. If an obligation is unascertained, the Lender may, in good faith, estimate the obligation and exercise its right of set-off in respect of the estimate, subject to
providing the Borrower with an accounting when the obligation is finally determined. The Lender shall promptly notify the Borrower after any set-off and application is made by it, provided that the failure to give notice shall not affect the validity of the set-off and application. The rights of the Lender under this Section 7.6 are in addition to other rights and remedies (including all other rights of set-off) which the Lender may have.

Section 7.7       Entire Agreement

This Agreement, together with the Loan Documents, contain the entire agreement between the Lender and the Borrower with respect to the matters hereof and supersedes all prior agreements and understandings, oral or written, with respect to such matters.

Section 7.8       Governing Law.

This Agreement shall be governed by and interpreted and enforced in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein.

Section 7.9       Counterparts.

This Agreement may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed counterpart of this Agreement by electronic means, including, without limitation, by facsimile transmission or by electronic delivery
in portable document format (“.pdf”) or tagged image file format (“.tif”), shall constitute the valid and binding signature of such party with
the same effect as if it were an original signature endorsed on this Agreement.

Section 7.10 Language.

The parties hereto acknowledge that they have required and are satisfied that this Agreement and all communications to be delivered pursuant hereto be drawn in the English language.

Section 7.11 Syndication.

The Borrower acknowledges that the Lender is acting for and on behalf of itself and certain other Persons with respect to the establishment and maintenance of the Loan and that, except for the Warrant, the Loan Documents shall be granted in favour of and held by the Lender for and on behalf of itself and certain other Persons.

 

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IN WITNESS WHEREOF the parties have executed this Agreement as of the date indicated above.

	
 
	
GILLA INC.

 

By: /s/ J. Graham Simmonds      

Authorized Signing Officer

 

	
 
	
 

SARASVATI INVESTMENTS INC.

 

By: /s/ Ashok Gautam                 

Authorized Signing Officer

 

 

 

- 15 -

 

 

SCHEDULE “A”

Monthly Cash Sweep Report

 

[intentionally left blank]

 

 

 

 

 

 

 

 

- 16 -

 

SCHEDULE “B”

E-Liquid Brands

 

[intentionally left blank]Exhibit 4.2

 

EAGLE BANCORP, INC.

 

SECOND SUPPLEMENTAL INDENTURE

dated as of July 26, 2016

 

to the Indenture

dated as of August 5, 2014

 

5.00% Fixed-to-Floating Rate Subordinated Notes due August 1, 2026

 

Wilmington Trust, National Association, as Trustee

 

 

SECOND SUPPLEMENTAL INDENTURE

 

THIS SECOND SUPPLEMENTAL INDENTURE (“Second Supplemental Indenture”), dated as of July 26, 2016 between Eagle Bancorp, Inc., a Maryland corporation (the “Company”), and Wilmington Trust, National Association, a national banking association, not in its individual capacity but solely as trustee (“Trustee”)

 

WHEREAS, the Company and the Trustee have executed and delivered a Subordinated Indenture, dated as of August 5, 2014 (the “Base Indenture” and as supplemented by this Second Supplemental Indenture, the “Indenture”), to provide for the issuance from time to time by the Company of its unsecured subordinated indebtedness to be issued in one or more series as provided in the Indenture;

 

WHEREAS, the issuance and sale of One Hundred and Fifty Million Dollars ($150,000,000) aggregate principal amount of a new series of Securities of the Company designated as its 5.00% Fixed-to-Floating Rate Subordinated Notes due August 1, 2026 (the “2026 Notes”) have been authorized by resolutions adopted of the Board of Directors of the Company;

 

WHEREAS, the Company desires to issue and sell One Hundred and Fifty Million Dollars ($150,000,000) aggregate principal amount of the 2026 Notes as of the date hereof;

 

WHEREAS, the Company desires to establish the terms of the 2026 Notes;

 

WHEREAS, all things necessary to make this Second Supplemental Indenture a legal and binding supplement to the Base Indenture in accordance with its terms and the terms of the Base Indenture have been done;

 

WHEREAS, the Company has complied with all conditions precedent provided for in the Base Indenture relating to this Second Supplemental Indenture; and

 

WHEREAS, the Company has requested that the Trustee execute and deliver this Second Supplemental Indenture.

 

NOW, THEREFORE, for and in consideration of the premises stated herein and the purchase of the 2026 Notes by the Holders thereof, the Company and the Trustee covenant and agree, for the equal and proportionate benefit of the Holders of the 2026 Notes, as follows:

 

ARTICLE I
 SCOPE OF SECOND SUPPLEMENTAL INDENTURE

 

Section 1.01. Scope. This Second Supplemental Indenture constitutes a supplement to the Base Indenture and an integral part of the Indenture and shall be read together with the Base Indenture as though all the provisions thereof are contained in one instrument. Except as expressly amended by the Second Supplemental Indenture, the terms and provisions of the Base Indenture shall remain in full force and effect. Notwithstanding the foregoing, this Second Supplemental Indenture shall only apply to the 2026 Notes.

 

ARTICLE 2
 DEFINITIONS

 

Section 2.01. Definitions and Other Provisions of General Application. For all purposes of this Second Supplemental Indenture unless otherwise specified herein:

 

(a) all terms used in this Second Supplemental Indenture which are not otherwise defined herein shall have the meanings they are given in the Base Indenture;

 

(b) the provisions of general application stated in Sections 1.01 through 1.16 of the Base Indenture shall apply to this Second Supplemental Indenture, except that the words “herein,” “hereof,” “hereto” and “hereunder” and other words of similar import refer to this Second Supplemental Indenture as a whole and not to the Base

 

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Indenture or any particular Article, Section or other subdivision of the Base Indenture or this Second Supplemental Indenture;

 

(c) Section 1.01 of the Base Indenture is amended and supplemented, solely with respect to the 2026 Notes, by inserting the following additional defined terms in their appropriate alphabetical positions:

 

“Calculation Agent” has the meaning ascribed in Section 3.02(e)(iv).

 

“Designated LIBOR Page” means the display on Reuters, or any successor service, on page LIBOR01, or any other page as may replace that page on that service, for the purpose of displaying the London interbank rates for U.S. dollars.

 

“DTC” has the meaning provided in Section 3.02(n).

 

“Fixed Rate Interest Payment Date” has the meaning provided in Section 3.02(e)(i).

 

“Fixed Rate Period” has the meaning provided in Section 3.02(e)(i).

 

“Fixed Rate Regular Record Date” has the meaning provided in Section 3.02(e)(i).

 

“Floating Rate Interest Payment Date” has the meaning provided in Section 3.02(e)(ii).

 

“Floating Rate Period” has the meaning provided in Section 3.02(e)(ii).

 

“Floating Rate Regular Record Date” has the meaning provided in Section 3.02(e)(ii).

 

“Interest Payment Date” has the meaning provided in Section 3.02(e)(ii)

 

“Issue Date” means July 26, 2016.

 

“Reset Rate Determination Date” means the second day on which commercial banks are open for business (including dealings in U.S. dollars) in London immediately preceding the first day of each applicable interest period commencing on the first Floating Rate Interest Payment Date.

 

“Tax Event” shall mean the receipt by the Company of an opinion of independent tax counsel experienced in such matters to the effect that, as a result of any amendment to, or change (including any announced prospective change) in, the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date of original issuance of the Notes, there is more than an insubstantial risk that the interest payable by the Company on the 2026 Notes is not, or within 90 days of the date of such opinion will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes.

 

“Tier 2 Capital Event” shall mean the receipt by the Company of an opinion of independent bank regulatory counsel experienced in such matters to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws or any regulations thereunder of the United States or any rules, guidelines or policies of an applicable regulatory authority for the Company or (b) any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, which amendment or change is effective or which pronouncement or decision is announced on or after the date of original issuance of the Securities, the 2026 Notes do not constitute, or within 90 days of the date of such opinion will not constitute, Tier 2 Capital (or its then equivalent if the Company were subject to such capital requirement) for purposes of capital adequacy guidelines of the Board of Governors of the Federal Reserve System (or any successor regulatory authority with jurisdiction over bank holding companies), as then in effect and applicable to the Company.

 

“Three-Month LIBOR” means, for any interest period, the offered rate for deposits in U.S. dollars having a maturity of three months that appears on the Designated LIBOR Page as of 11:00 a.m., London time, on the Reset

 

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Rate Determination Date related to such interest period. If such rate does not appear on such page at such time, then the Calculation Agent will request the principal London office of each of four major reference banks in the London interbank market, selected by the Company for this purpose and whose names and contact information is provided to the Calculation Agent by the Company, to provide such bank’s offered quotation to prime banks in the London interbank market for deposits in U.S. dollars with a term of three months as of 11:00 a.m., London time, on such Reset Rate Determination Date and in a principal amount equal to an amount that is representative for a single transaction in U.S. dollars in the relevant market at the relevant time as determined by the Company and provided to the Calculation Agent (a “Representative Amount”). If at least two such quotations are so provided, Three-Month LIBOR for the interest period related to such Reset Rate Determination Date will be the arithmetic mean of such quotations. If fewer than two such quotations are provided, the Calculation Agent will request each of three major banks in the City of New York selected by the Company for this purpose and whose names and contact information is provided to the Calculation Agent by the Company, to provide such bank’s rate for loans in U.S. dollars to leading European banks with a term of three months as of approximately 11:00 a.m., New York City time, on such Reset Rate Determination Date and in a Representative Amount. If at least two such rates are so provided, Three-Month LIBOR for the interest period related to such Reset Rate Determination Date will be the arithmetic mean of such quotations. If fewer than two such rates are so provided, then Three-Month LIBOR for the interest period related to such Reset Rate Determination Date will be set to equal the three-month LIBOR for the immediately preceding interest period or, in the case of the interest period commencing on the first floating rate interest payment date, 5.00%. All percentages used in or resulting from any calculation of Three-Month LIBOR will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with 0.000005% rounded up to 0.00001%. Notwithstanding the foregoing, in the event that Three-Month LIBOR as determined in accordance with this definition is less than zero, Three-Month LIBOR for such interest period shall be deemed to be zero.

 

(d) Section 1.01 of the Base Indenture is amended and supplemented, solely with respect to the 2026 Notes, by replacing the corresponding defined term in the Base Indenture with the following defined terms:

 

“Corporate Trust Office” for administration of this Indenture means the corporate trust office of the Trustee located at 50 South Sixth Street, Suite, 1290, Minneapolis, MN  55402, Attention: Eagle Bancorp Account Manager, or such other office, designated by the Trustee by written notice to the Company at which at any particular time its corporate trust business shall be administered.

 

“Senior Indebtedness” with respect to any series of Securities issued hereunder, shall have the meaning ascribed to such term in the Board Resolutions or supplemental indenture establishing such series in accordance with Section 3.01 hereof, and shall include: (i) the principal and any premium or interest for money borrowed or purchased by the Company; (ii) the principal and any premium or interest for money borrowed or purchased by another Person and guaranteed by the Company; (iii) any deferred obligation for the payment of the purchase price of property or assets evidenced by a note or similar instrument or agreement; (iv) an obligation arising from direct credit substitutes; (v) any obligation associated with derivative products such as interest and foreign exchange rate contracts, commodity contracts and similar arrangements; and (vi) any liabilities to general and trade creditors; in each case, whether outstanding on the date this Subordinated Indenture becomes effective, or created, assumed or incurred after that date. Senior Indebtedness excludes any indebtedness that: (a) expressly states that it is junior to, or ranks equally in right of payment with, the Securities or the Securities of any series; or (b) is identified as junior to, or equal in right of payment with, the Securities or the Securities of any series in any Board Resolution or in any supplemental indenture.

 

ARTICLE 3

FORM AND TERMS OF THE 2026 Notes

 

Section 3.01. Form and Dating.

 

(a) The 2026 Notes shall be substantially in the form of Exhibit A attached hereto. The 2026 Notes shall be executed on behalf of the Company by its Chairman of the Board, its Chief Executive Officer, its President or one of its Executive Vice Presidents, attested by its Secretary or one of its Assistant Secretaries. The 2026 Notes may have a legend or legends or endorsements as may be required to comply with any law or with any rules of any securities exchange or usage. The 2026 Notes shall be dated the date of their authentication.

 

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(b) The terms contained in the 2026 Notes shall constitute, and are hereby expressly made, a part of the Indenture as supplemented by this Second Supplemental Indenture, and the Company and the Trustee, by their execution and delivery of this Second Supplemental Indenture, expressly agree to such terms and provisions and to be bound thereby.

 

Section 3.02. Terms of the 2026 Notes. The following terms relating to the 2026 Notes are hereby established:

 

(a) Title. The 2026 Notes shall constitute a series of Securities having the title “Eagle Bancorp, Inc. 5.00% Fixed-to-Floating Rate Subordinated Notes due August 1, 2026” and the CUSIP number 268948 AB2.

 

(b) Principal Amount. The aggregate principal amount of the 2026 Notes that may be authenticated and delivered under the Indenture, as amended hereby, shall be One Hundred Fifty Million Dollars ($150,000,000) on the Issue Date. Provided that no Event of Default has occurred and is continuing with respect to the 2026 Notes, the Company may, without notice to or the consent of the Holders, create and issue additional Securities having the same terms as, and ranking equally and ratably with, the 2026 Notes in all respects and so that such additional 2026 Notes will be consolidated and form a single series with, and have the same terms as to status, redemption or otherwise as, the 2026 Notes initially issued, provided that such additional 2026 Notes are fungible for U.S. federal income tax purposes with the 2026 Notes.

 

(c) Person to Whom Interest is Payable. Interest payable, and punctually paid or duly provided for, on any Interest Payment Date will be paid to the Person in whose name the 2026 Notes are registered for such interest at the close of business on the Fixed Rate Regular Record Date or the Floating Rate Regular Record Date, as applicable, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Fixed Rate Regular Record Date or the Floating Rate Regular Record Date, as applicable, and may either be paid to the Person in whose name the 2026 Note is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Company, notice whereof shall be given to Holders of 2026 Notes of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the 2026 Notes may be listed and upon such notice as may be required by such exchange, as provided for in the Base Indenture.

 

(d) Maturity Date. The entire outstanding Principal of the 2026 Notes shall be payable on August 1, 2026.

 

(e) Interest.

 

(i)                                     The 2026 Notes will bear interest at a fixed rate of 5.00% per annum from and including July 26, 2016 to, but excluding, August 1, 2021 (the “Fixed Rate Period”). Interest accrued on the 2026 Notes during the Fixed Rate Period will be payable semi-annually in arrears on February 1 and August 1 of each year, commencing on February 1, 2017 (each such date a “Fixed Rate Interest Payment Date”). The interest payable during the Fixed Rate Period will be paid to each holder in whose name a 2026 Note is registered at the close of business on January 15 and July 15 (whether or not a Business Day) immediately preceding the applicable Fixed Rate Interest Payment Date (each such date, a “Fixed Rate Regular Record Date”).

 

(ii)                                  The 2026 Notes will bear a floating interest rate from and including August 1, 2021 to the Maturity Date or Redemption Date (the “Floating Rate Period”). The floating interest rate will be reset quarterly, and the interest rate for any Floating Rate Period shall be equal to Three-Month LIBOR plus 3.85%. During the Floating Rate Period, interest on the Notes will be payable quarterly in arrears on February 1, May 1, August 1 and November 1 of each year commencing on November 1, 2021 through the Maturity Date or Redemption Date (each such date, a “Floating Rate Interest Payment Date”, together with a Fixed Rate Interest Payment Date, an “Interest Payment Date”). The interest payable during the Floating Rate Period will be paid to each holder in whose name a Note is registered at the close of business on the January 15, April 15, July 15 and October 15 (whether or not a Business Day) immediately preceding the applicable Floating Rate Interest Payment Date (each such date, a “Floating Rate Regular Record Date”).

 

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(iii)                               The amount of interest payable on any Fixed Rate Interest Payment Date during the Fixed Rate Period will be computed on the basis of a 360-day year consisting of twelve 30-day months up to, but excluding August 1, 2021, and, the amount of interest payable on any Floating Rate Interest Payment Date during the Floating Rate Period will be computed on the basis of a 360-day year and the number of days actually elapsed. In the event that any scheduled Interest Payment Date for the 2026 Notes falls on a day that is not a Business Day, then payment of interest payable on such Interest Payment Date will be paid on the next succeeding day which is a Business Day (and no interest on such payment will accrue for the period from and after such scheduled Interest Payment Date). Dollar amounts resulting from interest calculations will be rounded to the nearest cent, with one-half cent being rounded upward.

 

(iv)                              The Company agrees that for so long as any of the 2026 Notes are Outstanding there will at all times be an agent appointed to calculate Three-Month LIBOR in respect of each Floating Rate Period (the “Calculation Agent”). The Calculation Agent shall have all the rights, protections and indemnities afforded to the Trustee under the Base Indenture and hereunder. The Company hereby appoints Wilmington Trust Company, National Association, as Calculation Agent for the purposes of determining Three-Month LIBOR for each Floating Interest Period and Wilmington Trust Company, National Association accepts the appointment. The Calculation Agent may be removed by the Company at any time. If the Calculation Agent is unable or unwilling to act as Calculation Agent or is removed by the Company, the Company will promptly appoint a replacement Calculation Agent, which does not control or is not controlled by or under common control with the Company or its Affiliates. The Calculation Agent may not resign its duties without a successor having been duly appointed, provided, however that if a successor Calculation Agent has not been appointed by the Company and such successor accepted such position within 30 days after the giving of notice of resignation by the Calculation Agent, the resigning Calculation Agent may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Trustee with respect to such series.

 

(f) Place of Payment of Principal and Interest. So long as the 2026 Notes shall be issued in global form, the Company shall make, or cause the Paying Agent to make, all payments of principal and interest on the 2026 Notes in immediately available funds to the Depository or its nominee, in accordance with applicable procedures of the Depository. A global security with respect to the 2026 Notes shall be exchangeable for physical securities of such series only if:

 

·                                          The U.S. Depository is at any time unwilling or unable or ineligible to continue as a depository and a successor depository is not appointed by the Company within 90 days of the date the Company is so notified in writing;

 

·                                          The Company executes and delivers to the Trustee a Company Order to the effect that such global securities shall be so exchangeable; or

 

·                                          An event of default has occurred and is continuing with respect to the global securities and the Company or the U.S. Depository requests such exchange.

 

(g) Redemption. The 2026 Notes shall be redeemable, in each case, in whole or in part from time to time, at the option of the Company prior to the Maturity Date beginning with the Interest Payment Date on August 1, 2021, and on any Interest Payment Date thereafter. Further, the Company may, at its option, redeem the 2026 Notes before the Maturity Date in whole or in part from time to time, upon the occurrence of a Tier 2 Capital Event or a Tax Event, or if the Company is required to register as an investment company pursuant to the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.). Any such redemption will be at a Redemption Price equal to the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the Redemption Date fixed by the Company. Any such redemption by the Company prior to the Maturity Date requires the prior approval of the Board of Governors of the Federal Reserve System. The provisions of Article XI of the Base Indenture shall apply to any redemption of the 2026 Notes pursuant to this Article 3.

 

(h) Sinking Fund. There shall be no sinking fund for the 2026 Notes.

 

(i) Denomination. The 2026 Notes and any beneficial interest in the 2026 Notes shall be in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof.

 

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(j) Currency of the 2026 Notes. The 2026 Notes shall be denominated, and payment of principal and interest of the 2026 Notes shall be payable in, the currency of the United States of America.

 

(k) Acceleration. 100% of the principal amount of the 2026 Notes shall be payable upon declaration of acceleration of the maturity thereof.  The maturity of the 2026 Notes shall be subject to acceleration only upon occurrence of an Event of Default described in Section 5.01(6), 5.01(7) or Section 5.01(8) of the Indenture, as amended hereby.

 

(l) Stated Maturity. The principal of the 2026 Notes shall be payable on August 1, 2026 subject to acceleration as provided under the Indenture.

 

(m) Defeasance. Section 4.03 of the Base Indenture shall apply to the 2026 Notes.

 

(n) Registered Form. The 2026 Notes shall be issuable as registered global Securities, and the U.S. Depository for the 2026 Notes shall be the Depository Trust Company (“DTC”) or any successor U.S. Depository appointed by the Company within 90 days of the termination of services of DTC (or any successor to DTC). Sections 2.03 and 3.05 of the Base Indenture shall apply to the 2026 Notes.

 

(o) Events of Default. The Events of Default provided for in Section 5.01 of the Base Indenture shall apply to the 2026 Notes, provided that:

 

(i)                                     the text of clause (6) of Section 5.01 shall be substituted with the following:

 

“(6) A court having jurisdiction in the premises shall enter a decree or order for the appointment of appointing a receiver, liquidator, trustee, or similar official in any receivership, insolvency, liquidation, or similar proceeding relating to the Company, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days;

 

(ii)                                  the text of clause (7) of Section 5.01 shall be substituted with the following:

 

“(7) The Company shall consent to the appointment of a receiver, liquidator, trustee or other similar official in any receivership, insolvency, liquidation or similar proceeding with respect to the Company;” and

 

(iii)                               a new clause (8), reading in its entirety as follows, shall be inserted:

 

“(8) A “major subsidiary depository institution” of the Company shall be the subject of a receivership, insolvency, liquidation or similar proceeding.”

 

(p) Acceleration of Maturity, Rescission and Annulment. Section 5.02 of the Base Indenture shall apply to the 2026 Notes, except that the first paragraph thereof shall be substituted with the following:

 

“If an Event of Default specified in Section 5.01(6) Section 5.01(7) or Section 5.01(8) occurs, the principal amount of all the 2026 Notes, together with accrued and unpaid interest, if any, thereon, shall automatically, and without any declaration or other action on the part of the Trustee or any Holder, become immediately due and payable. The Maturity of the 2026 Notes shall not otherwise be accelerated as a result of an Event of Default.

 

(q) Securities Subordinated to Senior Indebtedness. Section 13.01 of the Base Indenture shall apply to the 2026 Notes, except that the text of clause (2) of Section 13.01 shall be substituted with the following

 

“(2) In the event and during the continuation of any default in the payment of the principal of or any premium or interest on any Senior Indebtedness beyond any applicable grace period with respect to such Senior Indebtedness, or in the event that any Senior Indebtedness or any Security of any series is declared or otherwise becomes due and payable before its expressed maturity because of the occurrence of an Event of Default hereunder or thereunder (under circumstances

 

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when the provisions of the foregoing clause (1) or the following clause (3) shall not be applicable), the holders of Senior Indebtedness outstanding at the time such Security so becomes due and payable because of such occurrence of an Event of Default hereunder or thereunder shall, so long as such declaration has not been rescinded and annulled, be entitled to receive payment in full of all principal of, and premium and interest on or other amounts in respect of, all such Senior Indebtedness before the Holders of the Securities of such series are entitled to receive any payment on account of principal of, premium, if any, or interest and Additional Amounts on the Securities of such series. However, nothing herein shall prevent the Holders of Securities from seeking any remedy allowed at law or at equity so long as any judgment or decree obtained thereby makes provision for enforcing this clause; and”

 

(r) Ranking.  The 2026 Notes shall rank junior to and shall be subordinated to all Senior Indebtedness of the Company, whether existing as of the date of this Second Supplemental Indenture, or hereafter issued or incurred, including all indebtedness relating to money owed to general creditors and trade creditors. The 2026 Notes shall rank pari passu with the Company’s 5.75% Subordinated Notes due September 1, 2024, issued pursuant to the Base Indenture, as amended by the First Supplemental Indenture, dated as of August 5, 2014 between the Company and Trustee.

 

(s) No Collateral.  The 2026 Notes shall not be entitled to the benefit of any security interest in, or collateralization by, any rights, property or interest of the Company.

 

(t) Additional Terms. Other terms applicable to the 2026 Notes are as otherwise provided for in the Base Indenture, as supplemented by this Second Supplemental Indenture.

 

ARTICLE 4

SUPPLEMENTAL INDENTURES

 

Section 4.01. Supplemental Indentures. The following paragraph shall be added to the end of Section 9.01 of the Base Indenture and shall only apply to the 2026 Notes:

 

“Not in limitation of the foregoing, without the consent of any Holder of 2026 Notes, the Company and the Trustee may amend or supplement the Indenture or the 2026 Notes to conform the terms of the Indenture and the 2026 Notes to the description of the 2026 Notes in the prospectus supplement dated July 21, 2016 relating to the offering of the 2026 Notes.”

 

ARTICLE 5

MISCELLANEOUS

 

Section 5.01. Trust Indenture Act. This Second Supplemental Indenture is subject to the provisions of the Trust Indenture Act that are required to be part of the Indenture and shall, to the extent applicable, be governed by such provisions. If any provision of this Second Supplemental Indenture limits, qualifies, or conflicts with a provision of the Trust Indenture Act that is required under such act to be a part of and govern this Second Supplemental Indenture, the latter provision shall control.

 

Section 5.02. Governing Law. The laws of the State of Maryland shall govern this Second Supplemental Indenture and the 2026 Notes, except that the rights, immunities, duties and liabilities of the Trustee (acting in any capacity) under the Indenture shall be governed by the laws of the State of New York.

 

Section 5.03. Duplicate Originals. The parties may sign any number of copies of this Second Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.

 

Section 5.05. Severability. In case any provision in this Second Supplemental Indenture or the 2026 Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

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Section 5.06. Ratification. The Base Indenture, as supplemented and amended by this Second Supplemental Indenture, is in all respects ratified and confirmed. The Base Indenture and this Second Supplemental Indenture shall be read, taken and construed as one and the same instrument. All provisions included in this Second Supplemental Indenture supersede any conflicting provisions included in the Base Indenture unless not permitted by law. The Trustee accepts the trusts created by the Base Indenture, as supplemented by this Second Supplemental Indenture, and agrees to perform the same upon the terms and conditions of the Base Indenture, as supplemented by this Second Supplemental Indenture.

 

Section 5.07. Effectiveness. The provisions of this Second Supplemental Indenture shall become effective as of the date hereof.

 

Section 5.08. Successors. All agreements of the Company in this Second Supplemental Indenture shall bind its successors. All agreements of the Trustee in this Second Supplemental Indenture shall bind its successors.

 

Section 5.09. Indenture and Notes Solely Corporate Obligations. No recourse for the payment of the principal of or interest on any 2026 Note, or for any claim based thereon or otherwise in respect thereof, shall be had against any shareholder, employee, agent, officer or director, as such, past, present or future, of the Company or of any successor Person; it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Second Supplemental Indenture and the issue of the 2026 Notes.

 

Section 5.10. Trustee’s Disclaimer. The recitals contained herein shall be taken as the statements of the Company and the Trustee assumes no responsibility for their correctness. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Second Supplemental Indenture, the 2026 Notes, or for or in respect of the recitals contained herein, all of which recitals are made solely by the Company.

 

[Remainder of page intentionally left blank.]

 

8

 

IN WITNESS WHEREOF, the parties hereto have caused this Second Supplemental Indenture to be duly executed as of the date first above written.

 

	
 
    	
 
    	
EAGLE   BANCORP, INC.  
 as the Company
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
Ronald D. Paul
    
	
 
    	
 
    	
Title:
    	
President, Chief Executive Officer
    
	
 
    	
 
    	
 
    	
 
    
	
Attest
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    	
 
    
	
Name:
    	
Jane E. Cornett
    	
 
    	
 
    	
 
    
	
Title:
    	
Corporate Secretary
    	
 
    	
 
    	
 
    

 

[Signature Page to Second Supplemental Indenture]

 

9

 

	
 
    	
Wilmington Trust,   National Association, 
   as Trustee
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
Lynn M. Steiner
    
	
 
    	
Title:
    	
Vice President
    

 

[Signature Page to Second Supplemental Indenture]

 

10

EXHIBIT A

 

FORM OF NOTE

 

CUSIP No.  268948 AB2

ISIN No. 268942 AB21

 

THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A U.S. DEPOSITORY OR A NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH U.S. DEPOSITORY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

 

EAGLE BANCORP, INC.

5.00% Fixed-to-Floating Rate Subordinated Notes due August 1, 2026

 

THIS SECURITY IS NOT A DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE DEPOSIT INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.

 

	
No. [            ]
    	
 
    	
$[            ]
    

 

Eagle Bancorp, Inc., a corporation duly organized and existing under the laws of Maryland (herein called the “Company”, which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & CO., or registered assigns, the principal sum of One Hundred and Fifty Million ($150,000,000) on August 1, 2026 (the “Maturity Date”), unless redeemed prior to such date as permitted below, and to pay interest thereon from and including July 26, 2016 (the “Issue Date”) or from and including the most recent Interest Payment Date to which interest has been paid or duly provided for, as the case may be, semi-annually in arrears on each Fixed Rate Interest Payment Date, commencing on February 1, 2017, at the rate of 5.00% per annum, to but excluding August 1, 2021. From and including August 1, 2021, the Notes will bear interest at a floating rate per annum, reset quarterly, equal to Three-Month LIBOR plus 3.85%, payable quarterly in arrears on each Floating Rate Interest Payment date through the Maturity Date or Redemption Date. Interest shall be calculated on the basis of a 360-day year consisting of twelve 30-day months to, but excluding, August 1, 2021 and thereafter on the basis of a 360-day year and on the basis of the actual number of days elapsed.

 

In the event that any scheduled Interest Payment Date for the Notes falls on a day that is not a Business Day, then payment of interest payable on such Interest Payment Date will be paid on the next succeeding day which is a Business Day (and no interest on such payment will accrue for the period from and after such scheduled Interest Payment Date). “Business Day” means any day that is not a Saturday or Sunday, and that is neither a Legal Holiday nor a day on which banking institutions in the City of New York or place of payment are authorized or obligated by law, regulation or executive order to close. Interest payable, and punctually paid or duly provided for, on any Interest Payment Date will be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered for such interest at the close of business on the Fixed Rate Regular Record Date or the Floating Rate Regular Record Date, as applicable, as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Fixed Rate Regular Record Date or the Floating Rate Regular Record Date, as applicable, and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Company, notice whereof shall be given to Holders of 2026 Notes of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the 2026 Notes may be listed and upon such notice as may be required by such exchange, as provided for in said Indenture.

 

A-1

 

So long as this Security shall be issued in global form, the Company shall make, through the Paying Agent, all payments of principal and interest on the 2026 Notes in immediately available funds to the Depository or its nominee, in accordance with applicable procedures of the Depository. If this Security shall not be in global form, payment of the principal of and interest on this Security will be made at the office or agency of the Company maintained for that purpose in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register.

 

Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

 

Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

 

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

 

DATE: July 26, 2016

 

	
 
    	
 
    	
EAGLE   BANCORP, INC.  
 as the Company
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    	
Ronald D. Paul
    
	
 
    	
 
    	
Title:
    	
President, Chief Executive Officer
    
	
 
    	
 
    	
 
    	
 
    
	
Attest
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
By:
    	
 
    	
 
    	
 
    	
 
    
	
Name:
    	
Jane E. Cornett
    	
 
    	
 
    	
 
    
	
Title:
    	
Corporate Secretary
    	
 
    	
 
    	
 
    

 

A-2

 

CERTIFICATE OF AUTHENTICATION

 

This is one of the Securities of the series designated therein referred to in the Indenture referred to hereinafter.

 

 

	
Dated: July 26,   2016
    	
Wilmington Trust,   National Association,
    
	
 
    	
not in its individual   capacity but solely as Trustee
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Authorized   Signatory
    

 

A-3

 

[Reverse of Security]

 

This Security is one of a duly authorized issue of securities of the Company (herein called the “Securities”), issued and to be issued in one or more series under an Indenture, dated as of August 5, 2014 (herein called the “Base Indenture,” which term shall have the meaning assigned to it in such instrument), between the Company and Wilmington Trust, National Association, as Trustee (herein called the “Trustee,” which term includes any successor trustee under the Indenture) as supplemented by a Second Supplemental Indenture, dated as of July 26, 2016 between the Company and the Trustee (herein called the “Second Supplemental Indenture” and together with the Base Indenture, the “Indenture”), and reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Security is one of the series designated on the face hereof. The Company may, without notice to or the consent of any Holder, issue additional Securities having the same ranking, interest rate, maturity and other terms as the Securities of this series, provided that such additional Securities are fungible for U.S. federal income tax purposes with this Security. Any such additional Securities may be considered to be part of this series of Securities. The Company may, without notice to or the consent of any Holder, issue or incur Senior Indebtedness or indebtedness ranking pari passu with the Securities.

 

The Indenture contains provisions for Events of Default with respect to this Security, in each case upon compliance with certain conditions set forth in the Indenture.

 

If certain Events of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may be declared due and payable in the manner and with the effect provided in the Indenture.

 

The 2026 Notes shall be redeemable, in each case, in whole or in part from time to time, at the option of the Company prior to the Maturity Date beginning with the Interest Payment Date on August 1, 2021, and on any Interest Payment Date thereafter. Further, the Company may, at its option, redeem the 2026 Notes before the Maturity Date in whole or in part from time to time, upon the occurrence of a Tier 2 Capital Event or a Tax Event, or if the Company is required to register as an investment company pursuant to the Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.). Any such redemption will be at a Redemption Price equal to the principal amount of the 2026 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the Redemption Date fixed by the Company.

 

So long as the 2026 Notes shall be issued in global form, notice of redemption shall be given in electronic format to the U.S. Depository in accordance with the applicable procedures of the U.S. Depository, not less than 30 nor more than 60 days prior to the redemption date, all as provided in the Second Supplemental Indenture; provided however, such notice may be sent more than 60 days prior to a redemption in connection with a defeasance or the satisfaction and discharge of the series.

 

This Security may be redeemed in part only in multiples of $1,000 or any integral multiples of $1,000 in excess of $1,000. In the event of redemption of this Security in part only, a new Security or Securities for the unredeemed portion hereof shall be issued in the name of the Holder hereof upon the cancellation hereof.

 

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of a majority in principal amount of the Securities at the time Outstanding of each series to be affected. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. Notwithstanding the foregoing, without the consent of any Holder of Securities, the Company and the Trustee may amend or supplement the Indenture or the Securities to conform to the terms of the Indenture

 

A-4

 

and the Securities to the description of the Securities in the prospectus supplement dated July 21, 2016 relating to the offering of the Securities.

 

As provided in and subject to the provisions of the Indenture, the Holder of this Security shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default with respect to the Securities of this series, the Holders of not less than 25% in principal amount of the Securities of this series at the time Outstanding shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee security or  indemnity satisfactory to it, and the Trustee shall not have received from the Holders of a majority in principal amount of Securities of this series at the time Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of security or indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Security for the enforcement of any payment of principal hereof or any premium or interest hereon on or after the respective due dates expressed herein.

 

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and any premium and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed.

 

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of and any premium and interest on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

 

The Securities of this series are issuable only in registered form without coupons in denominations of $1,000 and in integral multiples of $1,000 in excess thereof. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same.

 

No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

 

Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

 

All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.

 

A-5

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