Document:

exv10w40

 

EXHIBIT 10.40

FIRST AMENDMENT

TO

LOAN AND SECURITY AGREEMENT

     THIS
FIRST AMENDMENT to Loan and Security Agreement (this “Amendment”) is entered into this
16th day of December, 2005, by and between SiliconValley Bank (“Bank”) and Xata Corporation, a
Minnesota corporation (“Borrower”) whose address is 151 E. Cliff Road, Suite 10, Burnsville, MN
55337.

Recitals

     A. Bank and Borrower have entered into that certain Loan and SecurityAgreement dated as
of December 17, 2004 (as the same may from time to time be further amended, modified, supplemented
or restated, the “Loan Agreement”).

     B. Bank has extended credit to Borrower for the purposes permitted in the Loan Agreement.

     C. Borrower has requested that Bank amend the Loan Agreement to (1) reset the Quick Ratio
(Adjusted) financial covenant, (2) incorporate a cash management services sublimit and letters of
credit sublimit, (3) increase the amount of the Committed Revolving Line, and (4) make certain
other revisions to the Loan Agreement as more fully set forth herein.

     D. Bank has agreed to so amend certain provisions of the Loan Agreement, but only to the
extent, in accordance with the terms, subject to the conditions and in reliance upon the
representations and warranties set forth below.

Agreement

     Now, THEREFORE, in consideration of the foregoing recitals and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, and intending to be
legally bound, the parties hereto agree as follows:

     1. Definitions. Capitalized terms used but not defined in this Amendment shall have the
meanings given to them in the Loan Agreement.

     2. Amendments to Loan Agreement.

          2.1 Section 2.1.1 (Revolving Advances). Section 2.1.1 (a) is amended in its entirety and
replaced with the following:

     (a) Bank will make Advances not exceeding (i) the lesser of (A) the Committed
Revolving Line or (B) the Borrowing Base, minus (ii) the amount of all outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit), minus
(iii) the Cash Management Services Sublimit. Amounts borrowed under this Section
may be repaid and reborrowed during the term of this Agreement

 

 

          2.2 Section 2.1.2 (Letter of Credit Sublimit). Section 2.1.2 entitled “Letters of Credit
Sublimit” is hereby incorporated to read as follows:

     Bank will issue or have issued Letters of Credit for Borrower’s account not
exceeding (i) the lesser of the Committed Revolving Line or the Borrowing Base
minus (ii) the outstanding principal balance of the Advances; however, the face
amount of outstanding Letters of Credit (including drawn but unreimbursed Letters
of Credit) may not exceed $500,000. Borrower’s Letter of Credit reimbursement
obligation will be secured by unencumbered cash on terms acceptable to Bank at any
time upon the Revolving Maturity Date if the term of this Agreement is not
extended by Bank. Borrower agrees to execute any further documentation in
connection with the Letters of Credit as Bank may reasonably request.

          2.3 Section 2.1.3 (Cash Management Services Sublimit). Section 2.1.3 entitled “Cash
Management Services Sublimit” is hereby incorporated to read as follows:

     Borrower may use up to $500,000 for Bank’s cash management services, which
may include merchant services, direct deposit of payroll, business credit card,
and check cashing services identified in various cash management services
agreements related to such services (the “Cash Management Services Sublimit”). All
amounts Bank pays for any Cash Management Services Sublimit will be treated as
Advances under the Committed Revolving Line.

          2.4 Section 2.2 (Overadvances). Section 2.2 is hereby amended in it entirety and replaced
with the following:

     If Borrower’s Obligations under Sections 2.1.1, 2.1.2 and 2.1.3 exceed the
lesser of either (i) the Committed Revolving Line or (ii) the Borrowing Base,
Borrower must immediately pay Bank the excess.

          2.5 Section 2.3 (Interest Rate, Payments). Section 2.3(a) is hereby amended in its
entirety and replaced with the following:

     (a) Interest Rate. Advances accrue interest on the outstanding principal
balance at a per annum rate equal to the Prime Rate; provided, however, if
Borrower submits a Compliance Certificate to Bank indicating that Borrower’s Quick
Ratio (Adjusted) financial covenant has dropped below 1.50 to 1.00 (the “AQR
Trigger”), then effective as of the first day of the month following Bank’s
receipt of the Compliance Certificate, Advances will accrue interest on the
outstanding principal balance at a per annum rate equal to the Prime Rate plus one
half of one percentage point (0.50%). If Borrower is late in submitting its
Compliance Certificate to Bank and the AQR Trigger is below 1.50 to 1.00, then the
interest rate

 

 

change will be effective retroactively to the first of the month following the
date the Compliance Certificate is due to Bank. If Borrower is late in
submitting its Compliance Certificate to Bank and Borrower’s AQR Trigger is
above 1.50 to 1.00, then the interest rate change will be effective five (5)
Business Days after Bank’s receipt of the Compliance Certificate. After an Event
of Default, Obligations accrue interest at 5 percent above the rate effective
immediately before the Event of Default. The interest rate increases or
decreases when the Prime Rate changes. Interest is computed on a 360 day year
fro the actual number of days elapsed.

          2.6 Section 2.4 (Fees). Section 2.4(a) and Section 2.4(c) are hereby amended in their
entirety and replaced with the following:

     (a) Unused Line Fee. A commitment fee equal to 0.50 of 1 percent per annum
of the average unused portion of the Committed Revolving Line is payable to Bank
in quarterly installments on the 5th day of each month following each fiscal
quarter.

     (c) Early Termination Fee. If Borrower terminates the Committed Revolving
Line prior to December 15, 2006, a fully earned, non- refundable early
termination fee equal to 1% of the Committed Revolving Line; or if Borrower
terminates the Committed Revolving Line prior to December 15, 2007, a fully
earned, non-refundable early termination fee equal to 0.50% of the Committed
Revolving Line

          2.7 Section 2.4 (Fees). Section 2.4(d) is hereby incorporated to read as follows:

     (d) Collateral Handling Fee. A collateral handling fee of $750 shall be payable to
Bank on the last day of each month.

          2.8 Section 6.2 (Financial Statements, Reports, Certificates). Section 6.2(e) is hereby
incorporated to read as follows:

     (e) Prior to Borrower’s fiscal year end, Borrower will deliver to Bank Borrower’s
Board of Director approved projection report for the following fiscal year.

          2.9 Section 6.7 (Financial Covenants). Section 6.7 is hereby amended in its
entirety and replaced with the following:

     Borrower will maintain as of the last day of each month:

     Quick Ratio (Adjusted). A ratio of Borrower’s unrestricted cash and cash
equivalents held at Bank plus Accounts to Current Liabilities
minus Deferred Revenue of at least 1.00 to 1.00.

 

 

          2.10 Section 13 (Definitions). The following terms and their respective definitions
set forth in Section 13.1 are amended and/or incorporated in their entirety and replaced with
the following:

     “Borrowing Base” is (i) 75% of Eligible Accounts, plus (ii) 50%
of Borrower’s unrestricted cash, plus (iii) the lesser of 25% of the value of
Borrower’s Eligible Inventory (valued at the lower of cost or wholesale
fair market value) or $750,000 but at no time greater than 25% of the
aggregate Eligible Accounts, as determined by Bank from Borrower’s
most recent Borrowing Base Certificate; provided,
however, that Bank
may lower the percentage of the Borrowing Base after performing an audit
of Borrower’s Collateral.

     “Cash Management Services Sublimit” is defined in Section 2.1.3.

     “Committed Revolving Line” is an Advance or Advances in an aggregate
amount of up to $5,000,000.

     Sub-letter (d) of the defined term “Eligible Accounts”:

     (d) Accounts for an account debtor, including Affiliates, whose
total obligations to Borrower exceed 25% of all Accounts, for the amounts
that exceed that percentage, unless the Bank approves in writing except for
those certain Accounts on a case by case basis, for which the percentage
may be up to 60%;

     “Eligible Inventory” is Borrower’s Inventory located at its principal
place of business (or any location permitted under Section 7.2) that complies
with representations and warranties in Section 5.2, but may not include used,
returned, obsolete, consigned, work in progress, demonstrative or custom
inventory, supplies, packing or shipping materials, but may include raw
materials.

     “Letters of Credit” means a standby letter of credit issued by Bank or
another financial institution based upon an application, guarantee, indemnity
or similar agreement on the part of Bank as set forth in Section 2.1.2.

     “Revolving Maturity Date” is December 15, 2007.

     3. Limitation of Amendments.

          3.1
The amendments set forth in Section 2, above, are effective for the purposes set forth
herein and shall be limited precisely as written and shall not be deemed to (a) be a consent to
any amendment, waiver or modification of any other term or condition of any Loan Document, or
(b) otherwise prejudice any right or remedy which

 

 

Bank may now have or may have in the future under or in connection with any Loan Document.

          3.2 This Amendment shall be construed in connection with and as part of the Loan Documents
and all terms, conditions, representations, warranties, covenants and agreements set forth in the
Loan Documents, except as herein amended, are hereby ratified and confirmed and shall remain in
full force and effect.

     4. Representations and Warranties. To induce Bank to enter into this Amendment,
Borrower hereby represents and warrants to Bank as follows:

          4.1 Immediately after giving effect to this Amendment (a) the
representations and warranties contained in the Loan Documents are true, accurate and
complete in all material respects as of the date hereof (except to the extent such
representations and warranties relate to an earlier date, in which case they are true and
correct as of such date), and (b) no Event of Default has occurred and is continuing;

          4.2 Borrower has the power and authority to execute and deliver this
Amendment and to perform its obligations under the Loan Agreement, as amended by
this Amendment;

          4.3 The organizational documents of Borrower delivered to Bank on
December 17, 2004 remain true, accurate and complete and have not been amended,
supplemented or restated and are and continue to be in full force and effect;

          4.4 The execution and delivery by Borrower of this Amendment and
the performance by Borrower of its obligations under the Loan Agreement, as amended
by this Amendment, have been duly authorized;

          4.5 The execution and delivery by Borrower of this Amendment and
the performance by Borrower of its obligations under the Loan Agreement, as amended
by this Amendment, do not and will not contravene (a) any law or regulation binding on
or affecting Borrower, (b) any contractual restriction with a Person binding on Borrower,
(c) any order, judgment or decree of any court or other governmental or public body or
authority, or subdivision thereof, binding on Borrower, or (d) the organizational
documents of Borrower;

          4.6 The execution and delivery by Borrower of this Amendment and
the performance by Borrower of its obligations under the Loan Agreement, as amended
by this Amendment, do not require any order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption by any governmental
or public body or authority, or subdivision thereof, binding on either Borrower, except as
already has been obtained or made; and

          4.7 This Amendment has been duly executed and delivered by
Borrower and is the binding obligation of Borrower, enforceable against Borrower in
accordance with its terms, except as such enforceability may be limited by bankruptcy,

 

 

insolvency, reorganization, liquidation, moratorium or other similar laws of general
application and equitable principles relating to or affecting creditors’ rights.

     5. Counterparts. This Amendment 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.

     6. Effectiveness. This Amendment shall be deemed effective upon the due
execution and delivery to Bank of this Amendment by each party hereto.

     In
Witness Whereof, the parties hereto have caused this Amendment to be duly
executed and delivered as of the date first written above.

	 	 	 	 	 	 	 	 	 
	BANK

	 	 	 	 	 	BORROWER
	 
	 	 	 	 	 	 	 	 
	Silicon Valley Bank	 	 	 	Xata Corporation
	 
	 	 	 	 	 	 	 	 
	By:

	 	 	 	 	 	By:	 	 
	 

	 	 	 	 

	Name:

	 	 	 	 	 	Name:	 	 
	 

	 	 
	 	 	 	 	 	 
	Title:

	 	 	 	 	 	Title:	 	 
	 

	 
	 	 	 	 	 

 

 

EXHIBIT D

COMPLIANCE CERTIFICATE

	 	 	 
	TO:

	 	SILICON VALLEY BANK
	 
	 	 
	FROM:

	 	XATA CORPORATION

     The undersigned authorized officer of Xata Corporation (“Borrower”) certifies that under the
terms and conditions of the Loan and Security Agreement between Borrower and Bank (the
“Agreement”), (i) Borrower is
in complete compliance for the period ending                                          with all required covenants except as noted
below and (ii) all representations and warranties in the Agreement are true and correct in all
material respects on this date. In addition, the undersigned authorized officer of Borrower
certifies that Borrower and each Subsidiary has timely filed all required tax returns and paid, or
made adequate provision to pay, all material taxes, except those being contested in good faith
with adequate reserves under GAAP. Attached are the required documents supporting the
certification. The Officer certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) consistently applied from one period to the next except as explained
in an accompanying letter or footnotes. The Officer acknowledges that no borrowings may be
requested at any time or date of determination that Borrower is not in compliance with any of the
terms of the Agreement, and that compliance is determined not just at the date this certificate is
delivered.

Please indicate compliance status by circling Yes/No under “Complies” column.

	 	 	 	 	 	 	 
	Reporting Covenant	 	Required	 	Complies
	Monthly financial statements + CC

	 	Monthly within 30 days
	 	Yes
	 	No
	Annual (Audited)

	 	FYE within 120 days
	 	Yes
	 	No
	A/R & A/P Agings

	 	Monthly within 30 days
	 	Yes
	 	No
	Borrowing Base Certificate

	 	Monthly within 30 days
	 	Yes
	 	No
	Board Approval Projections

	 	Prior to fiscal year end
	 	Yes
	 	No

	 	 	 	 	 	 	 	 	 
	Financial Covenant	 	Required	 	Actual	 	Complies
	Maintain on a monthly basis:
	 	 	 	 	 	 	 	 
	  Minimum Quick Ratio (Adjusted)

	 	1.00:1.00*
	 	                     :1.00
	 	Yes
	 	No

 

			
	*	 	A ratio of Borrower’s unrestricted cash and cash equivalents held at Bank plus Accounts to
Current Liabilities minus Deferred Revenue of at least 1.00 to 1.00.

Borrower only has deposit accounts located at the following institutions:                                         .

Has Borrower filed any new Trademark, Patent or Copyright applications?                                 Yes/No

(If “yes”, please list below and complete the attached Addendum to Intellectual Property Security
Agreement)

Trademarks:                                                                                 

Patents:                                                                                 

Copyrights:                                                                                 

 

	 	 	 
	Comments
Regarding Exceptions: See Attached.
	 	 
	 
	 	 
	Sincerely,
	 	 
	 
	 	 
	Xata Corporation
	 	 
	 
	 	 
	 

signature 

	 	 
	 
	 	 
	 

title 

	 	 
	 
	 	 
	 

date 

	 	 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 	BANK
USE ONLY
  	 	 	 
	 	 
	 	 	 	 	 	 	 
	 	Received By:
	 	 	 	 	 	 	 
	 	 

	 	 

AUTHORIZED SIGNER
	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 
	 	Date:
	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 
	 	Verified:
	 	 	 	 	 	 	 
	 	 

	 	 	 	 	 	 	 
	 	 

	 	AUTHORIZED SIGNER	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 
	 	Date:
	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 
	 	Compliance
Status:
	 	 	Yes     	No 	 	 	
	 	 	 	 	 

 

EXHIBIT C

BORROWING BASE CERTIFICATE 

COLLATERAL SCHEDULE

	 	 	 	 	 	 	 
	 
	Borrower:

	 	Xata Corporation
	 	Bank:
	 	Silicon Valley Bank
	 

	 	151 E. Cliff Road, Suite 10
	 	 	 	3003 Tasman Drive
	 

	 	Burnsville, MN 55337
	 	 	 	Santa Clara, CA 95054

	 	 	 	 	 	 	 
	Commitment Amount: $5,000,000
	 
	ACCOUNTS RECEIVABLE
	1.	 	Accounts Receivable Book Value as of       
	 	 	 	$                    
	2.	 	Additions (please explain on reverse)
	 	 	 	$                    
	3.	 	TOTAL ACCOUNTS RECEIVABLE
	 	 	 	$                    
	 	 	 
	 	 	 	 
	ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
	4.	 	Amounts over 90 days due
	 	 	 	 
	5.	 	Balance of 50% over 90 day accounts
	 	$                    	 	 
	6.	 	Credit Balances over 90 days
	 	$                    	 	 
	7.	 	Excess 25% Concentration Limit*
	 	$                    	 	 
	8.	 	Foreign Accounts
	 	$                    	 	 
	9.	 	Governmental Accounts
	 	$                    	 	 
	10.	 	Contra Accounts
	 	$                    	 	 
	11.	 	Promotion or Demo Accounts
	 	$                    	 	 
	12.	 	Intercompany/Employee Accounts
	 	$                    	 	 
	13.	 	Other (please explain on reverse)
	 	$                    	 	 
	14.	 	TOTAL ACCOUNTS RECEIVABLE DEDUCTION
	 	 	 	$                    
	15.	 	Eligible Accounts (#3 minus # 14)
	 	 	 	$                    
	16.	 	LOAN VALUE OF ACCOUNTS (75% of #15 + 50% of unrestricted cash)	 	$                    
	*60% on a case by case basis
	 	 	 
	 	 	 	 
	INVENTORY
	17.	 	Inventory Value as of            
	 	$                    	 	 
	 	 	 
	 	 	 	 
	INVENTORY DEDUCTIONS
	18.	 	Obsolete Inventory
	 	$                    	 	 
	19.	 	Any Demo Inventory
	 	$                    	 	 
	20.	 	Inventory sold on consignment
	 	$                    	 	 
	21.	 	Inventory with offsetting claims
	 	$                    	 	 
	22.	 	Work in process
	 	$                    	 	 
	23.	 	Other (please explain on reverse)
	 	$                    	 	 
	24.	 	TOTAL INVENTORY DEDUCTIONS
	 	 	 	$                    
	25.	 	Eligible Inventory (# 17 minus #24)
	 	 	 	$                    
	26.	 	LOAN VALUE OF INVENTORY (lesser of 25% of #25 or $750,000,
not to exceed 25% of #15)	 	$                    
	 	 	 
	 	 	 	 
	BALANCES
	27.	 	Maximum Loan Amount
	 	 	 	$                    
	28.	 	Total Funds Available Lesser of #27 or [#16 plus 26]	 	$                    
	29.	 	Present balance owing on Line of Credit
	 	$                    	 	 
	30.	 	Outstanding under Sublimits (LC)
	 	$                    	 	 
	31.	 	RESERVE POSITION (#28 minus #29 and #30)
	 	 	 	$                    

 

The undersigned represents and warrants that the foregoing is true, complete and correct, and
that the information reflected in this Borrowing Base Certificate complies with the representations
and warranties set forth in the Loan and Security Agreement between the undersigned and Silicon
Valley Bank.

COMMENTS:

XATA CORPORATION

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

     Authorized Singer
	 	 

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 
	 	BANK USE ONLY
  	 	 	 
	 	 
	 	 	 	 	 	 	 
	 	Rec’d By:
	 	 	 	 	 	 	 
	 	 

	 	 

Auth. Singer
	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 
	 	Date:
	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 
	 	Verified:
	 	 	 	 	 	 	 
	 	 

	 	 	 	 	 	 	 
	 	 

	 	Auth. Singer	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 
	 	Date:exv10w1

 

Exhibit 10.1

UNITED COMMERCIAL BANK

EXECUTIVE DEFERRED COMPENSATION PLAN

     The UNITED COMMERCIAL BANK (the “Bank”) (formerly, the United Savings Bank, F.S.B.), a
California corporation, adopted the United Savings Bank, F.S.B., Executive Deferred Compensation
Plan on August 1, 1997. Effective January 31, 2003, the Bank revises the name of that plan to the
UNITED COMMERCIAL BANK EXECUTIVE DEFERRED COMPENSATION PLAN (the “Plan”) and amends and restates
the Plan in its entirety and alters, among other things, the timing and method of distribution
under the Plan.

     The Plan is intended to provide supplemental retirement benefits to a select group of
executives and highly compensated employees in consideration of prior services rendered and as an
inducement for their continued services in the future. The Plan is intended to be a top-hat plan,
exempt from the participation, vesting, funding, and fiduciary requirements of Title I of ERISA,
pursuant to ERISA §§ 201(2), 301(a)(3) and 401(a)(1).

     Notwithstanding the existence of a trust, (i) Participants have the status of general
unsecured creditors of the Bank, (ii) the Plan constitutes a mere promise by the Bank to pay
benefits in the future, and (iii) it is the intention of the parties that the arrangements be
unfunded for tax purposes and for purposes of Title I of ERISA.

ARTICLE I

DEFINITIONS

     Whenever used herein, the masculine pronoun shall be deemed to include the feminine, and the
singular to include the plural, unless the context clearly indicates otherwise, and the following
definitions shall govern the Plan:

     “Administrator” shall mean the Bank or its delegate.

     “Beneficiary” shall mean one, some, or all (as the context shall require) of those persons,
trusts or other entities entitled to receive payment upon a Participant’s death.

     “Bank” shall mean United Commercial Bank, and any present or future parent corporation (within
the meaning of Section 424(e) of the Internal Revenue Code of 1986, as amended (the “Code”)), or
subsidiary corporation (within the meaning of Code Section 424(f)).

     “Deferral Account” shall mean the book entry account established and maintained hereunder for
each Participant.

     “Disability” shall mean the long-term disability of the Participant, as defined in the Bank’s
long-term disability plan for executives.

     “Distribution Election” shall mean a Participant’s election to receive payment of his or her
Deferral Account balance in the manner permitted under Article V.

     “Effective Date” shall mean August 1, 1997.

1

 

     “Eligible Executive” shall mean an executive or other highly compensated employee of the Bank
selected by the Administrator, in its sole discretion, as eligible to participate in the Plan and
notified of such in writing.

     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

     “Initial Entry Date” shall mean the Effective Date or, if later, the first day of the month
following the date an employee of the Bank is first designated as an Eligible Executive.

     “Interest Earnings” shall mean the amount credited to a Participant’s Deferral Account each
month under Section 4.2.

     “Interest Rate” shall mean the annual rate of interest selected by the Administrator, which
shall not be less than the prime rate published in the Wall Street Journal as of December 31 of the
preceding year.

     “Participant” shall mean an Eligible Executive who has commenced participation in the Plan
under Article II and whose Deferral Account has not been fully distributed.

     “Plan” shall mean the United Commercial Bank Executive Deferred Compensation Plan set forth
herein, now in effect, or as amended from time to time.

     “Plan Year” shall mean a calendar year.

     “Salary Deferral Amount” shall mean the dollar amount or percentage of Salary to be withheld
from an Eligible Executive’s Salary, as shown on a Participant’s Salary Deferral Election form.

     “Salary Deferral Election” shall mean an Eligible Executive’s election to defer all or a
portion of his or her Salary under the Plan on the form and in the manner prescribed by the
Administrator and required by the terms of the Plan.

     “Salary” shall mean the base cash wages and cash bonuses, if any, paid to an Eligible
Executive during the Plan Year.

     “Termination Event” shall mean a Participant’s retirement, death, Disability or other
termination of employment for any reason.

     “Trust” shall mean the legal entity created by the Trust Agreement.

     “Trust Agreement” shall mean the trust agreement, if any, entered into between the Bank and a
trustee, as it may be amended from time to time.

     “Unforeseeable Emergency” shall mean an unanticipated emergency, such as a sudden and
unexpected illness or accident of the Participant or a dependent of the Participant or loss of the
Participant’s property due to casualty, that is caused by an event beyond the control of the
Participant and that would result in severe financial hardship if a Plan withdrawal were not
permitted.

2

 

ARTICLE II

ELIGIBILITY AND PARTICIPATION

     2.1 Eligibility. Only Eligible Executives shall be eligible to become Participants.
Individuals in this select group shall be notified as to their eligibility to participate in the
Plan. The Administrator shall maintain a current list of Eligible Executives.

     2.2 Commencement of Participation. An Eligible Executive may begin participation in
the Plan by submitting a Salary Deferral Election to the Administrator within 30 days of the
Eligible Executive’s Initial Entry Date or prior to January 1 of any subsequent year.

     2.3 Cessation of Participation. Active participation in the Plan shall end when an
Eligible Executive’s employment terminates for any reason. No deferrals may be made with respect to
Salary paid after such termination date. Upon termination of employment or discontinuance of all
Salary deferrals, a Participant shall remain an inactive Participant in the Plan until his or her
Deferral Account balance has been paid in full.

ARTICLE III

SALARY DEFERRALS

     3.1 Deferral Elections.

          (a) Annual Elections. By filing a Salary Deferral Election with the Administrator, a
Participant agrees irrevocably to reduce his or her Salary earned after the effective date of such
election by the Salary Deferral Amount. Salary Deferral Elections are effective on a calendar year
basis, and must be filed before the beginning of the calendar year to which they relate. Except as
provided in Section 3.1(b), Salary Deferral Elections may not be amended or revoked after the
beginning of the calendar year. A Participant’s Salary Deferral Amount shall not be paid to the
Participant but instead shall be withheld from his or her salary, and an amount equal to the Salary
Deferral Amount shall be credited to the Participant’s Deferral Account.

          (b) Cessation of Deferrals During the Plan Year. A Participant may cease making Salary
deferrals during a Plan Year only upon the occurrence of an Unforeseeable Emergency. To cease
making deferrals, a Participant must file an amended Salary Deferral Election with the
Administrator in such written form as the Administrator may specify. The effective date of such an
amendment shall be the first day of the month next following the date the amendment is filed.

     3.2 Reduction of Deferrals. A Participant’s Salary Deferral Amount shall be reduced by
the amounts, if any, necessary to satisfy all applicable employment tax and income tax withholding
obligations, and all garnishments or other amounts required to be withheld by applicable law or
court order.

     3.3 Effect of Deferrals on Other Plans. Compensation under the United Commercial Bank
401(k) Plan, and any successor 401(k) Plan, shall be determined after the Participant’s Salary
Deferral Amounts have been withheld under this Plan.

     3.4 No Withdrawals. Except as otherwise provided in Article V, a Participant may not
withdraw any amount from his or her Deferral Account.

     3.5 Vesting. A Participant shall be 100% vested at all times in his or her Deferral
Account balance.

3

 

ARTICLE IV

CREDITED INTEREST ON DEFERRAL ACCOUNTS

     4.1 Deferral Account. A Deferral Account shall be established and maintained for each
Participant, which shall be credited each month with such Participant’s Deferral Amounts and
Interest Earnings. The Participant’s Deferral Account shall be charged with distributions
therefrom, income taxes attributable thereto, and any other charges which may be imposed thereon
pursuant to the terms of the Plan.

     4.2 Interest Earnings. The Interest Earnings to be credited to a Participant’s
Deferral Account for a month shall be an amount equal to the Participant’s Deferral Account balance
(before the account has been credited with the Participant’s Salary Deferral Amount for such month)
multiplied by the Interest Rate divided by twelve.

ARTICLE V

DISTRIBUTIONS

     5.1 Timing of Distribution. The amounts credited to a Participant’s Deferral Account
shall be paid (or payment shall commence) in cash within an administratively reasonable time after
the occurrence of a Termination Event or, if later, the commencement date specified in the
Participant’s most recent Distribution Election form filed with the Administrator at least twelve
(12) months prior to the Termination Event.

     5.2 Method of Distribution. A Participant’s Deferral Account balance shall be paid in
one of the following methods specified in his or her most recent Distribution Election form filed
with the Administrator at least twelve (12) months prior to the Termination Event: (i) a single sum
payment; or (ii) substantially equal annual installments over a period not to exceed ten (10)
years. If no Distribution Election has been properly made prior to the Termination Event, the
Participant’s benefits will be distributed as soon as administratively reasonable thereafter in a
single sum payment.

     5.3 Amendment of Election.

          (i) A Participant may amend or revoke a Distribution Election by filing a written amendment or
revocation at least (12) twelve months prior to the occurrence of a Termination Event. Any
purported amendment or revocation filed within twelve (12) months of the Termination Event shall be
null and void. A Participant may amend or revoke his or her Distribution Election only once.

          (ii) Notwithstanding the above paragraph (i), the Plan will permit a Participant to alter his
or her Distribution Election in effect on January 31, 2003, if the Participant submits a written
request for amendment or revocation to the Administrator by February 28, 2003. The Plan will treat
such written request as the Participant’s original Distribution Election. Such written request
shall not change the effective date of the original Distribution Election.

     5.4 Death Benefits. In the event a Participant dies before his or her Deferral Account
has been fully distributed, the Participant’s benefits shall be paid to his or her Beneficiary in
accordance with the Participant’s Distribution Election.

     5.5 Unforeseeable Emergency. Upon the written request of a Participant and a
determination by the Administrator that an Unforeseeable Emergency has occurred with respect to the
Participant, the Participant may withdraw the lesser of (i) the amount necessary to meet the
emergency or (ii) the then current value of the Participant’s Deferral Account.

4

 

     5.6 Early Withdrawal. Notwithstanding any other provision of this Plan, upon the
written request of a Participant and approval by the Administrator, a Participant may withdraw
exactly ninety percent (90%) of the amount credited to his or her Deferral Account in the form of a
single sum. Upon such withdrawal, the remaining ten percent (10%) of the Participant’s Deferral
Account shall be forfeited and the Participant shall have no further right thereto. Upon receipt of
an early withdrawal distribution, a Participant shall cease to participate in the Plan and shall
not be entitled to participate in the Plan in the future.

     5.7 Limitation on Distributions to Covered Employees. Notwithstanding any other
provision of this Article V, in the event that a Participant is a “covered employee” as defined in
section 162(m)(3) of the Code, or would be a covered employee if his or her Deferral Account was
distributed in accordance with his or her Distribution Election or withdrawal request, the maximum
amount which may be distributed from such a Participant’s Deferral Account, in any Plan Year, shall
not exceed one million dollars ($1,000,000), less the amount of compensation paid to the
Participant in such Plan Year which is not “performance-based” (as defined in Code section
162(m)(4)(C)), which amount shall be reasonably determined by the Administrator at the time of the
proposed distribution. Any amount which is not distributed to a Participant in a Plan Year as a
result of the limitation set forth in this Section 5.7 shall be distributed in the next Plan Year,
subject to compliance with the foregoing limitation.

     5.8 Payments to Minors and Incompetents. If any person entitled to any payment under
this Plan is, in the judgment of the Administrator, incapable of giving receipt for such payment
because of minority, illness, infirmity or other incapacity, the Administrator may pay the amount
due such person to a duly appointed legal representative, if there is one, or, if none, to the
spouse, children, dependents, or such other persons with whom the person entitled to payment
resides. Any such payment shall be a complete discharge of the liability of the Bank and the Plan
with respect to such payment.

     5.9 Tax Withholding. The Bank shall have the right to deduct from any payment made
under this Article V an amount equal to all or part of the federal, state and local taxes required
by law to be withheld by the Bank (including but not limited to any amount that may be necessary to
satisfy applicable income tax withholding and employment tax obligations), all garnishments, and
any other amounts required to be withheld by applicable law or court order.

ARTICLE VI

BENEFICIARY DESIGNATIONS

     6.1 Designation of Beneficiary. Each Participant may designate in the form and the
manner specified by the Administrator a Beneficiary to receive or continue receiving the payment or
payments (if any) due under Article V and which remain unpaid at the Participant’s death. The
Beneficiary of a married Participant shall be his or her spouse, unless the Participant designates
a Beneficiary other than the spouse and the spouse consents in writing to the designation in the
form and the manner prescribed by the Administrator. A Participant may revoke such designation at
any time and substitute therefor another Beneficiary. A married Participant may revoke a prior
Beneficiary designation only with the consent of his or her spouse in the form and the manner
prescribed by the Administrator.

     6.2 Failure To Designate a Beneficiary. If a Beneficiary has not been validly
designated, the Beneficiary shall be the Participant’s estate.

ARTICLE VII

TRUST OBLIGATION TO PAY BENEFITS

     7.1 Bank Contributions Held in Trust. Within thirty (30) days after the end of a Plan
Year, an amount equal to the sum of each Participant’s Salary deferrals and Interest Earnings for
such Plan Year (as determined under Article III) may be transferred to the Trustee to be held
pursuant to the terms of the Trust Agreement.

5

 

     7.2 Benefits Paid From Trust. Any payment required to be made under this Plan to a
Participant or Beneficiary shall be paid by the Trustee to the extent of the assets held in the
Trust by the Trustee, and by the Bank to the extent the assets in the Trust are insufficient to pay
such amount.

     7.3 Trustee Investment Discretion. The Interest Rate shall be for the sole purpose of
determining the Interest Earnings and neither the Trustee nor the Bank shall have any obligation to
invest Salary Deferral Amounts in any particular investment.

ARTICLE VIII

ADMINISTRATION AND CLAIMS

     8.1 Plan Administration. The Administrator shall have sole discretionary
responsibility for the operation, interpretation, and administration of the Plan. Any action taken
on any matter within the discretion of the Administrator shall be final, conclusive, and binding on
all parties. In order to discharge its duties hereunder, the Administrator shall have the power and
authority to adopt, interpret, alter, amend or revoke rules necessary to administer the Plan, to
delegate its duties and to employ such outside professionals as may be required for prudent
administration of the Plan. The Administrator shall also have the right within the scope of his
authority (if a designee of the Bank) to enter into agreements on behalf of the Bank necessary to
administer the Plan. Any Participant who is acting as Administrator shall not be entitled to make
decisions with respect to his own participation and entitlement to payment under the Plan.

     8.2 Claims Procedures.

          (a) Exclusive Procedures; Exhaustion. This Section sets forth the exclusive procedures
by which payments under the Plan are to be made. No legal action may be brought by any person
claiming entitlement to payment under the Plan until after the claims procedures set forth herein
have been exhausted.

          (b) Notice; Automatic Payment. Immediately following: (i) the occurrence of a
Termination Event; (ii) the approval of a request for a distribution upon the occurrence of an
Unforeseeable Emergency; or (iii) the approval of a request for an early withdrawal, the
Administrator shall send to the affected Participant (or his Beneficiary or legal representative,
if applicable), via return-receipt mail, a written notice setting forth the Participant’s Deferral
Account balance and the time and manner in which payment is to commence (as provided in the
Participant’s election). The Administrator shall then commence payment of the Participant’s
Deferral Account balance automatically in accordance with the provisions of Article V.

          (c) Application. Any Participant, Beneficiary or other person claiming entitlement to
an amount not paid automatically pursuant to Section 8.2(b) must file a written application with
the Administrator at the offices of the Bank. The application must set forth the basis for the
claim and be signed by the person making the application.

          (d) Determination; Notification. Within 60 days of receiving an application for
payment, the Administrator shall (i) determine whether to grant or deny the claim, and (ii) notify
the claimant in writing of the decision. If the claim is granted, the Administrator shall commence
payment in accordance with the provisions of Article V. If the claim is denied, in whole or in
part, the Administrator’s notice to the claimant shall explain the specific reasons for the denial,
refer to the specific Plan provisions on which the denial is based, describe any additional
material or information necessary for the claimant to perfect his application (if perfection is
possible), and explain the steps and time limit for requesting review of the claim.

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          (e) Claim Review. A claimant (or his authorized representative) shall have 65 days
from the date the Administrator’s notice is mailed in which to file an appeal of the denial of his
or her claim. Any such appeal must: (i) be in writing, (ii) request that the claimant’s application
be reviewed by an independent review Committee, (iii) set forth each ground on which the request
for review is based and the facts in support thereof, and (iv) provide any other comments the
claimant believes pertinent and helpful to his application. When making such an appeal, a claimant
may review the documents that were pertinent to the Administrator’s denial of his claim. Any
claimant who fails to timely file such a written appeal shall be estopped and barred from any
further challenge to the Administrator’s determination to deny his claim.

          (f) Review by Independent Committee. Upon receipt of a written appeal, the Bank shall
appoint an independent review committee, composed of at least three (3) individuals who did not
participate in the original denial of the application, to conduct a full and fair review of the
claim. The committee shall complete its review and decide the appeal within sixty (60) days after
the written request for review was received by the Bank. In conducting its review, the committee
may, in its sole discretion, require the Bank or the claimant to submit such additional documents
or other evidence as the committee deems necessary or appropriate. The independent review
committee’s decision shall be final and binding on all persons with respect to the claimant’s
appeal. If the appeal is denied in whole or in part, the committee shall notify the claimant in
writing, setting forth the specific reasons for the denial and the specific plan provisions on
which the denial is based.

     8.3 Reimbursement of Costs. If the Bank, the Plan, a Participant, a Beneficiary, a
person claiming entitlement to benefits, or a successor in interest to any of the foregoing brings
legal action to enforce any of the provisions of this Plan, the prevailing party in such legal
action shall be reimbursed by the other party for the prevailing party’s costs, including, without
limitation, reasonable fees of attorneys, accountants and similar advisors and expert witnesses.

ARTICLE IX

MISCELLANEOUS

     9.1 Nontransferability. The right of a Participant, Beneficiary, or other person to
any payment under this Plan shall not be assigned, alienated, transferred, pledged or encumbered.
Neither the Bank nor the Plan shall be liable for or subject to the debts or liabilities of a
Participant.

     9.2 Binding Effect. This Plan shall be binding upon and inure to the benefit of the
Bank, its successors and assigns and the Participant and his or her heirs, executors,
administrators and legal representatives.

     9.3 No Rights as Employee. Nothing contained herein shall be construed as conferring
upon any Participant the right to continue in the employ of the Bank as an employee.

     9.4 Applicable Law. This Plan shall be construed in accordance with and governed by
the laws of the State of California, to the extent not preempted by ERISA.

     9.5 Entire Agreement. This Plan constitutes the entire understanding and agreement
with respect to the subject matter contained herein, and there are no agreements, understandings,
restrictions, representations or warranties among any Participant and the Bank other than those set
forth or provided for herein.

     9.6 Amendment or Termination of Plan. The Bank may amend or terminate the Plan at any
time; provided, however, that no such amendment or termination shall be effective if it has the
effect of eliminating or reducing a Participant’s Deferral Account balance below the balance
calculated under the Plan immediately prior to giving effect to such amendment.

7

 

     IN WITNESS WHEREOF, United Commercial Bank has caused the Plan to be amended and restated by a
duly authorized officer effective as of January 31, 2003.

	 	 	 	 	 
	 	UNITED COMMERCIAL BANK

 	 
	 	By:  	
 	 
	 	 	 	 
	 	 	 	 
	 

	 	 	 	 	 
	 	 	 
	 	Signature:  	 	 
	 	 	 	 
	 	 	 	 
	 

	 	 	 	 	 
	 	 	 
	 	Name:  	 	 
	 	 	 	 
	 	 	 	 
	 

	 	 	 	 	 
	 	 	 
	 	Title:  	 	 
	 	 	 	 
	 	 	 	 

8

 

	 	 	 	 	 

EXHIBIT A

FIRST AMENDMENT

     Effective as of January 1, 2005, the Bank’s Executive Deferred Compensation Plan for deferrals
after 2004 (“Plan”) is hereby amended to allow a participant in the Plan during all or part of the
calendar year 2005 to terminate participation in the Plan or cancel a deferral election with
respect to amounts subject to Section 409A of the Internal Revenue Code pursuant to IRS Notice
2005-1, Q & A 20; provided that the amount subject to the termination or cancellation is includible
in income of the participant in the calendar year 2005 or, if later, in the taxable year in which
the amounts are earned and vested.

     This amendment shall be interpreted and implemented in a manner consistent with IRS Notice
2005-1, Q & A 20.

	 	 	 	 	 
	 Date: _____________________  	UNITED COMMERCIAL BANK

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	 	 
	 

9

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